Thursday, October 28, 2010

Aid: Germany receives kudos mixed with criticism

By Richard Johnson

Courtesy of IDN-InDepth NewsAnalysis

IFAD Photo by Giuseppe Bizzarri

PARIS (IDN) - Germany has been praised for its development cooperation efforts aimed at ushering in a more just world. But kudos come with criticism couched in diplomatic jargon. The essence of the message to Berlin is: continue to consolidate your strength but undertake concerted efforts to overcome your weaknesses and make your development aid more effective and suited to the needs of your partners in the developing world.

Australia and Britain, which reviewed Germany's aid efforts as peers, say: Germany has been one of the world's largest bilateral donors for the past two decades, but it spent only 0.35 percent of its national income on official development assistance (ODA) in 2009.

"This is well short of its promise to raise the proportion to 0.51 percent by 2010 and to 0.7 percent by 2015. However, Germany intends to keep its promise of increasing ODA to 0.7 percent of GNI (Gross National Income) by 2015," states the peer review done at the behest of the Development Assistance Committee (DAC) of the 33-nation Organisation for Economic Cooperation and Development (OECD).

The review goes on to say: Germany's global importance as a donor is well recognised. It encourages Germany to go further in providing strong international leadership on development issues in the future. The DAC commends Germany's leadership in particular on issues related to climate change and development, noting that the government has integrated the issue into its development cooperation programmes and increased climate-related ODA by 40 percent in the past few years.

"Since the DAC last reviewed Germany five years ago, it has made good progress in many areas of its development co-operation. It now works closely with 57 developing countries, down from 84, and plans to focus on governance, education, health, climate and environment, rural development and sustainable economic development, with an increased emphasis on the private sector," the says the DAC review presented in Berlin on October 27, 2010.

However, it says, Germany gave only 40 percent of its bilateral ODA to these countries, and that increasing such aid would maximize its development impact. However it notes that "prompted by the DAC, the government has approved plans to reform its fragmented development cooperation system and it has also taken steps to improve the coordination of its ODA".

The DAC urges Germany to go further and faster with these planned reforms to achieve greater efficiency and ensure more effective delivery of its ODA. "This will strengthen Germany’s contribution to meeting the Millennium Development Goals (MDGs), especially in sub-Saharan Africa," it adds.


Africa remains the highest recipient region, receiving 35 percent of Germany’s bilateral ODA in 2008. During the 2005 G7 summit at Gleneagles, Germany promised to double its aid for sub-Saharan Africa by 2010 (over 2004 levels).

But like some other G7 countries, Germany is lagging behind its Gleneagles promises. As an EU member, Germany also committed in 2005 to allocating half of its ODA increases to sub-Saharan Africa through to 2010.

While Germany's bilateral ODA to this region did increase significantly (from USD 1.4 billion in 2004 to USD 2.7 billion in 2008), this is much less than 50 percent of the increase in Germany's bilateral ODA over this period. Moreover, aid to sub-Saharan Africa as a share of Germany's gross bilateral ODA has increased only slightly, from 27 percent in 2004 to 29 percent in 2008.

Germany has renewed its promise that 50 percent of all new bilateral ODA allocations will be for sub-Saharan Africa in 2009 and 2010 and informed DAC that the necessary firm commitments have been made. However, the DAC review doubts whether this will really happen because the recent survey of DAC members' aid commitments indicates that Germany's bilateral ODA will continue to go mainly to middle income countries.

"Meeting the Gleneagles commitments is surely important in tackling poverty in a key region in the world and in underpinning Germany's credibility as a leader among major donors in the international system," the peer review reminds Germany.


The review asks Germany to beware of undertaking actions that serve the country's commercial interests. This implies that modalities need to be developed to ensure that projects are not selected on the basis of German commercial interests rather than expected developmental benefits.

In particular, says DAC, where loans are used for development cooperation, Germany needs to ensure that these meet all the ODA criteria -- that is, that they are developmental, concessional, and meet the minimum 25 percent grant element (calculated against a 10 percent discount rate) -- and to assess the extent to which future repayments on ODA loans may impact on targets for net ODA volume.

This sign of caution is important because BMZ continues to be responsible for a little more than half of Germany’s ODA -- the remainder is allocated to a range of other government departments, agencies and institutions. Precisely this makes it hard for Germany to maintain a coherent development cooperation policy.

With this in view, the DAC review observes: "There is a need to strengthen and improve the co-ordination of Germany's ODA at headquarters and in the field and to ensure that priority focal area strategies, guidelines and country strategies guide the work of all government departments, agencies and institutions involved and that these bodies feel a sense of ownership of these strategies."


The review takes note that Germany channels 6 percent of its ODA through non-government organisations (NGOs), and in working with NGOs, Germany gives high priority to NGOs' independence. However, it advises Germany to evolve a "clear strategy to guide this work applying both to German and Southern civil society organisations".

Most NGOs enjoy considerable freedom in how they use the ODA they receive "but there are insufficient accountability linkages between them and the responsible German development cooperation institutions".

For that reason, Germany needs to strike a balance between respecting NGOs' autonomy whilst encouraging them to demonstrate development results and also to align with partner country priorities. Also, Germany's consultation with NGOs on its development cooperation policies and strategies needs to be more meaningful.

One approach, the review says, would be to begin consultations earlier in the policy-development process. It asks Germany to develop a strategic approach to its relationships with NGOs. Such an approach should include a range of mechanisms for channelling funds through NGOs, such as framework agreements at headquarters and at partner country levels. "This kind of approach is necessary to ensure a sustained focus on results."

To achieve its commitments and maintain its credibility, the peer review advises Germany to set new realistic annual ODA volume targets -- as part of the 2012 budget proposal -- that form a credible pathway for achieving the 0.7 percent ODA/GNI target by 2015;

Germany is also advised to work to build cross party support for achieving the new targets and growth path and publicise them widely, replace debt relief with other types of development cooperation as the stock of debt becomes exhausted; and further concentrate its bilateral ODA on partner countries, particularly those in sub-Saharan Africa and countries affected by conflict and fragility.

The DAC review further advises Germany to develop its private sector programme to encourage foreign and domestic investments in areas aligned to partner countries' development strategies, ensuring that this does not lead it to divert ODA to finance assistance that is oriented to its own commercial interests.