A market-led approach
Following the election of the David Lange-led Labour government in 1984 the country underwent a radical process of reform that cut public-sector expenditure and deregulated the economy. At first, aid was not directly affected, but in the early 1990s the aid budget was reduced by a National government. In 1996 it was 0.21% of gross national income.
Aid programmes shifted from government-supported activities to those that worked more with civil-society organisations (such as community and professional associations) or the market. The sharp reduction in aid for recipient governments was used to encourage public-sector reform in countries such as Samoa and the Cook Islands.
New Zealand aid shrank so much during the 1980s that by the end of the decade its aid contributions were the second-lowest of all the OECD countries (the Organisation for Economic Co-operation and Development, whose members were developed wealthier nations). It didn't matter which political party was in power – aid fell under both Labour and National governments.
Trade and aid
More aid was directed towards specific projects with limited objectives and time horizons. The emphasis shifted away from poverty elimination and towards activities that both encouraged development through the growth of markets and provided prospects for New Zealand companies to trade. New Zealand’s aid programme was a matter of ‘doing well out of our doing good’, as Don McKinnon, minister of foreign affairs and trade, said in 1995.1
While aid declined in this era, the distinctive style of New Zealand’s overseas assistance was retained. This focused on recipient needs, targeted rural areas and emphasised technical assistance. Most projects funded were small (80% were under $150,000). During the 1990s around 75% of New Zealand aid was bilateral (given by one country to another).
Growth of non-government agencies
A large number of non-government development agencies began to appear or expand their operations during the 1990s. Some were local branches of international organisations, such as Oxfam, Tear Fund, World Vision, Save the Children and UNICEF. The aid they distributed around the world is termed multilateral aid as it came from many different governments and other sources.
Although these agencies often had different mission statements (for example World Vision is a Christian organisation), in effect they competed for public donations and government support. Some, such as World Vision, were successful in appealing for public support through campaigns such as child sponsorship and 40-hour famines. Many engaged in raising money for relief after natural disasters (cyclones in the Pacific or famines in Africa). Some also acted as sub-contractors, delivering government-funded projects through their overseas networks.
Focus on poverty elimination
In this market-driven era of aid, New Zealand followed global trends but did so slowly. There was a major international change of direction in aid, beginning in the early and mid-1990s. This new direction resulted from questioning of the market-driven model, which had debilitated governments and their ability to deliver basic services. It was also influenced by coverage of devastating famines in Ethiopia and resultant worldwide fundraising campaigns.
Global institutions, including the World Bank and bilateral aid agencies in Western Europe, began to explicitly focus on poverty elimination. There was also a recognition that governments had to be supported more effectively to deliver basic services to their people in a democratic and transparent manner. The focus on poverty was reflected in the United Nations Millennium Development Goals of 1999. One goal was to halve acute poverty in the world by 2015.