Scoping the Policy

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					                             MARCH 2007 CONSULTATION DRAFT




                            GROWTH AND LIVELIHOODS

                         TE TIPURANGA ME TE ORANGA



                              E tipu, e Rea, i ngä rä ōtou ao
           Ko tou ringa ki ngä räkau a te Päkeha hei oranga mö tou tïnana… *




(*Part of a famous text by Sir Apirana Ngata encouraging a young girl, Rea, to grow in
education, culture, and faith to foster her wellbeing: “Grow up, o Rea, in the days of
your world, your hands embracing modern means to enhance your livelihood ..”)


Introduction......................................................................................................... 2
Summary ............................................................................................................ 2
Kupu Whakataki ................................................................................................. 4
Whakarāpopotonga ............................................................................................ 4
Summary of Core Programming Areas and Assistance ..................................... 6
Section B: The Importance of Pro-Poor Economic Development He kaupapa
tautoko i te hunga pöhara ................................................................................... 7
Section C: Guiding Principles / Nga kaupapa ärahina ...................................... 10
Section D: Development Outcomes and Core Programming Ngä hua me ngä
whakaritenga matua ......................................................................................... 13
Section E: The Importance of Partnerships for Reducing Poverty .................... 23




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                                           Introduction
1. This policy statement outlines NZAID‟s approach to promoting pro-poor
economic development and livelihoods. It is consistent with NZAID‟s policy
statement Towards a Safe and Just World Free of Poverty, and the agency‟s
central focus on the elimination of poverty. It is one of an integrated set of
NZAID policy statements, including policies covering human rights, gender
equality, conflict prevention, HIV/AIDS, education, health, the environment, and
trade and development.1

2. The policy is intended to guide New Zealand‟s work with our partners in the
development process, including partner governments, other bilateral and
multilateral agencies, civil society and the private sector. It is intended to
complement the strategies describing NZAID‟s engagement in our two focal
regions, the Pacific and South-East Asia, and the engagement strategies for our
key multilateral partners as described in NZAID‟s Multilateral Engagement
Strategy.


                                            Summary

This policy begins by underlining the importance of broad-based economic
development for poverty reduction. It emphasises economic growth as a means
to an end – poverty reduction – rather than an end in itself.

The policy outlines the operating principles that guide NZAID‟s work, including
the focus we give to human rights, gender and the environment and the
emphasis we place on partnership, participation and sustainability. It underlines
the need to focus on the strengths, aspirations and assets of poor people, while
recognising some of the risks associated with economic development and
suggesting approaches to mitigate these.

NZAID‟s economic development                    assistance   will   contribute   to   three
development outcomes:

       a reduction in the number of people living on less than a dollar a day and
        who live with regular hunger;
       an increase in the opportunities for poor people to earn an income and
        improve the resilience of their livelihoods; and
       increased sustainable growth and a reduction in the poverty faced by
        people living in the poorer regions of developing countries.

1
 Copies of NZAID‟s other policy documents and strategies can be found on the NZAID website:
www.nzaid.govt.nz




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This policy is based within a framework of human rights. In particular it is
designed to protect and promote principles of equity by focusing NZAID‟s
support on the sectors and activities on which poor people depend and by
empowering poor women and men to build on their strengths and take
advantage of new opportunities.

The policy describes a range of core programming areas and types of
assistance to give effect to these development outcomes.              These are
summarised in the table below and described in further detail in Section D.

Emphasis is given to the importance of macro-economic stability, including
through the implementation of sound fiscal and monetary policies, public sector
reform, appropriate regulation/deregulation and the strengthening of key
institutions.

The policy also describes how NZAID can help its partners in government, the
private sector and civil society improve productivity, build competitive advantage
and thereby create jobs and improve incomes in the sectors of greatest
significance to poor people. It reconfirms the importance of tailoring NZAID‟s
partnerships and responses to the individual circumstances faced by different
countries, and the specific opportunities and constraints that they face. The
policy underlines the need to focus NZAID‟s efforts and these partnerships on
policies and activities that will make a real difference to poor people‟s lives.




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                                     Kupu Whakataki
1. E whakamārama ana tēnei whakapuakitanga kaupapa here i tā te NZAID
whāinga hei whakatairanga ā-moni, ā-ora i te hunga pōhara. E hāngai ana hoki
tēnei ki tā te NZAID whakapuakitanga kaupapa here Towards a Safe and Just
World Free of Poverty, ā, me te aro matua hoki a te tari nei ki te whakakore
rawa i tēnei mea te pōharatanga. He whakapuakitanga kaupapa here kotahi
tēnei nō tētahi kāhuinga kaupapa here a te NZAID, tae atu ki ngā kaupapa here
mōtika tangata, ōritetanga tangatatanga, haukoti whawhai, ko te HIV/AIDS, te
mātauranga, te hauora, te taiao, ā, ko te tauhokohoko me te whanaketanga.[ 2]

2. Ko tēnei kaupapa here hei whakataki i ngā mahi tahi a Aotearoa me ōna hoa
mahi whanaketanga, tae atu ki ngā kāwanatanga hoahoa, ētahi atu rōpū
kirimana takirua, kirimana takitini rānei, ki te iwi whānui me ngā kamupene anō
hoki. Hei tautoko anō tēnei i ngā rautaki mā te whakaatu i tā te NZAID ki ōna
rohe aronui e rua, arā ki Te Moana nui a Kiwa me Ahia ki te Tonga-Rāwhiti, ā,
me ngā whakatinanatanga rautaki mā ngā tino hoa kirimana takitini e whakaaria
rā ki roto i tā te NZAID Rautaki Kirimana Takitini (Multilateral Engagement
Strategy).


                                   Whakarāpopotonga

Tīmata mai tēnei kaupapa here i te whakaaro whānui ā-moni e heke ai te
pōhara. Ka whakanuia te whakatupu ā-moni hei kaupapa – e heke ai te pōhara
– kaua mō te mahi moni noa iho te take.

Ka whakaaturia ki tēnei kaupapa here ngā tikanga mahi a te NZAID, tae noa ki
te aronui ki ngā mōtika tangata, te tangatatanga me te taiao, me te whakaaro
nui ki te mahi ngātahitanga, te whai wāhitanga me te ora tonutanga.
Whakamana ana tēnei kaupapa here kia aronui ki ngā pūkaha, ngā hiahia me
ngā rawa a te hunga pōhara, i te wā tonu e aro tahitia ana ngā whakatūpato ki
ngā kaupapa mahi moni, ka homai hoki ētahi whakaaro me pēhea e kore ai e
raru.

E toru ngā hua e whāia ana e ngā tuku tautoko kaupapa moni a te NZAID:

         kia heke te tokomaha o te hunga e ora ana mō te iti ake i te kotahi tāra
        ia rā ka mutu he rite tonu te matekai;
         kia nui atu te whai wāhi o te hunga pōhara ki te mahi moni e tau ake ai
        ō rātou oranga; ā

2[1]
   He pepa kaupapa here anō, he rautaki anō nā te NZAID kei tōna ipurangi nei:
www.nzaid.govt.nz




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        kia piki haere tonu te whanaketanga ā, kia heke te pōhara o te hunga
        kei ngā wāhi pōhara o ngā whenua pōhara e noho ana.

Nō roto mai i ngā mōtika tangata tēnei kaupapa here. He mea āta mahi ia hei
whakatau tikanga tohatoha mā te whakahāngai i ngā tautoko a te NZAID ki ngā
kaupapa me ngā mahinga e hāpai nei i te hunga pōhara, ā, me te whakamana
wahine, whakamana tāne hoki ki te whakatupu i ō rātou pūkenga ki te whai hua
hoki ki te ao hou nei.

Ka whakaatu te kaupapa here nei i ētahi whakakaupapatanga katoa me ngā tū
tautoko hoki e hua ai ngā hua. E whakarāpopotohia ana ēnei ki te tēpu e whai
ake nei ka āta whakamāramahia anō hoki ki te Wāhanga D.

Ko tētahi wāhi nui ko te tau o ngā whakaaro whānui ā-moni, mā te whakatū
kaupapa here moni tau, ko te whakarerekē i te wāhanga kāwanatanga, ko te
here ture mākete me te wete ture mākete, ā, me te whakapakari anō hoki i ngā
tino whare mahi ā-motu.

Ka whakaatu hoki te kaupapa here nei pēhea ai te āwhina atu a te NZAID i ōna
hoa kāwanatanga, i ngā kamupene mahi, i te iwi whānui hoki kia huhua ake ai
ngā mahi, me te whakaara taumata whakataetae e whai mahi ai e whai moni ai
ki ngā wāhanga aronui ai te hunga pōhara. Ka tautoko te kaupapa here nei i te
tika o te whakahāngai i ngā hoahoatanga me ngā mahi whakautu a te NZAID ki
ngā āhuatanga motuhake o ia whenua kē, ki ngā hua me ngā here kei mua i a
rātou. He mea nui ki te kaupapa here nei te whakahāngai i ngā kaha o te
NZAID me ōna hoahoatanga nei ki ngā kaupapa here me ngā mahi e rerekē
tūturu ai te oranga o te hunga pōhara.




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                Summary of Core Programming Areas and Assistance
              Programming Area                        NZAID assistance may include support for…

                             Making Globalisation Work for the Poor
Fairer international trade rules             Trade policy advice, building capacity to engage in
                                             international processes and access markets.
Increasing the benefits & opportunities from Exploring ways to increase the opportunities and
migration                                    benefits of migration flows.

                                  Creating an Enabling Environment
                                                Macro-economic       policy    advice,  including  the
                                                establishment of medium term expenditure frameworks
Promoting sound monetary and fiscal policies International debt relief initiatives
and a pro-poor policy environment               Economic advice through the World Bank, ADB and IMF
                                                The development of pro-poor national policies and
                                                strategies
                                                The review and improvement of legal, regulatory and
                                                investment environments
Improving    institutions,   the    regulatory The sustainable management of natural resources
environment and competition                     Investment promotion
                                                Regional solutions to regulation and competition
                                                Institutional and organisational strengthening for key
                                                government agencies
Strengthened infrastructure for broad-based Small-scale and large-scale (selective) infrastructure
growth                                          projects
Land tenure                                     Locally-led improvements to systems governing property
                                                rights

                                 Making Markets Work better for the Poor
A vibrant and efficiently regulated private sector Promoting private sector development in sectors and
                                                   activities most likely to benefit poor people
Improving productivity and quality                 Strengthening the effectiveness and efficiency of
                                                   research and extension services
Developing skills and moving up the value The improvement of business and technical skills to
chain                                              enable the poor to move into more lucrative activities
Support for small- and micro-enterprise SME development strategies and programmes
development                                        Organisations supporting SMEs
Enhancing access to finance and mobilising Carefully selected micro-finance schemes
savings                                            Improving financial literacy and poor people‟s access to
                                                   commercial banking services
Improving food security                            Improving productivity and quality in primary sectors
                                                   Growing and marketing traditional food crops
                                                   Research into traditional staple food crops




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Section B: The Importance of Pro-Poor Economic Development
           He kaupapa tautoko i te hunga pöhara

3. In today‟s increasingly globalised world economy, economic growth is a
necessary, though not sufficient, condition for the achievement of the poverty
reduction objectives embodied in the Millennium Development Goals (MDGs).
Reducing income poverty (less than US$1/day to live on) and hunger is the first
of the eight MDGs agreed by the United Nations in 2000 and re-affirmed at the
UN Special Event in September 2005.3

4. Economic growth helps underpin the right of people to live free of absolute
poverty and hunger and their right to adequate education, health and other
essential services. Economic growth is a cornerstone of countries‟ poverty
reduction strategies. There are very few countries that have achieved significant
poverty reduction without economic growth, so growth is a key element of most
countries‟ poverty reduction and national development strategies. Economic
growth creates employment and income-generating opportunities, which enable
people to invest in their families‟ education, health and other assets. This can
help reduce vulnerability, empower people and be a source of pride. It also
helps to generate tax revenues for spending on health and education and the
other services needed to secure people‟s rights. Growth and the employment it
creates are fundamental to providing long term social stability and avoiding
conflict. And economic growth is directly correlated with improved indicators
for life expectancy, maternal and infant mortality and educational attainment.

5. But economic growth and development is not a one-way street. The
interaction between better health, improved education and growth is part of a
multi-faceted process. Healthier and better-educated people contribute more to
economic development and greater economic development provides greater
resources for health and education. Improved transport infrastructure can
contribute to better health and education outcomes but can also speed up
deforestation and the spread of HIV/AIDS. These inter-relationships underline
the importance of recognising the interaction between the various assets at the
disposal of poor people such as education and skills, tools and equipment, land
and property, the environment, savings and credit, and social networks, as well


3
   Estimates of the numbers of people living below the internationally accepted income poverty
line of $US 1 a day vary, but are generally agreed to be over 1 billion, or approximately a sixth
of the world‟s population. Those living with hunger and malnutrition are thought to exceed 800
million, the majority of whom are women, children and the elderly. More than a quarter of
children under age five in developing countries are malnourished. (Source: The Millennium
Development Goals Report 2005, United Nations.)




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as the significance of the broader policy environment in which they live, work
and vote.


“There is mounting evidence that high initial levels of inequality both lower the rate of growth
and increase the likelihood of negative distributional effects. In addition, the pattern of growth,
both geographically and across different sectors of the economy, also has an effect. If growth is
broad-based, encompassing the whole country and economy, it is likely to be faster and provide
greater opportunities for the poor. Similarly, rapid growth in those regions in which the poor live
and those sectors from which they earn a living will also assist poverty reduction: for example,
increased agricultural productivity has been a significant factor in poverty reduction in many
countries.”

(Accelerating Pro-Poor Growth through Support for Private Sector Development, OECD, 2004).

6. Many economic, social and cultural rights (such as the rights to work, an
adequate standard of living, housing, food education and health) 4 can be
realised only progressively over time due to resource constraints. Economic
growth can help reduce the resource constraints, but growth without equity and
social inclusion will not reduce poverty. Economic growth must, therefore, be
part of a comprehensive set of policies and institutions which will assist
countries to progressively protect and fulfil their peoples‟ economic, social and
cultural rights.

7. NZAID recognises that economic growth is a means to an end – a fairer and
more just world free of poverty – rather than an end in itself. Some forms of
economic growth are highly concentrated: growth does not always „trickle down‟
to the poor. If growth is to benefit poor women and men, they must be
participants, either directly or indirectly, in the process. Broad-based growth or
growth in the sectors on which most poor people depend has a higher chance
of benefiting them. In our partner countries, the majority of poor and vulnerable
people continue to live in rural areas and rely on their natural resource base for
subsistence food production and income generating activities. Women and
children account for the majority of the world‟s poor people. Hence, NZAID‟s
focus is on promoting broad-based and inclusive growth, with particular, though
not exclusive, attention to addressing rural poverty. This includes support for the
development of sectors such as agriculture, forestry, fisheries and tourism, and
support for specific measures to ensure that women, children and
disadvantaged people and regions are able to participate in and benefit from
economic growth.

8. While most poor people continue to live in rural areas, rapid urbanisation is
taking place in many developing countries. There are growing pockets of
intense poverty in many informal and squatter settlements, where economic and
employment opportunities are few and far between. In combination with
urbanisation, high population growth rates are contributing to a growing number

4
    International Covenant on Economic, Social and Cultural Rights




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of unemployed youth, particularly in such settlements. This policy must also
respond to the needs of people living in these areas too.

9. Through promoting pro-poor economic development, NZAID will also be
contributing to equitable development. This has not only a strong moral and
human rights basis, but also makes sound economic sense. Empirical analysis
has shown that achieving greater equity need not mean sacrificing growth. In
fact, the opposite is true: societies with lower levels of inequality, including
between men and women, achieve more sustainable and higher growth rates.5

10. Furthermore, in addition to helping reduce poverty, secure and resilient
livelihoods play an essential part in reducing the risks of conflict and other
security-related problems. This has particular resonance in parts of the Pacific
where inadequate and uneven economic development and growing
unemployment have already contributed to conflict, political instability and
economic crises.


“When poverty exists there is no freedom….. Overcoming poverty is not a gesture of charity. It
is an act of justice. It is the protection of fundamental human rights. Everyone everywhere has
a right to live with dignity, free from fear and oppression, free from hunger and thirst, and free to
express themselves and associate at will.”

Nelson Mandela, 4 November 2006.




5
    World Bank: World Development Report 2006: Equity and Development.




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Section C: Guiding Principles / Nga kaupapa ärahina

11. In line with our overarching policy statement, NZAID will be guided by a
number of operating principles when engaging in economic development
assistance activities. Many of these principles are synonymous with the
sustainable livelihoods approach to development. NZAID considers that
development approaches which adhere to the principles outlined below are
likely to be more effective in achieving appropriate and sustainable
improvements to the livelihoods of poor and vulnerable groups:

a) Rights-based

12. New Zealand views the right to live a life free of poverty and hunger as an
essential and fundamental human right. Absolute poverty impacts on people‟s
ability to exercise their other fundamental rights, so the right of poor people to
have secure livelihoods and to benefit from economic development should be
regarded as an essential element of all NZAID‟s development efforts.

b) People-centred

13. All poverty reduction efforts need to be underpinned by a focus on people –
especially the poor and vulnerable. Their perspectives, priorities and strengths
should inform NZAID‟s support for economic growth and livelihoods. As a
disproportionate number of the world‟s poor people are women and children,
supporting gender equality and women‟s empowerment are essential aspects of
this approach.

c) Macro-micro linkages

14. Supporting economic growth and livelihoods requires not only focussing on
both the macro level policies and micro level opportunities, but also considering
the linkages between the two. Macro level policy and institutions can enhance
or diminish the livelihood opportunities of poor and vulnerable people, and an
understanding of their livelihoods is essential in order to help inform the
development of more supportive policies and institutions.

d) Dynamic
15.    Poor people‟s livelihood strategies can change rapidly. NZAID‟s
programmes must retain the flexibility needed to respond to such dynamism, in
order to be able to support any opportunities poor people may have to
strengthen and diversify their livelihoods, or to help reduce their vulnerability.




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e) Holistic
16. Approaches to economic development must be holistic and be integrated
with other sectors, such as health, education and environment, that have a
direct bearing on the pace and pattern of economic development.

f) Sustainable

17. Sustainability must underpin all of NZAID‟s assistance in the economic
development sphere. Sustainability includes environmental, financial, economic
and institutional dimensions. NZAID recognises the importance of ensuring the
sustainable use of different ecosystems. NZAID will encourage the wider use of
environmental screening and impact analysis in order to promote the improved
environmental sustainability of particular policy options and projects.

g) Context-specific
18. As regional, country and location-specific conditions differ widely, no single
set of economic development policies or prioritised list of interventions will be
appropriate for all circumstances. “Poor people” are not a single homogenous
group.     They have different ethnic backgrounds, genders, traditional
allegiances, assets, needs, expectations and ambitions. Policies and
interventions must be appropriately tailored to these. There are also different
kinds of poverty: absolute poverty; poverty of opportunity; and vulnerability to
poverty. It is the role of our country and other strategy papers to identify the
most appropriate mix of activities best suited to specific country or regional
circumstances.

h) Coherent policies
19. Economic development policies of both NZAID and development partners
need to be consistent with, and supportive of, policies across a number of other
spheres, including human rights, gender equality, the environment, conflict
prevention, and HIV/AIDS. This policy is intended to help promote such policy
coherence. NZAID will also seek coherence between the development
objectives of this policy and other New Zealand government and broader
international policies in areas such as trade, foreign investment, security and
immigration.


i) Aid Effectiveness
20. NZAID is committed to the principles of good aid practice, as set out in the
Paris Declaration on Aid Effectiveness (2005). These principles include the
harmonisation and alignment of donor support with partner governments‟
national planning frameworks and processes, and the strengthening and




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delivery of donor support through partner government systems. NZAID is
committed to dialogue on strategic policy issues with governments, other
donors, civil society and the private sector on economic and other development
issues. We will also use a variety of aid delivery mechanisms, including
budgetary support, sector-wide approaches, projects and technical assistance
and scholarships, in our support for pro-poor economic development.


j) Managing the Risks of Change

21. Economic development is not an end in itself, but a means to an end – a
reduction in poverty and the increased well-being of people and society. Some
types of social, cultural and environmental changes may be viewed positively by
the people affected, others less so. A strong private sector can provide
increased employment and other opportunities for poor people. However,
increased commercial activity can also present challenges to important local
values and may be a catalyst for rapid social changes. Experience has shown
that, if left unaddressed, such pressures can contribute to conflict that can
sometimes undermine the broader stability needed for sustainable growth.

22. NZAID is committed to maximising the positive potential of economic
development and minimising or mitigating its negative impacts. This requires a
partnership approach, coupled with the careful analysis of the poverty, social
and environmental impacts, including at the community level, of different policy
and programme options. Timing and phasing are also critically important.


“Economic growth is a means, not the goal, of economic development. It can also be
instrumental for the realisation of human rights. However, economic growth must be achieved
in a manner consistent with human rights.”

(Frequently Asked Questions on a Human Rights-Based Approach to Development
Cooperation; UNOHCHR, 2006)




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Section D: Development Outcomes and Core Programming
           Ngä hua me ngä whakaritenga matua

                      Development Outcomes/Policy Objectives

23. Promoting pro-poor economic growth and livelihoods lies at the heart of
NZAID‟s overall poverty elimination objective. This policy‟s expected
development outcomes include:

.       a reduction in the number of people living on less than a dollar a
        day and who live with regular hunger, (reflected in the success of
        global, regional and national efforts to achieve MDG1 and increased food
        security);

.       increased opportunities for poor people to earn an income and
        improve the resilience of their livelihoods, (reflected in disaggregated
        data concerning the distributional impact of growth on different groups of
        poor people and including indicators such as job creation and output and
        incomes in sectors where the poor are engaged); and

.       increased sustainable growth and a reduction in the poverty faced
        by people living in the poorer regions of developing countries
        (reflected in, for example, population levels and improved living
        standards and service provision in rural and outer island areas).


24. This section considers key issues with respect to securing growth and
livelihoods for developing countries and describes how NZAID intends to
contribute to these outcomes through its programming work. This cannot be
prescriptive: the most appropriate combination of support for particular policies
and activities will vary from one country, region and situation to another and will
need to be agreed as part of country, regional and other strategy processes.

Making Globalisation Work for the Poor

25. The increasing openness, interdependence, and integration of countries
are powerful forces that need to be recognised at all levels of policy,
programme and project design. Many aspects of globalisation, for example
improved communications, have the capacity to make society as a whole better
off. But there will be those who gain more than others, and some who may
stand to lose from the introduction of new technologies or the opening-up of
international markets. The challenge for NZAID and our partners is to work
with globalisation to increase the opportunities for, and decrease the
vulnerability of, poor people. This may also include working to reduce the risks




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of conflict that are sometimes associated with rapid economic and social
change.

a) Trade for Development

26. Local, regional or international trade can be an important mechanism for
reducing poverty. Those developing countries that have carefully promoted
exports and international competitiveness have in general been most successful
in achieving long term economic growth.

27. NZAID‟s approach to trade for development is detailed in a separate policy
document, „Harnessing International Trade for Development‟. This recognises
that our partners require assistance to address the supply side constraints that
often impede poor people‟s trading and livelihood opportunities (e.g. poor
infrastructure, limited market information, inadequate skills). It also recognises
the importance of developing countries gaining free and fair access to
developed country markets through fairer international trade rules. NZAID is
committed to playing a constructive and supportive role in the WTO and
regional trade agreements, and is prepared to fund the provision of credible,
independent advice for countries in these and related negotiations. New
Zealand will continue to support the special and differential treatment of
developing countries interests in relevant international fora.

b) Increasing the Benefits and Opportunities from Migration

28. Migration and remittances, both internal and international, are often very
important parts of peoples‟ livelihood strategies. NZAID welcomes the revival of
interest in looking further into the economic and social impact of such
population movements. For many communities migration and remittances will
remain an essential element of their growth and survival strategies. NZAID will
explore ways to increase the opportunities and benefits of migration flows,
including to both migrants and their countries of origin, and for ways to help
governments and communities mitigate some of the associated local social and
capacity risks.

Creating an Enabling Environment

a) Promoting Sound Monetary and Fiscal Policies and a Pro-Poor Policy
Environment

29. At the national and international level, countries, managers, investors and
communities all need to be able to work within policy environments that are
predictable and that support their efforts. Sound monetary and fiscal policies
are an essential component of these.




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30. Poor monetary policy can lead to inflation and high interest rates, pressure
on wages and lower levels of investment, all of which impact disproportionately
on poor people. Meanwhile, the absence of realistic medium term expenditure
frameworks, policies and processes frequently contributes to the failure of
individual sector or project level poverty reduction efforts, budget over-runs and
poor service delivery. Poor fiscal management can also result in taking on high
levels of debt to finance funding gaps, and to increased vulnerability to both
market-based and natural shocks.

31. For these reasons, NZAID will continue to support the provision of advice
and assistance to its partners to promote the development and implementation
of sound monetary, taxation and fiscal policies. This includes transparent and
accountable policy processes and the establishment of realistic medium term
expenditure frameworks in support of clear pro-poor policies.

32. NZAID recognises that the efforts of many poor countries to make progress
towards the MDGs has been handicapped by high levels of indebtedness, often
associated with past development projects.            New Zealand will therefore
continue to be an active participant in international efforts to help better manage
and reduce the debts of such Highly Indebted Poor Countries, and other debt-
distressed low-income countries.

33. NZAID will also support efforts to evaluate and strengthen the performance
of International Financial Institutions that we fund and which are providing
economic policy advice to our partners.

34. Partner government commitment to a supportive pro-poor policy
environment, including locally-owned poverty reduction strategies, accountable
institutions and the effective delivery of public services, is essential if economic
growth is to benefit poor people. Support for key civil society organisations,
participatory budget processes, and public education in economic and trade
policy and financial literacy can have a key role to play in strengthening such
processes and in empowering such organisations and engagement
mechanisms.

35. NZAID will therefore encourage partner governments and other agencies to
develop and strengthen such frameworks and supporting analysis, including the
collection and use of relevant statistics, and will respond positively to requests
for assistance in these areas. Such assistance could cover poverty and social
impact (PSIA) and other local participatory poverty analyses, and the
development of appropriately focused national poverty reduction strategies.

36. Partner government commitment to developing and maintaining a pro-poor
policy environment will be taken into account when considering levels of
bilateral NZAID government-to-government development assistance. Where
such commitment appears limited, NZAID may reduce levels of assistance




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and/or focus its support through civil society organisations, sub-national entities
(such as provincial and local governments) and multilateral organisations.

b) Improving Institutions, the Regulatory Environment and Competition.

37. Good governance and accountable institutions are essential for pro-poor
economic growth.

38. Predictable and transparent rules formalised through legislation and
regulations are essential for economic development. Without such rules,
contract enforcement is impossible and people‟s rights may be infringed.
Ineffective or excessive regulatory or legislative frameworks also discourage
both domestic and foreign investors. For many island countries, problems
associated with their small size and isolation from major markets are
compounded by shortcomings in the regulatory and other aspects of their
investment environments.6 Poor or excessive business regulation increases
the costs of doing business and can impede private sector development,
including the transition from informal to formal sector activity and the expansion
of formal sector employment opportunities.

39. Experience has also shown that poor governance structures are often
synonymous with the over-exploitation of natural resources (for example, in the
forestry, mining, fisheries and tourism sectors). This can contribute to
unsustainable and uneven patterns of development, incur significant
environmental and economic costs for local communities, and has sometimes
resulted in conflict due to loss of land rights and other assets.

40. In addition to the rules, there is a need for the organisations that enforce
them, including an effective court system. Other checks and balances are also
required, including government and civil society watch-dogs, ombudsmen and
audit functions. All of these have to be underpinned by efforts to support
capability building and broader-based accountability mechanisms that involve
and support a broad range of interest groups, including the public service, the
private sector, the media and civil society.

41. Working through relevant multilateral and regional agencies, NZAID will
step up the support available to partner governments to help them review and
improve their legal, regulatory and investment environments and reduce the
costs of doing business. This includes the development and implementation of
transparent legal and management frameworks that promote the sustainable
use of natural resources and benefits for local communities. Assistance might
also include support for the review of, for example, Companies Acts and other

6
 See, for example, „Costs of Doing Business in the Pacific: 2006 Update‟, Pacific Islands Forum
Secretariat, 2006 (www.forumsec.org.fj/FEMM/2006) and „Swimming against the Tide? An
Assessment of the Private Sector in the Pacific‟, Asian Development Bank 2004.




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legislation covering the disclosure of accounts, bankruptcy and foreign
investment. NZAID will also work with partners to improve labour relations and
promote core labour rights in key sectors of the economy.

42. NZAID will also continue to fund the investment promotion activities of
multilateral and regional agencies, particularly those seeking to attract foreign
investment into the Pacific. NZAID cannot however provide direct funding for
investment through venture capital or other similar schemes. There are other,
much larger, agencies with considerably more experience and resources
available that are already engaged in providing this type of support.

43. NZAID recognises that in very small economies the opportunities for
increasing competition and efficiency through private sector ownership of
certain public utilities may be limited. However, there may still be opportunities
for governments to explore increased private sector involvement in the
management and delivery of such services. There are also challenges
associated with the regulation of private or public sector monopoly utility
suppliers. Consistent with the Pacific Plan, NZAID will explore the possibility of
an enhanced regional response to such issues.

44. Many of our development partners face substantial public and private
sector capacity challenges in their efforts to improve macro-economic
management and strengthen the environment for further private sector growth.
Accordingly NZAID will continue to place high priority on institutional
strengthening and other capability-building efforts, for both government and
appropriate private sector agencies (such as Chambers of Commerce) in these
areas. These may involve support from both our bilateral and our wider
regional programmes.

c) Strengthened Infrastructure for broad-based growth

45. Effective communications and infrastructure, including land and marine
transport, marketing infrastructure and information and communications
technology, provide an essential foundation for economic development.
Regular and reliable sea, road, rail and air services link people to markets, cut
down journey times, facilitate technology transfer and reduce production losses.
Well functioning and affordable communications infrastructure keeps people
informed, helps underpin good governance and facilitates the effective delivery
of essential services. Such infrastructure is particularly important for those living
some distance from the capital and other large urban areas.

46. In the Pacific, countries face above average costs in providing for the basic
infrastructure needed to support the livelihoods and other requirements of small
populations scattered over a large geographical area. NZAID has, in the past,
provided selective support for small-scale infrastructure development in the
region and will continue to support such things as improved jetties, local foot




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tracks, or telecommunications links with other parts of the country, particularly in
poorer and more isolated locations. Support for larger scale infrastructure
projects may also be considered where there is a close link to economic
development, a vital need and where the investment is part of a comprehensive
national plan. NZAID will pay particular attention to the institutional capability
and other ongoing maintenance arrangements of such proposals, and to the
possibility of innovative public/private partnerships playing a part in these.

d) Land Tenure

47. Clear, secure and transferable property rights can help provide a less risky
environment for people to make investment decisions involving their land. Land
tenure systems also have important implications for conflict prevention, gender
and other equity issues, and for environmental sustainability. They are also
culturally and socially embedded. NZAID concurs with recent analyses 7 that
suggest benefits can accrue from greater clarity, security and transferability of
property access rights. However, and especially within the Pacific region,
NZAID does not agree that such reforms need involve a move to individual
ownership of land itself. Other options are available, including the incremental
improvement of property rights within existing ownership structures.

48. While recognising the risks associated with any external involvement in
such a highly sensitive area, NZAID will be prepared to support partner
governments‟ efforts to clarify or improve property rights to land, provided there
is evident need and revealed community support for this. Any NZAID
involvement will pay particular attention to conflict prevention, environmental
issues, and the rights and needs of women and of any poor or marginalised
groups.

Making Markets Work Better for the Poor

a) A vibrant private sector

49. The private sector, including individuals and enterprises in both the formal
and informal sectors, has an essential role to play in generating the growth and
employment needed to underpin poverty reduction efforts. As the majority of
the world‟s poor live in rural areas, NZAID‟s focus is on promoting economic
and private sector development in sectors such as agriculture, forestry, fisheries
and sustainable tourism. Our development partners in the Pacific and S.E. Asia
all have rich and diverse cultures and creative people and we will continue to
explore with our partners how these cultural assets can be harnessed to
improve the lives of poor people. Selective support may also be given in labour-
intensive manufacturing, including through addressing working conditions and
managing environmental risks.
7
    See, for example, „Pacific 2020: Challenges and Opportunities for Growth’, AusAID, 2006.




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50. Beyond creating an enabling environment, arguments abound over the
appropriate role of government and donors in fostering private sector
development. Nevertheless, market weaknesses remain a feature of many
developing country economies and governments and donors can play a role in
addressing these and facilitating private sector development. Encouraging
governments to seek out and listen to the views of existing formal and informal
private sector operators and potential investors is an important part of this
process. Donors and governments can assist in a number of ways, including:
supporting efforts to improve productivity and quality; developing skills and
encouraging producers to move up the value chain; encouraging small and
medium-sized enterprise (SME) and micro-enterprise development, and;
improving access to finance. These are discussed below.

b) Improving productivity and quality

51. Agriculture, forestry and fisheries remain important drivers of economic
growth in developing countries. Poorer producers can benefit from assistance
to improve productivity that strengthens food security and generates surpluses
that can be traded. Quality of production often needs to be improved to satisfy
market requirements, but also, in the case of food production, to help reduce
the prevalence of food-borne diseases that reduce people‟s quality of life and
productivity.

52. Previous public sector efforts at providing research and extension services
have often been unsuccessful, resulting in over-sized, under-motivated and
poorly targeted services for poor and marginal producers. Nonetheless, primary
industry research and extension can be provided through delivery mechanisms
that help ensure services do meet the needs of producers (for example, when
some of the costs of services are recovered from producers, producers can help
determine the services provided to them). Where clear and direct links can be
shown to poverty elimination objectives, NZAID remains willing to assist in the
development of appropriate policies and contribute towards the costs of
improving the effectiveness of such research and extension efforts by
governments, specialised international agencies, extension agents, producers‟
associations and community based organisations.

c) Developing skills and moving up the value chain

53. Appropriate technical skills are essential if small business owners and poor
people are to be able to benefit from a wider range of economic opportunities
and increase their contribution to economic growth. Such skills can cover a
range of activities, from business skills through to a wide variety of vocational
training activities.    In order to decide when and how best to assist people
strengthen such essential skills, NZAID will assess who the potential
beneficiaries are likely to be (including the opportunities for poor people, women




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and youth), the demand for skills, and the effectiveness of previous and ongoing
training efforts. There are already a number of service providers engaged in
such activities in the countries where NZAID works: we will focus our efforts on
strengthening existing institutions and training providers.

54. While growth in sectors on which poor people poor rely for their livelihoods
is vital if there is to be a significant impact on income poverty, NZAID is
conscious of the importance of assisting poor people move away from an over-
reliance on commodity production. In today‟s globalised world, it is the more
value-added activities such as processing, design, marketing and branding that
have the potential to generate less vulnerable and the most increased income.

55. Working through a variety of partners, NZAID will be prepared to assist
rural and peri-urban producers respond to barriers in the supply chain, move
into more value-added activities and link up with more rewarding national and
international markets. This might include support to help poorer producers
develop their business and marketing skills, improve their technical skills so as
to address market chain problems and meet buyer requirements, diversify
production, think and act collectively and, where appropriate, move into
processing. In providing such support, NZAID will take a value chain approach,
closely analysing the opportunities and constraints facing our partners at
different stages in the process of getting their products from farm to table.

d) Support for Small- and Micro-Enterprise Development

56. Small and medium-sized enterprises (SMEs) and micro-enterprises in both
the formal and informal sectors are major contributors to pro-poor economic
development. As such, they represent an obvious choice for many of the types
of assistance outlined elsewhere in this policy.

57. In addition to supporting SME development strategies and programmes,
NZAID will consider support to representative private sector associations,
training colleges and small business support schemes, centres and facilities.
Efforts will be made to ensure the long-term sustainability of such schemes
through promoting the early consideration of cost recovery mechanisms.

58. While general support for specific pro-poor sectors will be considered,
NZAID will not support direct government involvement in commercial activities
that are best left to the private sector and competitive market processes.




e) Enhancing access to finance and savings




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59. Poor people often lack access to the finance necessary to fund investment
projects or the savings mechanisms that could help reduce their vulnerability to
ill health, poor harvests or other shocks. This can be for a wide range of
reasons: lack of adequate credit histories or collateral (for example in the form
of land or property), inability to fill out complicated loan forms, prejudices or
poor training of staff in commercial banks, or the lack of financial institutions
operating in rural areas.

60. For these reasons, there has been considerable growth in government and
donor support for micro-finance schemes, including community-based savings
and borrowing groups. Many such schemes remain dependent upon subsidies
continuing to meet at least some of their operating costs. However, it is also
important to recognise the overall impact that such schemes can have in
reducing peoples‟ vulnerability to poverty, including the importance of savings
as well as loans.

61. NZAID will consider support for micro-finance schemes, but assistance will
be strictly limited to those schemes that can demonstrate clearly their
appropriateness to local conditions and their compliance with international best
practice8. Consideration will also be given to supporting public-private sector
partnerships involving the commercial banking sector that are designed to
increase the access of small-savers, borrowers and SMEs to commercial
banking facilities and to improve financial literacy.

62. International experience with government-owned development banks has,
however, been very disappointing. As a result, NZAID will not provide support
for such banks.

f) Improving Food Security

63. Food security exists when all people at all times, have physical and
economic access to sufficient, safe and nutritious food to meet their dietary
needs and food preferences for an active and healthy lifestyle. 9 All too often the
poor and the vulnerable are excluded from the processes which determine
policies to promote food security. NZAID supports efforts to promote broad-
based economic development that is supportive of locally-owned food security
policies that take into account the perspectives of poor and vulnerable people.
People with secure livelihoods are more likely to be able to purchase or grow
adequate amounts of food, and people who have access to sufficient nutritious
food are healthier, more productive and more likely to diversify into new
activities.


8
  See, in particular, the principles and guidelines provided by the Consultative Group to Assist
the Poor: cgap.org/keyprinciples.
9
  Definition adopted by the World Food Summit,1996.




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64. Globalisation and broader poverty reduction efforts are, in many cases,
broadening choices and reducing the risks of widespread food insecurity. But
the changes are not always without costs. New convenience foods have
displaced traditional staples that often had a better nutritional content.
Traditional food crops are frequently in short supply in urban centres, and local
products can sometimes face intense competition from subsidised imports.
Combined with lifestyle changes, obesity and related non-communicable
disease problems have become a serious health challenge in many of NZAID‟s
partner countries in the Pacific region.

65. NZAID supports the Plan of Action agreed at the 1996 World Food
Summit10 and the declaration adopted at the World Food Summit Five Years
Later in 2002 which reaffirmed the right of everyone to have access to safe and
nutritious food. Many of the measures outlined in other parts of this policy
paper, including support for appropriate macro-economic environments, support
for improving productivity and quality in the primary sectors, and increasing
employment opportunities, will also help improve food security.

66. Where there is local demand, NZAID will also consider supporting efforts to
promote the growing and marketing of traditional food crops for local and wider
consumption. This may be through support for work on integrated pest
management and soil and water conservation technologies, improved
processing technologies, and by encouraging international research
organisations to pay increased attention to traditional staple food crops. Where
appropriate NZAID will also be prepared to support work that will generate more
accurate knowledge and estimates of the value of subsistence production, for
example through support for agricultural censuses and improved estimates of
the value of subsistence production in National Accounts.

67. Food security crises are usually associated with political and personal
insecurity (including wars and extreme cases of inappropriate policy
environments) and/or natural disasters (such as drought, floods or volcanic
activity). New Zealand will continue to work through international and regional
organisations, such as the UN and the Pacific Forum, to prevent and mitigate
the consequences of political insecurity. When crises occur, NZAID will
continue to support the provision of timely emergency assistance, through its
core contributions to UN agencies (such as the World Food Programme) and
through responding to appeals for additional funds for particular emergency
situations.




10
     See www.fao.org




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Section E: The Importance of Partnerships for Reducing
           Poverty
                     Te mahi tahitanga hei whakaheke i te pöhara

68. NZAID recognises that effective partnerships are essential in the global
fight against poverty. Partner government leadership and donor alignment with
locally owned policies and strategies are critically important factors. A single
development agency working on its own or with a small group of other donors
cannot expect to be effective in delivering the pro-poor outcomes that this policy
seeks to support.

69. In implementing this policy NZAID will therefore seek to develop and
strengthen its partnerships with governments and others (including other New
Zealand government departments) working to promote sustainable livelihoods,
economic development and improved economic governance. Partnerships will
vary according to whether NZAID‟s engagement is focusing on policy
discussion and change, or programme assistance, or a combination of the two.

70. Key policy engagement opportunities will be taken up with others at the
following levels:

       Developing county partner governments, especially in the Pacific, and
        Southeast Asia, as our key intergovernmental relationships.

       Civil society organisations and private sector organisations operating in
        developing countries, to promote broad-based economic growth, and to
        seek out opportunities to encourage partner governments to engage
        directly in policy dialogue with such organisations.

       Regional agencies, including units of the international financial
        institutions and representative offices of the United Nations.

       Multilateral agencies and forums, including where norms or good practice
        are formulated, such at the UN General Assembly and Economic and
        Social Council and Boards of international agencies11.

       New Zealand government departments with policy interests in these
        areas, or core policy and operational interests elsewhere which
        nonetheless may impact on pro-poor growth and livelihoods.



11
  Further information can be found in the NZAID Multilateral Engagement Strategy, which
covers our top priority engagement with the World Bank, ADB, OECD, and selected UN
Development Group agencies, (see www.nzaid.govt)




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       New Zealand civil society, business and consulting sector, and
        academia.

       Other bilateral and multilateral donors.

71. Wherever appropriate, NZAID will seek to promote partnerships between
such actors in support of pro-poor, government-led policies and programmes, in
a manner that supports the principles and good practice agreed to by the
international community in the 2005 Paris Declaration on Aid Effectiveness12.
NZAID intends increasing its work with other donors and agencies in support of
harmonised programmes, which can be scaled up, have critical mass and
impact, and will reduce transaction costs on partner administrations.

72. NZAID direct assistance, for programmes and projects, direct budgetary
assistance, technical assistance and policy analysis, research, and evaluation,
will be an important means to progress the objectives of this policy, including:

       Bilateral programmes, in support of pro-poor policies and in keeping with
        NZAID country strategies developed in consultation with those partners.
        Where economic growth is identified as a focal area for NZAID support,
        our programme strategies will develop more specific approaches which
        take into account both the macro and micro-level economic environment,
        and reflect the guiding principles and other guidelines and safeguards
        outlined in this policy statement.

       Regional organisations and agencies, including the work of Pacific
        regional agencies such as the Secretariat of the Pacific Community and
        the Forum Secretariat, and sub units of the international financial
        institutions such as the Pacific Financial Technical Assistance Centre
        (PFTAC) and the Foreign Investment Advisory Service (FIAS).

       Support for civil society or private sector-led initiatives.

       Multilateral economic development funds, including support through the
        concessional lending and grant facilities of the World Bank and ADB, and
        for debt relief in support of sound macroeconomic performance and
        providing increased fiscal space for investment in development.

       Strategic policy and funding initiatives at the national, regional and
        international level.




12
  The Paris Declaration is available from the Development Cooperation Directorate on
www.oecd.org




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Section F: Assessing the Impact of this Policy in achieving
Development Outcomes / Te ariä o tënei kaupapa

73. NZAID will monitor and support the collection of data on changes occurring
to pro-poor growth indicators (such as the number, gender and location of
people living on less than a dollar a day, investment levels and the cost of doing
business) in our main partner countries during the implementation of this policy.
Such data will be considered as part of periodic NZAID country strategy review
processes. While any changes in such indicators are unlikely to be attributable
only to the direct results of NZAID activities, they will nevertheless serve as
measures of the overall effectiveness of our and our partners‟ collective efforts.

74. The use of such general indicators will be supplemented by regular reports
on activities receiving direct NZAID support. Periodic evaluations will also be
undertaken to complement such reports and to provide additional information
about the achievement of policy outcomes and their contribution to development
results. Full use will also be made of the reports and reviews commissioned by
other partners, including regional agencies and civil society organisations.

75. Measuring outcomes will include specific analysis of the effects on different
groups of people. Particular attention will be paid to poverty, gender,
environmental and other cross-cutting aspects.

76. NZAID recognises that poor people should be directly involved in the
evaluation of what constitutes „improvements‟ to their standard of living.
Accordingly, NZAID will place importance on the adoption of participatory
design and evaluative processes throughout its programmes.

77. NZAID will work to support our development partners‟ own monitoring,
review and evaluation systems and to ensure that those people expected to
benefit from our support have an appropriate say in such systems and wider
policy mechanisms.




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