NZ aid to the Pacific 'a failure': Govt

New Zealand's aid programme in the Pacific has failed and will be overhauled, Foreign Minister Murray McCully said today.

Mr McCully was greeted by protesting students when he announced the change in policy in a speech at Victoria University today.

The students chanted that Mr McCully was to trying to corrupt and politicise aid, but he had a very different view.

"A key objective of our aid strategy should be to reverse the negative trends that we see in our own region, by any objective measurement our policies have simply not succeeded," Mr McCully said.

"Something just has to change. While we can point to individual achievements and areas of improvement, the overall picture in our Pacific neighbourhood is unacceptable."

New Zealand's aid budget would increase but not as much as promised by Labour and those making decisions over how it is spent will be returned to the Ministry of Foreign Affairs, he said.

There would be "prudent increases over the next few years" that would see the aid budget reach $600 million in 2012/13.

"The aid increase announced today is smaller than that promised by the previous government, but it is realistic and sustainable in the current global economic situation," Mr McCully said.

The aid budget was set at $471.9 million last year.

It will increase to $500m in this financial year, rising to $525m in 2010/11, $550m in 2011/12, and to $600m in 2012/13.

NZAID - which had semi-autonomy in how it spent the money - would be rolled back into the ministry and politicians would take more responsibility for how aid was spent.

Those who treated aid as a "sacred cow... beyond the stewardship of the government" were wrong, Mr McCully said.

It was taxpayers' money and "its expenditure should be overseen by elected office holders able to be held to account at the ballot box - not by faceless, unelected, unaccountable aid bureaucrats."

The current aid focus on poverty alleviation was "too lazy and incoherent" to make the best use of the money.

The aid mandate would now focus on sustainable economic growth with objective measures such as trade and tourism statistics as indicators of success.

"Our aid dollars have done little to build sustainable economies providing employment prospects and the promise of a brighter future.

"Depopulation has continued at an alarming rate in parts of Polynesia.

"Our billion dollar export trade into the Pacific has been reciprocated by imports from Pacific nations so miserly that they should be a source of national embarrassment."

Too much money was being spent on "unproductive bureaucracies" clipping the ticket, and when aid money was really needed - such as after the riots in Tonga in 2006 it had been missing in action.

"There, as have been the case in too many locations around the Pacific, others from outside the region, have moved into the space that we have unwisely vacated."

Critics of the move say it could see a return to aid being used as tool of diplomacy and not necessarily where it would do the most good.

Mr McCully said the change recognised aid was a key component of the Foreign Affairs portfolio, "and thus needs to align, as much as possible, with our wider foreign policy interests".

- NZPA