Only this particular IKEA puzzle, when all the parts click together, will become a hardy emergency shelter for a family of five.

This is how private companies are making foreign aid their business, muscling in where charities and governments once worked alone. IKEA is now the largest private donor to the United Nations refugee agency. The prototype "IKEA Refugee Housing Unit" – with its insulated roof, sun shade and solar powered lights – has been deployed in Lebanon in recent months to house people fleeing from neighbouring Syria. The shelter can be assembled in about four hours, transports easily and costs about $1000.

The plan is to ''revolutionise the refugee tent, or at least to vastly improve it," according to the company. Old flimsy canvas, lasting only a few months when exposed the elements, will be replaced by a product that will survive for up to three years.

Julie Bishop's 'New Colombo Plan'

For the Abbott government, watching from afar in Australia, this is exactly the kind of corporate innovation it hopes will transform the approach to the world's poor.

"There must be a major role for the private sector in the development sphere," Foreign Minister Julie Bishop declared a few weeks ago.

"A strong private sector delivers higher growth, more jobs and will help reduce poverty."

Bishop has set out what she describes as "a new paradigm" for Australia's foreign aid program, with business engagement at its heart. The government's ambition runs to far greater lengths than simply getting companies involved in delivering emergency relief. The entire $5 billion aid budget will be opened up, everything from building roads or hospitals, to helping women escape oppression.

"If there is a private sector solution available that is efficient and effective, we will embrace it," Bishop pledged.

The new buzzwords in Australia's aid program are "results", "value for money" and "robust quality systems". Corporate-speak is in. Feel-good language about responsibility or charity are most definitely out.

Gone too is the very agency that had been in charge of foreign aid delivery, AusAID. Soon after the election, the government announced sweeping cuts to the aid budget and surprised many by engineering a reverse takeover of AusAID by the Foreign Affairs department. Bishop sees a more natural alignment in Australia's aid and diplomatic objectives, one being the notion of "aid for trade".

"Over the years I've watched every government come in and make changes," says Wendy Rose. The head of Save the Children for 15 years from the mid-1980s, Rose is known affectionately by close friends as the Dame of Australia's aid organisations  and, well into her 70s, she still holds a place on charity boards.

"Now Bishop comes in and without so much as a by-your-leave gets rid of AusAID. This is a profound change," she says.

In dark public service humour around Canberra, "WasAID" has become a running joke. In aid circles there is worry about the loss of experienced staff and accumulated technical expertise. The merger resulted in 500 redundancies, many from the former AusAID, and more jobs lost overseas.

Any big workplace change is tough and the cultures of the once separate departments are notably different. Diplomats by nature are cautious, whereas useful work in the poorest regions often involves taking big risks.

Yet the Coalition insists Australia's aid program badly needed an overhaul. There was a view AusAID was too independent from the taxpayers funding it. Revelations about inflated salaries paid to consultants working in chronically poor nations damaged the agency's reputation and overshadowed examples of good work.

The Coalition also accused Labor of using aid as a honey pot to win favour in the bid to win a temporary seat on the United Nations Security Council.

During Labor's six years in office, both major parties had pledged to a considerable boost in foreign aid spending. Official development assistance, as aid is formally known, was on track to reach about $8 billion by 2015 – a staggering increase from $2.9 billion in the last year of the Howard government.

But it didn't last. Labor struggled with a political promise to bring the nation's finances back into surplus and aid became an easy target for cuts. In Labor's last two budgets, "deferred" spending plans in foreign aid that had been projected in the years ahead saved almost $5 billion.

The Coalition went even harder after winning office, pocketing Labor's savings and making more. Programs were dumped in Jordan, Iraq, Latin America and especially Africa. There seems little political cost. Indeed, cutting aid might be a political plus.

Opinion polls show people vastly overestimate the amount Australia actually spends overseas – many up to a factor of five. An Essential Media survey in June also found putting a freeze on foreign aid had almost two-third support. Even a majority of Greens voters say the government should cut aid spending.

World Vision chief Tim Costello blames a national "zeitgeist of turning inwards" exploited across the political spectrum, for Australians' apparent stinginess. "If we are in terrible pain after 23 years of economic growth, pity help the rest of the world," Costello says.

Aid will now be capped at a total budget of just over $5 billion annually for the next two years, and then increase with inflation. The aim to spend 0.5 per cent of national income on overseas aid has been abandoned, let alone a United Nations target of 0.7 per cent.

If Australia still used the measure, by 2017, the government will spend just 0.29 per cent of national income on aid – just 29 cents out of every $100 dollars Australia earns. Presently the figure stands at 32 cents in every $100.

"Aid alone is not a panacea for reducing poverty," Bishop insisted in June. She is convinced the world economy has undergone profound changes in recent years and the aid program must change too. The standout is China, where millions have been raised out of poverty by a booming economy. This has transformed where aid is needed – and the thinking about how it should be delivered.

Australia has followed other big Western donors, Britain and the United States, in putting its faith in the private sector to spur economic growth and reduce poverty. The comparison Bishop cites is potent. Across the world each year, $US134 billion ($144 million) is devoted to official development assistance. But this money is dwarfed by private capital.

The amount family members working abroad send home – known as remittances – is estimated to be $US400 billion. Private investment in developing countries is more than twice as much again, at US$US890 billion.

The government's aim is to tap into private money and entrepreneurial spirit. "Leverage" is another buzzword. Bishop has created a $140 million "development innovation hub" in her department to take risks – an idea that raised a few eyebrows in business boardrooms that generally see the bureaucracy as sluggish. The government's enthusiasm for risk is tempered. New benchmarks warn any underperforming projects will be cut.

The region has changed. Countries such as Indonesia now have a bigger economy than Australia and a growing middle class. There are still 100 million people in Indonesia living on about $2 each day, but to reach them, foreign donors have to work with local authorities who want to privilege their own markets.

After Typhoon Haiyan struck the Philippines last year the UN for the first time sent a special liaison officer to co-ordinate offers of help from local and global business. Manila insisted on local contractors for reconstruction.

Private companies are also good at sniffing out opportunities. Mobile phone manufacturers found across the world, women are 21 per cent less likely to own a mobile phone. Australian aid has already contributed to a program by phone manufacturers to increase women's access to mobiles in Indonesia and Papua New Guinea. This goes beyond basic communication, but can give access to health services or emergency warning.

Mark Ingram is an enthusiast for a bigger private sector role in development. Ingram runs Business for Millennium Development, an organisation with the goal of connecting big corporate players with tiny markets in poor countries. But talking with business means talking about "profits", often a dirty word in humanitarian circles.

"The profit motive is viewed by many to implicitly mean 'exploitation'. But that is not necessarily the case," says Ingram. "Business engagement with the poor can be designed with intentional mutual benefit."

Ingram's favourite example is a piggery in central PNG – Highlands Pork Limited. Resources company Oil Search has backed the project to draw together a network of small piggeries and increase pork sales on the local market.

The aim is to create "supply chain" and spread the income. The pigs have to be fed, so that means finding local root crop farmers who can sell food. These root crops, or cassava, are often grown by women. That creates income. Then the meat has to be distributed, giving someone else a job.

Ingram concedes this notion of "inclusive business" can be difficult to grasp. "It doesn't reduce down to a sound-bite ... donors will have to be quite patient." But by gradually generating wealth, life takes on a more predictable character.

Hundreds of reports and books have been written about foreign aid, what works, what doesn't. In recent years such debates have been occasionally savage – economist Jeffrey Sachs' book The End of Poverty countered by William Easterly in The White Man's Burden. Zambian economist Dambisa Moyo's Dead Aid, a devastating critique of modern aid policies, was a best-seller.

Mistakes have been made. For every wheelchair-bound woman in south-east Asia who can run a successful food store thanks to a little foreign help, 10 similar experiences fail. The most disturbing example of failure is right next door. For all the billions provided by Australia over decades, PNG will not meet a single one of the UN's millenium development targets when they are assessed next year.

But if aid is not the panacea, the private sector might fare little better. "The private sector is not a developmental panacea," warned an official audit of Britain's foreign aid program published in May – right at the moment Bishop was getting ready to set out her new paradigm for Australia. Faith in "miracles" by companies, the audit said, should not underplay the role for donors to help the poorest in society.

Paul Ronalds, head of Save the Children in Australia, believes economic growth has certainly lifted more people out of poverty. But in some of the poorest regions, Ronalds says, there is simply no functioning economy to work in. No healthcare. No schools. Just grinding poverty.

"For that group of people to be able to compete in any way in a global market you've got to start to build up their local skills," Ronalds says. "You've got to get them to the lowest rung on the development ladder so they can then start to climb it."

Ronalds sees the merging of aid workers and diplomats as having disrupted Australia's aid program, with the worrying potential for long term objectives to be overtaken by short term political interests. He points to experience during the Cold War, when aid was seldom given to alleviate poverty, but to shore up alliances.

Joanna Hayter from the International Women's Development Agency is more blunt. "The disappointment about the new framework is it just seems so mean-spirited."

Hayter, from an organisation that specialises in gender challenges, questions how the private sector can ever help rebuild a girl's life after being forced into sexual slavery in a war. Or to even get women into the formal workforce in poor societies.

"You can't just do that because you make a business decision," Hayter says. Women are often already looking after children and families, households and act as linchpins in the community. Take women out without the huge effort required to replicate this informal and unpaid work – "society will collapse".

Hayter's concern is privileging the private sector can be needlessly divisive. Where government or other organisations have skills to offer, they should be used. Otherwise the endless repetition of "economic growth" is simplistic.

"It's the voice of people that have never lived in poverty or deprivation," she says.