The challenges ahead

In the direct aftermath of independence in sub-Saharan African countries fifty years ago, many bilateral aid agencies were established in 1961, including in the Federal Republic of Germany and in my home country, Switzerland. Turning 50 offers an opportunity to reflect on past successes and setbacks. More importantly, it represents an opportunity to take a fresh look at forthcoming challenges. Looking at major shifts in the global development context, I will here provide the personal view of an outsider on the role of aid agencies in general and of Germany in particular in addressing these challenges.

Fifty years down the road, the global development context is indeed undergoing radical changes:
– With a doubling of its population from 1 billion to 2 billion people, Africa will become relatively labour abundant and land scarce. At the same time, Asia is experiencing a swift demographic transition, with increasing labour costs. This will alter regional comparative advantages and patterns of integration in the world economy, with specific risks and opportunities for Africa.
– Stringent environmental and energy constraints fundamentally challenge the dominant development model centred on economic growth. Increased competition over scarce resources and environmental degradation calls for a paradigm shift in our relationship with the biosphere.
– The vast majority of the world’s poor live in middle-income countries where official development aid (ODA) plays only a very marginal role. Poverty alleviation increasingly depends on domestic and global public policies that address inequality through political engagement rather than technical approaches. Mobilising and working with civil society has become as important as engaging with governments.
– The emergence of new donors, both governmental and private ones, erodes the de facto oligopoly exerted by the traditional OECD/DAC donors. Increasing donor competition opens new doors to address development challenges, for instance via triangular aid programmes and multi-stakeholder partnerships. But it further diminishes the power of aid conditionality in pushing the Western liberal democratic development agenda.
– The unfolding of a series of crises from 2008 on –from food and energy to private finance, banking, sovereign debt and public finance – puts the aid system under great strain. Many donors are set to cut down their aid budgets. Germany, with a relatively stronger economy and better fiscal situation, is expected to show leadership in sustaining the global aid effort.
– Dealing with fragile states remains a major challenge, compounded by the increasing frequency of disasters in war-torn and post-conflict settings. Mixing development with defence and diplomacy has produced mixed results at best. Therefore it is necessary to reconsider the role of aid in integrated stabilisation approaches.

Against this background, how can bilateral development agencies remain, or rather become, more relevant and effective in addressing global and local development challenges? What about Germany in particular?

For an outsider, Germany obviously is a major player in development assistance, ranking among the world’s largest and top European donors. With its unique recent history, Germany has gained first-hand experience in rebuilding a war-torn country, successfully mobilising domestic forces in conjunction with external assistance. After the Cold War, Germany again succeeded in boosting a swift economic development in the former German Democratic Republic. It is today the strongest economy in Europe, with a solid industrial base, relatively sound public finances and a generally appreciated education system. The quality of its development aid is generally acknowledged.

The coherence challenge

For most developing countries, however, ODA today accounts for only a marginal share of GDP and government revenue. Aid often has much less impact on developing countries than do donor countries’ policies on international migration, trade, finance, security, agriculture, investment or research and technology. So yes, German policymaking matters a great deal in global development affairs. Therefore, the first priority must be policy coherence for sustainable development (PCSD).

Over the last two decades, there has been much progress on policy coherence in terms of conceptual clarification, analysis and reporting. Developmental NGOs and some bilateral aid agencies are taking a firmer stand on a broad range of policies that are critical to global development.

In practice however, PCSD is often wrongly equated with inter-ministerial coordination and there has not been much improvement in the design and implementation of more coherent policies. Obviously, total policy coherence will never be achieved. Incoherence is deeply ingrained in policymaking, reflecting the variety of conflicting interests in any society. PCSD should thus not be seen as a realistic objective to be achieved. It should rather serve as a heuristic tool for informed democratic deliberation in donor countries when debating policy options. This is a precondition for minimising the most blatant inconsistencies between domestic policies and development objectives and will help to adopt compensatory or corrective measures where appropriate.

To have a substantive impact, PCSD should become part and parcel of policymaking. For instance, when laws that are likely to have a significant impact on developing countries are submitted for parliamentary approval, there should always be an assessment of that impact. In addition, ODA reporting to parliament could expand on how various national policies impair or contribute to international development. Relevant issues include policies on trade, intellectual property, security, finance or migration.

Strengthening PCSD requires resources and skills within development agencies and a strong voice in the cabinet. Because of its economic and political weight, Germany can play a leading role in pushing this agenda domestically, within the EU and at the global level.

Defence and diplomacy

Many aid donors, including Germany, are militarily involved in the “Global war on terror”, sending armed forces in developing countries like Afghanistan. In a laudable attempt to improve policy coherence, integrated approaches have been devised to link development with defence and diplomacy (the 3D approach). But in practice defence tends to take precedence over development. Just consider the much higher budgetary allocation and political stakes involved in sending troops to the battlefield. As a result, development assistance tends to be instrumentalised for military and diplomatic purposes.

Moreover, a large share of ODA is allocated to fra­gile states, often well over the absorptive capacity of the recipient countries. Development aid in support of stabilisation and counterinsurgency objectives runs the risk of being rejected altogether by recipients who see it as part and parcel of Western military intervention. It is true that development assistance – unlike humanitarian relief – is a foreign policy instrument that is not meant to be neutral and impartial. But it would be short-sighted to align development aid with security objectives in the hope to muster political support at home for larger aid budgets. Development should have a much stronger voice in 3D approaches, taking into account the growing body of evidence on what works and what does not in conflict-torn
countries.

Leadership potential

Germany has long been a pioneer in raising awareness on global environmental challenges and in promoting climate change mitigation and adaptation. Evidence shows, however, that this has not translated into any sustained increase in the number of aid projects geared towards the promotion of efficient and clean energy, at least until recently (Michaelowa and Michaelowa 2011).

German leadership in supporting innovative mechanisms such as Reducing Emission for Reforestation and Forest Degradation (REDD) in the UNFCCC context is most welcome. In the post-Fukushima era, and with a looming peak to oil crisis in the face of rising energy demand, German leadership will be critical in strengthening the global and regional governance of energy, beyond immediate concerns for energy security. In addition, German industrial know-how and technology can make a real difference in the framework of triangular cooperation with emerging and developing countries.

Germany must remain a key actor in international development cooperation. This country in particular is expected to keep raising its aid budget, all the more as other donors facing worse fiscal deficits are likely to reduce theirs. At the same time, German leadership should expand well beyond funding, and tackle the design and implementation of sustainable development strategies, notably regarding climate change and the promotion of greener, less carbon-intensive economies. With its strong industrial base and technological expertise, Germany has a comparative advantage in assisting poor countries in diversifying their economies and energy mix. Diversification and industrialisation in Africa will be critical to help absorb an ever more abundant labour force in urban centres, together with state building and the strengthening of civil-society organisations that must exert checks and balance on the otherwise unrestrained power of the executive.

Half a century ago, a first generation of German aid pioneers have opened the way and ventured into the difficult terrain of official development assistance. On the 50th anniversary of Germany’s Federal Ministry for Economic Cooperation and Development, let me congratulate the ministry, its agencies and staff for all the good work and successes registered so far. With its specific history, its geographical location between Western and Eastern Europe, its widely recognised industrial leadership, welfare and educational system, Germany should enhance its contribution to key multilateral institutions that are well positioned to provide and protect global public goods.

The current share of German aid channelled via multilateral organisations is comparatively rather low. With increased funding, Germany should exert greater leadership in the definition and formulation of global public policies and in the design of the next generation of development goals that must imperatively include clean energy and environmental pro
tection.