The Australia-China Chamber of Commerce and Industry of New South Wales



Return to the publications page


Return to the home page.




24 November 2000

Afternoon Session:  Australia’s Aid Policy with China



The initial discussion focused on the allocation of Australia’s development assistance to China according to various categories, as presented in AusAID’s publication, Australia and China: Supporting reform and development – Aid program strategy 2000-2001.  Copies of the publication are available from AusAID’s Public Affairs Office in Canberra, or from their Internet site:

In the early part of next year, AusAID will formulate the China aid program strategy for the 2001-2002 period and welcomes input from the private sector.  This could include comments about the effectiveness of the current program as well as suggestions for new directions that could be considered for the forthcoming program.

Accordingly, this summary is divided into two parts.  The first includes comments relating to the current program.  The second part summarises comments relating to new directions.  Follow-up communications are stated at the end.


Part One: Aid program strategy for 2000-2001

Several questions were raised about the pie chart giving the breakdown of Australia’s development assistance to China for the current period.  The percentages shown in the chart (page 9) of the publication mentioned above are as follows:

Rural development, environment and natural resources – 25%
Education and training – 10%
Governance – 16 %
Health – 13%
Multisector – 6%
Other including food aid, humanitarian and emergency relief, and ACIAR – 30%

The last category “other” is the largest in terms of percentages and is somewhat ambiguous.  For example, humanitarian elements exist with some of the other categories.  The “other” category also includes official development assistance that arises from separate (non-AusAID) budgets.  Food aid consists mainly of contributions to international agencies such as the World Food Program.  Additionally, the Australian Centre for International Agricultural Research (ACIAR) is a government agency that supports international agricultural research to reduce poverty, improve food security and protect the natural resource base for agriculture in developing countries.  Although this activity is classified as official development assistance, it is carried out under a separate budget.

The estimated value of the China bilateral program for the current financial year was reported to be $A39.8 million, while the addition of the "other" category (amounting to about $A17.7 million) results in an overall estimate of total aid flows to China of $A57.5 million.

Additional questions arose as to how the allocations are determined.  A summary of the discussion arising from these questions is given in the following subsections.


Consultations with MOFTEC

AusAID works closely with China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC) in determining the projects that are supported by AusAID funds.  Most of these projects arise at the suggestion of the Chinese.  For example, a project that was open for tenders at the time of the roundtable discussion is the Datong Cleaner Environment Project. 

According to the design document, the project was initiated in 1996 by the Shanxi Environmental Protection Bureaux and the Datong Coke and Gas Corporation.  A proposal was submitted through MOFTEC in September 1997 by the Foreign Economic Relations and Trade Commission of Shanxi Province and the Datong Municipality. 

During the visit of the AusAID Environmental Strategy Mission, the proposal was redrafted to seek Australian assistance to enable the Datong Coke and Gas Corporation’s demonstration plant, using best practice technology, to serve as a model for 1000 other coking plants in Datong and elsewhere in Shanxi Province.  The project was approved after a feasibility design study.

Other development assistance projects have proceeded in similar way.  With many years of close cooperation between AusAID and MOFTEC, the projects that are proposed by the Chinese are generally those for which MOFTEC has determined that Australian assistance is likely to make a substantial contribution to China’s development progress.


AusAID standards for development assistance projects

AusAID’s current objectives are to advance Australia's national interest by assisting developing countries to reduce poverty and achieve sustainable development.  “National interest” includes a number of considerations that are linked to the reduction of poverty and achieving sustainable development.  These include benefits to Australia from increased security within the Asian region (mainly but not exclusively), as well as longer-term benefits from stronger regional economies. 

It is generally hoped that participation in AusAID projects by Australian companies adds to the level of expertise and experience of these companies and that economic development of the recipient nations enhances their international trading capacity.  However, AusAID projects are not chosen specifically for their contribution to Australian companies or for the trade enhancement benefit.

It was pointed out that some confusion exists about the extent to which humanitarianism and altruism are key attributes for development assistance projects.  The response of public sector participants suggested that most projects make a humanitarian contribution, but they are expected to make other contributions as well.  For example, the Datong Cleaner Environment Project is assessed to contribute substantially to the reduction in the amount of air pollution in Shanxi Province and therefore contributes to an overall environmental improvement.  It is also expected to reduce the incidence of respiratory illness in the province. 

AusAID projects are also directed toward assisting China in its transition to a market-based economy and this is expected to have an indirect effect on the alleviation of poverty.  Thus, a range of projects exists, some of which have a direct effect on poverty, while others have a more indirect effect.  All projects must make some contribution to China’s economic and social development and all must meet the “national interest” objectives mentioned above.

Comments from the private sector participants were supportive in relation to the range of areas covered by AusAID projects.  This specifically included:

Ø       governance,

Ø       rural development, environment and natural resources,

Ø       promoting dialogue on human rights, and

Ø       education and training



Private sector participation in AusAID projects

It was noted that the implementation of all AusAID projects is done by companies that are registered in Australia or New Zealand.  Specifically, all tendering companies must carry on business in Australia or New Zealand, have headquarters and associated facilities in Australia or New Zealand and the majority of the team proposed in the tender must be Australian or New Zealand citizens or permanent residents who have qualifications recognised in Australia or New Zealand.  The team leader must be an Australian or New Zealand citizen or permanent resident and have relevant qualifications recognised in Australia or New Zealand. 

Exceptions may occur with projects for which there is a demonstrated lack of technical capacity within Australia or New Zealand.  Additionally, the proportion of Australian and New Zealand citizens or permanent residents may be reduced (but may not be less than one-third), provided that the majority of those nominated from third countries come from the developing country or countries in which the project is being implemented. 

Co-financed projects that are administered by international aid organisations, with some direct contributions from the Australian Government, are not tied to Australian services in the manner just described.  There is a presumption, however, that that qualified Australians will have the opportunity to apply for expatriate staff positions and consultancy opportunities with these organisations.

Goods needed or purchased as part of the aid funding need not be sourced in Australia, but it is generally hoped that a substantial portion of it will be.  Procurement must comply with the normal conditions for government purchases and this is based upon achieving “value for money”.

A brief discussion arose regarding AusAID’s selection process for implementing contractors.  Private sector participants made the following comments:

Ø       Examination of the short-listed companies suggests that most of the implementation work is done by a relatively small number of companies.  Although it is clear that AusAID seeks a wider field, there is nevertheless a perception among potential tendering-companies that new entry is difficult.  This perception acts to perpetuate the relatively small number of implementing companies.

Ø       The implementing companies sub-contract much of the work to other companies and this sub-contracting process is less transparent to the private sector, as compared to the contract for project management. 

Ø       In the past, the evaluation procedure for projects and for specific tenders was difficult to understand, and the “debriefing” for unsuccessful bids was not always effective in clarifying the procedure.

Public sector participants stated that the tendering process is constantly being reviewed and improved so that many of the difficulties experienced by prospective tenders in the past have now been eliminated or minimised.  AusAID has consultations with new tenderers and offers guidance in the preparation of their bids. 

AusAID encourages smaller companies to form syndicates for the purpose of making bids and encourages the implementing company to draw from a range of potential sub-contractors.

The sub-contracting arrangements are controlled in the sense that AusAID has specific compliance requirements for subcontracts.  It was pointed out, however, that information about the sub-contracting procedure in general, and about compliance in specific cases, is not generally available. 


Improving private sector participation

More complete information about current AusAID projects in China would be beneficial to private sector companies that do not seek to be part of the contracting process.  This could include Australian businesses that are seeking markets for unrelated products or services, but for which indirect benefits could be obtained from the goodwill established by AusAID projects. 

For example, the Chamber could make use of information about AusAID projects when meeting with visiting delegations from the relevant cities.  These delegations would typically be from municipal or provincial government departments that are not directly related to the projects, but the link through the project is nevertheless likely to enhance the level of cooperation in other areas.

The information that is readily available from AusAID is not is a particularly useful form.  For example, the aid program strategy for 2000-2001 (cited in the first paragraph of this summary) does not list new or current projects.  Page 2 of the document contains a list of ongoing projects, but the location associated with each is excessively general (China wide, Beijing, various provinces in China, flood affected provinces in China, etc.). 

Greater detail is available from the project design documents that are posted on the Internet for potential tenders.  However, these are taken off the Internet after the deadline for tenders and cannot be referred to later unless they were downloaded during the announcement period.

Public sector participants agreed that the “business opportunities” information on the Internet was managed by the contracts division of AusAID and was designed to facilitate the contracting process.  Other ways of conveying and retaining relevant information could be considered. 

The Chamber agreed to supply some specific suggestions in a separate document in relation to these comments.

Part Two: Aid program strategy for 2001-2002

As noted above, most of the private sector participants supported the range of activities that went into the strategy for 2000-2001, but nevertheless suggested that several new directions should be considered.

These are summarised in the sections below.


Increased focus on urban poverty and urban development in China

It was noted that most of Australia’s development assistance projects in China focused on rural poverty.  In view of the fact that approximately 68 per cent of Chinese live in rural areas, this emphasis is understandable.  However, the rural-to-urban migration is rapidly increasing and this places increased pressure on urban development.  Unless urban planning is improved substantially, this migration may be associated with a transfer of poverty from rural areas to urban areas.

It was also suggested that the alleviation of poverty through specific aid projects might be more difficult in urban areas.  This arises from the need to integrate these projects more completely into the overall urban environment.  Additional planning and coordination may therefore be necessary and the process of achieving this should be started before the need becomes urgent.


Increased focus on small and medium-sized enterprises in China

AusAID’s assistance relating to governance has, in the past, concentrated on the financial sector and various Chinese state-owned enterprises (SOEs).  Many of the smaller SOEs have now been privatised.  This was achieved, in some cases, by selling shares to the employees. 

Assistance in improving the managerial and financial structure of these enterprises is needed in order to ensure that they are able to grow in size and diversity under a more competitive market system.


Increased focus on enterprises and industry associations in China

Recent reports indicate that private enterprises in China contribute about 33 per cent of the gross domestic product.  If privately owned agricultural enterprises are included, the proportion may reach 51 per cent.  Taking into account collectively owned enterprises, the contribution of all non-state-owned businesses account for about 62 per cent of GDP.

Private sector participants noted that the relevance to this to AusAID projects is that the close link between MOFTEC and the provincial and municipal Foreign Economic Relations and Trade Commissions may, in the near future, be less comprehensive in screening development projects, compared to the situation during the past two decades. 

Input from enterprises and industry associations is correspondingly more important, but these are less developed as effective organisations, compared to departments within the three levels of government.  These organisations should gradually become more active participants in the AusAID project selection process, and to be effective in that capacity it will be necessary to undertake some project work in institutional strengthening.


Summary of follow-up from the Chamber

1. Specific suggestions for improvements in the information made available to the private sector about current and anticipated AusAID projects in China.

2. More specific suggestions and rationale for new directions in the development assistance program with China for 2001-2002.



Return to the top of this page.