Australia's new International Development Policy sets a broad scene for private sector development

The new — and highly anticipated — Australian International Development Policy sets the scene for Australia’s future support for private sector development. While there is not a lot of detail on how Australian aid should work with the private sector or support private-sector development, it does contain some essential elements that frame the future of Australia’s development assistance.

The policy sets the stage for Australia’s development cooperation agenda and priorities for the years ahead and is the first substantive development policy setting for a decade. 

First Nations input, leadership and traditions

For the first time, a development policy has recognised the need to incorporate First Nations input, leadership and traditions.

Not much is said directly in the policy about private sector development in developing economies or the Indo-Pacific in particular.

There are references to working with private investors, where for example, Australia seeks to “leverage private sector investment” and advocate “for countries in our region to attract finance from the private sector, multilateral development banks and philanthropies.” However, there is little on how Australia can boost the economy and employment opportunities for local firms. 

This level of detail may be too much to expect from a broad policy like this. However, I would have thought more could be said about the role of the private sector in job creation and regional and local economic growth. Australia has good experience in market systems, business-led approaches and private-sector partnerships.

The policy does not mention small business development. It does refer to “support local leadership, solutions, and accountability, including by channelling funding to local actors… Funding for local partners has a double dividend, creating local jobs and delivering direct economic benefits, as well as improving our impact.”

Supporting business environment reforms

I am pleased to see a continuation of efforts to support structural reforms that improve economic performance and prevent economic downturns and crises. This includes reforms that “diversify and open economies, create decent jobs, and improve business-enabling environments.”

The policy describes Australia’s support for partnerships:

There are some valuable new areas of focus. This includes support for climate action and gender in development.

Increasing climate investments

These include a strong commitment to climate change by increasing climate investments and better addressing climate risks. This underscores the need for Australia to step up its climate funding as part of its bid to co-host COP31.

This policy has been released alongside the recent Development Finance Review, which looked at how new forms of finance can address increasingly complex development challenges facing the Pacific and Southeast Asia, including climate financing. The Government has accepted all eight of the Review’s recommendations which seek to build Australia’s capability to use the full suite of development financing approaches to address urgent Indo-Pacific development needs
and vulnerability to climate change.

Supporting gender in development

The policy also reinforces the importance of gender in development. It reinstates a target for 80 per cent of all development investments to address gender equality effectively. It introduces a new requirement for all new investments of more than three million Australian dollars to include gender equality objectives.

Watch this space

The Australian Council for International Development notes that this policy is “just the beginning.” It “marks the start of rebuilding the international development program.”

I suspect we will see a shift in how Australia supports private sector development in its aid program in the coming years. This will likely include a stronger focus on climate and ensuring a more inclusive development outcome (i.e., women, indigenous communities, young people, and people with disabilities). While private investors are encouraged, it will be interesting to see how Australia nurtures these relationships and facilitates investments into infrastructure and supply chains. The reform agenda for developing economies is continuous and expanding. This is not only about creating space for the private sector to create jobs, trade, and provide goods and services to the local economy. It is also about how local people engage in the economy sustainably and in a manner that improves their economic futures.