The Federal Ministry for Economic Cooperation and Development (BMZ) develops the guidelines and the fundamental concepts on which German development policy is based. German development policy is guided by the goal of improving living conditions for people in developing countries and emerging economies. BMZ works to move the world forward in cooperation with the international community to shape a positive, global future; it devises long-term strategies for cooperation with the various players concerned. BMZ commissions its implementing organisations to execute the German government’s development projects. The duties of these organisations include:
- Implementing projects within Financial Cooperation and Technical Cooperation
- Preparing and seconding German experts and development workers
- Providing training for managers and technical experts from partner countries
KfW Entwicklungsbank and the Deutsche Investitions und Entwicklungsgesellschaft (DEG), a subsidiary of the KfW Group, are responsible for Financial Cooperation (KfW) and financing private sector investments (DEG) respectively.
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) is responsible for technical cooperation with Germany’s partner countries, for preparing and sending out development workers, and for human resources development and further training. The Centrum für internationale Migration und Entwicklung (CIM) is in charge of placing experts in partner countries.
There are other, specialised implementing organisations of Technical Cooperation, such as the Federal Institute for Geosciences and Natural Resources (BGR) or the National Metrology Institute (PTB). The individual implementing organisations have developed highly specialised skills, and cooperate in their work in partner countries.
Private sector development (PSD) policy and strategy
There can be no sustainable development without economic development. A sufficiently robust rate of economic growth is the absolute precondition for reducing poverty and attaining prosperity. But economic growth must benefit all sections of society, i.e. it must be inclusive and ecologically sustainable.
Provided this is the case, economic development can have an impact that goes well beyond the confines of economic growth per se, and can help achieve many development goals. For example, ensuring that individuals have productive work that gives them prospects at personal level and within society also fosters security and peace. Employment and an income they can live on allow families to give their children a better education and break out of the vicious circle of poverty.
At the same time tax revenues are generated for the state, giving it more leeway. The pressure on ecosystems and the climate are lessened if growth is geared to conserving natural resources. In many developing countries this is particularly important because they, especially the more vulnerable sections of their populations, are disproportionately harshly affected by climate change and pollution. Sustainable economic development is thus a way of ensuring inclusive pro-poor development.
In the promotion of sustainable economic development, German development cooperation concentrates on delivering advisory services on economic policy, fostering the potential of the private sector and supporting cooperation countries in their efforts to put in place stable financial systems. Vocational training systems and properly functioning labour market institutions enable people to benefit from economic growth and from the country’s increased prosperity. Activities in this area are geared to creating jobs and reducing poverty, and are often complemented by direct employment promotion measures.
BMZ recognizes the important role the private sector must play if development is to be achieved and recognizes that the social, ecological and economic challenges faced by developing countries cannot be met by the state alone. BMZ believes that governments, civil society and the private sector must assume joint responsibility and take concerted action. Cooperating with the private sector in development partnerships mobilizes additional private-sector inputs for development-policy processes and objectives, and promotes the transfer of expertise and modern technology to developing countries. This means that cooperation generates enormous benefits in development.
German development policy takes its lead from the principles of the social and ecological market economy. As well as ensuring sound economic, political and social living conditions for the population, measures aim to conserve the natural resource base on which life depends for the generations to come. The goal is to put in place a market order in line with the prevailing conditions in the cooperation country that also embraces a social element.
- Scope and Structure of German Official Development Assistance: Trends and Implications for the BMZ and Other Ministries, German Development Institute (2018)
- The German strategy for Aid for Trade (2017)
- BMZ Development Policy Action Plan on Gender Equality 2016 – 2020 (2016)
- BMZ Sector Strategy Private Sector Development (2013)
- BMZ Economic development, growth and employment Webpage
Partnership mechanisms for the private sector
BMZ has a strong focus on cooperation, with the international community but also with the private sector. German development cooperation addresses the company level directly, so as to harness the potential offered by the private sector for sustainable development. It sees itself as the partner of the private sector and advocates more values-based engagement and greater corporate social responsibility. Companies in the private sector wield major influence over the globalization process and by cooperating with them governments can gain access to additional resources, know-how and money for development cooperation. Therefore BMZ has a number of policies and programs for partnership with the private sector:
- The lab of tomorrow fosters the development of new business-driven solutions
- developpp.de: Brokering links between companies and other project stakeholders; Financial support; Technical assistance
- GIZ Cooperation Arrangements: Financial support; Technical Assistance
- OECD DAC Peer learning country report on private sector engagement (2016): Germany
Transparency, effectiveness and results in PSD
Transparency is an important aspect of Germany’s development policy. The public and parliament are informed about the use of public funds through full and timely publication and explanation of the development contributions provided by the German government. At the same time this helps to further enhance the effectiveness of German development cooperation: If information on the use of funds is disclosed and if cash flows are predictable and traceable, development cooperation becomes more efficient.
In order to achieve the highest possible level of transparency in German development cooperation, BMZ complies with current international transparency standards when disclosing aid flows. BMZ is actively involved in drafting these standards within the framework of relevant transparency initiatives such as, for example, the International Aid Transparency Initiative (IATI), where Germany is one of its founding members. It is also involved in sector specific initiatives such as the Extractive Industries Transparency Initiative (EITI).
At the fourth High Level Forum on Aid Effectiveness in Busan (Republic of Korea) in 2011 a new Global Partnership for Effective Development Cooperation was initiated. An important agreement reached in Busan concerns the introduction of a common transparency standard for development cooperation. BMZ published its national schedules for the implementation of the transparency standards in December 2012. Germany has thus met the commitment made in Busan. BMZ is strongly committed to measuring and evaluating the success of German development programs and policies. The results of commissioned reports enable BMZ, parliament and the German public to look at the past and know what has been achieved for the people of developing and emerging economies.
Results of evaluations help BMZ and its partners to look ahead and assess how German development cooperation can continue to respond well to challenges in future. Transparency is an important aspect of Germany’s development policy and in accordance with the principles of transparency all evaluation reports are accessible to the public.