Michael Field reports the Samoan PM Tuilaepa Sailele saying Air New Zealand’s decision to end its Los Angeles-Apia service is stupid. The flight brings much-needed American tourists to Samoa and Tonga but Air New Zealand says the run is not economic. New Zealand has been subsidising the route with aid funds for the last few years. Tonga has said it no longer wants its aid money from New Zealand to subsidise the flight so the deal is off.
It raises some interesting questions about our development aid. The last Labour Government initiated the subsidy as a stop-gap measure to protect the tourism industries in Samoa and Tonga, with the intention of carrying out cost-benefit and economic impact analysis. But the National Government has rolled the subsidy over for another two years, spending several million dollars and I’d be very interested to know whether they have done the cost-benefit sums.
Development blogger Terence Wood has this to say in an interesting post on Murray McCully’s changes to the aid programme:
… the Minister has selected some rather questionable new aid projects for funding. A good example being the decision to subsidise Air New Zealand flights from Samoa and Cook Islands to Los Angeles (discussed here). The subsidy might have development benefits – linking relatively isolated island states to markets – or it might not. And, even if it does have development benefits the money devoted to it might be more effective elsewhere. The decision to subsidise was of the type that requires careful analysis before being acted on. And yet there’s no evidence that such analysis fed into the Minister’s decision. More worryingly still, the subsidy was awarded directly to Air New Zealand instead of through the best-practice approach: to put the services out to tender and see which of the various airlines servicing the region could deliver best value for money. Which makes the whole affair seem remarkably like corporate welfare.
Murry McCully is very keen on spending aid dollars to promote economic development but I am yet to see much rigour when it comes to careful economic or social impact analysis. Without it, you are left with trickle down economics. Which is not fair on the taxpayer or the people our development aid is supposed to be helping.