By Jill Hickson

In moving to slash Australia's$1.5 billion foreign aid budget, foreign minister Alexander Downer made his first target the Development Import Finance Facility (DIFF), with its funding of $124 million.

Strong complaints from businesses and from countries which benefit from DIFF have forced Downer to promise China, Indonesia, Vietnam and the Philippines that projects in 1997-98 which would have been funded under DIFF will now go ahead with the funding from the bilateral aid budget.

Cuts to Australia's foreign aid began under the Hawke Labor government in 1986. In 1969, the Gorton Liberal government set the aid budget at 0.55% of GDP, still under the 0.7% recommended by the OECD. Today the aid budget is 0.33% of GDP, and this will fall even lower after the budget.

DIFF was designed to assist Australian firms in obtaining infrastructure contracts in the Asian region. Funds provided to recipient governments have to be spent by goods or services from Australian companies. DIFF represents over 50% of the Australian aid program to China and over 40% of Australian aid spending in Indonesia.

Under the scheme, big companies have done very well. The construction firm Transfield received contracts worth $269 million, of which $88 million was provided from DIFF. GEC Alstrom had contracts worth $174 million. Westinghouse Brake and Signal Co. (Aust), John Holland Construction and others received contracts worth $1.169 billion between 1991 and 1995.

Virtually none of this was for humanitarian purposes, but rather for big capital works and services programs. Some smaller NGOs were able to access a small amount of funds from DIFF for projects like the Solatex solar electrification project in Indonesia -- which has also been cut.

There are now more than 1.3 billion people in the world living in absolute poverty -- without decent housing, clean water, sanitation, health care, education and adequate food. The majority of these people survive on less than a $1 a day and 75% of them live in south Asia, Indochina and China.

Opinion polls show strong support for aid spending. The replacement of DIFF funds by money coming from the general aid budget will mean further cuts in real humanitarian assistance and increased hardship for the poor in these counties.

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