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Contributions from
the Column
Focus
Germany’s DC: a foot in the door of crucial partners
World Bank: in search of strategy
Cooperation challenges
Economic development needs capacity building
What China’s success means for other countries
10/2005
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Demand for capacity building
Developing countries with high growth rates generally do not need foreign assistance along with donor-financed campaigns to combat poverty. What they do need is expertise in environmental and social issues.
[ By Günther Taube ]
More attention is being paid to “anchor countries” in bilateral German Development Cooperation (DC), since the Federal Ministry for Economic Cooperation and Development (BMZ) published such a strategy last December (Wieczorek-Zeul, 2005). Taking the baton from a study conducted by the German Institute for Development Policy, the BMZ defined a group of 15 large, influential developing and newly industrialising countries as anchor countries (see article by Andreas Stamm and Tilman Altenburg on p. 364 of this issue).
Cooperation with these countries can be expected to increasingly serve as starting points or hubs (“anchors”) for regional projects conducted by German DC. For instance, Brazil is such an anchor for Latin America – especially in the Mercosur free trade area. Likewise, South Africa and Nigeria play special roles on their continent. Clearly, anchor countries are crucial for the future of their respective region, but also for the world economy (see article next page) as well as the deliberation in global, multilateral structures such as the United Nations or the World Trade Organisation.
In the past few years, a number of reforms relevant to cooperation with anchor countries have been undertaken in German DC. Above all, bilateral cooperation, which used to be spread thinly across more than 120 countries, has been concentrated on around 70 partner countries since the late 1990s. Cooperation with partner countries is limited to one sector unless that partner country is considered “focal,” in which case there are activities in up to three sectors. The aim of this strategy is to make the impact of German cooperation more effective. Six of the 15 anchor countries are currently defined as focal partner countries (China, India, Pakistan, South Africa, Indonesia, and Turkey) and five others as partner countries (Thailand, Egypt, Nigeria, Brazil, and Mexico).
Moreover, German implementing agencies have also become more closely coordinated in the past years. This applies, for instance, to the drafting of regional concepts, country strategies, and programmes. Another example is the establishment of country teams with representatives from BMZ, the KfW development bank, the German Technical Cooperation (GTZ), InWEnt (Capacity Building International) and other agencies. In addition, joint bureaus (“German Houses”) have been set up in the partner countries and local focus coordinators appointed.
Much progress has been made in turning ongoing programmes with a good track record of many years into strategic partnerships. This is particularly so in the case of those anchor countries that are considered focal partners (where the current portfolio concentrates on no more than three sectors). The sectors chosen reflect German priorities as well as interests and preferences of the partners. Core issues are environment and energy, economy and social affairs, good governance, security and peace.
Well defined wishes
Anchor countries are obviously losing interest in German DC projects to combat poverty. This task is increasingly considered a domestic concern. India has even categorically declared that it will only engage in official development cooperation with six bilateral donors. In addition to Germany, these are Britain, Japan, France, Russia, the USA, and the EU.
Changes are also felt in financial cooperation. Projects increasingly focus on supporting structural programmes rather than on covering an acute lack of capital. Accordingly, German financial cooperation with Brazil was phased out in the 1980s.
Another clear trend is anchor countries precisely defining specific needs. For example, governments of developing countries repeatedly ask InWEnt what they might do about money laundering in general. But what China recently did was unusual – coming came up with eight items for this agenda and wanting 20 of its financial experts to take part in a 14-day seminar devoted to the topic.
In such cases, Germany no longer acts as an aid donor. Rather, InWEnt is in a position to respond fast and flexibly to the wishes of partner countries in search of capacity building measures. Countries with fast growing economies particularly appreciate such services, as becomes evident in the fact that China today covers 50 percent of all costs involved in InWEnt programmes.
Anchor countries already display keen interest in programmes enhancing organisations and human resources. They are also keen to engage in expert dialogue. As such demand is likely to increase, it makes sense to provide more opportunities for the interaction of experts, managers, and politicians from anchor countries and Germany, enabling them to discuss the concerns they share.
The fields of environmental policy and social security provide good examples for such an approach. It is trivial to note that for the international community to live up to ecological challenges emerging economies matter almost as much as advanced nations. What is relevant for German policy, however, is that awareness of these issues is growing fast in countries such as China or India, as the People’s Republic demonstrated at the Renewables 2004 conference in Bonn. It is urgent to separate the strong economic growth of such countries from the consumption of fossil fuels to reduce the environmental impact.
Germany has a lot to offer in terms of energy efficiency and environment-friendly technology. Moreover, it is a bad idea in terms of both environmental and economic policy to subsidise energy and the use of natural resources (such in the case of agricultural irrigation), as should be pointed out in international dialogue and capacity building.
Just like environmental affairs, social issues are an increasingly important concern of the governments of many anchor countries. A recent position paper by the Central Committee of China’s Communist Party stated, for instance, that “social harmony” is threatened in the People’s Republic. Officially, the booming economy is considered problematic as it goes along with a lack of social equity, a growing gap in incomes, and insufficient social security. For similar reasons, our Chinese partners are also interested in German labour law. India, too, has recently indicated that it was interested in learning more about social security systems in Germany.
Anchor countries should be expected to play a greater role in the design, organisation, and financing of jointly conducted programmes. At the same time, German DC can be expected to focus more on disseminating knowledge in anchor countries, with dialogue programmes playing an increasingly important role – involving, among others, various German government departments as well as participants from civil society and the private sector. To a growing extent, anchor countries will serve as locations and hosts of capacity building programmes, as they are themselves increasingly becoming active as donors. Consequently, there is an interesting perspective of conducting development cooperation with three and more countries at once.
Underestimated players
Increasingly, the impact of anchor countries is being felt in the world economy. They are assuming roles previously reserved for advanced countries. Here we will discuss three examples.
Direct investments: More and more, anchor countries are the source of direct investments in other developing and newly industrialising countries. Chinese companies from the public and private sector have invested enormous amounts abroad, often targeting regions and sectors of strategic interest. For instance, Petrochina has invested more than five billion dollars abroad, more than half of which went to the politically instable country of Sudan. Similarly, South African companies have invested in other African countries in the past ten years. For example, most direct investment in Tanzania now comes from South Africa.
Financial markets: Anchor countries have become much more important for international financial markets. In the past ten years, almost all major financial crises originated in one of them (Argentina, Brazil, Thailand, Russia, Turkey, and Mexico). At present, however, the growing trade deficit of the US along with the resulting trade surpluses in Asia is considered the most worrysome trend for the international financial system. China and the Tiger States are not the only countries that have built up large currency reserves; India and Pakistan have done so, too. In the case of Pakistan this is particularly surprising, as this country was so weak as recently as 2001/02 that it had to accept financial support from the International Monetary Fund (IMF). In the meantime, Pakistan has paid back those loans before they were due and has begun placing Eurobonds on international markets. This example shows that anchor countries deserve special attention as may very well have some surprises in store for the world.
Aid donors: Because of their quickly growing economies, anchor countries are increasingly becoming donors of development assistance themselves. In some cases – for example, China, Brazil, and India – this role is not new. Nonetheless, that both India and Pakistan have forgiven other countries debt in the course of the HIPC-debt relief campaign is a noteworthy proof of a new aid dimension. Moreover, aid by anchor countries is increasing fast – quite unlike that of the traditional donors.
Dr. Günther Taube
directs Section 2 (International Frameworks, Good Governance, and Economic Policy) at InWEnt. This article reflects the personal opinion of the author.
guenther.taube@inwent.org
Biobliography:
Wieczorek-Zeul, 2005: “Partners in global development”, D+C, May, 204-206
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