Summary and Conclusions
The context and rationale for New Zealand's development co-operation

The basic rationale for New Zealand's development co-operation is to help maintain peace, security and stability, advance international prosperity and protect the global environment, particularly in the South Pacific.(1) Development co-operation forms part of New Zealand's role as a responsible international citizen. For a country of 3.8 million people, New Zealand in 1999 maintained an aid programme of 134 million United States dollars (USD) and addressed a wide selection of issues through various channels and funding windows.

Developing countries in the South Pacific face a particularly complex range of development challenges. New Zealand has close ties with many nations in the Pacific and events in the region matter to it. Fostering economic growth and good governance in developing countries in its neighbourhood is thus a major national interest, with development co-operation a key instrument of policy in this context. Through NZODA (as its aid programme is known), New Zealand is working in partnership with developing countries in the Pacific, and beyond, to help them address their development challenges. New Zealand is among the principal donors in the Pacific and directs most of its official development assistance (ODA) to the region via a range of bilateral, regional and multilateral channels. This indicates a focus on countries with a continuing need for aid and external assistance, despite some having relatively high levels of per capita income.

New Zealand plays its part as a constructive member of the international and especially the Asia-Pacific regional community in other ways also:

New Zealand is engaged in an impressive range of activities to assist developing countries integrate into the global economy on a sound basis including by:

• Providing leadership, especially when Chair of the Asia-Pacific Economic Co-operation (APEC) process in 1999, in efforts to address the root causes of the Asian financial crisis, notably causes related to financial and corporate governance.
• Helping to create a more open trading environment between Australia, New Zealand and member countries of the Association of South-East Asian Nations (ASEAN) by reducing impediments to trade and investment.
• Supporting initiatives within the South Pacific Forum, such as the annual Forum Economic Ministers Meeting (FEMM), which enable development issues to be discussed and addressed within a peer group context.
• New Zealand played a catalytic role in 1998 in brokering a peace agreement which is bringing to a close 10 years of conflict on the Papua New Guinean island of Bougainville. It has also responded rapidly and strategically in the Solomon Islands since 1999, following an escalation in violence related to ethnic tensions.
• New Zealand has provided humanitarian and emergency assistance in response to crises in recent years, including in Kosovo, East Timor and Papua New Guinea following the Aitape tidal wave.

While some of New Zealand's contributions to promoting prosperity, maintaining security and protecting the environment are justifiably well known, its lesser-known longer-term development co-operation efforts are also producing results. These achievements deserve to be better communicated to the public, to help build confidence in aid and the NZODA programme. An opinion survey conducted in 1999 found that most New Zealanders had low levels of knowledge of the aid programme and were only moderately convinced of the effectiveness of aid. A field visit to the Solomon Islands to prepare for this peer review found that New Zealand's activities there are indeed relevant, producing results and contributing, both directly and indirectly, to poverty reduction.

New Zealand has a new coalition government and both coalition parties indicated in their election manifestos an intention to increase ODA in a staged manner.(2) The previous government set itself the objective of increasing ODA "towards the OECD average". As a share of gross national product (GNP), New Zealand's ODA exceeded the weighted average of the 22 Member countries of the OECD's Development Assistance Committee (DAC) in 1997 and 1998, but remained well below the DAC average country effort (unweighted average). With a ratio of 0.27%, its highest level for a decade, New Zealand was the 15th ranked country in the DAC in terms of ODA/GNP performance in 1998 and 13th in 1999.

Carrying New Zealand's policy framework forward

Previous DAC peer reviews have noted a clear improvement in the quality of New Zealand's development co-operation policies and programmes during the 1990s: a policy basis for NZODA has been developed and published in Investing in a Common Future; programme management has been strengthened through a unit, staffed by development specialists, to provide programme support and conduct reviews and ex post evaluations; and country programmes have been introduced, complemented by annual programme talks with main partner countries. This review confirms that improvements in NZODA's policies, analytical capacities and processes continue to provide a good underpinning for New Zealand's development co-operation.

At the same time, implementation of the development partnership strategy, with its focus on poverty reduction and support for locally-owned development strategies, is leading many bilateral and multilateral donors to review and adjust their approaches to delivering development co-operation. This broad international change agenda is supporting reforms in individual aid agencies. Domestically, New Zealand's new coalition government is committed to a strong aid programme. This could be an appropriate moment, therefore, for New Zealand to map out a medium-term agenda for its development assistance, re-articulating its support for the development partnership strategy and spelling out how it will assist with efforts to achieve the international development targets set for 2015.

In this context, the challenges for the NZODA programme include:

• Re-examining development co-operation objectives and strategies.
• Reconsidering the organisational and staffing structure and skill mix for NZODA, in Wellington and at posts in developing countries.
• Ensuring that bilateral programmes are appropriately balanced between priority for main partner countries and selected out-reach to other developing countries.
• Setting a medium-term ODA/GNP target which becomes a reference point for establishing the level of the aid budget.

New Zealand's commitment to poverty reduction was made explicit in Investing in a Common Future. Recent work in the DAC Informal Network on Poverty Reduction indicates that pursuing multiple objectives may compromise an aid agency's poverty reduction goal. This may be occurring with the New Zealand programme - while nearly two-thirds of bilateral ODA funded social infrastructure and services in 1998, this was mostly directed to secondary and tertiary education, particularly in New Zealand. Only 9% of New Zealand's bilateral ODA was directed to basic social services. Similarly, although a range of NZODA schemes and funds support activities in the areas of health, environment and good governance, the budget allocations for these remain modest. Recognising the multi-dimensional character of poverty reduction, particularly in the South Pacific, there may be room for New Zealand to go further in aligning NZODA's guiding principles with the central thrust of the development partnership strategy by clarifying the programme's poverty reduction objective and directing more of New Zealand's ODA towards key activities for poverty reduction. The emerging context of political, public and civil society support in New Zealand is propitious for making poverty reduction a clearer objective.

The NZODA policy statement on education and training needs expanding. Considering the importance of this sector in the New Zealand programme, more policy guidance needs to be provided in a social development and poverty reduction framework on what the relative priorities should be as regards primary, secondary and tertiary education; the distribution between training in-country, in New Zealand and in third countries; and the special places to be given to education for girls, adult literacy training, vocational training and distance education.

New Zealand's policies for gender and environment are well formulated and provide good guidance on how NZODA should proceed. In other areas currently without specific policy guidance - health and population, good governance and human rights - policies should be developed taking account of international trends and the views of stakeholders and partners. There may be some merit in combining areas, such as a consolidated policy on basic social services and another on human rights, participatory development and good governance.
This could be an appropriate moment for New Zealand to prepare a full restatement of its aid policy objectives and framework drawing out the interlinkages and synergies between actions in different areas and sectors of intervention and relating them to New Zealand's fundamental interests in development progress and poverty reduction.

Organisational and staffing structure in NZODA

The NZODA programme is managed by the Development Co-operation Division of the Ministry of Foreign Affairs and Trade (MFAT). Personnel at New Zealand embassies and high commissions in developing countries, both foreign service officers on posting and local staff, become heavily involved with the development co-operation programme.

Several DAC countries run their operational development programmes from foreign ministries rather than from a separate organisation, but this model is facing a number of interrelated challenges. There is increased awareness that delivering development co-operation effectively within more integrated, co-ordinated and partner-led contexts requires delegation of authority to suitably qualified staff in the field, a career structure which attracts and retains people with both development experience and political skills and an increased focus on coherence and synergies between the development co-operation programme and donors' other polices impacting on developing countries. Given these trends towards country-based partnership frameworks, it would be timely for New Zealand to examine the current organisational and staffing structure for NZODA.

Considering the relatively small size of New Zealand's programme and its intimate relationship with New Zealand's main foreign policy agenda, a separate aid organisation may not be an appropriate option. But the current structure could be assessed in comparison to other possibilities, such as an autonomous agency within the foreign affairs ministry, an expanded and reinforced development co-operation division within MFAT or integrated bilateral country desks handling all aspects of New Zealand's external relations with developing countries, backed up by a substantial core unit of development specialists to provide programme support. The experience of other donors facing comparable challenges might be investigated.

There are four categories of staff within the Development Co-operation Division:

• Career foreign service officers on rotation in the division, typically for a period of approximately two years in the past but efforts are being made to extend this.
• Non-rotational development programme managers with open tenure or fixed-term contracts.
• Development specialists on open tenure or three-year contracts.
• Non-rotational staff in administrative and support positions.

These staffing arrangements are seen to have two main advantages. First, foreign service officers bring experience from other parts of MFAT or the field and are subsequently able to apply a development co-operation perspective to their work in other divisions or in overseas postings. Second, employing development specialists on contract enables NZODA to adapt quickly to new demands and aid priorities. Since around half the staff in the division - including all senior staff, most development specialists and most programme managers - are either on contract or on rotation, the division is able to maintain a high degree of flexibility in its staffing arrangements which are regularly realigned to reflect changing demands and priorities.

On the other hand, staff rotation, based on diplomatic posting schedules, and employing development specialists on fixed-term contracts without a clear career perspective presents a challenge to the emergence of a core group of staff with in-depth development expertise within NZODA and the building up of institutional memory and continuity of aid programmes. Creating a core group of development officers able to serve both in Wellington and the field should be an objective for New Zealand. Longer postings to developing countries and successive development-related rotations may need to be envisaged. As development co-operation becomes delivered more frequently through integrated development frameworks, in co-ordination with other donors and in partner-led contexts, New Zealand should consider devolving greater programme management responsibility to officers in the field who have both development expertise and political skills. Moving in this direction will pose challenges for the New Zealand system without a more strategic approach to staffing, clear signals and incentives from the top on the value of development knowledge and experience to careers in MFAT and more decentralisation of programme formulation and management to strengthened field offices in the context of new partnership frameworks.

Implementation of aid projects is normally contracted out to a Management Services Consultant (MSC). For reasons of national involvement and identification, and where this is cost effective and compatible with the principle purposes of NZODA, New Zealand (or Australian) consultants are normally contracted. A major review of the MSC system is currently being undertaken by NZODA to assess the overall operation of the MSC contracting system. This review could usefully be expanded to consider two issues encountered during the field visit to the Solomon Islands relating to the contracting out of project implementation to MSCs:

• New Zealand should consider whether its aid programme is pursuing all opportunities to integrate the provision of services as well as goods from developing countries in its activities. Integrating local talent and know-how into the development process is limited to project review and implementation. Where locals can demonstrate the capacity to act as MSC and fulfil the New Zealand government's accounting and financial management requirements, New Zealand should seize such opportunities for reasons of partnership, local ownership, sustainability and overall development impact.
• MSC-run technical assistance efforts require a context of policy dialogue and integrated approaches to development to enhance effectiveness.

Sharpening the focus of New Zealand's programme

New Zealand's bilateral programmes are significantly shaped by the particular characteristics of its main partner countries, which comprise a large number of small island states. This largely explains the number of bilateral country programmes and the range of sectors in which NZODA assistance is sought, and poses special challenges of focus and management.

New Zealand has 19 main partner countries in the Pacific and East and South-East Asia. Bilateral assistance is also channelled through a number of scholarship schemes and funding windows for non-governmental organisations (NGOs) and the New Zealand private sector, as well as various sectoral and thematic funds and schemes which are often region-specific. For a programme with net bilateral ODA in 1999 of USD 101 million, 19 main partner country programmes is a large number to manage. These country programmes are also administratively intensive. New Zealand has a total of nearly 300 projects with an average project size of approximately 300 000 New Zealand dollars (NZD) (around USD 150 000). For most of these projects, contractual arrangements need to be made for consultants and each requires input from the development specialists in the Development Co-operation Division of MFAT. The various education and training schemes and activities require individual arrangements to be made and sometimes specific follow up. The NZODA programme consequently requires a high level of administrative and management input.

Through its multilateral assistance, New Zealand is supporting a range of agencies operating in the Pacific, Commonwealth agencies, United Nations agencies, sometimes with quite modest contributions, and some of the international financial institutions. In total, New Zealand contributes to some 40 multilateral organisations. New Zealand should continue to ensure that multilateral agencies take proper account of the special circumstances which prevail in the small island states of the Pacific and make adequate provision for the region in apportioning and delivering their services. A secondary objective should be to support effective and administratively straightforward ways of reinforcing the poverty reduction focus of the NZODA programme, extending its development co-operation efforts beyond the Asia-Pacific region and demonstrating its commitment to being a constructive member of the international community.

Summary of main recommendations

New Zealand has a serious and credible aid programme. This review confirms that the basic rationale for the NZODA programme is sound and deserves to be reinforced. At the same time, New Zealand's aid programme is facing a number of challenges. The election of a new coalition government in particular provides the opportunity for New Zealand to map out a mid-term agenda for its development assistance. In this context, the DAC recommends that New Zealand:

• Sharpen the programme's focus by making poverty reduction a clearer objective for the NZODA programme.
• Look to allocate more ODA towards programmes directly targeted to poor people and the basic sources of poverty. (A major review of NZODA investment in education and training is currently underway to determine whether a higher proportion of ODA should be allocated to basic education in partner countries.)
• Examine the current organisational structure for NZODA to determine its strengths and weaknesses in comparison to other possible structures in the light of the international convergence towards partner country-owned strategies involving intensive policy dialogue and donor adaptability.
• Build up a core group of officials for the NZODA programme with both development experience and political skills who would dedicate a substantial part of their careers to development work in Wellington and postings to developing countries.
• Strive to maximise the use of developing countries' own services and goods in the implementation of projects, including allowing for the use of local managing service consultants from partner countries.
• Ensure that its bilateral aid programmes are appropriately balanced between priority for main partner countries and selected out-reach to other developing countries.
• Set a medium-term ODA/GNP target.
• Expand public information and development education to build up public confidence in aid and show that NZODA is well-managed and achieving results.

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1 . The need to help maintain peace, security and stability in the South Pacific has been dramatically demonstrated by the violent efforts to overthrow the legitimate governments of Fiji and the Solomon Islands in May and June 2000. The meeting to review New Zealand's development co-operation took place at the OECD on 15 May 2000, prior to these events.

2 . In its first budget, brought down in June 2000, the new government allocated 227 million New Zealand dollars (NZD) for ODA for the 2000/2001 financial year, an increase of NZD 14 million over the budget allocation for 1999/2000.

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