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Last week, we released the migration scores from the 2016 Commitment to Development Index. A few eyebrows were raised at Australia’s relatively good performance, at third place, better than any G-8 country and far better than the US or UK. That didn’t seem to fit with what we think we know about Australia’s attitude to immigrants. So did we get something wrong? We don’t think so, and here we explain why not.
Given this, how can Australia do so well on our index? Does this score, as one correspondent suggested, “fail the smell test”?
We are comfortable that the index reflects the overall policy stance. But we acknowledge that as well as averages, outliers and extremes are also important. Australia’s offshore detention of migrants is without question a hugely important issue—indeed, we think it so important that in July this year we proposed an innovative approach to tackling it. The challenge for any index is adequately to reflect extremes in a composite score, since the averages inevitably mask outliers. We should not ignore the scandal of offshore detention, but nor should our outrage about these cases lead us to ignore the wider policy environment, which is also important for millions of people. And looking at these broader policies, the data shows that, Australia is remarkably open to immigration. 27 percent of Australia’s population is foreign-born, compared to 13 percent in the United States and 12 percent in the UK. (Of OECD countries, only Luxembourg has a higher percentage than Australia.) Put another way, the US would need to open its doors to more than 60 million additional immigrants to increase its foreign-born population to the same proportion as Australia.
A country’s policies cannot be completely represented by measures based on averages; but nor can it be completely represented by the extremes. It is important to supplement quantitative summary scores, of the kind we produce in the CDI, with broader narrative information, including about distribution and outliers, and to make policy recommendations about what needs to be fixed; and that is what we do.
The migration component of the CDI is a reasonable overall measure of a country’s immigration policies as they affect development, and on this overall measure, Australia deserves its place near the top of the index.
First, our index is heavily influenced by the evidence—explained in Clemens (2011)—that it is good for development if rich countries offer opportunities to migrants from developing countries. This has led us to give 30 percent of the index score to the number of new immigrants that a country accepts from developing countries each year, as a proportion of the population in the receiving country. We give more weight to immigration from poor countries. Admittedly the data lags reality by a couple of years, but on this measure Australia scores highest of all the CDI countries, closely followed by New Zealand, Canada, and South Korea.
The positive effects of its large foreign-born population aside, Australia does not do so well on our measure of the numbers of asylum seekers and refugees they accept, which counts for a quarter of the migration component. On this Australia is about middle of the pack: way below Sweden, for example. But Australia takes a lot of students relative to its student population (second only to New Zealand), and this accounts for 15% of the score. Furthermore, Australia gets extra recognition for the fact that, of those foreign students, 71 percent are from developing countries (a proportion bettered only by South Korea and Japan—the equivalent figure for the UK is 51 percent).
Finally, and perhaps most controversially, Australia does relatively well on MIPEX, a measure of whether a country has policies which promote integration and well-being of migrants. This is important for the impact on development, both because it is an indicator of the improvements in the lives of the migrants themselves, and because it is an indicator of whether migrants will be able to send remittances home, or reunite families. It may be surprising that Australia does well on this measure: eighth out of the countries in the CDI and comfortably ahead of both the UK and the US. But for most immigrants, this score is justified. For example, Australia is second only to Sweden in the way that the children of immigrants are integrated into the education system; and nearly all permanent residents can quickly become citizens and fully participate in Australia’s civic life, a measure of integration on which Australia comes fourth after Portugal, Sweden and Denmark.
But the way MIPEX is constructed means that it does not, unfortunately, reflect concerns about the way some asylum seekers, refugees and migrants are treated in some countries, including the salient example, which is sadly not unique, of Australia’s detention centres. We constantly update the methodology and data sources for the CDI, and to the extent that comparable cross-country data can be produced, the treatment of potential refugees who are not granted asylum should indeed be part of future iterations.
No index is perfect, of course. The CDI is doing its job of drawing attention to the many ways in which a country’s policies affect international development, stimulating a conversation about what the evidence tells us about which policies are important, identifying room for improvement, praising countries which pursue good policies, and creating a framework for more qualitative analysis and policy recommendations. We think it is important to recognise that, overall, Australia does have relatively development-friendly migration policies, while at the same time deploring alleged human rights violations in immigration detention centres.
Australia’s recent election has ended in a stalemate, with neither party scraping together enough seats to form a majority government. But amidst the flurry of election promises, one topic was conspicuous by its absence from both major parties’ platforms: the expensive, embarrassing problem of the country’s offshore detention centres for migrants and refugees. The centres made headlines again recently when Omid Masoumali died after setting himself on fire, reportedly protesting his detention.
While the policy of detaining migrants offshore is controversial, it has endured in various forms since 2001. But there is a way to make it better for everyone involved: the Humanitarian Investment Fund, or HIF, is a simple piece of financial engineering that can turn the costs of detention into productive investments in resettlement. It would leave detainees, taxpayers, and the government all better off.
Various governments have built on elements of the ‘Pacific Solution’ that calls for detaining migrants and asylum seekers in centers on Papua New Guinea and elsewhere before returning them or resettling them, sometimes in third countries like Cambodia. More than 1,500 potential refugees were housed offshore last year. Overall, more than 40 percent of detainees are held for a year or more, and the average time in detention has increased to over a year.
It’s all eye-wateringly expensive. Costs per person are hard to pin down, but calculations based on Parliamentary reports suggest that it cost an average of $440,000 AUD to keep a single person on Nauru over the 2014 fiscal year. What could that money have bought if it were spent differently? The Netherlands reports the highest first-year costs in the OECD for integrating refugees, at $31,933 USD a head (about $39,300 in 2014). So a single year’s detention on Nauru cost more than 11 years of support in the OECD’s most expensive resettlement regime. Put differently, we could have resettled 11 people in the Netherlands for the price of detaining just one on Nauru for a year.
That’s what the Humanitarian Investment Fund (HIF) would do, reorienting sunk costs towards investments in refugees’ futures. (You can read a detailed write-up here.) Rather than paying to keep people in detention, the HIF’s financial model shifts these expenses to an endowment that can be traded to give refugees asylum in any country they want to settle in, and which will accept them. Detainees would represent capital to help a willing third country offset any perceived short-run costs of providing public services, or temporary support like language classes.
Smart investments instead of sunk costs
The current policy misses a trick or three, and the Humanitarian Investment Fund model could turn these losses into smart investments.
Better value for money for taxpayers. The offshore programmes in Nauru and PNG cost a reported $1.2 billion AUD last year (more than $900 million USD). Enabling people to resettle in third countries in exchange for a small share of those costs would leave a lot of money on the table to spend on Australia’s aid programme, or on public services at home.
Better for people being detained, some of whom are children. People are held in camps for long periods, sometimes under conditions that are hard for Australia’s watchdog agencies to monitor, leading to risks of abuse or neglect. Australia’s Human Rights Commission found that “children detained...on Nauru are suffering from extreme levels of physical, emotional, psychological, and developmental distress.” The HIF model would move people off this caseload much more efficiently.
Better for Australia’s relationships with other countries. The current policy resettles some detainees in third countries with which the government has struck aid-for-migrants deals, including in Cambodia and PNG. Australian filmmaker David Fedele summarises the situation in an op-ed: “Papua New Guinea is currently struggling to look after its own people…There is no true social security system for its population, and excruciatingly high living costs, unemployment and crime.” As a result, there’s mounting frustration and even uncertainty about the system’s legality. And the deals cost even more in aid, such as the $55 million AUD paid to Cambodia.
Reasonable people have strong opinions about whether Australia should house and support more refugees, and facilitate their arrival on-shore. But it seems unreasonable to argue that pouring money into detention, restricting choices for refugees, and damaging the country’s relationships with other nations is the right public policy for Australians.
From offshore to opportunity
There are some reasons why Australia’s political leaders might not want to pivot from the detention model. One argument is that the current strategy acts as a deterrent, preventing many more people from making the risky crossing to Australia. To the extent that’s accurate, the strategy is not working: asylum applications went from 4,300 in 2003 to an average of over than 12,000 a year between 2012 and 2014. Another argument is that countries like PNG and Nauru depend on the aid that Australia is providing in exchange for hosting detainees. But switching from detention to investment through a model like the HIF would be efficient, generating large savings that could also be spent on more effective aid for these countries.
Deterrence is not working, detention is bad for detainees, and the camps are ruinously expensive for taxpayers. So reallocating funding to a HIF model makes sense: it would dramatically increase the number and quality of resettlement options. It would reduce the costs that current policy inflicts on people fleeing conflict overseas. It would help refugees transition out of camps quickly, saving time and money. And it would further establish Australia as a humanitarian leader, capable of using its diplomacy, resources, and stature to give those escaping hardship a fair chance at safe, productive lives.
Thanks to Forrest Rilling, Hannah Postel, and, particularly, Rajesh Mirchandani for helpful comments.
In a few weeks’ time Australia’s Westpac bank will start closing down the accounts of money transfer organizations used by immigrants to send money home. Westpac is the last major Australian bank still offering services to organizations in the country’s US$25bn remittance sector.
Two weeks ago, Merchant’s Bank of California also decided to close the accounts of all money transfer organizations (MTOs) sending money to Somalia. The source of Merchant’s decision appears to have been a cease-and-desist order issued by the Office of the Comptroller of Currency (OCC) in June, purportedly due to the bank’s failure to appropriately monitor the destination of remitted funds.
Unfortunately, we’re seeing a trend here. In 2013, Barclay’s closed the accounts of nearly 90% of its UK-based MTOs, despite being the last large bank in the country willing to do business with remitters. HSBC made the same decision the previous year, following a nearly US$2bn handed down by US regulators.
Regulators gone wild
This `de-banking’ is a response to growing pressure from national and international regulators to comply with rules on anti-money laundering and combating the financing of terrorism (AML/CFT). Since 2010, the Financial Action Task Force (FATF) has placed 23 countries on its `blacklist’ of nations seen as high risk for money laundering or terrorist financing, or as not doing enough to comply with international standards. That’s more than double the number from the previous five years.
Local regulators have responded by drastically increasing the fines they hand out. In the UK data shows the size of fines issued by the Financial Conduct Authority (formerly the FSA) skyrocketed in 2011, up to almost £10m in some years. That might not seem like a lot of money, but it highlights a trend in which banks now increasingly run the risk of large penalties. Last year, South Africa’s Reserve Bank fined its top four banks approximately $10m for AML violations. Just last week, the US Financial Crimes Enforcement Network (FinCEN) handed down a $20m fine to Oppenheimer & Co for similar problems with compliance.
Throwing remittances under the bus
Remittance companies do not bring in much money to the big banks, but the size and random nature of regulatory fines has turned these firms into a liability. Based on 2012 data, four out of the ten most popular destinations for UK remittances in the global south were placed on the FATF blacklist in the last five years. Many other countries which represent only a small portion of remittances (such as Somalia) nonetheless generate concerns over terrorist financing, which in turn raises the expected costs for banks who do business with them.
In testimony given during a legal battle over its decision to kick out its remittance clientele, Barclay’s admitted that it was regulatory pressure, combined with the `high risk’ nature of MTOs which led to their decision to largely withdraw from the market. Rather than assess their customers on a case-by-case basis, as recommended by bodies such as the FATF, Barclays and many other banks are instead opting to minimize their exposure by cutting out risky remittance corridors altogether.
These decisions will ultimately drive up the costs of remitting. Sonia Plaza at the World Bank has documented a rise in bank remittance costs in Australia following its recent spate of de-banking. In the UK, while it is merely suggestive evidence at this point, the price of sending money to Somalia from the UK began climbing following the Barclays decision, despite previously being fairly similar in cost to other remittance corridors from the UK (note that the largest UK remittance provider to Somalia, Dahabshiil, won an injunction against its closure until late 2014). Rising costs mean less money in the pockets of receiving families as well as more cash traveling through informal channels - two pernicious effects that should alarm the development community and regulators alike.
In preparation for a CGD working group on government contract publication, we’ve been looking at how much information governments already put online about the contracts that they award. Australia — current president of the G-20 — is an interesting case. It doesn’t proactively publish the full text of contracts as the UK, Slovakia, and Colombia do. But it does publish a lot of information about who won government contracts for what and for how much. Even better, it publishes it in an easily searchable form and even puts out Excel spreadsheets with summary data.
And while it doesn’t publish the contacts, Australian government guidance on Confidentiality throughout the Procurement Cycle does state that once a contract has been awarded the terms of the contract are not confidential, unless the agency has determined and identified in the contract that specific information is to be kept confidential in accordance with the guidance on specific clauses. And the contract database flags contracts if they have these specific confidentiality clauses and provides the reason for them: costing and profit information; intellectual property; Privacy Act considerations; ‘public interest’; secrecy provisions; and ‘other.’
The Need for Secrecy Is Low
The Australian contracts database is an incredibly useful tool to see how widespread are potential confidentiality issues that might arise from proactively publishing all contracts. The answer appears to be: not so widespread, and focused around commercial secrets.
Looking at the 74,859 Australian federal contracts in the database for 2012, with a combined value of a little over 40 billion Australian dollars, 1,676 contracts were flagged with confidentiality clauses. That’s about 2.2 percent of the total. (They were bigger than average contracts, worth nearly 7 percent of total contracting value.) Nearly one-half of the contracts with confidentiality flags listed costing and profit information as the reason for the flag. Ten percent raised intellectual property concerns. Privacy Act and public interest considerations accounted for another 13 percent between them. Statutory secrets were involved in 4 percent of contracts, leaving ‘other’ with a 24 percent share.
In short: only about one in fifty contracts signed by the Federal Government in Australia raise specific confidentiality concerns. Of those concerns, considerably over half involve commercial secrets –profit, price, or intellectual property.
Pushing for More Open Contracts
The new CGD working group will be studying the issues surrounding government contract publication, particularly the concerns of privacy and commercial and state secrets. The group hopes to develop a consensus about the best way to maximize contract transparency while protecting those (legitimate) secrets. Australia’s data provides a valuable guide as to where and how significant are the issues.
And back to Australia’s presidency of the G-20: the group has a focus on fighting corruption, investment and infrastructure ,and development. Greater government contract transparency can play a role in delivering better quality infrastructure and services at lower cost and with greater probity. Why not use the G-20 forum to push for more open contracting across G-20 countries and beyond? Australia’s own data suggests it wouldn’t be that difficult to do.
In June 2002, Australia renounced its ratification of the Kyoto Protocol and joined the US in outright opposition to the treaty. Conservative Prime Minister John Howard offered this explanation to Australia’s Parliament: "It is not in Australia's interests to ratify. The protocol would cost us jobs and damage our industry." The table below clearly shows the source of Howard’s concern: according to CGD’s CARMA database, Australia’s power sector is hugely dependent on coal, which is by far the most potent source of greenhouse gas emissions. In fact, Australia’s 74% coal share in the energy sector dwarfs America’s 48% share.
Energy Sources for Power Plants (%)*
Total Fossil Fuels
* Source: CARMA database, Center for Global Development
** Renewables and nuclear
Nevertheless, Prime Minister Howard has just reversed himself and embraced greenhouse emissions reduction. According to today’s Australian: http://www.theaustralian.news.com.au/story/0,25197,22080702-601,00.html “In a determined bid to turn around the Coalition's electoral fortunes, John Howard will this week outline the key elements of a national emissions trading scheme, to come into effect from 2011. The Prime Minister will seek to revive the Coalition's faltering election hopes by outlining plans to further develop low emissions technologies in key sectors such as coal.”
So the people of Australia have spoken clearly on the matter, and Australia’s conservative Prime Minister has listened. Australia will join the UK, Canada and New Zealand in aggressively reducing greenhouse emissions. In this sphere, the traditional five-country alliance has evaporated and the US now stands alone.
Meanwhile, US opponents of proposed emissions reduction legislation continue to bombard Congress with dire warnings about the potential cost to our “coal-dependent” economy. The burden is now on them to answer a simple question: “If our traditional allies the Australians can do this, despite a coal dependency over 50% greater than ours, why can’t we?”