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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.

Disclaimer

CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.