Performance Incentives

Improved governance and improved aid effectiveness are expected of all countries that will benefit from increases in Australian aid.

In future, Australia will provide significant incentives by allocating additional resources to those countries able to achieve agreed improvements in areas such as governance and addressing corruption.

Australia will allocate up to 10 per cent of the aid program over time on the basis of performance. Performance criteria will:

be developed as part of country strategy performance frameworks agreed with respective partner governments
comprise a mix of quantitative and qualitative indicators, such as independent corruption ratings; government budget allocations for core services necessary to reduce poverty, such as health, education, and law and order; improvements in business regulation; progress in implementation of economic and public sector reforms; and, in the Pacific, commitments to sensible regional governance arrangements
be different in each country and be based on improvements relative to each country's particular situation in order to maximise impact.

The initiative will be rolled out on a pilot basis, with a number of countries, including Papua New Guinea and the Philippines, to be the first ones eligible for funding in 2008, with other countries following by 2010.

The application of additional aid funding made available through the performance initiative will be determined through the jointly agreed country strategy process.

Such funding will be used for additional program support in sectors of importance to the respective country (for example, to promote infrastructure or health and education) and will be aligned with existing country budgets.

2006