As middle-income countries (MICs) progress towards more advanced economies, their need for external assistance changes. To sustain growth and manage rising inequality, MICs face complex policy challenges which call for new institutions and capacities. They have access to more development finance but are not necessarily equipped to use it to best effect.

This evaluation assesses how Australian aid is evolving to support economic partnerships with Asian MICs. Looking at two case study countries—Indonesia and Vietnam—and through the Southeast Asia regional programs, it explores the transition away from the traditional donor-recipient relationship towards knowledge-based assistance, designed to support reform and help partner countries make better use of their own resources.

The evaluation also assesses what types of results are being achieved and what approaches are proving to be effective. The findings are pertinent to assessing the strategic case for Australia continuing to provide aid to Asian MICs.

The review found that:

  • Rather than transitioning out of bilateral aid, there is a strong case for Australia remaining engaged and continuing to build its comparative advantage as a partner on economic and social reform.
  • To be an effective partner on economic reform, DFAT needs to maintain relationships of trust with key individuals and institutions at the centre of governments, however, there is scope to strengthen the alignment of aid, trade and diplomacy.
  • Knowledge-based assistance is making a useful contribution to supporting reform and improving national development expenditure in the case study countries.
  • Positioning aid to support economic partnerships calls for improvement in DFAT’s systems and capacities in a number of areas including analytical and diagnostic work, capacity and skills and monitoring and reporting results.
  • The evaluation team found consensus among DFAT stakeholders that support should continue, however there were also widespread concerns that it is vulnerable to a loss of public and political support and that DFAT needs new ways of making the strategic case for continued aid.

Read the report