Strategic orientation
Partners in the private sector
By Hans-Jürgen Beerfeltz
Did you know? Germany’s BMZ was never called the Aid Ministry. In 1961, Walter Scheel founded the Federal Ministry for Economic Cooperation. In the 1990s, “and Development” was added, resulting in one of the longest names for a ministry in Germany. In my opinion, it aptly expresses what our job is. The current government coalition has lived up to the name since taking office in 2009.
In my view, one of the most important things is to encourage lots of people to get involved as developers. Governments on their own cannot rise to the giant challenges we are facing. Poverty, climate change, resource depletion, loss of biodiversity, diseases, energy bottlenecks and lack of education are just some of the global issues that must be tackled. We certainly need strong partners.
If you want to have partners, you have to involve them directly. Obviously, the governments of other countries are our partners. We want to cooperate directly – in the sense of bilateral action – and our preference is to deal directly with the people in our partner countries!
The BMZ’s closest partners, however, also include a wide range of large and small associations, non-governmental organisations, churches and political foundations. These are all important development actors. As a government department, we need to cooperate with them. We intend to launch a new Service Point for Civil Society and Municipal Involvement next year. The idea is to support relevant actors even more and help them to become active. In my view, the BMZ is not simply a government department; it is a platform for citizens’ participation!
Private firms have a special influence on the process of globalisation. Their commitment and creativity, moreover, affect areas where, for political, economic or logistical reasons, state agencies have little bearing. Private sector companies are therefore inevitable and crucial partners for making development cooperation succeed. We need private capital and industry expertise to create jobs and generate incomes in our partner countries. We need them to create skills and roll out technologies that are climate-friendly and environmentally sound. Our development policy emphasises the role of the private sector for reaching developmental goals.
Of course, our predecessors at the BMZ also cooperated with the private sector, though they tended to see such partnership as somehow dirty and something they did not want to tell the public about. In contrast, I believe that close cooperation with the private sector is decisive for development – and that includes closer linking of policies on foreign affairs, trade and development!
Entrepreneurship creates jobs, incomes and prospects. It directly reduces poverty. It is therefore indispensable to involve more companies in developing countries and emerging markets. We offer the private sector a lot of ways to network with us and get involved. Our develoPPP.de programme for development partnerships with industry combines our strengths with those of the private sector. We cooperate to achieve development. We share interests in sectors like energy, insurance, water and waste management as well as many others. Cooperation makes sense on product certification, skills training and resource management, to mention just a few examples. The flexibility of develoPPP.de allows us to involve big corporations that belong to the DAX30 as well as small and medium sized enterprises (SMEs) that manufacture medical technology, for example, or sell food.
We aim to motivate companies to make more direct investments in our partner countries. On our behalf, the DEG, the branch of Germany’s governmental KfW Banking Group that supports private-sector growth in developing countries, offers corporate loans to close the “SME gap”. Unless they get special services, investing in developing countries is not attractive to SMEs. The DEG therefore helps to mobilise capital, for instance by co-funding feasibility studies.
Information and networks matter, which is why we launched an awareness raising campaign. Part of it was a road show that took us to German chambers of commerce, where we reach out to SMEs and explained our initiatives. Via GIZ and CIM, we send advisers to Germany’s chambers for foreign trade in developing countries and emerging markets, thus giving private-sector companies active there access to our development expertise. In Germany, we have “development scouts” in industry associations and chambers of commerce; their job is to broker relevant contacts. They guide companies through the complex landscape of development cooperation and provide economic and developmental know-how.
Higher standards of living
The goal of German development policy is to raise the standards of living in our partner countries. Development policy helps to improve the political, legal and economic environments in our partner countries. At the same time, our commitment reduces market risks. More efficient governance, adherence to international standards, the rule of law, better infrastructure and capacity building all help to reduce transaction costs and ensure the success of investments in the mid and long term. These examples clearly show that our Development Minister Dirk Niebel is not carrying around a bag full of money for private sector businesses; rather, we aim to mobilise private sector funding for development – to the benefit of all parties involved!
The more we succeed in getting industry on board and the more we mobilise private capital for financial cooperation with more advanced developing countries, the more we will become able to earmark budget items for use elsewhere – for instance in the least developed countries.
I am convinced that development policymakers are attractive partners for industry. Thanks to involvement in political and economic modernisation and transformation processes, our Ministry and its implementing agencies have decades of experience in developing countries and emerging markets. After many years of involvement at the local level, our local partners trust us and network with us. Such competence can help companies, for instance, when they want to minimise market entry risks. In other words, our involvement makes it more attractive to invest in markets that are as promising as they are challenging.
Our partner countries, moreover, enjoy genuine added value when we closely involve the private sector in our development policy. After all, we cooperate to the benefit of everyone involved – including the people who create jobs in our partner countries so that others can get themselves out of poverty as well as German companies that can more easily become involved in this challenging field. This approach also serves the interests of German taxpayers, whose euros we can use more effectively elsewhere. This triple-win scenario is worthy of the BMZ’s name – we are fostering development by economic cooperation!