Jose Ramos Horta claims the $3 billion pledged to East Timor since independence has never made it to the people. (AAP)

A watchdog agency on overseas aid says many Australian programs for developing countries waste money.

Australia is also failing to train the numbers of people it should be helping in East Timor, Papua New Guinea and the Solomon Islands, says Tim Anderson, spokesman for the independent group AID/WATCH,

The agency’s criticism comes after East Timor President Jose Ramos Horta urged western countries, including Australia, to review foreign aid policies.

He claimed $3 billion pledged to East Timor since independence had never made it to the people or been used to relieve poverty.

AID/WATCH has been vocal on the issue of ‘boomerang aid’ – where aid money to foreign countries ends up funding Australian companies and consultants rather than the people it is meant for.

Dr Anderson told Radio Australia’s Connect Asia that aid programs, including those of the World Bank and the Asian Development Bank, are expensive and wasteful.

‘Very little education and training happens under our aid programs, even though billions of dollars are spent,’ he said.

‘There are a lot of short-term workshops, there’s a very small number of scholarships. We are not even the top three of training partners with Timor Leste [East Timor] at the moment.

‘Indonesia, the Philippines and Cuba, for example, are far bigger providers of training to East Timor than Australia is.’

He says the problem is systemic.

‘It isn’t resources that stops us training large numbers of people from Timor, Papua New Guinea, or Solomons, and it’s not a lack of goodwill,’ he said.

‘It’s something about our system and the way we do aid programs.’

But Mark Purcell, from the Australian Council for International Development – an umbrella organisation for non-profit aid and development agencies – says community organisations have strong standards in aid delivery.

He believes the Australian Government is moving in the same direction.

‘You can make criticisms and I think it’s right and appropriate for the president of East Timor to keep everyone on their toes,’ he said.

‘But I think people are working very hard and very seriously to actually improve the lives of people in East Timor.’