Thursday, 1 August 2013

Germany´s Next Aid Model

No, this is not about Heidi Klum. God forbid! Neither it is about the German deputy development minister Gudrun Kopp (see picture for blond hair).

Just seven weeks ahead of Germany´s national election, it is time to think about how German development cooperation should be conceptualised in the forthcoming government. Five years ago, William Easterly and Tobias Putze tried to get a handle at an ´ideal´ aid agency strictly based on empirically observable parameters[1] (rather than negotiated and vetted DAC peer reviews). Their study, covering 38 bilateral and several multilateral aid agencies, was based on criteria derived from the bulging development aid literature:

·         Transparency (a precondition necessary for any meaningful evaluation)

·         Specialisation (avoiding fragmentation of aid supplies costly to recipients)

·         Selectivity (focus on poor countries)

·         Efficient delivery (avoiding tied aid, food aid, and technical assistance)

·         Administrative loss (share of aid bureaucracy cost).

Among the bilateral aid agencies covered in the Easterly/Putze study, Germany´s BMZ occupied the second last rank! German cooperation was seen in particular as fragmented, bureaucratic and nontransparent compared to its DAC peers.
Meanwhile, the recalibration of the world economy toward China and the success of large emerging countries in helping lower global poverty (aka Shifting Wealth) have turned some of the cited criteria for evaluating aid agencies doubtful, even obsolete. Shifting Wealth, apart from allowing for a milder assessment of past and present BMZ performance than granted by the Easterly/Putze study, suggests some specific recommendations for Germany´s aid over the next legislation period (2013-17) that actually can be opposite to some of the traditional criteria:

·         The selective focus of aid needs to shift from poor countries to poor people. Only just two decades ago, 93 percent of the world´s poorest people lived indeed in the poorest (least developed) countries; today, three fourth of the world´s poorest people survive in countries now classified as middle-income countries (Ravi Kanbur und Andy Sumner, 2011)[2]. For humanitarian reasons, the aid focus needs to reflect the new geography of poverty, even against populist sentiment at home. In India, half a billion people remain in abject poverty, 200 million in China. Other countries that the BMZ should focus on, according to the selectivity criterion ´number of poor people´, are Nigeria, Bangladesh and Indonesia.

·         The implicit reorientation of development cooperation from Africa to Asia would also change the optimal mix of aid finance, from grants toward soft loans. Often cash rich, emerging countries´ poverty is their own prime responsibility. Western development loans, however, can lever political choices in those countries while they are less burdensome for fragile budgets in DAC countries, potentially more flexible and delivered more speedily (at least if they follow the innovative  Agence Franaise de Développement model) conceived by Cohen, Jacquet and Reisen (2006)[3].

·         China´s and other emerging countries´ proven contribution to global development and poverty reduction, notably in Africa (African Economic Outlook 2011), is forcing Western donors to reexamine their standards and to find ways to merge them with Eastern cooperation modes. The merger of Western standards, which is heavy on declamatory good-governance rhetoric, with project-oriented Eastern cooperation modes, often nontransparent as based on barter deals, is yet to be designed, it seems to me.

·         German bilateral cooperation excels on implementation – and should ´sell´ itself so. Unlike Britain (remember Tony Blair?) and France, Germany has relatively few spin doctors. But it has GIZ (the project implementation agency) and KfW (the development bank). These institutions grant Germany a comparative advantage in project delivery and completion. Germany´s bilateral cooperation is thus defined by close links with programmes and projects, creating high visibility for many German actors and facilitating their financial monitoring. These traits of German cooperation, largely undersold to DAC peers and multilaterals, make it a valuable partner for trilateral South-South-North cooperation, in particular joint with China.

·         Help restore core finance for multilateral development cooperation. Where -unlike in Germany - implementation agencies are lacking, there is a tendency to use multilaterals via earmarked funding. Germany has largely refrained from multilateral ´cherry-picking´ and should work hard on its peers to stop this trend, which has weakened the UN system ever since the US called to call the shots there, i.e. since the 1960s when many countries became sovereigns independent from colonial rule. A high share of earmarked finance in multilateral budgets causes permanent ´funds shopping´ by management, thus diverting its attention and time; it raises administrative overhead costs; and it intensifies the bureaucratic tendency for mission creep and fight for mandates. The unproductive struggle among multilaterals for G20 mandates provides a visible warning. Germany´s next government is called for to clean the multilateral donor chaos; due to tutelage problems, this task can´t be let to ministries – the Bundeskanzleramt will have to deal with the problem[4].

It is questionable whether the current BMZ ministry can confront these challenges in its current setup[5]. Where most of the extremely poor people reside today, namely in large emerging countries, development cooperation can only succeed by managing cross-cutting issues, integrating policy fields as diverse as food security, basic welfare systems and green urbanisation.


[1] Easterly, W. und T. Putze (2008), “Where Does the Money Go? Best and Worse Practices in Foreign Aid”, Journal of Economic Perspectives, Vol.22.2, S. 29-52.
[2] Kanbur, R. und A. Sumner (2011), “Poor Countries or Poor People? Development Assistance and the New Geography of Global Poverty”, Cornell University, WP 2011-08.
[3] Cohen, D., P. Jacquet and H. Reisen (2006), “After Gleneagles: What Role for Loans in ODA?”, OECD Development Centre Policy Brief No.31.
[4] H. Reisen (2012), “Herausforderungen an die multilaterale Entwicklungszusammenarbeit“, KfW Meinungsforum Entwicklungspolitik, Nr.4, 4.April 2012.
[5] J. Faust und D. Messner (2012), “Probleme globaler Entwicklung und die ministerielle Organisation der Entwicklungspolitik“, Zeitschrift für Außen- und Sicherheitspolitik“, Vol. 5, S. 165-175.

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