Governance is high on the agenda in Australia’s aid policy, with a budget of $850 million for 2014/15. Governance refers to the selection and monitoring of governments and the effectiveness of a government in implementing policies.

Governance funding increased significantly in the post-September 11 security environment, peaking in 2005-2006 at 36% of ODA, but since has been gradually declining. While governance has still been given high priority because of the importance of developing sound institutions and government processes, the results have not always been commensurate with spending levels.

While strong and effective governments are needed for successful development, promoting a commitment to good governance from recipient governments is typically beyond the ability of aid to influence, except at the margins. Governance affects the capabilities of the recipient country, the performance of the donor country, and the quality of the relationship between the two. However, the problem with governance is that it is often seen as a ‘catch-all’ concept. While aid can play a critical role in promoting development, the role of aid in governance must be kept in perspective. For most countries, it is their own policies and practices that are far more influential than aid in determining whether or not development outcomes are achieved. There is also significant evidence to demonstrate that aid flows to governance lead to reduced incentives to strengthen national institutions, and mainstream foreign priorities and interests in developing countries.

Solidarity needed

As the world becomes increasing connected and interdependent so do the problems of stagnation and recession. For countries like Australia this means that the contribution that is made to governance in other parts of the world becomes less a matter of solidarity and needs, and instead is viewed in terms of ‘national interests’. Current development relationships continue to present an asymmetry of interests with the donor remaining the demanding party and the recipient utterly dependent on goodwill and not in the position to exercise any rights.

Good governance?

The governance debate has also raised a number of fundamental issues. These include the appropriateness of the ‘good governance approach’ itself, with arguments over how far traditional political structures and social values should be compromised for western forms of democracy. There are also broader principles at stake, including the extent to which aid donors can, or should, seek to influence constitutional structures or economic policies in recipient countries, particularly when the economic policies being promoted benefit Australia, such as relaxing foreign ownership rules or promotion of mining.