development co-operation review series: germany … · development co-operation review series ......

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DevelopmentCo-operationReview Series

Germany

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No. 29

Development Co-operationReview Series

Germany

1998 No. 29

Development Assistance Committee

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

ORGANISATION FOR ECONOMIC CO-OPERATIONAND DEVELOPMENT

Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into forceon 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promotepolicies designed:

– to achieve the highest sustainable economic growth and employment and a rising standard of living inMember countries, while maintaining financial stability, and thus to contribute to the development of theworld economy;

– to contribute to sound economic expansion in Member as well as non-member countries in the process ofeconomic development; and

– to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordancewith international obligations.

The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany,Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,Turkey, the United Kingdom and the United States. The following countries became Members subsequentlythrough accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969),Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic(21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996) and Korea(12th December 1996). The Commission of the European Communities takes part in the work of the OECD(Article 13 of the OECD Convention).

In order to achieve its aims the OECD has set up a number of specialised committees. One of these is theDevelopment Assistance Committee, whose Members have agreed to secure an expansion of aggregate volume ofresources made available to developing countries and to improve their effectiveness. To this end, Membersperiodically review together both the amount and the nature of their contributions to aid programmes, bilateraland multilateral, and consult each other on all other relevant aspects of their development assistance policies.

The Members of the Development Assistance Committee are Australia, Austria, Belgium, Canada, Denmark,Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States and the Commission of theEuropean Communities.

Publie en francais sous le titre :

SERIE DES EXAMENS EN MATIERE DE COOPERATION POUR LE DEVELOPPEMENTALLEMAGNE

OECD 1998Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through theCentre francais d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France,Tel. (33-1) 44 07 47 70, Fax (33-1) 46 34 67 19, for every country except the United States. In the United States permissionshould be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive,Danvers, MA 01923 USA, or CCC Online: http://www.copyright.com/. All other applications for permission to reproduce ortranslate all or part of this book should be made to OECD Publications, 2, rue Andre-Pascal, 75775 Paris Cedex 16, France.

FOREWORD

The Development Assistance Committee (DAC)conducts periodic reviews to improve the individualand collective development co-operation efforts ofDAC Members. The policies and efforts of individualMembers are critically examined approximately onceevery three years. Some six programmes are exam-ined annually.

The Peer Review is prepared by a team, consist-ing of representatives of the Secretariat working withofficials from two DAC Members who are designatedas examiners. The country under review provides amemorandum setting out the main developments inits policies and programmes. Then the Secretariat andthe examiners visit the capital to interview officials,parliamentarians, and NGO representatives of thedonor country to obtain a first-hand insight into cur-rent issues surrounding the development co-operation efforts of the Member concerned. Brief fieldvisits investigate how Members have absorbed themajor DAC policies, principles and concerns, andexamine operations in recipient countries, particularlywith regard to sustainability, gender equality andother aspects of participatory development, and localaid co-ordination.

Putting all this information and analysistogether, the Secretariat prepares a draft reporton the Member’s development co-operation whichis the basis for the DAC review meeting. At thismeeting senior officials from the Member underreview discuss a series of questions posed in abrief document: “Main issues for the Review.”These questions are formulated by the Secretariatin association with the examiners. The main dis-cussion points and operational policy recommen-dations emerging from the review meeting are setout in the Summary and Conclusions section of thepublication.

This publication contains the Summary and Con-clusions as agreed by the Committee following itsreview on 9 June 1998 in Paris, and the Report pre-pared by the Secretariat in association with theexaminers, representing Japan and Sweden, on thedevelopment co-operation policies and efforts ofGermany. The report is published on the authority ofthe Secretary-General of the OECD.

James MichelDAC Chair

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LIST OF ACRONYMS

AA* Federal Foreign OfficeAChM* Chilean Association of MunicipalitiesAwZ* Committee for Economic Co-operation

and Development of the ParliamentBMZ* Federal Ministry for Economic

Co-operation and DevelopmentBMWi* Federal Ministry of Economic AffairsCDG* Carl-Duisberg SocietyCEECs Central and Eastern European CountriesCGIAR Consultative Group for International

Agricultural ResearchCIM Centre for International Migration

and DevelopmentCPU* Corporación de Promoción UniversitariaDAAD* German Academic Exchange ServiceDAC Development Assistance CommitteeDED* German Development ServiceDEG* German Investment

and Development CorporationDG Directorate-GeneralDSE* German Foundation

for International DevelopmentEC European CommissionEDF European Development FundEU European UnionEZE* Protestant Central Agency

for Development AssistanceFAO Food and Agriculture OrganisationFUNAI Brazilian Agency for Indigenous AffairsGDI German Development InstituteGEF Global Environmental FacilityGNP Gross national productGTZ* Agency for Technical Co-operationHIPC Heavily-indebted poor countries

IDA International Development AssociationIFAD International Fund for Agricultural

DevelopmentILO International Labour OrganisationKfW* Bank for Reconstruction (Kreditanstalt für

Wiederaufbau)KZE* Catholic Central Agency for Development

AssistanceNGOs Non-governmental organisationsNIS New Independent States of the former

Soviet UnionODA Official development assistancePCM Project Cycle ManagementSDR Special drawing rightSIPs Sector investment programmesSSA Sub-Saharan AfricaUN United NationsUNDP United Nations Development ProgrammeUNEP United Nations Environment ProgrammeUNESCO United Nations Educational,

Scientific and Cultural OrganisationUNFPA United Nations Fund for Population

ActivitiesUNHCR United Nations High Commissioner

for RefugeesUNICEF United Nations Children’s FundUNIDO United Nations Industrial Development

OrganisationVENRO* Association for Development Policy

of German NGOsWFP World Food ProgrammeWHO World Health OrganisationWTO World Trade OrganisationZOPP* Objectives-oriented project planning

Signs used() Secretariat estimate in whole or part– Nil0.0 Negligible. . Not available... Not available separately but included in totaln.a. Not applicable

Slight discrepancies in totals are due to rounding.

* Denotes acronym in original language.

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TABLE OF CONTENTS

Summary and conclusions ....................................................................................................................................... 7

Chapter 1. Policy framework ................................................................................................................................... 13

Basic policy and new orientations ........................................................................................................................... 13Political responsibility and policy coherence ........................................................................................................ 14

i) The Federal Ministry for Economic Co-operation and Development (BMZ) ........................................... 14ii) The Federal Foreign Office (AA) ..................................................................................................................... 15iii) Broader aspects affecting developing countries and coherence in national policies ............................ 15iv) European Union aid programmes .................................................................................................................. 16

Country, regional and sector strategies ................................................................................................................... 16Follow-up on DAC policy Principles and Recommendations ............................................................................... 18Public opinion and Parliament ................................................................................................................................. 18

Chapter 2. Implementing the programme ............................................................................................................ 19

The Bank for Reconstruction(KfW) and the Agency for T echnical Co-operation(GTZ) .................................... 19Other specialised agencies (DED, DSE, GDI) ........................................................................................................ 22The Political Foundations ......................................................................................................................................... 23Other non-governmental organisations(NGOs) .................................................................................................... 24Aid co-ordination and field representation ............................................................................................................ 26Performance measurement, evaluation and overall effectiveness ...................................................................... 27

Chapter 3. Poverty reduction and gender ............................................................................................................ 31

Chapter 4. Other development priorities .............................................................................................................. 35

Environment ............................................................................................................................................................... 35Education and training .............................................................................................................................................. 36Private sector development and public/private partnerships ............................................................................. 36Crisis prevention and development-oriented emergency assistance ................................................................ 37Human rights and the rule of law ............................................................................................................................. 38

Chapter 5. Volume, composition and terms ......................................................................................................... 39

ODA volume and outlook .......................................................................................................................................... 39Composition of ODA .................................................................................................................................................. 41

i) Bilateral aid ....................................................................................................................................................... 41ii) Debt re-organisation and forgiveness ........................................................................................................... 42iii) Geographic distribution .................................................................................................................................. 43iv) Multilateral aid ................................................................................................................................................. 43

Financial terms, tying, procurement and anti-corruption policies ...................................................................... 44Official aid to countries in transition ........................................................................................................................ 46Total resource flows ................................................................................................................................................... 47

Annex 1. The German aid programme in Peru ................................................................................................... 49

DEVELOPMENT CO-OPERATION REVIEW SERIES: GERMANY

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Annex 2. German Development Co-operation in Ethiopia ................................................................................ 52

Annex 3. German Co-operation and participatory development and good governance ............................ 53

Annex 4. Graphs, tables and chart ........................................................................................................................ 55

Press release of DAC Aid Review of Germany ..................................................................................................... 67

Description of key terms .......................................................................................................................................... 71

Charts1. ODA net disbursements ..................................................................................................................................... 562. The German aid system ..................................................................................................................................... 573. Net ODA from DAC countries in 1996 ............................................................................................................... 58

Tables1. Main ODA volume indicators ............................................................................................................................. 582. ODA net disbursements by main categories ................................................................................................... 593. Distribution of bilateral ODA commitments by major purposes .................................................................. 604. Allocable ODA net disbursements by major groupings and regions ........................................................... 615. Major recipients of bilateral ODA net disbursements ................................................................................... 626. Total financial flows ............................................................................................................................................. 637. Official aid and total net flows to Part II countries (CEECs/NIS) .................................................................... 648. Geographic distribution of German official aid and total net flows to Part II countries (CEECs/NIS) ...... 65

Boxes1. The German co-operation system in action: promotion of local government in Chile .............................. 242. The protection of indigenous communities and natural resources .............................................................. 363. Aid from Baden-Württemberg ........................................................................................................................... 41

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SUMMARY AND CONCLUSIONS

OVERVIEW

Germany is one of the four largest donor coun-tries, behind Japan and almost level with the UnitedStates and France, and twice as large as the next twoDAC Members, the United Kingdom and theNetherlands. Total net disbursements over recentyears had been running at around $7.5 billion, aboutone third channelled through multilateral agenciesand the remainder through Germany’s bilateral aidagencies or in the form of debt relief. Because of thesignificance of loans in German aid, which generatelarge repayments, the net disbursement figure under-states the scale of new bilateral activity. With just un-der $6 billion in 1996, Germany’s gross bilateral aidwas almost as large as International DevelopmentAssociation(IDA) gross disbursements. The Germanbilateral aid system, in terms of activity levels, there-fore ranks among the largest aid delivery channels inthe world, bilateral or multilateral.

Germany has a pluralistic aid system. There is acentral ministry for policies and programming (FederalMinistry for Economic Co-operation and Development– BMZ), two major implementing agencies, one for Finan-cial Co-operation (Bank for Reconstruction –KfW , whichis essentially a German parastatal bank, one functionof which is to provide concessional loans to develop-ing countries), and one for Technical Co-operation (Agencyfor Technical Co-operation –GTZ, which has a legalstatus of a company). In addition, there are severalagencies for providing training for developing coun-try personnel, in particular the Carl-DuisbergSociety(CDG), the German Foundation for Interna-tional Development(DSE), an institute for trainingGerman development managers and specialists(German Development Institute –GDI), a volunteerservice (German Development Service –DED), apersonnel assistance agency (Centre for InternationalMigration and Development –CIM) and an agencyproviding investments (German Investment andDevelopment Corporation –DEG). An important roleis also played by the Federal Foreign Office (AA). BMZclosely co-ordinates with the AA in elaborating and

implementating development co-operation policyand programmes. In the recipient countries theGerman embassies co-ordinate and represent theGerman development co-operation on the officiallevel. Officials of the BMZ on secondment are presentin the German diplomatic representations in 19ma-jor recipient countries and five multilateralorganisations. A unique feature of the German aidscene is the existence of five Political Foundations,each associated with a political party but operating inan independent fashion in development areas with ahigh political content. Several of the German provin-cial governments (Länder) have significant aidprogrammes and there is a large and diversenon-governmental organisation (NGO) sector which hasrecently, with encouragement from the BMZ, formedan umbrella organisation (Association forDevelopment Policy of German NGOs –VENRO).

Since the last aid review of Germany in 1995, therehas been further evolution in policies, priorities andinstitutional cultures in the German aid system, witha large degree of continuity but also some significantelements of change. The BMZ reformulated in Octo-ber1996 its Concept for Development Policy which was sub-sequently adopted as a basic reference point by allministries and official agencies. Essentially, the con-cept paper sets out a guiding philosophy fordevelopment co-operation adapted to the situationand preoccupations of the post Cold War world. It setsglobally sustainable development as the guiding prin-ciple, interpreted broadly to include economic, eco-logical, social and political dimensions. It sees thepolitical and economic framework conditions indeveloping countries as central determinants ofdevelopment, deriving five political and economiccriteria for the deployment of German assistance toparticular countries. And it sets three priority areas –poverty alleviation based on participation and self-help; environmental and resource protection; andeducation and training.

The scale, orientation and expertise of theGerman aid system are extremely impressive. Few


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DAC Members have such extensive programmesdrawing in the experience and knowledge of a largerange of national institutions and individuals. Germandevelopment assistance is also very much concernedwith participation and capacity-building, this being afundamental value of the GTZ and, in the area ofpolitical development, of the Political Foundations.

At the same time, the German aid authorities areconfronting major challenges in two areas:

OrganisationThe German aid system, with its multi-institutional

structure and its focus on the project approach, hasdifficulties in adapting to the key shift in the waydevelopment co-operation is managed. Increasingly,sectoral programmes are being designed by devel-oping countries themselves, requiring on the part ofdonors strong field-level capabilities for engaging inpolicy discussion, and the use of flexible financialinstruments.

VolumeThe volume of German aid has been falling almost

continuously since 1990, despite frequent policy com-mitments to protecting the aid budget from the mas-sive public expenditure commitment entailed by thereunification of Germany. The aid budget has in factbeen reduced in line with other government expen-ditures in the context of the Maastricht criteria.Germany’s aid effort in terms of ODA/GNP hasdeclined from 0.42 per cent in 1990 to 0.28 per centin1997. The declining budget allocation has beenaccompanied by rising contributions to the EuropeanCommission(EC) aid programme under agreementsreached at the Edinburgh Summit. This has producedan intensifying squeeze on the other components ofGermany’s aid, notably the bilateral programme, butalso voluntary contributions to some UnitedNations(UN) agencies.

REORCHESTRATING THE MULTI-AGENCYGERMAN AID SYSTEM

While there are almost as many different modelsof organising an aid system as there are Members ofthe DAC, usually the policy function is either incorpo-rated within the Federal Foreign Office or forms anintegral part of the implementing agency. Germanyhas adopted a model with an independent ministryfor policy and overall programming, the BMZ, whichclosely co-ordinates and co-operates with the Federal

Foreign Office and the other ministries involved. Aspointed out in the previous DAC review of Germany’sdevelopment co-operation (see Development Co-operationReview Series, No. 9, 1995), the complexity of the Ger-man system results in a number of systemic and insti-tutional redundancies and rigidities. For the most part,these have been managed rather successfully over theyears, essentially through day-to-day accommodationand pragmatism on the part of those in the system.Nevertheless, the underlying tensions remain a char-acteristic of German aid management and they nowhave to be addressed if Germany is to adjust success-fully to the twin challenges of budget constraints andchanging development management patterns.

There is in fact a change process already under-way. Although it is not at this stage a systemic effort, itis having, or will have, systemic effects. The key ele-ments here are the following.

Decentralisation of implementing agencies. The GTZ isundertaking a far reaching decentralisation which givesresident Country Directors large autonomy in program-ming, management and procurement (including free-dom to obtain technical advice and services from out-side the GTZ). It is setting out to create aclient-oriented, service-based culture which is keyedto working with the needs and processes of its devel-opment partners rather than its own institutionalneeds and processes. (How the decentralisation of theGTZ will impact on its use of German consulting firms,which currently obtain some 30 per cent of GTZ’s busi-ness is as yet unclear.) Meanwhile, the KfW has cre-ated field offices for the first time and is planning tocreate more, adapting to what is seen as a generaltrend towards decentralisation in developmentco-operation. These offices will be housed togetherwith the GTZ field offices to facilitate co-operation andsynergy. This is an important development since theinvestment projects undertaken by the KfW dependcritically on institutional capacity-building of the kindthat GTZ specialises in. Indeed, as the Germanauthorities themselves note, the old dividing linesbetween technical and financial co-operation arebreaking down. The GTZ and the KfW now have150joint projects. There are regular management-level meetings between the two organisations toco-ordinate policies and activities. The cultural dividethat has in the past characterised the two institutions,has thus been greatly reduced, although the differingperspectives produced by the disbursement thrustof a development bank operating at long distance andthe capacity-building thrust of a technical assistance


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agency with extensive field presence may still some-times come to the surface.

Changing focus of the KfW. Since the early 1990s, theKfW has been moving towards more sectoral ap-proaches involving more sector policy dialogue, in linewith the perception that the framework conditions arecentral to project success. It has also been shifting itssectoral investment pattern away from commercialinfrastructure sectors such as energy and power tosocial infrastructure such as environment, water, healthand education as well as towards private sector ratherthan public sector counterparts. As in other DAC Mem-bers this changing pattern has been influenced by the“Helsinki disciplines” on tied aid credits, negotiatedin the OECD in 1992. Moreover, the KfW is applyingthe guidelines laid out by the BMZ on integratingpoverty and gender dimensions into project selec-tion and design. Since project selection and designare the responsibility of KfW’s clients in developingcountries this means establishing new standards andcapacities in their counterpart organisations. It alsoinvolves new disciplines and capacities in KfW itself.

Evaluation. The BMZ has recently introduced amajor change in its approach to the evaluation func-tion. It will no longer be responsible forproject-by-project evaluations but rather undertakea programme of thematic evaluations aiming toestablish the nature and degree of the impact ofGerman development assistance in its key themeareas. The implementing agencies will themselvesnow be responsible for designing and carrying outproject-level evaluations. This shift in evaluationpolicy should help the German aid system, includingthe BMZ itself, to be more results oriented. Both theKfW and the GTZ already have evaluation capacityand experience in the conduct of internal evaluations(the GTZ uses self-evaluations as an intrinsic part ofthe learning processes in project implementation). TheBMZ will co-ordinate an annual programme of evalua-tions, conducted in terms of the DAC Guidelines on Evalu-ation. Both the KfW and the GTZ also have permanentoutside auditors (major international accounting andconsulting firms) responsible for checking decisions andeffectiveness. How these parallel auditing systems willoperate to assist the effective functioning of the twoagencies, rather than to add unnecessary processes andduplication, and how they will relate to the new thrusttowards decentralisation and client-orientation are im-portant issues. There is also the question of publica-tion policy with respect to evaluations. At present thepolicy is to publish only evaluation synthesis reports.

Internal review of the BMZ. The BMZ has carried outa review of its own functions through an internal TaskForce. Its report has been delivered to the Ministerfor Economic Co-operation and Development and isbeing discussed throughout the ministry. As of now, itis understood that any decisions will await the fed-eral elections due in the autumn. The motivation inthe BMZ for initiating this review was the ongoingbudget squeeze, which has produced a steady declinein the number of staff. There is a view in the BMZ thatexisting modes of managing the German aidprogramme are no longer sustainable or appropriate,in particular, detailed involvement in project concep-tion and design. A more strategic approach would beboth more manageable and more in line with the BMZrole in the German system. This would involve a focuson country selection, on ensuring that project andprogramme portfolios are in line with German andlocal priorities and establishing their impact (seeevaluation section above), on international policy dia-logue, on involvement in overseeing the EuropeanUnion (EU) aid programme through the structuresestablished for this in Brussels and in the field, andon more effective participation in decision-making inGermany on policies affecting developing countrieswith the objective of improving the coherence ofGermany’s overall policy settings.

Relocation of the German Government to Berlin. In thecontext of the shift of the seat of government to Berlin,it has been decided that the BMZ will remain in Bonn,to be joined by a number of development agenciesnow located in Berlin. The BMZ is already beginningto adapt by introducing advanced audiovisual com-munication technology, but this arrangement willclearly not be without its consequences both practi-cally and perhaps on the level of visibility and prior-ity. And the physical separation from the Federal For-eign Office may make this particular relationship moreproblematic.

Relations with NGOs. Seeking a more manageableand structured dialogue with NGOs, the BMZ encour-aged the establishment of an NGO umbrellaorganisation, VENRO. German NGOs involved withdevelopment issues and activities are many and var-ied and they regard their independence as important(a weakness however is that Germany’s strong envi-ronmental NGOs, while very much concerned withenvironmental issues in developing countries, rarelyco-operate with the development NGOs). While thereis an NGO funding scheme operated by the BMZ, theyare wary of becoming subcontractors to the GTZ, which


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could lead to a subsidiary role. Indeed they see them-selves as competing with the GTZ to some degree.The existence of VENRO as a new player on theGerman aid scene is hard to assess at present, butNGOs will begin to gain impact, for example byactively promoting discussions of development issuesin local constituencies during the Federal elections,and through their dialogue with the BMZ

Each of the developments outlined above impliessignificant change in the German aid system. How-ever, without a more comprehensive change process,the key problems in German aid administration willremain.

As outlined above, the question is how such a plu-ralistic aid system can deal with developmentco-operation modalities increasingly based on policydialogue and local ownership at the field level. Here,the essential problem is that the BMZ is highly con-strained in terms of its field presence and is, by con-stitution, removed from operations. At present it hasjust 24 posts outside of Bonn and travel by headquar-ters’ staff seems to be underfunded. The capacity ofthe BMZ to engage in field level policy dialogue istherefore extremely limited. Moreover, theco-operation instruments are in the hands of the imple-menting agencies, and the probable trend is for theBMZ to exit from any detailed involvement in imple-mentation. The implementing agencies, notably theGTZ, are beginning to work in the context of sectorprogrammes and to engage in sector policy dialogueand co-ordination efforts. At the same time, the imple-menting agency staff do not have the authority to en-gage in higher level policy dialogue. The Germanembassy does of course have that authority andGermany does play an active part in governmentpolicy dialogue and co-ordination efforts. But thesingle development co-operation officer in theembassy and other embassy staff are easily over-whelmed by the scale of the co-ordination processesnow emerging in many developing countries. More-over, Germany takes a generally cautious attitudetowards sector investment programmes and budgetaid. Thus, where these modalities are being heavilyused, for example in Mozambique, Germany finds thatit is not a player on the same level as other significantdonors. To these other donors, the German aidprogramme therefore does not seem flexible enoughfor full participation in sector programmes discussedand organised in the recipient country and Germanycan seem less and less visible in such contexts. Onlyin one instance so far, the education sector programme

in Ethiopia, has Germany been able to participatein a financial pooling arrangement. Elsewhere, thereseem to be significant constraints on broad sectorand programme support. For example, the KfW hasnot been able to feed balance-of-payments supportto Mozambique through the Central Bank asrequested by the government, which is trying to cre-ate a market-oriented foreign-exchange allocationsystem.

These blockages and redundancies in the Germanaid system have been evident to many observers forsome time. But they now constitute a basic challengeto Germany’s participation in a decentralised,policy-based development co-operation system. Thedividing lines between policy and implementation,between development policy and political relationswith individual developing countries, between devel-opment and diplomatic expertise are all breakingdown. A serious examination of the aid system as awhole, going beyond the BMZ’s internal review toinvolve all the main actors, seems needed to identifyhow to adapt to the new development co-operationcontext.

One key instrument for achieving better articula-tion and concertation in the German aid system couldbe the Country Concept papers produced by the BMZ.However, they would need considerable sharpeningof their strategic content and the definition of the rolesof each of the various agencies and co-operationinstruments in the context of the partner countries’own development goals and strategies and theprogrammes and activities of the entire donor com-munity. The Concept Papers were evaluated recentlyby the GDI, which found them to be too weak in theseterms. Processes for better integrating country assess-ments by the AA into the formulation of developmentco-operation plans should be encouraged.

KEY THEMES IN GERMAN AID:POVERTY, GENDER AND DEVELOPMENT-ORIENTED EMERGENCY ASSISTANCE

Since the Rio Conference in 1992, sustainabledevelopment has been the major objective ofGermany’s aid effort and some 30 per cent of bilat-eral aid is devoted to the environment. However, sus-tainable development is seen as a much broaderconcept than the environment and other componentsof the sustainability equation, social and political,receive much emphasis.


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Poverty alleviation at the grassroots level hasbeen a theme of German development co-operationfor nearly two decades; gender issues have alsoreceived attention for some time. The BMZ has nowdeveloped guidelines for the integration of povertyand gender into all project selection and design pro-cesses. Projects are not able to progress through toapproval stage unless these dimensions have beensatisfactorily incorporated. The GTZ has put consid-erable conceptual effort into its approach to povertyand gender since the early 1990s and has an internalAdvisory Team on Poverty Alleviation, Gender andProcess Management, successfully mainstreamingpoverty and gender issues within this organisation.As mentioned above, the KfW has also been workingto mainstream poverty and gender issues.

These are very positive developments. At thesame time, it remains difficult to obtain an overallmeasure of the degree of poverty orientation in theGerman aid programme. The BMZ is pioneering a sys-tem for tracking the poverty orientation of projects, achallenge which all DAC Members are facing. Whilethe BMZ system is sophisticated, it also illustrates thedifficulties of making distinctions between targetedand general poverty orientation.

At the more macro level, an overview of what ishappening in the whole German aid system withregard to poverty orientation is difficult to obtain. Thiscan lead to political controversy when there are ques-tions about how much German aid is devoted to basicsocial services for example.

Germany has a particular interest in issues ofpolitical stability and conflict resolution, both in gen-eral and in specific situations where Germany isdirectly affected as a recipient of refugees and asy-lum-seekers. The Political Foundations have playedcrucial but often unreported roles in assisting thepositive evolution of political systems in developingcountries. German humanitarian assistance is gov-erned by a Co-ordination Committee which meetsfrequently, chaired by the Federal Foreign Office,drawing in the German NGOs active in this field, withagreed principles and a code of conduct. Morerecently, the BMZ has instigated a new policy instru-ment for development-oriented emergency aid,which has been operationalised by the GTZ. Thiseffort has produced some impressive thinking andprogrammes, including in the area of reintegrationof soldiers through employment creation inmicroenterprises.

AID VOLUME, PUBLIC SUPPORTAND DEVELOPMENT EDUCATION

The decline in Germany’s aid volume and ODA/GNP ratio is essentially related to general budget dis-cipline associated with the Maastricht criteria. Someother important DAC Members have followed thesame downward path, with the result that overall ODAfrom DAC Members is now around 20 per cent lowerthan in 1992. Germany has been the largest contribu-tor of official aid to the countries of Central and EasternEurope and the former Soviet Union, including bothdebt relief and special payments associated with therepatriation of troops from East Germany.

The strains of budget constraints on the aidprogramme are reflected in a growing problem inmatching previous commitments with a shrinkingannual operating budget. To ease a difficult situation,the KfW has recently begun to capitalise futurerepayments of aid loans due to the government andto apply this capital as new lending.

Public support for the development budget is notstrong and public concern with development issuesis not especially evident, despite the large environ-mental movement in Germany and the directexposure to immigration and asylum seekers. TheParliamentary Committee on DevelopmentCo-operation is not one of the strongest, especiallyin relation to the Budget Committee.

A more strategic programme of development edu-cation could help to produce a more informed andinvolved public for development co-operation inGermany. It might be most effective to work in a tar-geted way at the local level, including schools, usingthe large numbers of ex-volunteer workers and build-ing on the interest shown in the developmentco-operation activities with specific developingregions and municipalities by the Länder. The Internetis an exciting new tool in these contexts. As in otherDAC countries these highly concrete activities seemto be more effective in generating interest andcommitment than broader campaigns.

CONCLUSIONS

The German aid effort is impressive in manyrespects, notably its range and depth. Germany is alsothe main contributor to the EU aid effort and is activein shaping EU aid policies, while not especially


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comfortable with the basis for defining and workingwith the EU’s partners. It is also strongly orientedtowards the goals set out in the strategy agreed inthe DAC in 1996, Shaping the 21st Century: The Contri-bution of Development Co-operation. The partnership prin-ciple which is central to this strategy is shared byGermany.

With aid volume down significantly and stillapparently on a declining trend, and an aid sys-tem which is in the process of adapting to thedemands of the new decentralised, policy andsector-based development co-operation modali-ties, the German aid programme is at a turning

point. Concrete actions to address these chal-lenges might include:

• a new public commitment to begin rebuildingaid levels in the near term, easing the squeezeon the bilateral programme and enablingGermany to play a commensurate role infinancing UN development agencies.

• a comprehensive review of the German aid sys-tem to enhance its capacity for concertedadaptation to policy and programme-basedapproaches to co-ordinated developmentpartnerships.

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I

POLICY FRAMEWORK

BASIC POLICY AND NEW ORIENTATIONS

The Basic Principles of Development Policy of the FederalGovernment adopted in 1986, stipulate:

“The aim of the German development policy is toimprove the economic and social situation of thepeople in developing countries and to providescope for their creative growth. It therefore helpsmeet the basic needs of the people and enablethem to help themselves. It contributes to thedevelopment of a viable economy and socialdiversity as the prerequisite for the country’sself-sufficient development. And it promotesregional co-operation and facilitates the integra-tion of developing countries into the worldeconomy.”

The Basic Principles are supplemented bythe Concept for Development Policy of the FederalMinistry for Economic Development andCo-operation (BMZ), published in October 1996. Inaddition there are the Guiding Principles for BilateralFinancial and Technical Co-operation with Developing Coun-tries of 1984, which were updated in 1996, and a largenumber of sector and regional concepts. Furthersources of policy guidance are the Development PolicyReports sent by the Federal Government to Parlia-ment. The last (and tenth) report was submittedin February1996. In line with changing conditionsin developing countries, the internationalenvironment, international agreements, Develop-ment Assistance Committee(DAC) Recommenda-tions, and in light of experience, the different policyguidelines have been regularly updated and newones have been added.

Frequent ethnic and other conflicts, large-scalemigration, often affecting Germany directly, growingworldwide environmental threats and the breakdownof the centrally planned economic systems have sig-nificantly influenced the orientation of German aid.These developments were already mentioned in the1995 DAC Review of German development

co-operation, but they have not lost importance.Some problems have become even more prominentin recent years. Protection of the environment,conflict prevention, human rights, democracy andgood governance, private sector development,greater involvement of civil society and povertyreduction have, therefore, become important factorsin German aid policy.

A special further dimension since the beginningof the1990s is assistance for the transformation ofthe Central and Eastern European countries(CEECs), including the New IndependentStates(NIS) of the former Soviet Union, countrieswith several of which Germany has had close rela-tions for centuries. In this context, Germany holdsthe view that less developed countries in Europedeserve the same treatment as the traditional aidrecipients. Aid should be distributed on the basisof poverty criteria and not according to the geo-graphic location of recipient countries.

The 1996 Development Policy Concept identi-fies poverty alleviation, environmental and resourceprotection, education and training as the three pri-ority areas of German development co-operation.At the same time, faced with a very large influx ofrefugees, crisis prevention and emergency relief areconsidered increasingly important in Germanco-operation with developing and transitioncountries.

As in other DAC countries, the pressure on thegovernment to justify the use of taxpayers’ moneyfor foreign assistance has risen. Germany, therefore,is paying increasing attention to the economicreturns of the aid programme – a developmentrelated to its difficult economic situation and grow-ing problems with unemployment. While this aspecthas not been absent in the past, it has not beenmentioned so often and clearly as in the last year.In December1997, the Minister for DevelopmentCo-operation stated: “Development co-operationcontributes also to strengthening Germany as a


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business location and to safeguardingemployment.” Although moral considerations anda broad approach to international security remainthe main motives behind Germany’s developmentco-operation, the positive effects on the Germaneconomy are used as an additional argument to ob-tain a sufficient share of the Federal budget for aidprogrammes. For this purpose a study was initiatedthat will measure the positive impact of the aidprogramme on the German economy and employ-ment situation. The initial findings are expected inAugust1998.

In a joint press conference with the President ofthe Federation of German industry, the Ministerannounced more co-operation between official devel-opment assistance(ODA) and the private sector .Private sector resources, in particular private invest-ments, should supplement ODA.

German development aid is seen as assistancefor self-help and Germany attaches importance tothe partnership principle. In line with the DAC Strat-egy (Shaping the 21st Century: the Contribution of Devel-opment Co-operation), the recipient country should beat the centre of the joint development effort. Theactive participation of the local population is con-sidered a precondition for sustained success, andwomen should hold an equal share in the economicand social development of the aided country. In linewith these principles German projects are carried outthrough institutions of the partner country. The reporton the visit of German aid projects in Peru, TheGerman Aid Programme in Peru (Annex1) illustrates thisapproach.

Seeing that the framework conditions in the part-ner country influence considerably success or failure,the German authorities have in recent years begun toapply stricter conditionality than in the past. The fol-lowing five criteria are seen as conducive to success-ful development:

• respect for human rights;

• popular participation in political decisions;

• the rule of law;

• introduction of a social market economy, and

• the development commitment of the partnergovernment.

The five criteria are considered as a whole. TheGerman Government has not set absolute standards.Rather it is the general trend which is evaluated. It isstated that positive trends result in intensifiedco-operation, while negative trends have conse-quences for the level and nature of German aid. Par-ticularly acute cases of failure to meet the criteriamay lead to the termination of co-operation. In linewith these principles, several countries (Ethiopia,the Kyrgyz Republic, Mongolia, Uganda and Yemen)will receive more aid in 1998, while others will notreceive new commitments (Cuba, Iran, Iraq, Liberiaand Somalia). On the other hand, these criteria donot seem to be always applied with the same rigourin the policy dialogue with all partner countries,notably when other important German interests areinvolved, such as trade. China is frequently citedin this respect, although the German Governmentand Parliament have been more critical of thehuman rights situation in that country than manyother donors.

POLITICAL RESPONSIBILITYAND POLICY COHERENCE

i) The Federal Ministry for EconomicCo-operation and Development (BMZ)

A special ministry for developmentco-operation, the BMZ, was set up in 1961. Althoughthe BMZ has to co-ordinate certain decisions withother ministries, it clearly is the main actor at thepolicy-making level and has a stronger position thanthe aid administration in many DAC countries. Thefact that development co-operation matters aredefended at the highest level of government by aminister who has his own ministry has certainadvantages. As a member of the Cabinet, he hasthe possibility to influence decisions of the govern-ment, although the degree of influence and weightof the BMZ in the government is a matter of debate.The fact that the BMZ will remain in Bonn, when thegovernment and Parliament move to Berlin in twoyears time, is likely to weaken its position. On theother hand, the interest of the German authoritiesto turn Bonn into a centre for developmentco-operation should logically give the BMZ a largerrole. To reduce the disadvantage of this loominggeographic separation from the rest of the govern-ment and the Parliament the BMZ is developingadvanced communications systems (videoconferencing, e-mail).

POLICY FRAMEWORK

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The main tasks of the BMZ are:

• the planning and elaboration of Germany’sdevelopment co-operation policy, includingsectoral, regional and country concepts;

• negotiations of projects and programmes withthe partner countries;

• the financing and supervision of the publicimplementing agencies;

• financing and co-operation with non-govermental organisations(NGOs);

• donor co-ordination and representation ofGermany in most international developmentinstitutions;

• control and evaluation;

• informing Parliament, the media and the popu-lation.

Since the last DAC review of German aidinApril1995, some changes were made in theadministrative structure of the BMZ. In particulara fourth Directorate-General(DG) was established.The current structure is as follows:

• DG1 deals with general administration, budget,relations with NGOs, science and culture;

• DG2 with bilateral ODA for individual regionsand countries;

• DG3 is responsible for the principles andinstruments of bilateral co-operation, moni-toring of results, promotion of the privatesector, food and emergency aid andrefugees;

• DG4 is responsible for multilateral aid, donorco-ordination, EU development policy andthe drafting of policy and aid concepts.

The BMZ has a staff of about580 (includingpart-time staff), some20 less than in 1995. Due tobudget restrictions all Federal ministries have toreduce their staff annually by 1per cent to 1.5per cent .

In view of the declining human and financialresources the BMZ has conducted a comprehen-

sive review of its functions. This review shouldprovide a basis for streamlining the organisationand operation of the BMZ and indeed for a widerre-assessment of the German aid system.

ii) The Federal Foreign Office (AA)

While the BMZ has the main responsibility for thedevelopment co-operation policy, the AA is respon-sible for the overall German foreign relations. Thusthe two ministries jointly elaborate the principles andprogrammes of development co-operation policy andco-operate closely in its implementation. As a resultof this division of labour, the AA has an important rolein framework planning, allocation of bilateral commit-ments and even individual projects as well as man-agement of the programme in the field. It has directresponsibility for about 4per cent of ODA. Severaldivisions of the regional departments deal withdeveloping countries. The departments for interna-tional economic affairs, for EUrelations with devel-oping countries, for the United Nations(UN), humanrights and humanitarian assistance also cover issuesof aid policy.

The AA is responsible for humanitarian aid anddisaster relief, while the BMZ is in charge ofdevelopment-oriented emergency assistance. In 1994,implementing agencies for humanitarian aid – NGOsand government institutions – formed a Committee forthe Co-ordination of Humanitarian Aid which alsoincludes the BMZ, and the Ministries of Defense, Trans-port and Health. The Working Group on HumanitarianAid of the AA convenes the committee bi-monthly orto special sessions in case of emergencies.

The AA plays an important role in developmentco-operation through its embassies in the develop-ing countries which organise monthly meetings of theimplementing agencies. In the multilateral area theAA leads the negotiations for the Lomé Agreementand for Germany’s participation in the EuropeanDevelopment Fund(EDF), but the budget resourcesfor contributions to the EDF are in the BMZ and theFederal Ministry of Finance, and the Federal Ministryof Economic Affairs(BMWi) is responsible for theco-ordination of the German position in the EU.

iii) Broader aspects affecting developingcountries and coherence in national policies

German aid officials stress the rapidly growingglobalisation of problems. They are aware that


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development co-operation has to be supported byadequate measures in other domains, such as trade,finance, environmental and agricultural policies, butthey have relatively little influence in thesedomains.

Germany is endeavouring to improve the coher-ence of all policies which have an influence on thedeveloping countries. The German Government is astrong advocate of an open-market oriented tradepolicy in the EU and is pursuing the same policy inthe World Trade Organisation(WTO). W ith the disman-tling of trade barriers, the developing countries cantake advantage of the global division of labour.

Germany has a special programme for the promo-tion of developing countries’ exports and for the par-ticipation of these countries in German and othertrade fairs. This so-called Protrade programmeincludes the provision of short-term advisory servicesand of financial support for the participation of smalland medium-sized enterprises in fairs in Germany andin other countries. The activities in 1996 included,among others, the dispatch of 650 experts for productand marketing advice, a financial contribution forabout 1100enterprises in 59countries for their par -ticipation in 40 German fairs, information on marketsand publicity campaigns.

German imports of goods and services fromdeveloping countries reached $94 billion in 1996. Thisamount corresponds to $1153 per capita, a relativelylarge amount if compared to per capita imports byother major OECD countries.

iv) European Union aid programmes

Germany is the largest contributor to Europeandevelopment assistance, and has always supportedit as an important element of European policy.Germany, however, advocates a more global outlookfor European aid. The Basic Principles of Development Policyof the Federal Government state in this regard:

“The Federal Republic considers it important thatthe European Community should look beyond itshistorical ties and seek co-operation on a globalbasis. It should therefore intensify its relationswith the developing countries of Asia and LatinAmerica.”

The German Government has submitted a posi-tion paper along these lines to the European

Commission(EC). It proposes a reform of EUrelationswith the developing countries whereby preferenceshould be given to development considerations overhistorical and geographical ones, to overcomepost-colonial structures. The Lomé Agreement has not,in the opinion of the German Government, achievedthe desired success.

Germany aims to increase the efficacy and sig-nificance of EUdevelopment co-operation throughco-ordination, complementarity and coherence, asforeseen in the Maastricht Treaty. A pilot projecton operational co-ordination started in 1994 duringthe German Presidency has meanwhile beenfinalised. Germany supports the preparationof country strategy papers and in-countryEUco-ordination through the flow of informationand informal consultation. On key questions, jointEUopinions are seen as a helpful instrument vis-à-visthe partner government, but in this regard, Germanysees room for improvement. Co-ordination alsotakes the form of specific co-operative arrange-ments, such as trilateral co-operation (e.g.microfinance in Mali by the EC, France and Germany).In the area of coherence, trade and agriculturalpolicy are contentious issues. The LoméAgreement should be brought into line with theWTO conditions.

Germany considers that the operations of the ECshould be improved and that the EC should notexpand its aid activities to the detriment of Membercountries. Implementation of EUprojects should beleft to national institutions of the EUMember coun-tries. There appears to be some sentiment amongGerman aid officials that given the EC’s problemswith project planning and the utilisation of funds,more German participation in EU project implemen-tation is warranted. This position is not surprisinggiven that EUaid programmes are taking a growingshare of German aid, at the expense of the bilateralprogramme.

COUNTRY, REGIONAL AND SECTOR STRATEGIES

The country concepts were introduced in thebeginning of 1992 as the central management instru-ment of the BMZ for the planning and co-ordinationof all instruments of German developmentco-operation. They exist for more than 50partnercountries, and replace the previous less binding andless detailed country policy papers.

POLICY FRAMEWORK

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The country concepts consist of four main sections:

• core problems, development potential, and thepolitical conditions for development of the part-ner country;

• main areas of future development co-operationin the light of past experience and the priori-ties of both governments;

• issues for policy dialogue;

• co-ordination with other donors.

The papers are prepared by the BMZ and arebased, among others, on regular reports by theGerman embassies and supplemented by an analy-sis of the socio-economic situation (by the Bank forReconstruction – KfW) and an analysis of thesocio-cultural conditions (by specialised researchinstitutes) in the recipient country. Suggestions madeby NGOs, international organisations and the privatesector can be included in the country papers. Imple-menting agencies, in particular KfW and the Agencyfor Technical Co-operation (GTZ) – the latter has itsown country-wide project implementation papers –the AA, other ministries and NGOs are convened bythe BMZ in so-called “country discussions”, where theycan comment on the country papers and the propos-als for future co-operation. Once approved by theMinister, the country papers are binding for officialfinancial and technical co-operation and serve as abasis for the preparation of government negotiations,policy dialogue, the selection of projects, and theco-ordination with other donors. The country desksof the BMZ follow the implementation of the countryconcept. In doing so they make use of reports fromthe implementing agencies, the embassies and othersources.

The country concepts synthesise the country situ-ation, the priorities of both governments, Germandevelopment co-operation and other donor activitiesinto a coherent concept for future co-operation withthe partner country. The concept papers are internalBMZ documents and are not shared with representa-tives of partner countries since they may contain sen-sitive issues and judgements. The contents of theconcept is, however, essentially based on the resultsof ongoing partner dialogue. The partner country isinformed about the concept, its objectives and strat-egies during inter-governmental negotiations and onother occasions.

In view of the different political, economic andsocial situation in different parts of the world the BMZprepared in 1992 and 1993 five regional concepts fordevelopment co-operation: Africa South of Sahara,Asia, Latin America, the Middle East and Mediterra-nean countries, Central and South East Europe andthe New Independent States of the former SovietUnion. These regional strategy papers serve as a linkbetween the overall conceptual framework and thecountry strategies. They highlight the most importantdevelopment problems of the region and their reper-cussions for German aid. They examine the possibili-ties for the implementation of cross-cutting activitiessuch as the protection of natural resources.

For the selection, design, preparation, monitor-ing and evaluation of projects and programmes, theBMZ is applying a variety of sector (and subsector)concepts. Besides the specific sector concepts, thereare a number of cross-sector concepts: poverty alle-viation; socio-cultural conditions of developmentco-operation; promotion of women in developmentco-operation; rural development; utilisation of localexperts; promotion of the private sector, co-operationwith the Indian population in Latin America.Cross-cutting objectives (poverty alleviation, gen-der, environment) are fed into project designsthrough the participation of the respective sectordesks in project preparation. Specific codes indic-ating the relevance of the project for these objec-tives are attributed to the project files so that thecross-cutting objectives are taken into accountthroughout the decision-making process. During thelast ten years the BMZ elaborated and issued some30 sector and cross-sector concepts.

Sector investment programmes (SIPs) provide acommon and coherent sector strategy for the continu-ation of regular projects. SIPs should be sector orsubsector programmes which are established andimplemented with the recipient government and thelocal partners.

Germany is involved in four SIPs (agriculture inZambia, health in Uganda, education and roads inGhana) in the form of parallel financing. This allowsGermany to apply its own rules and procedures. It isnot in favour of joint financing since it wishes to verifythe utilisation of funds and attaches importance to the“visibility” of its contribution. For the time being theBMZ finds it impossible to provide general purposeor budget financing under the SIPs. However, awareof the burden that different donor procedures place


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on the recipient country administration, Germany isparticipating, on an experimental basis, in the har-monization of SIP procedures in Ethiopia. Moreover,GTZ and KfW evaluate two of the SIPs to assessadvantages and drawbacks of this new instrumentand to draw some conclusions for its furtherconceptual development and implementation.

FOLLOW-UP ON DAC POLICY PRINCIPLESAND RECOMMENDATIONS

Germany regards DAC Principles and Recom-mendations as the common frame of reference forpartnership co-operation and as in harmony withGermany’s own concept of development policywhich emphasizes, in particular, poverty eradicationand sustainable development. Explicit and detailedreferences to the DAC Strategy Shaping the21st Century –The Contribution of DevelopmentCo-operation are, however, rare. The field visit in Perushowed that the partnership approach was system-atically pursued and that poverty alleviation andenvironment protection played a major role inGerman co-operation. However, the DAC Strategyhad not been discussed with the recipient countrygovernment and German aid officials were not par-ticularly familiar with it.

PUBLIC OPINION AND PARLIAMENT

Development co-operation does not figureprominently in public debate in Germany. Whilethere is a general desire to assist the “Third World”,evidenced by substantial personal contributions,the German public in general is apparently notmuch interested in a detailed discussion of aidpolicy issues. Few are convinced that developmentaid contributes to reduce German unemployment.On the contrary, more than a few people fear thatit creates more competition for the Germaneconomy. Nevertheless, there is strong awarenessin Germany of environmental protection as an is-sue which requires global action, including in andwith developing countries. Moreover, there are –and have always been– a number of core groupspressing to alleviate poverty in developing coun-tries through German aid. Supporters come fromNGOs, but are also found in Parliament and in thediverse range of official institutions implementingthe German aid programme. Although there hasbeen litt le support for a larger off icial aid

programme, there have been no negative attitudeseither. Moreover, Germans appear to be willing tosupport developing countries through fair trade.Fair trade shops can be found in many Germantowns.

The BMZ, as well as other government bodiesand institutions dealing with development issues,are active in keeping the media and the public atlarge informed about development co-operationin general and topical issues in particular. It pro-duces a number of publications including theannual Development Policy Handbook for Journal-ists, BMZ-Aktuell, annual reports, reports to Parlia-ment and brochures on different topics (OneWorld-One Environment, Poverty Eradication – Why andabove all How, Women, Co-operation with Developing Coun-tries, etc.). Since the end of 1996, the BMZ ispresent on the Internet with a website providinginformation on its organisation, tasks and concepts.In consultation with the Federal President the BMZannually awards “development policy prizes” tojournalists.

The aid administration provides financial sup-port to programmes organised by some 50 NGOsand private institutions, most of which are activenationwide. It also contributes to some 240 localand regional groups active in the field of develop-ment education under a special “Action GroupProgramme”. However, despite the emphasisplaced on development education by the Germanauthorities, disbursements for public informationon development assistance and for developmenteducation are relatively modest and declining.

The German Parliament has a Committee forEconomic Co-operation and Development(A wZ)which has 32 members. AwZ organises hearings onspecial issues of importance for both German aidpolicies and developing countries, including dis-cussions of the problems of refugees and of envi-ronmental issues which inevitably touch also upondevelopment policy. German parliamentarians areparticularly interested in matters concerning theEU and its aid programmes (see section on the EU).

Alongside the AwZ, the Parliament’s BudgetCommittee and its rapporteurs on the BMZ bud-get have an important influence on the develop-ment co-operation programme through theirdeliberations of the overall aid budget and itsstructure.

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2

IMPLEMENTING THE PROGRAMME

Germany has multiple systems for the implemen-tation of its bilateral aid programme. Not only is therean institutional separation for financial and technicalassistance, but the latter is implemented by a largenumber of institutions. Financial assistance is exclu-sively administered by the Kreditanstalt fürWiederaufbau(Bank for Reconstruction). The mainchannel for technical assistance is the Agency for Tech-nical Co-operation (GTZ), but important roles are alsoplayed by the German Foundation for InternationalDevelopment (DSE), the German DevelopmentService(DED), the Centre for International Migrationand Development(CIM), the German Investment andDevelopment Corporation(DEG), the five PoliticalFoundations, the Carl-Duisberg Society(CDG), theGerman Academic Exchange Service(DAAD), Protes-tant and Catholic organisations and other NGOs. Lastbut not least, the KfW also finances project-relatedtechnical assistance to its counterparts.

THE BANK FOR RECONSTRUCTION (KFW)AND THE AGENCY FOR TECHNICALCO-OPERATION(GTZ)

KfW which was founded in 1948 is both a bank forthe German economy and an institution for financialassistance for the developing countries. Its capital ofDM1billion is 80 per cent held by the FederalRepublic and 20 per cent by the Federal Länder. Thebulk of its activity is located in the domestic economyand this part of its business has been rising rapidlysince reunification. As a result, the share of lending todeveloping countries has declined to 5 per cent of thetotal business of the KfW. However, since lending todeveloping countries is far more labour-intensive, itoccupies almost onethir d of KfW’s personnel. Threehundred and eighty staff work in the field of financialco-operation with developing countries, of which296 are specialists working in three regional depart-ments, one technical department, the legal depart-ment and a Secretariat of International Credit Affairs.In addition, KfW relies on a pool of approximately200external technical and economic experts who are

employed when the need arises. Until now, the KfWhas operated almost exclusively from its head officesin Frankfurt, with field offices only in Eastern Europeand the former USSR, and in two developing coun-tries. But in a new departure more field offices are tobe opened in 1998 and 1999.

Under the financial co-operation programmes,KfW finances investments and project-related consult-ing services to expand economic and social infrastruc-ture. The bulk of KfW’s activities in developing coun-tries consists of project and sector aid. Structural andgeneral commodity assistance play a secondary anddeclining role. A special type of project assistance isthe promotion of local development banks and creditco-operatives through which support for small andmedium-sized enterprises as well as for the creditsector is provided. In recent years there was a certainshift from economic towards social infrastructureprojects with increased attention being given to theprotection of the environment, gender, and povertyreduction. The share of social infrastructure and ser-vices almost doubled from 22per cent of project com-mitments in 1992/93 to 42 per cent in 1994/95, butdeclined in 1996/97 to 36 per cent. Most projects arerelated to the supply of drinking water, sewage andwaste disposal, but the increase was most noticablein the educational sector. The share of economicinfrastructure and services fell substantially from44per cent in 1992/93 to 33per cent in 1994/95, butrose again to 42per cent in 1996/97. Most projects inthis category concerned energy production and sup-ply. In addition to the changing sector emphasis KfWis moving away from isolated projects towards sectoraid in line with defined policies. In this context, KfWconsiders a harmonization of different donorapproaches to a given sector important. Consequently,it harmonized its sector strategy with France andintends to do it also with the EC and other EU donors.

KfW is working today in over 100countries withabout 1600 development projects. KfW appraises theeligibility of projects according to development-policycriteria, supports the partner countries in their


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preparation and implementation, and evaluatestheir success after they are completed. All projectsare carried out by so-called project sponsors,i.e.local organisations in the partner countries whichare selected during the project appraisal phase.KfW shares, however, the responsibility for the suc-cess of the projects. It advises the localorganisations not only during the planning andimplementation of the project, but in many casesalso after their completion. KfW also promotes thetraining of the local staff of the partner organisationswho operate the project.

Finance is mainly provided in low-interest loans,but an important part is in grants. The latter areextended to the least-developed countries, and toother countries for self-help oriented measures, forsocial infrastructure and environment protection andfor credit guarantee funds for small and medium-sizeenterprises. Most funds are from the budget of theBMZ, but KfW also raises funds on the capital marketwhich are combined with budget funds in so-calledcomposite loans and mixed credits (see section onfinancial terms in Chapter 5).

For the preparation of projects and programmesBMZ has established study and expert funds,administered by the KfW. About 3 per cent of thefinancial assistance commitments ($36 millionin 1997) are reserved for feasibility studies. Thesefeasibility studies are not limited to the project butembrace the whole sector and consider the activi-ties of other donors. They are financed throughgrants. Other grants concern advisory services (over$10 million per year) and special funds forshort-term experts ($10million per year). Since 1996KfW has increased information activities in a reac-tion to the public demand for more transparencyand the declining aid budget which began to poseproblems for the KfW (see section on volumein Chapter5).

In addition to its activities in the developing coun-tries, the Bank is involved with advisory services andprojects in the countries in transition in Central andEastern Europe and the former Soviet Union.

KfW works with the multilateral agencies on policyand economic reform issues to improve the frameworkconditions for the success of its projects. In future KfWintends to contribute increasingly to global issues suchas climate protection and conflict prevention, and toprivate-public partnerships.

Under terms established by the BMZ, theco-operation between KfW and the GTZ was furtherincreased in recent years. Both institutions areco-operating and complementing each other at thecountry level, the sector level or in individual projects.One hundred and forty-two projects (16more than inthe previous year) were supported jointly in 58 coun-tries at the end of 1996. These were mostly projectsin resource protection, primary health care, basic edu-cation and rural water supplies. Each institution con-tributes its specific know-how to these co-operationprojects. In the future local co-operation will be evencloser, following the opening of KfW field offices whichwill share the premises with GTZ. This closerco-operation between the two institutions with dif-ferent instruments and procedures is challenging, andsome scepticism exists within the GTZ. However, thedegree of overlap now between financial co-operationand technical co-operation is such that the KfW andGTZ are bound to develop even closer links.

GTZ was established in 1975 under a generalagreement with the BMZ as the principal executingagency for technical co-operation activities. The GTZalso carries out projects for other Federal ministries.GTZ performs its tasks on a public-benefit basiswhereby surpluses are used exclusively fordevelopment-related purposes. Since 1991 theGerman Government also uses the GTZ to supportthe development and reform processes in the coun-tries in transition. Another activity is technical assis-tance against payment for other bilateral and multi-lateral donors or recipient countries with theagreement of the BMZ.

In 1996 the GTZ worked in 135countries on858projects with its own personnel. The total turn-over amounted to $1.3billion. Its activities includeadvisory services for the BMZ and for organisations inthe recipient countries, recruitment of experts,project-related training, provision of equipment forthe projects and distribution of grants. In line withBMZ’s policy, GTZ places increasing emphasis on pri-vate sector development and on improving the legaland administrative environment in developing coun-tries to facilitate synergies between developmentco-operation and trade and investment activities byGerman industry. Another increasingly importantactivity is development-oriented emergency and refu-gee aid (see below).

GTZ headquarters administration is divided intoeight departments of which four are regional depart-


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ments and one deals with planning and developmentof various sectors, including refugee and emergencyassistance. It has the task of advising the BMZ on thefurther development of its basic principles and instru-ments, designing strategies into which they can beincorporated and promoting and monitoring theiron-site implementation. The GTZ head office supportsthe field structures with sector-specific, technical, com-mercial and administrative know-how and serviceswhen these cannot be mobilised locally. GTZ fieldoffices and project staff are essentially responsiblefor advising partner institutions on the preparation ofnew projects and the implementation of Germanproject contributions.

Following the formulation of new guidelinesin1994, the GTZ began to decentralise its activitiesin 1996. This exercise will last three years. The deci-sion to decentralise was taken to increase quality andcost effectiveness in the light of budget austerity andto provide greater flexibility in planning and imple-mentation through closer relations with counterpartorganisations and target groups. The decentralisationshould result in: i)greater client orientation, ii) greatercountry-specific know-how, iii)mor e flexible struc-tures, iv)gr eater decision-making autonomy, andv)gr eater economic efficiency. While most countryspecific tasks have been transferred to the field office,the head office continues to deal with GTZ’s core func-tions (country and regional management in Germany).Decentralisation led to a new operational structurecalled “tandem”, which consists of the office directorin the recipient country and the regional director inthe head office. The former has authority over theexpatriate staff and can hire local personnel but he isnot responsible for the country programme. Expatri-ate project directors have full responsibility for indi-vidual projects.

The decentralised structure should permit savingsthrough i)a reduction in duplicate work due to a cleardivision of labour, ii)better use of local exper tise andmore employment of local experts, iii)faster provisionof services by locating the decision-making authorityto the closest operational level. It should also lead toa larger share of projects financed by non-Germansources. An assessment of the efficiency achieved isnot yet possible since the decentralisation process isnot completed. Initial evaluation results are expectedin 1999.

A significant shift of responsibilities from the headoffice to the field offices has so far not been accom-

panied by a corresponding shift in personnelresources. Staff at headquarters declined from 1 292in 1994 to 1213 in 1998 and headquarters expendi-tures remained at 11per cent. In the field, the expat-riate staff remained at close to 1600 people, while anincreasing number of local staff are employed. Thelatter exceeded 8500 in 1997 as compared to 5 460in1994, of whom 1500 in professional positions. Thus,total project personnel was around 10000 in 1997.Most project staff are recruited for the duration of theproject. Only 7 per cent of project staff are GTZ offi-cials on leave from headquarters, and another 5percent to 7per cent have long-term contracts, i.e. movingfrom one project to another. Field office directors staythree to five years in this position and then move backto headquarters or to another field office. About 30percent of GTZ projects are sub-contracted mainly toGerman consultancy firms.

For the purpose of increasing the use of local per-sonnel, in 1996 the GTZ management issued guide-lines for the utilisation of this personnel and intensi-fied the training programmes. When employing localpersonnel GTZ tries not to weaken local administra-tions. Local experts are, in principle, also involved inall ex ante assessments of projects, with the aim of us-ing as much as possible the know-how available inthe partner countries.

In addition, some 800 German or otherEU nationals are employed by a local firm in adeveloping or transition country as “integrated”experts at local salaries. They receive a supplemen-tary salary and social security coverage from Germany.The programme for “integrated” experts is adminis-tered by the CIM, a joint undertaking by GTZ and theCentral (German) Employment Agency with financialsupport from the BMZ. Most integrated experts areengaged in education and training, protection of theenvironment and private sector development.Since 1996, developing country experts who com-pleted their academic or professional training inGermany are also entitled to participate in thisprogramme. During 1996, 38experts returned home,mainly Palestinian doctors and teachers. Their knowl-edge of the situation in their home country makesthem particularly well placed to contribute to thedevelopment of the partner country.

GTZ activities on behalf of other donors – mainlyEU, UNHCR and the Arab Gulf States – declined inrecent years to less than 7per cent of its contractsin1996 and were lower than planned.


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OTHER SPECIALISED AGENCIES (DED, DSE, GDI)

Besides KfW and GTZ, there are several othersemi-public aid agencies carrying out different tasks.They were created by the German Government, butare legally non-governmental institutions.

The German Development Service (DED) wasfounded in 1963 primarily for the provision of volun-teers. In comparison with volunteers from other donorcountries DED personnel is older – on average37 years – and more experienced. The volunteers arerequired to have at least two years’ practical workingexperience after the completion of their studies beforethey can apply for a DED assignment. On average theywork three and a half years in developing countriesmainly in agriculture, technical training, health, socialwork and small-scale business promotion.

DED is 95 per cent government owned and100 per cent government financed. In 1996 it had abudget of $88 million which financed 1 000 volunteersin 42 countries, mainly in Africa, and a head office staffof150. The personnel is not limited to Germans, butincludes other Europeans and local nationals. In thecase of local personnel they have to be employed bylocal administrations with the DED topping up thesalary. This contribution declines annually and ceasesafter sixyears.

DED does not have projects of its own but worksinside projects of partner organisations. To start workin a country it needs the agreement of the BMZ andthe AA, but its activities are not included in govern-ment consultations. The country programmes are pro-posed by the resident representative –DED has33field offices– who is fully responsible for its imple-mentation. He has to report annually to the head officeand comment on the activities of each volunteer. DEDco-operates with other German institutions includingthe GTZ, the CDG and the CIM, and participatestogether with French and Irish volunteers in theEuropean volunteer programme. The latter is prima-rily engaged in rural development in Africa. DED alsoprovides some financial assistance in support of civilsociety in developing countries and is engaged ininformation and education work in Germany.

The German Foundation for International Devel-opment (DSE) is an institution for development policydialogue and training which offers advanced coursesto specialists and executive personnel from develop-ing countries and more recently also from countries

in transition. In addition, it prepares German special-ist personnel for their assignments in a developingcountry (about 1 200 per year) and maintains the larg-est documentation and information centre on devel-opment co-operation issues in Germany.

The DSE is supported jointly by the Federal Gov-ernment and the Federal Länder. It has adecentralised structure with centres and conferencefacilities in several Länder. The bulk of the DSEprogrammes are financed by the BMZ. The FederalLänder of Baden-Württemberg, Bavaria, Berlin, NorthRhine-Westphalia and Saxony place conference andtraining centres at its disposal.

The DSE works with partners in Germany andabroad. A strong partner is GTZ which helps to iden-tify partner institutions abroad. A large part of theprogrammes takes place in developing countries andthe rest in Germany. In 1996 half of the training (mea-sured on a person per day basis) took place in therecipient countries. Since 1960 DSE has providedadvanced professional training to more than120000decision makers, specialists and executivesfrom over 150countries. At present the training andseminars involve some 10000 par ticipants every year.

The training is planned together with partner in-stitutions in the developing countries and, when theytake place on-site, also implemented with them. Thetraining includes:

• Short-term programmes lasting up to threemonths in Germany or abroad, e.g. seminars orcourses for middle-management specialists andtrainers. They include the secondment ofprogramme officers to support advanced train-ing institutions in developing countries.

• Long-term programmes lasting between threeand 24months in Germany and developing coun-tries, focusing on practical professional advancedtraining in direct agreement with professionalinstitutions of the developing countries.

• Programme packages consisting of combinationsof short-term and long-term programmesmutually agreed with partner institutions andcovering a time-scale of several years. Suchprogramme packages aim at supporting struc-tural change and sustainability. Examples ofprogramme packages are: the promotion of localgovernment in Chile and the Philippines; a


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training programme for regional planning andproject management in Indonesia; andadvanced training of teaching staff for the pub-lic health sector in Tanzania.

The DSE has developed networks with formerparticipants to follow-up its programmes, to exchangeexperience and to update professional knowledge. Itwill exploit the new forms of information technologyto facilitate continuous contacts and networking.

The German Development Institute (GDI), whichwas founded in 1964, has the following three tasks:

i) post-graduate training of German and EUnationals for professional work in developmentco-operation agencies;

ii) research on development policy issues andadvice to the German Government on devel-opment co-operation issues; and

iii) consultancy work based on its research.

GDI receives 300 to 400 applications annually forits nine-month training course of which only18 areselected. Since the beginning of the programmein1965, 610 post-graduate students have taken thiscourse, most of whom are employed by GTZ, KFW andinternational development institutions. Several workwith the BMZ and the AA. In the field of consultancywork GDI has recently produced a study on Germanco-operation with South Africa, a critical evaluation ofGerman country concepts, and provided advisory ser-vices to the Bolivian Government.

THE POLITICAL FOUNDATIONS

The Political Foundations are a unique feature ofGerman development assistance. There are five ofthem, the two oldest and largest of which are theFriedrichEbert Foundation established by the SocialDemocratic Party and the KonradAdenauer Founda-tion established by the Christian Democratic Union.The three others are the FriedrichNaumann Founda-tion of the Free Democratic Party, the Hanns SeidelFoundation of the Christian Social Union and theHeinrichBöll Foundation of the “Gr een” Party. TheAdenauer Foundation works in 108countries and islocally represented in 82 countries. For theEbertFoundation the situation is similar , while theSeidel Foundation and the NaumannFoundation each

have 40offices abroad and the BöllFoundation hasten. Since 1990 the Political Foundations have activi-ties also in CEECs/NIS.

The Foundations are autonomous in conductingtheir activities, and are not subject to instructions by“their” party. They focus on political education andsupport for all groups of society in developing coun-tries, such as trade unions, employers’ associations,co-operatives and political parties. This includes thepromotion of self-help groups and counselling for themanagement of mass media in developing countries.The Foundations develop longer-term concepts fordemocratic development, and work to strengthen therespect of human rights, the rule of law, good gover-nance, decentralisation and local administration. Theysupport the legal institutions and various local struc-tures. They recognised the importance of democracyand good governance for successful developmentco-operation well before the bilateral and multilat-eral donors began to pay attention to these factors.They also pay attention to social security. A majoradvantage is their capacity to work with the opposi-tion parties and groups since the official aidprogramme can only work with the government. Thispermitted, for example, the German Foundations toplay an important and successful role in strengthen-ing democracy in South Africa and Chile. Support forthe ombudsman in Peru is another example. Severalpartner countries use the German Foundations to findout how other developing countries dealt with cer-tain problems.

While by and large the Foundations have the sameapproach, there are, nevertheless, some differencesof emphasis. The Böll Foundation concentrates moreon the lower grassroots level, in particular on ecologi-cal and feminist movements, while the Seidel Foun-dation emphasizes vocational training. There existssome positive competition between the Foundations,which does not prevent them from co-operating andsometimes working with the same partners.

The Foundations work on the basis of the BMZpolicy concept and conform to its financial regulations.All project proposals have to be submitted to the BMZwhich finances almost entirely the developmentactivities of the Foundations, and to the AA. The Foun-dations provide feedback on their experience to thetwo ministries and the BMZ receives a final report ofthe projects with the financial details after three years.In 1996 the Foundations received $236 million fromthe BMZ. At the end of 1996 they had 275 experts


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abroad under contract, often local people, working on573 projects. This was less than in 1995 (292 experts)and in 1994 (326 experts). Their number is likely tohave declined further since 1996 since the financialsupport from the BMZ fell somewhat to $200 millionin 1997 and 1998. The work in the recipient country issupplemented by inviting a large number of personsto Germany for training.

A recent evaluation of the activities of the Politi-cal Foundations in Chile and South Africa concludedthat important local actors relied on the Foundationsin crucial situations. Thanks to the relations of trustthey were able to develop, the Foundations couldarrange meetings between hostile camps. Even whenthe situation appeared hopeless they continued towork for peaceful solutions. The study also concludedthat the activities of the different Foundations comple-mented each other, but that more co-ordination wouldbe useful.

The Foundations did not join the Association forDevelopment Policy of German NGOs (VENRO) buttheir relations with the other NGOs are said to begood. Relations with the GTZ improved in recentyears. They meet once a year with the GTZ, and havecommon programmes in many countries, but they donot wish to work as subcontractors for the GTZ.

OTHER NON-GOVERNMENTALORGANISATIONS(NGO s)

The BMZ attaches importance to co-operation withNGOs. Germany was the first DAC Member to intro-duce, in 1962, a scheme for cofinancing private activi-ties in developing countries. Over 500German NGOsof various size and background working in the field ofdevelopment co-operation are financially supportedby the BMZ, but the co-operation is characterised bythe special role played by large institutions. The BMZ

Box 1. The German co-operation system in action: promotion of local government in Chile

A decentralisation policy was formally introduced in Chile under the military regime, but only after the returnto democracy in 1990 was this policy truly implemented through the decentralisation of decision making and theintroduction of local elections. As a consequence of their increased tasks and responsibilities, local administra-tions felt a need for training which could not be met by existing Chilean public service training systems.

Different German organisations contribute to meet these needs. The Ebert Foundation offers advice to mu-nicipalities and organises seminars to promote an exchange of information. One of these seminars led to the foun-dation of the Chilean Association of Municipalities (AChM) in 1993. Five years after its foundation, all 341 Chileancities have become members of this association. It maintains contacts with corresponding organisations all over theworld and shows an active organisational life. Mayors from all political parties co-operate, and common positionson municipal policy are elaborated and defended against other political bodies.

Another focus of AChM’s activities is the provision of training for mayors, councillors and members of the mu-nicipal administrations. These activities have been supported by the DSE since 1994. In a comprehensive ap-proach, the DSE aims at the strengthening of the didactic knowledge of local trainers as well as at the direct supportof the AChM seminars. The DSE offers its advice, and finances about half of the costs of the seminar courses as wellas part of the association’s publications; 2 220 people have participated in at least one of the 55 training coursesorganised so far. According to a 1998 evaluation report, the DSE programme package was highly effective in promot-ing the organisational development of the partner organisation, and therefore, indirectly, in promoting the Chileandemocracy.

The Adenauer Foundation, in co-operation with the Chilean research and training institute Corporación dePromoción Universitaria (CPU), focuses on capacity building in municipalities. Via the CPU, the Adenauer Founda-tion has supported a training programme for social policy administration specialists (in particular for municipali-ties) since 1990, and for employees of municipal administrations since 1992. Other activities in this field are sup-ported by the DED, and the GTZ might also expand its general training activities to training targeted at the municipaladministration.

Given the large number of German organisations involved in the support of the Chilean decentralisation pro-cess through training activities, the above mentioned evaluation report strongly recommends more intensiveco-operation among the different agencies.


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spends 10 per cent of its budget and 7 per cent of totalODA on support to NGO activities. But this amountsto just one half the amount collected by German NGOsfrom private sources, which exceeded $1 billion perannum in recent years.

For a long time NGOs did not have a common plat-form due to diverging political and ideological views,but in December1995 they established, with the en-couragement of the BMZ, the Association for Devel-opment Policy of German NGOs (VENRO). VENRO has80 members of which six are regional umbrellaorganisations. It has a staff of six professionals whoare financed through membership fees. VENRO servesas a forum for exchange of information and joint stra-tegic planning, but also as a platform for dialogue withthe aid authorities. New accents of developmentpolicy and other fundamental issues were debatedwith the BMZ. A discussion was also launched on waysof improving internal quality controls and enhancingthe efficiency of development work. The churches andother NGOs also contributed their own particularexperience and knowledge to the BMZ country- andsector-related work.

The creation of VENRO permits better and regularcontacts between the NGOs and the government.VENRO established a working group to provide inputsinto the country concepts of the BMZ. In 1997 a seminarwas organised in India, involving the German and IndianGovernments and the NGOs of both countries.Cofinancing arrangements with the governmentimproved considerably, but VENRO wants to simplifythe procedure still further, in particular for the smallerNGOs, permitting them to decide the allocation of fundsfor smaller projects. While NGOs appreciate their rela-tions with the BMZ, the same cannot always be said of itsrelations with the GTZ. In particular, NGOs are opposedto the idea of receiving public funds through the GTZ,and do not favour direct GTZ contacts with SouthernNGOs. They consider that the Southern NGOs are not yetin a position to deal with such a strong partner.

During the forthcoming election campaign, VENROwill organise activities in favour of development aid,but does not expect its activities to generate muchattention since development aid is not an importantpreoccupation for public opinion and the parliamen-tarians. While this assessment is probably correct, itis somewhat surprising that neither the BMZ nor theNGOs have carried out a public opinion poll in recentyears. A more precise knowledge of the attitude ofthe population towards development aid would

enable them to better focus information and devel-opment education work.

The largest members of VENRO and the largestrecipients of public funds are the two major GermanChristian churches, which also raise substantial amountsof money from private sources. Both had created alreadyin 1962 a central agency for development co-operation,the Protestant Central Agency for DevelopmentAssistance(EZE) and the Catholic Central Agency forDevelopment Assistance(KZE) which receive funds fromthe government and from the churches for their aidactivities. Between 1962 and 1996 the two agenciesobtained DM6.7billion ($4.5 billion at the 1996 exchangerate) in public contributions, of which $198million in1996, for more than 10300 projects and programmes.The churches themselves raised even larger amounts,in 1996 more than twice the official contribution. Inaddition, since 1991 they obtained $11million foractivities in Central and Eastern Europe. KZE entrustedits tasks to Misereor, the largest Catholic NGO, whichalready in 1962 had experience with projects in devel-oping countries. Misereor makes the assessment of projectrequests for the KZE, supervises their implementationand audits the accounts. For these purposes it has a staffof about160. On the Protestant side the central agencyis independent of the largest Protestant charity Brot fürdie Welt (Bread for the World). It has a staff of80entir elyfinanced through funds of the church.

Church development work is oriented towards soli-darity with the poor. It contributes in many differentways to providing lasting relief from suffering in thedeveloping countries and creating just social orders.Co-operation partners in developing countries are nor-mally local church organisations, but in special casesalso secular NGOs. The churches’ aid programme is sodesigned that the local partners plan and implementprojects independently and, in doing so, involve wher-ever possible the sections of the population concernedas beneficiaries of the development activities. Encour-aging individual responsibility and self-help is a primeobjective even more than in official aid. In recent yearsthere has been a clear trend of transferring moreresponsibility to the partners in the developing coun-tries. This trend was accompanied by a move fromprojects towards programmes. EZE and KZE mainlysupport education and training, health services andother social infrastructure, agriculture, communitydevelopment and institution-building. Many projectshave more than one purpose. Particular emphasis isplaced on the participation of target groups,sustainability and respect of human rights.


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In response to a recommendation by AwZ, and toreduce the workload of the BMZ, since 1991 the twoagencies have received block grants and in most casesare entitled to decide themselves which projects theyfinance. Thus, in 1996 EZE and KZE decided more thanthree-quarters of their activities. The approval of theBMZ is, however, still needed for projects exceeding$3.3 million, activities in politically sensitive countries,projects involving major risks, and fundamentally newactivities and instruments. At the beginning of eachyear EZE and KZE discuss with the BMZ desk for rela-tions with the churches their past and futureprogrammes. In addition, the central churchorganisations are involved in discussions of BMZ sec-tor and country concepts as well as general issues ofdevelopment co-operation.

Apart from the church organisations there arenumerous other NGOs, including the German RedCross, Workers’ Welfare, German Freedom from Hun-ger Campaign, etc. They received together $49 mil-lion in official contributions in 1996. This support ison a project-by-project basis, a procedure which someof them consider as cumbersome, in particular forsmall NGOs and small projects. To qualify for suchcofinancing, NGOs must justify at least three yearswork experience in developing countries, show suffi-cient technical and administrative capacity and pro-vide proof that the project has a direct impact on pov-erty alleviation. They must also make a convincingcase of the reliability of their partners in developingcountries. The projects must correspond to thedevelopment policy of the recipient country and tothe basic principles of German development aid. Theyalso need the approval of the AA.

As a rule government support covers up to 75 percent of the project cost, but can in exceptional casesbe as high as 100 per cent. The NGO has in principleto contribute at least 10per cent. The remaining 15percent can consist of other public or local contributions.Administrative costs can be financed by the BMZ upto a certain limit. EZE and KZE bear their administra-tive costs themselves.

AID CO-ORDINATION AND FIELDREPRESENTATION

The German Government considers it essentialthat the aid programmes of bilateral and multilateraldonors be better co-ordinated to ensure the mosteffective and efficient use of available funds. It sup-

ports enhanced aid co-ordination through inter-governmental bodies. This applies particularly toco-ordination within the EU, but also within the DAC,World Bank consultative groups and through theUnited Nations Development Programme (UNDP).Germany welcomes the full endorsement of devel-opment co-operation as a community task by theMaastricht Treaty and notes with satisfaction that thegoals for European development co-operation asmentioned in the Maastricht articles correspond tothe goals for Germany’s bilateral development assis-tance. Germany declared that it supports the effortsto improve the efficiency of European aid manage-ment through better co-ordination between MemberStates’ bilateral aid programmes and the EC aidprogramme, and through the application of the prin-ciple of complementarity laid down in the MaastrichtTreaty. Consequently, Germany has encouraged theattempt towards operational co-operation in a num-ber of recipient countries. One example is Peru whereit took the lead in setting up a regular and well func-tioning local co-ordination of EUdonors.

The German Government also endeavours toachieve an improvement of aid co-ordination inbilateral consultations with other donor countries,notably France. A concrete measure is the agreementbetween the KfW and the Caisse Française deDéveloppement concluded in January 1998. Last butnot least it supports greater coherence among theinternational organisations whereby each organisationshould concentrate on those tasks in which it has acomparative advantage.

The number and profile of German field repre-sentation has already been an issue at previousreviews of German development co-operation by theDAC. Under an agreement with the AA, the BMZ sta-tions 24 officials in diplomatic representations abroad.This number has not increased over the years. Duringtheir assignment abroad they are integrated in the AA.Officials on secondment from the BMZ are present inthe main recipient countries (9in Africa, 6in Asia, 4inLatinAmerica) and several multilateral organisations.The bulk of professional staff in German embassiesdealing with aid matters are, therefore, career diplo-mats. Some 90diplomats work full-time or at least halfof their time as development co-operation officers.Another 115professional embassy staff devote sometime to development issues.

In carrying out its tasks the embassy – in line withestablished rules and procedures of co-ordination and


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co-operation – makes use of the knowledge andadvice of the personnel of the implementing agen-cies, in particular from the GTZ. Embassies haveweekly contacts with the GTZ field office and organiseregular meetings with all project directors, permittingan exchange of information and preparations for con-sultations with the partner country. In addition to theirpolitical and co-ordinating functions the embassiesare authorised to finance small-scale projects whichdo not exceed $10 000. The maximum amount percountry and year is $40 000.

Contrary to the small number of BMZ personnelin the recipient countries, the GTZ is well represented.At present it has offices in 61 developing countrieseach staffed by several people, mainly local person-nel. These offices primarily provide logistical supportfor the implementation of projects, as well as infor-mation for headquarters and the embassy, but are alsoinvolved in local donor co-ordination and have con-tacts with the administration of the recipient country.In discussions the OECD Secretariat has had with thePeruvian authorities and other donors in Lima itbecame evident that some considered the GTZ officerather than the embassy to be their counterpart. Thissituation, which reportedly exists also in other coun-tries, can create some uncertainty as to who is incharge of the German aid programme. Relationsbetween the embassy and the GTZ representative inLima are close and good.

While KfW so far has only two field offices in thedeveloping countries (but several in the countries intransition), following an evaluation of their utility KfWwill open six more in 1998 and another three or fourin1999. They will be staffed by one KfW and two tothree local personnel. All offices will share thepremises with the GTZ, but keep their institutionalindependence and separate terms of reference. None-theless, the sharing of the premises should facilitatecommunication and on-the-spot co-ordination of Ger-man financial and technical co-operation.

Apart from the aid section of the embassies, the61GTZ offices, and the twelve (future) KfW offices,there are also 33 DED field offices of which only oneis a joint office with the GTZ. Given this large numberof sometimes overlapping field offices the questionhas to be raised whether the present situation per-mits the most efficient approach and the mostcost-effective one. In view of the tight budget situa-tion, and for reasons of efficiency, the possibility ofsetting up a single German aid office in the partner

countries is now being considered. A first modest stepin this direction has already been undertaken by GTZand KfW. Since Germany is aiming at a closer integra-tion of its financial and technical assistance, theopportunity of facilitating this integration through thesetting up of joint field offices should not be lost. Aunified development co-operation office would alsofacilitate co-operation with the authorities of the part-ner countries and the co-ordination with other donors,tasks which Germany endeavours to improve further.The decentralisation of GTZ activities and theintended strengthening of its field offices would beanother reason for reviewing the present set up.

PERFORMANCE MEASUREMENT, EVALUATIONAND OVERALL EFFECTIVENESS

The BMZ has an evaluation unit, the Division forSuccess Control, currently staffed with five profession-als. Since its creation in 1970 more than 1 000 evalua-tions have been carried out. Both ongoing and recentlycompleted development projects and programmesare examined. However, in view of the large numberof projects, the BMZ is only able to carry out spotchecks. Every year approximately 60projects,i.e.about 2 per cent of the measures financed by theBMZ are assessed. These evaluations form part of acomprehensive system of efficiency controls which theimplementing organisations themselves carry out(project progress reviews, project completion evalu-ations and ex post evaluations).

BMZ evaluation results are made available to allresponsible units within the Ministry, as well as tothe implementing agencies. Partners in developingcountries receive a translation of summaries of theevaluation reports. Moreover, the Ministry’s evalua-tion division is responsible for the supervision of theimplementation of the recommendations made bythe evaluators. After approximately one year, theunits of BMZ responsible for individual projectsreport about compliance or give reasons why certainrecommendations have not (yet) been followed. Theimplementing agencies report regularly in compli-ance with these recommendations through theirrespective reporting mechanisms. Furthermore, gen-eral recommendations and criteria derived from theevaluation findings are incorporated into the BMZ’spolicy and sector papers, which serve as guidelinesand a basis for decisions concerning the selection,planning and implementation of similar projects inthe future.


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The projects to be evaluated during the course ofa year are included in an annual plan. Independentexpert evaluators are engaged in order to evaluatethe projects in accordance with a standardized evalu-ation scheme, taking into account both developmen-tal and essential technical aspects. This scheme isbased on a framework of criteria which has beendeveloped by the DAC Expert Group on Aid Evalua-tion in order to make evaluation results as compa-rable with those of other donors as possible. Abouthalf of the evaluation teams are led by a member ofthe BMZ.

While a number of DAC countries publish fullevaluation reports, the German evaluation reports areconfidential. They are primarily intended for theinternal use of the agencies responsible for theprojects, so that they will improve planning and prepa-ration of future projects and programmes. The Parlia-ment and the general public are, however, keptinformed through the publication of condensedcross-section analyses of all evaluations. The GermanParliament has been interested in these yearly syn-thesis reports and has in the past suggested improve-ments on that basis. The report covering BMZ evalua-tions carried out in 1994/95 was published in the series“BMZ aktuell” in February 1997. The most recent studycovering BMZ evaluations of 1995/96 is available as adraft.

According to both reports, the developmentalimpact of the projects has been mainly positive. Nega-tive impacts reportedly occurred only in very fewcases. However, comparing the impact achieved withthe projects’ objectives lead to disappointing resultsin about one quarter of the cases evaluated. As regardssustainability, the 1994/95 study reports serious prob-lems in about 40 per cent of the cases evaluated, andthe draft report on 1995/96 evaluations states that onlyin at maximum one third of the projects sustainabilitycan be expected. For about onequarter of the cases,evaluators see no way in which the projects couldattain sustainable results.

Different factors are influencing these results.While project implementation is generally consideredto be a strength of German developmentco-operation, problems are encountered regardingthe definition of objectives and project planning.Although some improvements are reported, muchremains to be done, in particular regarding targetingand setting up the conceptional base of the projects.In the 1994/95 report, monitoring, especially impact

monitoring, is also considered to be a main weakness.The later report, however, does not see major prob-lems in this field any more. Among external factorsinfluencing project results, inefficiencies andorganisational shortcomings of the local projectexecuting agencies are considered most important.

Currently the above described evaluation systemis undergoing some major changes. In April1997, theBMZ decided to shift the responsibility for singleproject evaluations to the implementing agencies KfWand GTZ which have been instructed to apply the DACPrinciples for Evaluation of Development Assistance. From 1998onwards, the Ministry’s evaluation division will con-centrate on sectoral, thematic or instrument relatedevaluations. Individual projects will be evaluated onlyin this broader strategic context or if they are of par-ticular political importance. This reorientation of BMZevaluation activities towards politically and strategi-cally important issues corresponds to the recommen-dations made during the last DAC Peer Review.

The implementing agencies follow their own qual-ity control systems. These systems rely heavily onself-evaluations. Decentralisation of GTZ activitiesbrought about some changes in the organisation ofthese self-assessments: the responsibility for projectevaluation has been moved from headquarters to thefield. The evaluation team is now selected by theproject director, a practice which could give rise toquestions concerning the rigour and objectivity of theevaluation. However, projects implemented by GTZand KfW undergo a multiple check, first throughinternal quality control managed by the operationaldepartments, and then through external control byleading German auditing companies, the BMZ and theFederal Court of Audit. Furthermore both GTZ and KfWhave independent evaluation functions. In the KfWthe Sector Policy Department has the responsibilityto discuss the results of final evaluation reports withthe responsible operational departments which hadcarried them out. The department’s special evalua-tion unit, staffed with six professionals, mainly dealswith intersectoral and methodological issues. In theGTZ the Quality Assurance Unit got direct evaluationresponsibilities following the delegation of individualproject evaluations by the BMZ in 1997. It is equippedwith a staff of eight professionals who supervise andorganise evaluations of selected projects, especiallywhen particular problems arise.

Self-assessments of KfW and GTZ do not onlycover the monitoring of the progress of the projects,


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but also include a final assessment of all operations.Besides final inspections of the investments, the KfWcarries out ex post evaluations of each operation threeto five years after the completion of the investmentphase, and a few long-term assessments as much as20 years later.

Both KfW and GTZ publish summary reports ontheir evaluations. The KfW has published four reportssince 1991 based on the verdict of the independentauditing company. The most recent report publishedin December 1997 covers all 177 projects andprogrammes that underwent an expost evaluationin1994/95. In two-thirds of the cases, developmentresults were rated very good, good, satisfactory, or atleast altogether adequate (“successful”), whileonethird of the operations were considered to showinadequate or clearly insufficient results or to be com-plete failures (“unsuccessful”). The previous reportcovering the expost evaluations carried out in 1992/93showed some slightly better results. The differencesdo not appear to be significant, however.

The criteria of the rating system are: achievementof objectives, economic, social and environmentalimpacts, commercial viability and sustainability,whereby the weight given to the individual criteria var-ies depending on the projects’ objectives. The prob-lems to achieve sustainable results which represent amajor concern in the BMZ evaluation reports, appearto be less prevalent for the KfW financed operations.

As in the previous report, the main reason statedfor unsuccessful operations was the inadequatefulfilment of obligations and tasks by the partner gov-ernment and the local project-executing agency. KfWexpectations were too optimistic in these cases. Inother cases, expectations were too optimistic regard-ing the demand for the services provided. The previ-ous study furthermore observes some planning defi-ciencies. In both reports the manufacturing industryachieved the poorest results. Above-average resultswere obtained by the operations in social and eco-nomic infrastructure.

For almost twenty years the KfW has co-operatedwith the Caisse Française de Développement. This hasalso resulted in joint evaluation efforts. In 1997 bothagencies developed common evaluation criteria in thefinancial sector and applied them to their co-operationprogrammes for the promotion of rural financial sys-tems in Mali. Since the experiences were positive, fur-ther joint evaluations are planned for the future.

GTZ has so far undertaken three majorcross-section analyses of the effectiveness of itsactivities in 1994, 1996 and 1997. The third report cov-ered all 88 projects completed in 1995 and a randomsample of 81ongoing projects. The results are basedon the GTZ’s self-evaluations checked and confirmed,however, by the independent auditing company onthe basis of a random sample comprising 25per centof the completed projects. Overall, four-fifths of thecompleted and ongoing technical co-operationprojects were considered successful or satisfactory.This compares well to the result of the previous studywhere about three-quarters of the evaluated projectsgot a corresponding rating. Comparing the threecross-section studies completed so far, no generaltrend appears, however.

The German contribution to achieving the projectpurpose was considered successful or at least suffi-cient in 93per cent of the evaluated projects. Thepartner country’s contribution was, however,regarded as unsatisfactory in more than onequarterof the cases. Just like the KfW, the GTZ admits thatthe capacity of partner organisations was sometimesoverestimated: “in 16per cent of the ongoingprojects, the project design was not tailored to theperformance capacity of the partner organisations.”Sustainability, defined as “the extent to which thepartner organisations and target groups are willingand able to self-reliantly continue and furtherdevelop the innovations effected by the project” wasconsidered to be achieved with a high degree ofprobability in 58per cent of the cases. In 30per centof the projects, this probability was perceived asmoderate, and in 12per cent of the projects, itappeared to be low.

Successful projects generally achieved high tar-get group identification. The designation of suitableproject partners and eventually their gradual capac-ity development turned out to be key requisites forproject success. Flexible adaptation of the projectconcept and the project objective to the partnercountry’s situation – particularly the changing frameconditions– proved to be another important featureof successful projects.

The GTZ’s characteristic strength is seen in theprovision of services, inputs of resources and techni-cal solutions. “The appropriateness of applied tech-nology and the inputs to the completed technicalco-operation projects in form of seconded and localpersonnel, materials and equipment were given very


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positive ratings.” This finding is in line with thepositive scoring of implementation as compared tothe definition of objectives, planning and monitoringin the BMZ evaluations.

Other institutions implementing developmentprojects or programmes financed through the BMZbudget also have to carry out monitoring andevaluation activities. According to the BMZ guide-lines revised in January 1998, they have to reporton the progress of the project once a year. In thisexercise as well as in a final project completionreport, objectives and achievements of theprojects have to be compared. Furthermore, theimplementing institutions have to undertakeevaluations and the BMZ carries out spot checks.

Among the numerous evaluations carried outby the BMZ in this context in recent years, twocountry evaluations regarding the activities of theGerman Political Foundations are of particularinterest since they represent the first comprehen-sive studies of this particular kind of activity. Bothevaluations were completed in 1995. They werecarried out as an overall appraisal of the activitiesof the different foundations over the whole periodof their work in the country and not as aproject-by-project evaluation. South Africa andChile, the two countries chosen for the evaluationexercise, both went through a successfuldemocratisation process. In both cases the workof the foundations was considered very helpful instrengthening the different opposition groups, pro-moting political dialogue, reducing ideological bar-riers and contributing to a common understand-ing of basic democratic values through a pluralisticand very flexible approach.

Besides project/programme effectiveness, train-ing activities are also evaluated. The DSE assessesthe success of its training activities through afollow-up of the career of the participants. Partici-pant surveys indicate for instance, whether thetrained experts found a corresponding job in theirhome country and how they rate the practical appli-cability of the techniques and skills acquired in thecourse.

Thus, besides administrative and purelyresearch-oriented activities, the activities financedthrough the BMZ all undergo a more or less system-atic evaluation. It is not clear, however, to what extentthis is true for that part of the German developmentco-operation programme which is financed out of otherbudgets, i.e.the budgets of other ministries, of theLänder and of the cities.

Concerning the overall effectiveness of theGerman aid programme, the BMZ states that:

“... trends are clearly pointing upwards. Two majorevaluation exercises on objectives-orientedproject planning(ZOPP) and the country program-ming approach have demonstrated that greatlyimproved planning techniques influence thewhole project cycle in a positive way. The annualsynthesis reports of all evaluations point in thesame direction. Nevertheless, further improve-ments are called for, particularly in the area ofinstitutional analysis and more realisticgoal-setting and time frames. The interactionbetween the overall framework conditions at themacro-economic and sectoral levels and aid per-formance, particularly at the project level,continue to remain unclear in many ways.”

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3

POVERTY REDUCTION AND GENDER

Poverty reduction is a prime objective of Germandevelopment policy. Already in 1983, the BMZ cre-ated a special staff panel for poverty reductionco-operating with NGOs which already had consider-able experience in this field. Since 1989 the “Workinggroup on promoting poverty reduction by promotinghelp for self-help” has provided a regular forum forthe exchange of ideas and experiences among theBMZ, the implementing agencies and NGOs. As indi-cated by the name of the working group, from thebeginning a high priority was given to participatoryand self-help approaches. In 1990, this resulted in afirst policy paper Fighting Poverty through Self-Help. Thispaper was complemented in 1992 by a second paperThe Main Elements of Poverty Reduction clearly establish-ing poverty reduction as a cross-cutting task of allGerman development activities. The paper furtherfocused on structural reforms as the means to addresscauses rather than simple outward manifestations ofpoverty. Other strategic policy papers followed in thecourse of the 1990s, setting a sound strategic base tothe poverty alleviation efforts of German developmentco-operation.

The concept of poverty reduction throughself-help was discussed and adopted by the GermanParliament. In 1991 and in 1995 the BMZ and a num-ber of German governmental and non-governmentalorganisations reported on the progress of povertyreduction to the Parliamentary Committee forEconomic Co-operation and Development. In Janu-ary1998, the Parliament reinforced all previous deci-sions on the issue and requested the government toimplement the strategy through an even stronger focuson self-help projects and programmes in co-operationwith self-help groups of the poor and local NGOs. Atthe same time, traditional basic-needs strategies asfollowed in the 1970s were rejected as having provedto be ineffective.

The BMZ “Guideline for assessing the poverty ori-entation of development co-operation projects” whichcame into effect in January1998 also emphasizes theimportance of a participatory approach. For a project

to be considered as involving poverty reduction, somedegree of participation of the poor must be guaran-teed. Furthermore, poor people must be a significantpart of the target group and the project has to improvetheir living conditions as well as their productivepotential. Finally, the project has to operate in apoverty-oriented environment. The indicators for thefulfilment of these criteria differ between “direct pov-erty reduction” and “comprehensive poverty reduc-tion” projects (see below).

As the majority of the poor are women, the BMZlooks upon the consideration of gender roles as a pre-requisite for successful and sustainable povertyreduction. Specific conceptual papers, closely relatedto the cross-sectoral concept papers on poverty alle-viation, have been developed on the Promotion ofWomen in Developing Countries in 1988 and on GenderEquality in 1997. The latter constitutes a binding guide-line for the formulation of official German develop-ment co-operation by the BMZ and its implementingagencies. It provides specific guidance on how to“en-gender” development co-operation. More thanthe former WID approach, the concept on genderequality focuses on the need to address the relation-ship between sexes, rather than to target womenalone.

Just as for poverty alleviation, the goal of equalopportunities for women and men is recognised as asignificant cross-sectional task in the 1996 Conceptfor Development Policy of the BMZ. This implies thatfor all conceptions and measures under Germandevelopment co-operation, the impact on womenmust be investigated. Since 1992, all project reports,whether women-specific or not, have to specify theanticipated effects on women (specifically positive,risky or negative). If no gender-effects can berecorded, this has to be stated explicitly. The offi-cials responsible for women and youth in the BMZobtain all project documents of technical and finan-cial co-operation during the planning phase, permit-ting verification that gender aspects are being takeninto account.


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In terms of administration, the interrelationbetween the goals of poverty alleviation and genderequality is reflected by the merger, in 1996, of theindividual units into a larger division on “povertyalleviation and gender issues”. This division is respon-sible for the mainstreaming of both issues within thedevelopment co-operation programme. Besides itsconceptional work, the division thus contributes to thepreparation of country and sectoral concepts as wellas to the selection of individual projects and has thefinal word on particular questions of major interest.

Building on the basic understanding of povertyalleviation and gender as cross-cutting issues, themajor German implementing agencies are also work-ing to mainstream their efforts in these fields. To thisend the GTZ created an innovative organisationalstructure. In the mid-1990s, know-how on poverty andgender was re-allocated on a cross-departmental basisto different units of the organisation. While the over-all responsibility remains in the Strategic CorporateDevelopment Unit, direct consultancy is provided byspecial advisors on poverty reduction, gender, andprocess management in individual country depart-ments. In addition, two officers in charge of the spe-cial gender and poverty reduction pilot programmesupport the country departments and the Planningand Development Department through the develop-ment of technical concepts and country strategies andprovide assistance for their implementation. As part-time members of “Thematic Teams”, officers from thesectoral divisions and the Personnel Department aswell as co-workers in the field co-operate with thosepermanently responsible for poverty and genderadvisory services.

Further, the GTZ is integrating the cross-cuttingissues of poverty and gender into its strategic toolssuch as the Project Cycle Management (PCM) andZOPP. Since ZOPP was found to be too inflexible andoften to neglect the participation of the target group,new guidelines on PCM(1996) and ZOPP(1997) nowemphasize flexibility and partnership. A cross-departmental “Advisory Team on Poverty Alleviation,Gender and Process Management” was createdinAugust1997 to ensure the integration of poverty andgender aspects in all co-operation principles and stan-dard procedures.

The efforts to integrate these issues into all fieldsof the agency’s work are reflected in comprehensiveGTZ documentation on gender and poverty reduction.While the elaboration of general policy papers isleft to the BMZ, the GTZ focuses on directlyproject-oriented strategy papers, training manuals forproject management and sector-specific documents.

In the KfW, although not reflected in the adminis-trative structure, poverty and gender issues aremainstreamed. Poverty and gender-related assess-ments form part of target group analyses. These issuesare being dealt with in one of KfW’s Sector PolicyDepartments. Similarly to the BMZ and the GTZ, theagency aims to familiarise its staff with these issuesthrough training, e.g.via exposure and dialogueprogrammes or the participation in pilot schemes. Intheir 1997 evaluation synthesis reports, both KfW andGTZ report specifically about the effects of their workon poverty reduction as well as about the women-specific impact of their projects. In a recent assess-ment the KfW observed a tangible impact on the

Source: BMZ, Guideline for assessing the poverty orientation of development co-operation projects, p. 4 (shortened).

Categories for projects involving poverty reduction

Contribution toand identificationwith the project

Criteria

1. Targeting

2. Expected impact

3. Participation of the poor

4. Project environment

Direct Poverty Reduction (target group clearly identified and reached directly)

Self-help projects Other direct poverty reduction

Comprehensive PovertyReduction

Proportion of poor in target group 50 per cent or as highas in the region (lower limit 30per cent)

Project improves living conditions for the poor and promotes their productive potential

Poor in the region/countrybenefit from indirect impactof the project

Ownershipand self-organisation

Favourable local framework conditions

Guaranteed scope for NGOs to act

Plausible causal chain toimproved living conditionsfor the poor

Participation mechanismspresent in principle

POVERTY REDUCTION AND GENDER

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situation of women in only 29 per cent of the projects.This impact was reportedly positive in all but three(out of forty) cases.

Among the projects assessed by the GTZ uponcompletion, almost 80 per cent explicitly includewomen as part of the target group. In 38 per cent ofthe projects the impact on women was reported to bevery good or good, in 35 per cent of the projects itwas satisfactory. The evaluation of ongoing projectsled to even better results. It is interesting to note,however, that for both completed and ongoingprojects, the evaluation shows a clearly stronger posi-tive impact for men.

Concerning poverty alleviation, the GTZ evalua-tion reported very good or good results in about half,and satisfactory results in about one quarter of theongoing projects. The KfW holds that 64 per cent ofthe projects helped to alleviate poverty. In both agen-cies, direct as well as indirect effects were taken intoaccount. The relevance of indirect effects is particu-larly high for the KfW since only about one fifth of theprojects directly affect the poor.

Since a detailed analysis of the causal chain whichcan lead to an indirect impact on poverty alleviationis extremely complicated, the KfW evaluations gen-erally rely on the assumption of some plausiblecause-and-effect links. However, for selected countriesand sectors, external experts have been in charge ofan in-depth analysis. They investigated the contribu-tion of railway projects to poverty alleviationinT anzania and Bangladesh, as well as in the contri-bution of electricity projects to poverty reductioninEgypt and Indonesia. The results of those studiesvary considerably. While a contribution topoverty-alleviation could be deduced for Indonesia,this was not the case for Egypt and Bangladesh, andonly to a rather limited extent for Tanzania. As the mainreasons for unsatisfactory results, the studies pointto the inefficient sector policies of the partner coun-tries as well as the insufficient integration of povertyaspects in general government policies. The study onTanzania further emphasizes that even though somepositive impact on poverty alleviation can be reachedthrough railway projects, this impact will always remainmodest in comparison to a contribution to other sec-tors such as education, health or social security.

Besides GTZ and KfW, other governmental andnon-governmental organisations also follow specificpoverty and gender policies. The DSE for instance,

developed particular gender guidelines in 1997. Theselection of participants for DSE seminars and thechoice of training materials are based on these guide-lines. Among the Political Foundations, the HeinrichBöll Foundation follows the most direct povertyapproach with a strong emphasis on gender issues.Other Political Foundations rather emphasize thestructural effects of their general democratisation poli-cies. Many NGOs seek direct effects in combinationwith a structural impact through the promotion of theorganisation of the poor. Some German NGOs furtherconsider advocacy in Germany itself to be part ofindirect poverty alleviation. They focus on reforms inindustrialised countries, especially regarding tradeand foreign policy, to create the necessary interna-tional frame conditions for successful poverty allevia-tion efforts.

The share of poverty and/or gender-orientedprojects in German ODA is difficult to determine dueto the lack of precise internationally agreed criteria.The BMZ’s own efforts to identify and classify projectsor programmes dealing with poverty alleviation ledto the 1998 Guideline mentioned above. This guide-line could help to more clearly demonstrateGermany’s efforts to reduce poverty. However, the cri-teria used still seem to be too subtle to allow consis-tent judgements on the classification of projects.

Thus, estimating the share of German aid whichimpacts directly or indirectly on poverty is, as forother DAC Members, not easy. Self-help povertyreduction oriented projects doubled from 8per centof ODA in 1991 to 15.8per cent in 1996, but fell shortof the original budgetary planning figure of 18.6percent. The planning figures for the following yearsdeclined significantly to 14.2per cent in 1997 ris-ing slightly to 15.1per cent in 1998. It is thereforenot clear that increased priority is going to theseprojects, in terms of the policy declaration. Morebroadly, according to data supplied to the DAC, only4per cent of German bilateral commitments in 1995concerned basic education and 1.4per cent basichealth, so a total of 5.4per cent of Ger many’sdevelopment assistance was allocated to thesebasic social services. Given the high-leverageimpact of basic social services on well-being andpoverty reduction, a review of the allocation of aidflows might be appropriate. However, it should benoted that since 1995 the BMZ statistics show ashare of bilateral ODA for basic needs above 50percent. This reporting problem is unfortunate as itcreates confusion and controversy.


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Germany supported the 20:20 initiative atthe 1995 World Summit for Social Development inCopenhagen. 20:20 has since then been integratedas a political goal in some agreements with devel-oping country governments. However, there has beenno rising commitment to basic social programmes ingeneral and much remains to be done in order tooperationalise the initiative.

Germany also made a number of commitmentsin the context of the 1995 World Conference onWomen in Beijing. For the years 1996-2000, $40 mil-lion are set aside for legal and socio-political advi-sory services for women, of which $9million werecommitted in1996. Under this scheme, Germanysupports local organisations in Africa, Asia and LatinAmerica. In Namibia, Cameroon and Guatemala,Germany advises the government on legislation forwomen’s rights. In Kenya, Germany has a project tofight prostitution through training for other sourcesof income.

German NGOs are disappointed about the imple-mentation of the commitments made at these majorinternational conferences. They hold for instance, thatthe scheme developed following the Beijing Confer-ence lacks strategic elements. They further point outthat between 1995 and 1997, the BMZ budget indi-

cated a reduction rather than an increase of the shareof basic education and basic health.

In general, it appears that there are divergentviews in the German aid administration between thosewho want to keep poverty reduction as a priority goalof development co-operation and those who preferto gear German aid increasingly towards private sec-tor development. To reconcile the two tendencies itis sometimes stated that private sector developmentcan be a useful way of reducing poverty. Evaluationreports indeed suggest that, for instance, support forsmall and medium-sized enterprise development inaddition to rural development, has been successfulin reducing poverty. It has to be kept in mind, how-ever, that private sector development does not byitself take care of the problem of poverty.

A detailed analysis of the poverty issue is avail-able in a study of the German Development Instituteentitled German Aid Policies for Poverty Reduction. The studyconcludes that “poverty reduction as a priority of Ger-man development co-operation is a realistic aim. Whatmatters is to concretise the overall concept [...] and togive poverty reduction the priority stated in the policypapers”. The same seems to be true for the genderapproach which has been well conceptualised, but willneed some more effort before it is fully implemented.

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4

OTHER DEVELOPMENT PRIORITIES

Apart from poverty alleviation,the other main focalareas of German aid are environmental protection andresource conservation, and education and training.Another important area is the promotion of the privatesector.

ENVIRONMENT

German public opinion is particularly sensitivewhen it comes to the protection of the environmentand of natural resources. It is therefore not surprisingthat environment protection and resource conserva-tion is the second focal area of German developmentco-operation. According to internal BMZ guidelines atleast one quarter of bilateral ODA should, on aver-age, be used for projects which serve primarily anddirectly environment and resource protection. Thistarget has been met. Between 20 per cent and 27 percent of German bilateral aid commitments wereannually devoted to this sector during the years1990to1996. Mor eover, environment protection which isinterrelated with sustainable development, is not onlya key sector, but permeates all sectors of Germanco-operation, notably through environmentally sen-sitive design and environmental impact assessmentsof most development co-operation projects andprogrammes. Environmental objectives and concernsare taken into account at the earliest possible momentin the project design phase, and are monitored dur-ing the implementation phase through regular reports.They play a major role in country concepts and in thepolicy dialogue with the partner countries. There isno doubt that the German aid programme is largelyshaped by environmental considerations.

Germany aims at placing economic developmentin the partner country on an ecologically sustainablebasis. This is done through promoting national envi-ronmental policies, legislation and control, concen-tration on projects which have a major environmentalimpact, development and provision of environmen-tally friendly technology, support for the internationaland regional initiatives and efforts.

The projects concern, among others, measures toreduce air pollution, sewage, elimination of garbage,biological plant protection, ecological agriculture,environmentally compatible power stations, irrigationsystems and industrial plants, fight against desertifi-cation and reforestation.

Germany pays particular attention to the conser-vation of tropical forests notably in Brazil. It is the larg-est contributor towards the protection of tropical for-ests, with annual payments in recent years of betweenDM250 million and DM 300 million ($133 million and$200million). The International Pilot Programme forthe Conservation of the Tropical Rain Forest in Brazilgoes back to an initiative of the German Federal Chan-cellor at the 1990 G-7Summit meeting. Germany con-tributes 60per cent of the resources. Started in 1992,this programme had a slow start and so far little head-way has been made in preventing the continuingdestruction of large areas of tropical forest. Destruc-tion of the Amazon rain forest nearly tripled between1990-91 and 1994-95, surpassing the years of defores-tation that set off the international programme. How-ever, this is a complex undertaking and results willtake time.

In the context of debt relief negotiated in theParis Club, Germany offered many developing coun-tries the possibility to forego part of its claims ifthe amounts are used by the beneficiary countryfor environment-related projects. In 1996, this pos-sibility was broadened to include poverty allevia-tion projects. An amount of DM 200 million($133million) is allocated in the 1996 aid budgetfor this purpose.

Germany actively supported the creation of theGlobal Environmental Facility(GEF) and is in favourof using this Facility as the central financing mecha-nism of the global environment conventions. Itemphasizes the link between developmentco-operation and the initiative for the protection ofthe global climate for which $50million are madeavailable.


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EDUCATION AND TRAINING

Measures in the field of education and trainingaim at building up the necessary manpower capacityfor sustained development in the partner countries.German activities concentrate on basic education,vocational training and institution building. Techni-cal/vocational training is a sector in which Germanypossesses great experience. Priority is given to tech-nical training, but the service sector is receivingincreasing attention. Technical and vocational train-ing is often provided by German enterprises not onlyin Germany but also in developing countries and byintegrated experts. A description of a vocational train-ing programme is contained in “The German AidProgramme in Peru”. Support for basic education ismainly provided through NGOs. In this sector Germanyalso co-operates with the United Nations Educational,Scientific and Cultural Organisation (UNESCO) and theWorld Bank. Programmes to reduce illiteracy are usedto disseminate basic knowledge in the fields of health,hygiene, agriculture, environment protection, etc.

The real importance of primary educationin German aid is difficult to determine due to partlycontradictory data. According to information sub-mitted by the BMZ to Parliament, the share of pri-mary education rose from 1.3 per cent of bilateralcommitments in 1992 to 8.5 per cent in 1995, butdeclined in the following years to 4.2 per centin 1997, while, according to DAC statistics, primaryeducation obtained only 4per cent of bilateral com-mitments 1995. In the Handbook for Journalists it isindicated that half of the $573 million provided by

the BMZ for education was for primary educationand onequarter for vocational training.

German activities in the field of education andtraining also include teacher training, advisory servicesfor ministries and institutions in developing and tran-sition countries as well as university partnerships andscholarships for studies and training in Germany. Asregards advisory services, Germany, among others,supports the Ministry of Education in Peru, and is incharge of co-ordinating the assistance of EU countriesand the EC in the education sector in this country.

The Minister for Economic Development andCo-operation has stated several times the importanceof attracting more students from developing countriesto German universities. He considers the availabilityof persons educated in Germany important for thesustainability of German aid projects and for the cre-ation of appropriate frame conditions for developmentco-operation.

PRIVATE SECTOR DEVELOPMENT AND PUBLIC/PRIVATE PARTNERSHIPS

About onefifth of German bilateral aid is directedtowards private sector development. The German aidadministration considers private sector developmentto be a key factor in poverty alleviation. It also believesthat the German private sector has an important rolein developing adequate structures in the partnercountry, and that the interests of German aid coin-cide with those of the German economy. As stated

Box 2. The protection of indigenous communities and natural resources

The protection of indigenous communities and natural resources in Brazil is an example of German aid for theprotection of the environment and for poverty reduction. To safeguard the survival of ethnic minorities in thetropical rain forest and to protect their habitats from further settlement, KfW and GTZ are supporting the demarca-tion of indigenous lands. In around 80 areas, swaths are being cut into the forest to identify the boundaries, andsignposts are being erected. The conspicuous identification of the lands is the basis for the legal recognition ofindigenous settlement areas. The respect for these boundaries, which must not be trespassed by settlers or enter-prises, is being monitored by the indigenous communities with the support of the Brazilian Agency for IndigenousAffairs(FUNAI). For this purpose observation points are set up along the demarcation lines. At present, thedemarcation is being carried out in 30 indigenous lands. By the end of 1997 a total area of around 205 000 squarekilometres is scheduled to be demarcated. An estimated 40 000 to 50 000 indigenous people live in these protectedareas.

The project touches a politically delicate issue in Brazil. Already when it was being prepared, great politicalresistance had to be overcome. Numerous legal objections were raised against the demarcation. However, theworldwide attention and pressure from the countries which are supporting the Pilot Programme to Conserve theBrazilian Rain Forest helped to bring about a rapid denial of the objections, so that demarcation could begin.

OTHER DEVELOPMENT PRIORITIES

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in the Memorandum, “German developmentco-operation performs the function of a mediator andcatalyst. ... It thus contributes in large measure tostrengthening Germany as a business location and tosafeguarding jobs in Germany”.

In view of the increasing orientation of develop-ment co-operation towards this sector, the BMZ elabo-rated in 1996 a concept for the promotion of the privateeconomy in the partner countries. This activityemploys a broad range of instruments, developedwith the participation of German business and indus-try, in training, advisory services, finance, twinningarrangements, etc. Particular attention is given to thepromotion of crafts, small and medium-sized enter-prises, the development of savings and credit insti-tutions, notably in the co-operative sector, and tomarket reforms. Training is often provided by Germanenterprises in developing countries and “integrated”experts. Another important contribution is advisoryservices for recipient country governments andadministrations with a view to strengthening the part-ner countries’ own efforts.

One of the instruments of German co-operationin this sector is the German Investment and Devel-opment Corporation. The DEG which is wholly gov-ernment owned, provides finance and advice for theprivate sector in developing and transition countries.It promotes co-operation between German andEuropean enterprises and enterprises in partner coun-tries. It facilitates and participates in joint ventures.In 1996, the DEG committed DM676 million ($450 mil-lion) for 77 projects in 40 countries.

Another instrument is the Senior Expert Servicewhich puts retired professionals of German industryat the disposal of developing and transition countries.These experts work on a voluntary unpaid basis, butreceive a subsistence allowance and travel costs. Theyare sent for a period of up to sixmonths to solve tech-nical and management problems and to train localpersonnel. In 1996, 920 senior expert missions tookplace of which200 in China.

The German aid administration attaches impor-tance to establishing a development-orientedpublic-private partnership. The introduction of asocial market economy is one of the five criteria ofGerman development co-operation. Germanyassists the developing and transition countries indecentralising the state administration – an area inwhich it is particularly competent due to its own

federal structure– in strengthening the judiciaryand in supporting indigenous forms of social secu-rity. With the help of the Political Foundations, thechurch organisations and other NGOs, it supportsthe participation of the civil society indecision-making processes.

The KfW, which has considerable experience inprivatising East German enterprises, has begun toenlist more private participation in the administra-tion of its projects in developing and transition coun-tries. In doing so, it experienced difficulties in fundingprivate partners in certain areas. KfW considers thatthe sharing of risks, the supervision of the private com-pany, the right regulatory system and the necessaryinfrastructure are important issues in public-privatepartnership.

CRISIS PREVENTION AND DEVELOPMENT-ORIENTED EMERGENCY ASSISTANCE

In its latest (1996) report to Parliament, theFederal Government stressed the importance of cri-sis prevention. Germany aims at reducing naturaland man-made disasters and the flow of refugeesin co-operation with the countries concerned.Attention is given to fighting the root causes of theflow of the crisis. This implies fighting poverty, eco-nomic and social disparities and resource degra-dations, support for regional integration and thepromotion of good governance in all relevant sec-tors. It further implies the introduction of early warn-ing systems. The instruments for analysis andplanning of German co-operation are currentlybeing reviewed to better introduce aspects of crisisprevention.

Crisis prevention is seen as part of a comprehen-sive approach ranging from short-term emergencyactions to longer-term co-operation activities. Emer-gency and refugee aid should lead into long-termdevelopment aid. The return of refugees to theirhome countries should be closely linked in an inte-grated approach to development projects and to theactivities of the emergency and refugee programme.In 1996 the Federal Government published aconceptual framework entitled Development-OrientedEmergency Aid and in 1997 Development Co-operation andCrisis Prevention. The GTZ, which carries out the emer-gency assistance, has elaborated a concept fortechnical assistance for development-oriented emer-gency and refugee aid.


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Germany attempts to convert emergency and refu-gee aid into the rehabilitation and reconstructionmeasures of classical development co-operation andthus to make a contribution to disaster control that isnot only comprehensive and sustainable but alsocomplementary to that of other organisations. GTZservices for development-oriented emergency assis-tance include the entire spectrum from disaster pre-vention through emergency aid and refugeeprogrammes to rehabilitation and reconstruction andthe reintegration of ex-combatants. An important goalof German emergency relief and refugee aid is to con-tribute to disaster prevention and preparednessthrough strengthening the self-help capacities ofpeople and organisations. It includes measures forsocial, physical and economic rehabilitation follow-ing disaster. Individual measures are thus integratedinto an overall international concept for disaster con-trol. A guiding principle is – whenever possible – towork through development programmes that pre-datethe disaster. Including disaster victims in project plan-ning and implementation also helps avoid depen-dency and strengthens both individual andorganisational initiative. In 1996 GTZ spent $164 mil-lion on development-oriented emergency assistance,mainly in Africa and the former Yugoslavia, of which$48 million on behalf of non-German institutions.In1995 the activities reached the same volume.

Many activities concerned the reintegration of refu-gees and demobilised soldiers, an activity in which GTZhas acquired considerable experience. Germanyrecognises that a crucial development co-operation taskis to turn ex-combatant potential to productive pur-poses. Targeted programmes are needed to supportthe reintegration of ex-combatants and thus reduce therisk of renewed violence. For this reason,demobilisation and reintegration programmes havehigh priority in the field of development-oriented emer-gency aid. GTZ has evolved a range of specific instru-ments to reintegrate them. Close co-operation withlocal and regional NGOs and with other developmentorganisations has produced a number of successful

projects. Projects aim to strengthen the self-helppotential of ex-combatants. Literacy courses andon-the-job training give them a chance to develop theskills that are needed for reconstruction. Reintegrationprogrammes promote employment and support smalland medium-sized businesses. Germany views itsprogrammes as an integral part of crisis prevention inpost-war situations. They often run parallel todemocratisation efforts and reconstructionprogrammes. Demobilisation and reintegrationprogrammes exist in six African countries (Angola,Eritrea, Ethiopia, Mozambique, Somalia and Uganda)and in Bosnia-Herzegovina. In the latter country theactivities concern only the reintegration of refugees.

To support the comprehensive approach a newbudget line was created in 1995 which contains thefunds for conflict prevention measures, emergency,food and refugee aid. It was endowed with $219 mil-lion in 1996, but disbursements seem not yet to havereached that level (see composition of bilateral aid).

HUMAN RIGHTS AND THE RULE OF LAW

Respect for human rights and the rule of law areamong the five basic criteria for German aid. They areconsidered not only a vital condition for successfuldevelopment co-operation, but also for crisis preven-tion, security and peace in the world. Germany hasmade important contributions to DAC work on par-ticipatory development and good governance. Dur-ing recent years Germany has made available overDM200 million ($133 million at the 1996 exchangerate) annually for this purpose and for good gover-nance. The scope and nature of the measures dependon the willingness of the recipient country to carry outthe necessary reforms. They include advice to thegovernment, assistance for elections, support for thejudiciary and promotion of the participation of civilsociety in the political process. Activities in this areaare largely carried out through the Political Founda-tions and church organisations.

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5

VOLUME, COMPOSITION AND TERMS

ODA VOLUME AND OUTLOOK

Traditionally the fourth largest donor, Germanybecame in 1995 and 1996 the third largest source ofODA. This development was, however, more the resultof a decline in aid from other major donors than alarger German effort. Although the German authori-ties have often stated that aid for the developing coun-tries should not suffer from the large commitmentsvis-à-vis the former Soviet Union, substantial aid forCentral and Eastern European countries and the hugeburden of German reunification, German ODA hasconsistently declined in relation to gross nationalproduct(GNP) from 0.42 per cent in 1990 to 0.31 percent in 1995. It rose again in 1996 to 0.33 per cent,reflecting extraordinary rises in debt relief and sub-scriptions to multilateral funds, but then fell substan-tially in 1997 to 0.28 per cent. Like many other DACcountries, Germany faces a difficult economic andbudget situation. In this context, it has to be acknowl-edged that the rehabilitation of the East Germaneconomy is taking longer than expected with majorrepercussions for the German taxpayer and theemployment situation in Germany. Faced with thehighest number of unemployed people sincethe1930s, it is not surprising that senior aid officialspay growing attention to possible benefits for theGerman economy from the aid programme. Moreover,of all OECD countries, Germany had and still has tofinance by far the largest number of refugees. DACreporting instructions only allow the inclusion of theexpenses for refugees during the first year. A recentGerman request to include expenses in the followingyears was not accepted by the Committee.

In the light of the above-mentioned circum-stances, it was difficult to maintain aid performanceat its pre-unification level. In 1996 the German aideffort was still well above the DAC average, but belowthe average of EUMembers and the average countryeffort of DAC Members. Over the five-yearperiod1990/91-1995/96, German ODA declined onaverage 2.2per cent in real terms, while during thepreceding five-year period it had risen by 2.4per cent.

Following the substantial reduction of German aidin1997, it is likely that the percentage decline in realterms during the last five years was close to the aver-age decline in DAC Members’ ODA. Germany’s sharein total DAC ODA has thus remained much the samesince 1990/91 at between 12per cent and 13per cent.

The bulk of German ODA is financed through thebudget of the BMZ, the share of which is, however,decreasing. While in 1980 BMZ’s budget accountedfor83per cent of ODA financing and in 1990 for 76percent, its share fell to 69per cent in 1996. The changeis essentially due to an increase of contributions toEUprogrammes, aid to refugees, and debtreorganisation. These components are not includedin the BMZ budget and now represent about one quar-ter of ODA disbursements. Rising disbursements bythe Federal Länder also contributed to the decline ofthe BMZ share in German ODA. The Länder contrib-uted 7per cent in 1995 and 1996. The Federal For -eign Office provides less than 4per cent (primarilyfor humanitarian and cultural activities). About 70percent of the BMZ budget is disbursed bilaterally, 10percent goes to the EDF and 20per cent to other multi-lateral funds and institutions. In the coming years thebilateral share is expected to decline somewhat, whilethat of the EDF will increase. The decline of the bilat-eral share is also related to loan repayments whichrose from less than $1 billion in 1994 to almost $1.3 bil-lion in 1997.

Contributions to EUprogrammes are included inGerman ODA figures, as for other EUMembers, on thebasis of gross contributions. In view of the difficulteconomic, social and budget situation in Germany, thehigh share of Germany’s net contributions to the over-all European budget (54per cent) has become animportant issue in German public opinion and theParliament and hence for the government. This pre-occupation became apparent during the negotiationsconcerning the latest replenishment of the EDF.Germany negotiated a smaller share, 23.4per centcompared to 26per cent for EDFVII, but this wasmainly the result of enlarged EUMembership.


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Under the German budget system, forward planningis possible through the instrument of “commitmentauthorisations”, as opposed to cash appropriations whichare for disbursement during the fiscal year. Commitmentauthorisations are the basis for aid pledges by the aidadministration at the annual or biennial negotiations withrecipient countries or for negotiations concerning thereplenishment of resources of the international institu-tions. Based on these pledges, ODA commitments overthe next three or more years are made for individualprojects or programmes. The development of commit-ment authorisations and cash payments in the BMZ bud-get in recent years is given below.

The Federal Government uses a five-year rollingplan as a basis for its budget proposals. The most recentplan covers the years 1997-2001. The first year’s figurestally with the current year’s budget as passed byParliament, including any supplementary budgets. Thesecond year’s figures correspond to the government’sdraft budget for the coming financial year, as presentedto Parliament. For the following three years purelyindicative data are given. This medium-term financialplan is progressively adapted every year to changingeconomic and political conditions. Such changes haveoccurred relatively frequently in recent years. Theywere due either to expenditure blocks affecting thewhole Federal budget, or to additional budget votesin response to new spending requirements, such asemergencies and peace operations. The budget pro-posed by the Federal Government for the BMZ isdiscussed by the AwZ which gives its opinion to theBudget Committee of the Parliament.

The share of the BMZ in the Federal budgetdeclined substantially from on average 2.5 per centin the second half of the 1980s, to 2 per cent during1990-92 and 1.7per cent in recent years. On the otherhand, the BMZ has succeeded in maintaining its shareof the Federal budget at 1.7per cent since 1994. Some

Table A. The budget of the BMZin DM million

1993 1994 1995 1996 1997 1998

Commitment authorisations 8 896 6329 5 302 7 620 4 924 5104

Cash appropriationsBilateral 5 764 5076 5494 5522 5377 5301*Multilateral 2442 2752 2466 2277 2385 2535Administrative costs 74 79 91 90 80 80Total 8280 7906 8052 7889 7842 7916*Increase or decrease (%) –4.6 1.8 –2.1 –0.6 0.9As a share of total federal budget expenditure (%) 1.8 1.7 1.7 1.7 1.8 1.7BMZ budget as a share of total ODA (%) 72.0 71.5 74.6 69.0 . . . .

* including DM 250 million prefinanced by KfW.

attribute this fact more to support for the BMZ byGerman industry than to the influence of public opin-ion and Parliament. It should also be kept in mind thatODA disbursements outside the BMZ budget, notablythe aid through the EC budget, rose over this period.

The decline of budget appropriations is posing prob-lems for the KfW and the GTZ since they had signedproject commitments on the basis of higher commitmentauthorisations in previous years. KfW, therefore, had toprefinance its disbursements to the tune of $145 millionin 1997 and again in 1998. This amount is equal to 10percent of KfW gross disbursements. KfW will recuperatethe funds by keeping the repayments of the loans dur-ing the next ten years. No decision has so far been takenas to how the shortfall in 1999 will be covered, but it isvery likely that the German Government and KfW willhave to rely increasingly on capital market funds throughmixed and composite financing (see section on finan-cial terms). GTZ has very limited possibilities toprefinance its activities. It will, therefore, be very diffi-cult to cover the project expenditure in 1998.

ODA contributions by the Länder which in 1990 werebelow DM600 million reached almost DM 800 millionin 1995 and 1996. This rising trend is, however, unlikelyto continue. The bulk of these amounts concern imputedcosts for students. Direct development aid rose until1993 when it reached DM 172 million and declinedafterwards to DM141million in 1996 (see T ableB).Baden-Württemberg and North Rhine-Westphalia havethe largest programmes in developing countries amongthe German Länder. Together they provided about halfof direct aid disbursements in 1995 and 1996. Other rela-tively important contributions were made by Bavariaand Berlin. Aid activities by the Länder concern edu-cation and training in Germany and in the developingcountries, dispatch of personnel and goods, financialsupport for NGO projects and development educa-tion in Germany.


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COMPOSITION OF ODA

The composition of aid is characterised by a declineof bilateral aid and a corresponding rise in the share ofmultilateral contributions. In 1996 a special factor wasthe doubling of subscriptions to IDA, but this was anon-recurring situation. The declining trend is duerather to the rise in aid provided through the EC andthe more “locked in” nature of multilateral aid throughinternational replenishment mechanisms. The declineof bilateral aid is most likely to continue in the coming

Unless development co-operation becomes ahigher priority after the general elections in Septem-ber1998, or even more capital market funding is usedto finance the loan programme, the volume ofGerman aid is likely to decline further in the comingyears, in particular as a ratio of GNP. The sharpdecline of commitment authorisations in 1997 and1998 to less than 60 per cent of their 1993 level willseverely curtail the possibilities for new commit-ments. During the budget debate in Parliament themain opposition party drew the attention to the

Box 3. Aid from Baden-Württemberg

Baden-Württemberg in 1997 was active in 37 countries. Projects concerned primarily education and training,health, handicraft, agriculture and forestry. Among the financed projects in 1996 are the construction of a school inEritrea, a health service for young women and girls in Kenya, irrigation in Sri Lanka and a literacy programme inHaiti. Six Land (regional) ministries are involved in the provision of development assistance. In its recent report tothe regional Parliament, the regional Ministry of Economic Affairs stressed the continued commitment of the ad-ministration to sustainable development in the developing countries, but admitted that the aid activities had to becurtailed considerably already in 1996. It is not envisaged to start new projects in 1998 and 1999.

repercussions of this situation for future German aid.Moreover, GNP is forecast to rise by 4.5 per centannually in nominal terms until 2001 while Federalbudget expenditures will only rise by 1.1 per centannually according to the latest medium-term bud-get planning. In addition, loan repayments will risefurther by about 10per cent over the 1997 level, andthus reduce the net amount of German ODA. The ces-sation of large financial transfers to the former SovietUnion in 1997 had no positive effects on the aid bud-get for developing countries.

years due to the shrinking budget and the fact justnoted that a large part of multilateral contributions isprotected by firm multi-year commitments. This situa-tion already poses serious problems for the bilateralprogramme as evidenced by the insufficient funds forKfW and GTZ described above.

i) Bilateral aid

By far the largest part of bilateral aid has been ingrants, of which roughly half concerned expenditures

Table B. ODA from the Federal LänderIn DM million

1990 1991 1992 1993 1994 1995 1996

A. (excluding imputed student costs) 114 137 139 172 148 142 141Of which:Baden-Württemberg 35 43 42 42 40 40 35North Rhine-Westphalia 17 31 31 59 34 34 34

B. Imputed students’ costs 454 461 553 589 573 647 (646)Of which:Baden-Württemberg 64 77 98 86 71 78 (78)Berlin 133 97 113 127 126 142 (142)North Rhine-Westphalia 110 112 134 141 140 158 (158)

C. Total 568 598 692 761 721 789 (787)In $ million 351 360 444 460 444 550 (523)as a share of net ODA (%) 5.6 5.2 5.8 6.6 6.5 7.3 6.9of which imputed students’ costs as

a share of net ODA (%) 4.4 4.0 4.7 5.1 5.2 6.0 5.6


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for technical co-operation. In comparison with theaverage composition of DAC aid, the share of techni-cal co-operation expenditure is larger. This is largelyexplained by the inclusion of imputed costs for stu-dents. Germany is one of the seven DAC countrieswhich include indirect costs for students from devel-oping countries in their ODA statistics. These costshave been rising in absolute terms and as a share oftotal net ODA from 4.4 per cent in 1990 to 6.0 per centin 1995 and 5.6 per cent in 1996. This is the secondhighest percentage among the seven countries. Theshare in the German aid programme of project andprogramme aid, of food aid and administrative costswas lower. (Administrative costs include the BMZ, theAA, including the costs of the embassies in the devel-oping countries, the KfW, the DSE, the DED, the DIE,the CDG and the DEG, but not the GTZ.) The amountsfor debt reorganisation varied from one year toanother. The share of emergency aid, other than foodaid, corresponded by and large to the DAC average.This fact is somewhat surprising in view of the largenumber of refugees which account for the bulk ofexpenditure reported under emergency aid (87 percent in 1995, 59per cent in 1996). It implies thatGermany provided less emergency assistance abroadthan other DAC countries. Assistance for refugees inGermany (during the first year of stay) amounted to5per cent of ODA in1995, but to only 2 per centin1996. The share of loans declined substantiallyuntil1996, but rose again 1997. Detailed figures areavailable in Annex Table2.

The distribution of bilateral ODA commitments bymajor purposes is shown in Annex Table3. The mostimportant changes during the last five years concerna rise in the share of education, water supply and sani-tation, other social infrastructure services, transportand storage. Aid for energy, industry, commodity aidand programme assistance declined during thisperiod.

In comparison with the DAC average, Germanyprovided more aid for education. This higher share ismainly the result of the inclusion of imputed costs forstudents. Excluding these costs, aid for educationwould not be much higher than the DAC averagealthough Germany selected education and training asone of the three priority areas for its aid. Aid for thehealth sector is half the DAC average, although itincreased.

The changes in the sectoral distribution of com-mitments reflect largely shifts in the KfW loan

portfolio which became even more apparentin 1997. The share of social infrastructure projectsrose from 9per cent in 1990 to 28per cent in 1996and 40per cent in1997. In par ticular, water supplyand sanitation rose during this period from 7percent to 23per cent. There was also a major increasein the share of education and health. More aid isdirected towards environment and resource protec-tion, and poverty alleviation projects. However, halfof the commitments still concern economic infra-structure and services.

ii) Debt re-organisation and forgiveness

As a large creditor, Germany is one of the majorplayers in the Paris Club, and is one of the countrieswhich has forgiven most debt within that framework.The amounts of debt rescheduled or forgiven inindividual years fluctuated widely. In 1996 reporteddebt forgiveness reached $774 million. In 1997 theParis Club restructured a further six countries’ debton Naples terms. Germany’s share of this was$153million of which T anzania was the main benefi-ciary ($79million). Altogether , the German Govern-ment so far waived or promised to waive ODA debtfor an amount of DM9.1billion ($6.1billion atthe 1996 exchange rate).

It should be noted, however, that reportingpractices on debt re-organisation are not uniformamong DAC countries. While most DAC countriesagree not to report future interest after debt is for-given, the German administration considers thatrenunciation of future interest represents a lossto the national budget and should, therefore, beincluded in ODA.

For several years the German Government hasalso waived or rescheduled part of its claims on thecondition that the debtor country uses local currencyfunds equivalent to 20 to 50 per cent of the amountwaived for projects related to environment protectionand/or poverty reduction. In 1996 such debt conver-sion agreements were concluded with eight develop-ing countries for an amount of over $90million. Thefunds for this debt conversion facility in the budgetmore than quadrupled from $30million in 1993 to$140million in 1997.

Germany has made contributions to the IDA debtreduction facility to enable countries to buy back com-mercial bank debt, but is not known to have made acontribution to the HIPC Trust Fund.


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iii) Geographic distribution

German aid is worldwide, and the number ofrecipient countries increased further from 141in1990/91 to 156 in 1995/96. Its distribution changedover the years as regards regions, income groups andindividual countries. In particular the share of Asia,of North Africa and the Middle East fluctuated sig-nificantly from one year to another, while that ofSub-Saharan Africa (SSA) remained fairly stable,although it was marginally lower in 1995/96 thanin 1990/91 and during the 1980s. SSA remained themain recipient region with almost one third of bilat-eral ODA followed by Asia, Latin America, NorthAfrica and Middle East and Europe. Europe’s sharewhich had been exceptionally high compared to theDAC average fell sharply in 1996 to 4 per cent, butwill rise again according to 1998 budget allocations.As to income groups, the share of theleast-developed countries fell from one third duringthe 1980s to below 30 per cent of bilateral ODA inrecent years, while that of the other low-income coun-tries rose substantially. The lower middle-incomecountries obtained significantly less. Aid for the highincome countries became negative in 1996. The shareof geographically unallocated aid rose to almost 20 percent, but was still small compared to the DAC average(see Annex Table4).

In spite of the large number of recipient countries,ten countries obtained almost half of bilateral allo-cable ODA in 1995/96. This was primarily due to China,which obtained 15per cent of bilateral allocable ODA.Such a high share is unusual for the Germanprogramme and occurred probably for the first time.Egypt (8per cent), Nicaragua (7 per cent) andBosnia-Herzegovina (5 per cent) were the other mainrecipients in 1995/96. At the beginning of the decade,the largest beneficiaries had been Egypt, Israel, Indiaand Turkey. Thus, only Egypt maintained its share inGerman aid, but India and China have long beenamong the main recipients although not with the sameshare. Except for these three countries, there weremajor changes among the ten largest aid recipients(see Annex Table5).

Germany was the largest donor for about a dozencountries. Over the five-year period 1992-96, it wasthe source of about half of DAC countries’ gross ODAdisbursements to Croatia, Iran, Turkey and Uzbekistan.It contributed 43per cent of gross ODA disbursementsfor ex-Yugoslavia, which probably resulted from thelarge number of refugees, and about onethird for

Liberia. Slovenia obtained almost two-thirds of its aidfrom Germany, but the amount involved was small.Since Germany considers Slovenia as a moreadvanced country in transition, the responsibility foraid to this country was shifted in 1997 from the BMZto the Federal Ministry of Economics. On the otherhand, Bulgaria and Romania are treated like devel-oping countries on account of their low per capita GNP.

iv) Multilateral aid

The share of multilateral contributions in Germannet ODA has been rising in recent years from 31percent in 1990/91 to 37per cent in 1997. This is the resultof firm multi-year commitments for many internationalfinance institutions and for the European aidprogrammes which cannot be adjusted downwards intimes of falling aid budgets. The Budget Committeeof the Bundestag (lower house of Parliament)requested some years ago that a ceiling of 30 per centfor multilateral contributions should be introduced inthe budget of the BMZ. This limit has been largely,although not entirely, respected. The multilateralshare in the BMZ budget amounted to 33per centin1997 and 1998. The higher share in total ODA ismainly due to EU aid which, apart from the EDF, fallsoutside the BMZ budget. While on the whole a posi-tive attitude towards multilateral assistance still exists,the German Government has in recent years taken amore demanding stance regarding the efficiency ofthis aid. In particular, it considers that UN organisationsand the ECprogramme should become more costeffective.

Roughly one half of Germany’s multilateral aidgoes through the European aid programmes for whichGermany is the largest contributor. In 1997 contribu-tions to EU aid programmes reached 60per cent ofmultilateral ODA and almost onequarter of total ODA.Most of the remaining multilateral aid concerned theIDA for which Germany is the third largest contributorwith a share of 11.4per cent. Contributions to theregional development banks are much smaller. Theyhad declined sharply to less than 1per cent of GermanODA in 1995 and 1996, but reached 3per cent in 1997.Contributions to UNagencies which as a share of ODAhave always been below the DAC average, declinedfurther from 5per cent of ODA to 4per cent in recentyears, about half the DAC average. In view of the bud-get situation this decline is most likely to continuesince the contributions to UNagencies and funds arenot protected by multi-year commitments, but are ona voluntary basis. Indeed, 1998 budget allocations for


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the UNDP were more than one third lower than in 1996.This situation is, however, difficult to reconcile withGermany’s desire to attract UNagencies andprogrammes to Bonn. Contrary to UN contributions,Germany’s 12 per cent share in the GEF for thethree-year period 1994-97 is in line with Germany’semphasis on environment protection.

The BMZ is responsible for most multilateralinstitutions. In particular it is in charge of relations withthe World Bank group, GEF, CGIAR, IFAD, the regionaldevelopment banks and funds, UNDP, UNIDO, UNFPAand the WFP. The Federal Foreign Office deals withUNESCO, UNHCR and UNICEF. UNEP, FAO, WHO andILO are the responsibility of the respective sectorministries. For European programmes, four FederalMinistries are jointly responsible: Economics, Finance,AA and the BMZ.

FINANCIAL TERMS, TYING, PROCUREMENTAND ANTI-CORRUPTION POLICIES

German aid commitments are in conformity withthe DAC Terms Recommendation. With an overall grantelement of 91.7per cent in 1996 (91.4 per cent in 1995),German terms corresponded to the DAC average. Thegrant element of commitments for the least developedcountries is 100 per cent since Germany has extendedonly grants to this group of countries since 1978.

As regards loans, their average grant elementin1995/96 was 60.4 per cent which was lower than theDAC average. The average is the result of differentkinds of loans. Apart from two sets of standard condi-tions for its ODA loans, Germany has mixed and com-posite credits the terms of which vary. For the poorerIDA eligible countries Germany applies IDA terms,i.e.a maturity of 40years including 10years of graceand 0.75per cent interest (grant element 81per cent).For all other countries, the standard ODA loans havea maturity of 30 years including 10 years of grace anda rate of interest of 2per cent. These conditions havea grant element of 66per cent, but in practice the grantelement was often somewhat higher or lower.

To mobilise additional resources mainly for largeinfrastructure and industrial projects, the Germanauthorities introduced during the 1980s a “mixedfinancing” scheme. Under this scheme, the KfW com-bines funds from the aid budget with its own fundsraised on capital markets and extends the blend astied ODA loans. This blend of budget and capital

market funds inevitably results in harder financialconditions than those of the traditional German ODAloans. The market fund component, which is tied toGerman exports, is guaranteed by the GermanGovernment through the Hermes credit insurance.

Following the OECD agreement on stronger disci-plines for tied financial aid, including mixed credits,the so-called “Helsinki agreement”, the volume ofGerman ODA committed in the form of mixed creditsdropped markedly from 1992 onwards, but the facilityremained available. In 1995 mixed credits totalled$314 million, of which $153 million in budget funds, fornine projects. This was only half the amount which hadbeen made available in 1994. In 1996 mixed financingdeclined further to $100million for three projects, ofwhich $79million was from the BMZ budget.

In order to compensate for this fall in mixed cred-its, Germany created another mixed credit schemein1994, called “composite financing”. This schemealso allows for blended ODA loans, but it differs frommixed financing in that it is not mandatorily tied toGerman exports and the KfW market fund componentis guaranteed (90per cent) by the BMZ rather than byHermes. KfW carries the remaining risk of 10per cent.Most composite loans (eleven out of fifteen) wereuntied, in which case the “Helsinki disciplines” do notapply. Whether and at which stage a tying decision istaken, varies from case to case.

The shift of guarantee responsibility to the BMZfor this scheme should help to ensure full attention tothe aid quality of the projects to be financed. In caseswhere the Helsinki agreement allows the provision oftied aid (i.e.for non-commercially-viable projects),composite financing transactions may also be tied. Likethe mixed financing scheme, this alternative is sup-posed to allow for promoting German exports as aby-product of development-oriented initiatives.

In the 1996 budget law a ceiling of $900millionwas established for official guarantees for the capitalmarket portion of composite financing transactions.The ceiling was increased by $175million in the 1997budget law. Eligible recipient countries are those witha relatively high credit rating, in particular those with-out debt problems. Agreement on composite financ-ing projects was reached with China, India, Indonesia,Pakistan, Thailand and Tunisia for a total value of about$1.65billion. The loans are for projects in transport,energy and environment, sectors in which Germanindustry is in a strong competitive position.


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Table C. KfW co-operation with developing countries in figuresDM million

1992 1993 1994 1995 1996 1997

CommitmentsFunds from the budget 2 963 3038 3098 3519 3507 2885of which: for projects and programmes 2274 2825 2879 2986 3337 2826

for structural and commodity aid 689 214 219 533 171 59Capital market funds 436 477 289 311 482 512of which: composite financing – – – 80 449 357

mixed financing 436 477 289 231 33 155Total 3 399 3515 3387 3830 3990 3397of which: grants 1085 987 1432 1606 1400 1333Disbursements* 2 723 2786 2194 2527 2592 2766Repayments* 1459 1445 1377 1492 1705 1773Net disbursements 1929 1836 1281 1271 1200 994

* including capital market funds.Source: KfW.

Germany’s tied aid as a share of bilateral ODAcommitments declined from an average 55 per centduring 1990-92, to 37 per cent in 1994. In this regard,the German authorities have described their positionto DAC as follows:

“In view of the problems in the German labourmarket, the government endeavours to ensure inall developmentally suitable cases that due con-sideration is given to bidders from Germany, with-out neglecting the principles of international com-petition.... The requirement that projects financedby the Federal Republic of Germany must beselected according to development criteria con-tinues to apply. The German Government is alsokeen that there should be competition for theawarding of contracts and that the developingcountries should not suffer any price disadvan-tages. When contracts are awarded directly, pricesare subject to scrutiny. The German Governmentmakes sure that the ‘Minimum Conditions forEffective International Competitive Bidding’ con-tinue to be applied.”

The decision whether a loan will be tied to pro-curement in Germany or in the EU is taken by the BMZ.If the loan is tied, up to 50per cent of the amount canstill be procured outside Germany, although in prac-tice this is rare.

In 1996, Germany notified the largest volume of“Helsinki”-type aid credits: SDR 709 million, an increaseof 72per cent over the 1995 level of SDR413million. Itwas thus the largest source of “Helsinki”-type notifica-tions among the OECD countries in 1996. Since the com-ing into force of the agreement on tied aid disciplines

Composite financing contains different blends ofpublic and private funds (fifty/fifty, onethir d/two-thirds, two-thirds/onethird, etc.). In addition todifferent blends the maturity and the grace period ofthe capital market part also vary from one loan toanother, while the official part is provided on IDA con-ditions. The recipient countries, therefore, try toreduce the share of capital market funds. The averageinterest rate of composite loans is 3per cent.

To conform with the rules of the Helsinki agree-ment on tied aid credits the concessionality level ofmixed and tied composite financing has to reach atleast 35per cent. Many credits are just above thisthreshold. KfW considers that terms should be morediversified. It considers that there is an important gapbetween grants and market-related loans which canbe met by aid loans with different concessional terms.

While the difference between mixed and/or com-posite lending and exclusively budget financed ODAloans consists essentially in their financing rather thanin their development orientation, domestic consider-ations can play a more prominent role in mixedfinancing than in traditional ODA.

Germany is in favour of cofinancing with otherbilateral and multilateral donors, in particular forstructural adjustment programmes, provided it canmaintain its criteria for development co-operation.The volume of cofinanced projects varies from yearto year. In 1996 onequar ter of project agreementsfor financial assistance concerned cofinancing. Theagreement between the KfW and the CaisseFrançaise de Développement in January 1998 isintended to increase cofinancing with France.


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in February 1992 to the end of 1996, Germany notifiedthe second largest amount (SDR 2.6 billion) after France.It also was the second largest source, after Japan, ofnon-“Helsinki”-type credits, mostly untied loans.

Germany has agreed to the principle of untyingaid to the least developed countries provided all DACMembers are involved, but has set out a number ofconditions. First, the focus should only be on“procurement-related aid”, over SDR2million andshould specifically exclude all technical co-operation,including investment-related technical co-operation.Second, Germany wants a common understanding ofwhen international competitive bidding should becompulsory, based on a review of completed countryprocurement profiles. Third, the agreement should notlead to an additional administrative burden.

Germany is one of the few countries which has in-formation on procurement. Such information is avail-able for $1.5 billion of the $1.7 billion of bilateralfinancial aid disbursements in 1996. Of the formeramount, 70 per cent concerned foreign currency costsand 30 per cent local costs. German enterprisesaccounted for 84 per cent of the foreign currency costs.

As regards multilateral aid, the information collectedby Germany shows that the German share in procure-ments differs very much depending on the institution.In 1996 the German economy obtained orders from theWorld Bank/IDA and the regional development banksto the tune of $1.5billion. Most of the orders came fromthe World Bank/IDA where Germany secured 13per centof the orders. On the other hand, orders from the 7thEDFamounted to only 6per cent of total procurements .

As regards anti-corruption measures the GermanGovernment has introduced since September1997 aclause based on the DAC Recommendation of May1996.It sets out the negative effects of corruption and under-lines the political will of both governments to work to-gether to guarantee transparency, accountability andprobity in the use of public funds and to eliminate op-portunities for corrupt practices in their developmentco-operation. In the summary record of negotiations thetwo governments agree upon the following assessmentof the negative effects of corruption:

• it undermines good governance;

• it wastes scarce resources and has afar-reaching negative impact on economic andsocial development;

• it undermines the credibility of, and public sup-port for, development co-operation and com-promises the efforts of all who work to supportsustainable development;

• it compromises open and transparent competi-tion on the basis of price and quality.

The implementing agencies involved in Germandevelopment co-operation have also beenrequested to review their internal control proceduresin order to increase protection against corruption inaddition to existing precautions and monitoringrequirements.

While Germany’s actions can be regarded as withinthe letter of the recommendation, they are differentfrom what virtually all other DAC Members havedelivered – an explicit clause in contract documenta-tion. Germany has, however, given support to reviewin the DAC experience of the measures taken underthe recommendation at an appropriate time.

OFFICIAL AID TO COUNTRIES IN TRANSITION

An assessment of the German aid effort has totake into account the outstanding contributionGermany has been making in assisting the coun-tries in transition in Central and Eastern Europe andthe NIS. Germany has been by far the largest donorto the more advanced countries in transition, theso-called Part II countries on the DAC List of AidRecipients. During the period 1990-96, Germany wasthe source of 39per cent of all official net aid dis-bursements by DAC Member countries. It is truethat a large part of the $18billion in official aidresulted from commitments undertaken vis-à-vis theformer Soviet Union in the context of Germanreunification. These obligations have come to anend and this is reflected in a substantial decline ofGerman aid to PartII countries in 1996 and 1997.Nonetheless, the volume of German aid remainedwell above all other DAC countries, except theUnited States. Another major portion of German aidconcerned debt relief for Poland but this is typicalalso for many other DAC countries. In relation toGNP, German aid for these countries has been amultiple of the DAC average.

Even excluding aid to Russia, Germany’s financialand technical contribution for the countries in Centraland Eastern Europe is remarkable in comparison with


47

the efforts of other countries. It is true that Germany’sleading position is related to geographic proximity,historical links and security considerations, includingmigratory pressure, environmental concerns andexposure to organised crime. However, other DACcountries, which are geographically close to CEECs/NIS and have historical links, have not made the sameeffort, except Austria. Germany is among the few DACcountries which have developed an overall strategyand country concepts for aiding the countries in tran-sition, and which have a separate budget for this pur-pose. Most of the budget funds are in the Ministry ofEconomic Affairs, but the BMZ, the AA and other min-istries and institutions also have funds for activitiesin these countries. The aid activities are co-ordinatedby the Ministry of Economic Affairs, the AA and theBMZ, assisted by the KfW which has established sev-eral field offices for this purpose.

In its co-operation with the CEECs/NIS Germanymakes use of its own experience in transforming theeconomy of the Eastern part of Germany. The trans-formation of a centrally planned economy into a mar-ket economy requires time and a change of mentalityof the population. It also involves economic and socialhardship. For this reason Germany pays attention tothose strata of the population which are much affectedby the changes and pursues a partnership approachdefining projects jointly with the target groups. Thetransfer of knowledge is facilitated by the dispatch of“integrated experts”.

The amounts disbursed by Germany and the otherDAC countries over the period 1990-96 are shown inAnnex Table7. In 1998 and the next few years, Ger man

aid to this region will be affected by budget austerityand is expected to decline below the 1996 level. Bud-get appropriations for the so-called TransformProgramme which finances a large part of Germany’stechnical assistance activities in CEECs/NIS, werereduced by more than half to $81 million.

The geographic distribution of official aid forPartII countries is characterised by a high concen-tration in three countries. Russia obtained by far thelargest amount, almost half of bilateral allocable aidduring the period 1990-96. Poland was the secondlargest recipient with over onequarter and theUkraine the third largest with 12 per cent. Togetherthe three countries obtained almost 90per cent ofgeographically allocated aid. Another 5 per cent wasextended to Belarus. (The percentages shown inAnnex Table8 dif fer since they include geographi-cally unallocated amounts and multilateral contribu-tions.) In 1995/96, Poland and Russia obtained largeramounts than China and Egypt, but this situation willnot continue in future.

TOTAL RESOURCE FLOWS

Non-ODA flows to developing countries and mul-tilateral institutions which had been exceptionallyhigh in 1994, exceeding $17 billion, declined to lessthan $14billion in 1995 and 1996. As a share of GNPthey declined from 0.84per cent in 1994 to 0.58percent in 1996, but still remained well above the levelof earlier years. By far the largest amounts concernedprivate flows at market terms, in particular bilateralportfolio investment. Private grants increased to

Table D. Official aid to Part II countries (CEECs/NIS)Percentage of GNP

1990 1991 1992 1993 1994 1995 1996

Germany 0.07 0.16 0.17 0.13 0.12 0.19 0.05 Total DAC 0.01 0.04 0.04 0.04 0.04 0.04 0.02

Table E. Total net flow of resources to Part I and Part II countries (CEECs/NIS)In $ million

1990 1991 1992 1993 1994 1995 1996

Part I 13 560 13 098 8 921 15 366 23 948 21 197 21 175Part II 6 293 11 965 14 352 13 412 9 435 7 425 6 334Total 19 853 25 063 23 273 28 778 33 383 28 622 27 509as % of GNP 1.32 1.47 1.17 1.51 1.64 1.19 1.18


48

$1 billion in recent years. Other official flows becamesmall, primarily on account of negative net transac-tions with multilateral institutions (see AnnexTable6).

In 1994, for the second time in the last ten years,total net flows to developing countries exceeded1per cent of GNP reaching 1.18 per cent. In 1995and 1996 they declined to 0.88 per cent and 0.91 percent of GNP, but still remained above the DACaverage. In this regard, Germany occupied rank sixin 1995 and rank eight in 1996 among the 21 DACcountries.

Total net flows to PartII countries r eached almost$70 billion during the period 1990-96 which corre-sponded to close to 60per cent of total resources fromall DAC countries. After a substantial increase from$6billion in 1990 to $14billion in1992 they declinedcontinuously in the following years to $6billionin1996. The composition of non aid flows changedfrom one year to another. Whereas in 1993 and 1994private flows at market terms had been the main com-ponent, these flows became negative in 1995. None-theless, direct investments kept rising and reached$2.8billion in1995 which was twice the amount pro-vided by German investors in 1993.

49

Annex 1

THE GERMAN AID PROGRAMME IN PERU

Peru is one of the four priority countries forGerman aid in Latin America. During the period 1987to 1996 it received $614 million from Germany whichwas the third largest donor of aid to Peru over thisperiod. In 1997 Germany had 21 financial assistanceand 35 technical co-operation projects in Peru, andthe number will increase further in 1998. German aidactivities are facilitated by good bilateral relations.The relatively large number of Germans who live inPeru and who have established enterprises there alsocontribute to this situation. (German-owned or man-aged enterprises in Peru offer annually 35-45trainingplaces in business management in co-operation withthe German-Peruvian Chamber of Commerce.

As determined through the 1996 intergovernmentalnegotiations, the main thrusts of co-operation are:

• social development, including basic educationand health; drinking water and sewage;

• rural development;

• small and medium-sized enterprises includingvocational training;

• decentralisation and strengthening of localadministration;

• environment and sustainability.

German aid projects are carried out throughPeruvian counterpart organisations which share theresponsibility for the projects. They are concentratedin the Central and Southern Andean region andNortheast Peru, and on certain sectors. One majorsector is drinking water and sewage. The German offi-cials consider that German aid in this sector has beenvery positive and successful, reflecting the particularknow-how that the KfW possesses in this field. Othermajor activities are advisory services for Peruvianministries, natural resources and rural development,including irrigation. Activities in the fields of educa-

tion and environment have been less successful. Fre-quent changes of personnel in the counterpart insti-tutions pose problems in these and other sectors.Germany attaches importance to greater participationof local groups but encounters some resistance fromthe Peruvian counterpart organisations.

Since German projects are normally carried outthrough local counterpart organisations they consistof a financial contribution frequently, but not always,combined with the provision of one or two experts.The German aproach to have the projects carried outby local counterpart organisations is very much in linewith the DAC principle that the recipient countryshould be at the centre of the development effort.

Germany supports several integrated rural develop-ment programmes. Scarce water resources, limited arableland and harsh climatic conditions are significant lim-iting factors for the extension of agriculture in theAndes. The German projects are directed at helpingpoor farmers to increase their productivity and in-comes in these difficult conditions. The “Plan MerissInka” programme comprises a series of small andmedium-scale irrigation projects in the SouthernAndes. It comes under the responsibility of theregional government and is carried out by aspecialised and rather autonomous organisation (PlanMeriss – Plan de Mejoramiento de Riego en la Sierra y Selva).The German contribution is a combination of soft loansextended by the KfW and technical assistance pro-vided through GTZ. The KfW has just committed itsthird loan to the project. It is likely that the technicalassistance component will be phased out at the endof 1998 since Germany believes that Plan Meriss isnow able to take over these aspects and assume own-ership of the programme.

The purpose of the project is to help the localorganisations responsible for irrigation systems to usethe scarce arable land and water resources in an effi-cient and sustainable way for agricultural activities andthus improve the living conditions of the farmers and


50

the economic development of the region as a whole.To achieve this the programme is aiming at increas-ing the availability of water through the constructionor upgrading of water reservoirs, dams and irrigationcanals and at strengthening local rural organisationsthrough training and advisory services put at the dis-posal of farmers’ associations. The emphasis is onsustainable irrigation and farming methods in orderto prevent soil erosion, and on the participation ofthe farmers in the planning and the execution of theprojects. It is planned to raise farmers’ participationfrom some 2.5 per cent of the cost of the projects atpresent to 10 per cent.

The programme involves over a thousand farm-ers thought to have the potential to increase their out-put. Most are poor, or even very poor, in particularthose living high up in the mountains. Eighty-sevenper cent possessed less than one hectare of irrigatedland, often located on steep hills at high altitude withvery short vegetation periods. The upgrading of awater reservoir has allowed improved irrigation of theexisting fields and an increase of irrigated land byclose to 100hectares. It also allows more and betterharvests and a diversification of products. Many whoused to migrate to towns to earn an additional incomeno longer need to do this, since their income hasincreased significantly as a result of the project. How-ever, the water fees levied at present are far too lowto cover the cost of maintenance and repair works.These fees are usually determined at governmentallevel and although it is envisaged to raise them, thisseems difficult.

A second integrated rural developmentprogramme visited by the OECD Secretariat is in theecologically-fragile Colca Valley. It has many points incommon with Plan Meriss, largely focusing on povertyalleviation through improved irrigation systems andagricultural techniques and through training activities.

At present the main activities of the project, car-ried out in co-operation with the regional and com-munal administrations and with local NGOs, consistin introducing new and better varieties of crops andother products for which the peasants can find a mar-ket. Seminars are organised on innovative farmingmethods and on intermediate or simple technologyfor food processing (cheese, yoghurt, jam, aromaticplants, etc.). In addition to the training activitiesincluded in the project, agreements have been con-cluded with two local agricultural training centres,where participants in the project can take courses.

Regarding the improvement of the irrigation systems,the project mainly focuses on the rehabilitation andupgrading of the existing infrastructure, theorganisation of water committees and the introduc-tion of more rational water distribution plans. In thehighlands, where the income of farmers is based onlivestock (llamas, alpacas) and potatoes, the projectfocuses on simple irrigation devices to extend avail-able pastures, and on the improvement of foddercrops.

Vocational training is an area where Germany has par-ticular expertise to offer and which has been singledout in the country concept as one of the main sectorsfor German assistance to Peru. Thus the Servicio Nacionalde Adiestramiento en Trabajo Industrial(SENA TI), one of themain Peruvian technical training centers, has beensupported by Germany through GTZ for many years.SENATI, which works in close co-operation with theAssociation of Peruvian Industrialists, has been pro-viding general education and special technical skillsto youths, who are already working as trainees in fac-tories or smaller workshops, to improve their techni-cal skills and offer better employment perspectives.The programme, which is largely based on the Ger-man system of “Dual Education”, has proved very suc-cessful. Despite the high rate of unemployment inPeru, SENATI students are always sure to find a jobonce they finish their courses.

Since 1987, Germany has been supporting a newprogramme for the advanced training of foremen inmetalwork, electricity and automotive engineering.Courses are established in close co-operation withpartner enterprises and take account of their practi-cal needs. Germany provides assistance for theestablishment of adequate curricula and familiariseslocal teachers with new technologies.

From 1992 to 1995 Germany, the Netherlands,Spain and Switzerland financed jointly with Peru a socialrehabilitation scheme in the Cusco region. This projectwas co-ordinated by the UNDP. Germany also financeswith the EC a local action plan for poverty reduction.In 1993 it provided DM 30 million ($19 million) toFONCODES (Peru’s social fund) for poverty reduction.In addition, Germany forgave Peru DM30million ofdebt on the condition that the equivalent ofDM9million in local funds be made available forenvironment protection projects, and it intends to for-give another DM50million ($32million) provided theequivalent of DM20million ($13million) in local fundsis used for poverty reduction.

ANNEX

51

Peru is one of six pilot countries selected by theEU for enhanced co-ordination of the bilateral aid activities ofits Members’ and the European Commission’s aid programme.EUMembers and the Commission have intensifiedtheir exchange of information and meet monthly.Individual donors accept responsibility for particularsectors: Germany is responsible for the educationsector. Sector meetings take place in addition to themonthly co-ordination meetings. Switzerland andCanada decided to participate in this EU co-ordination(the two largest bilateral donors – United States andJapan – the World Bank and the Inter-AmericanDevelopment Bank have remained outside thesearrangements).

In the German embassy two officials deal withdevelopment co-operation. The more senior, who isseconded from the BMZ, deals with policy matters.Since 1995, he has been organising bi-monthly meet-ings of all German aid institutions, consultant firmsand NGOs to exchange information, prepare consul-tations with the Peruvian Government, discuss projectevaluations, etc. The second official deals with thescholarship programme and micro-projects. The

embassy has almost DM300 000 ($190 000) annuallyat its disposal for micro-projects related to povertyreduction.

In addition to the embassy, the GTZ has an office inLima which, apart from the German director, employsnine local staff. This office is responsible for thesupervision of the numerous technical co-operationprojects. The director participates in the local donorco-ordination meetings and maintains contacts withthe different line ministries. Following GTZ’s decisionin 1996 to transfer responsibility for projects fromheadquarters to its field offices, the responsibility andthe workload of the Lima office increased significantly,so far without an increase in staff resources. Thedirector of the GTZ office assembles all directors oftechnical co-operation projects every two months foran exchange of information. The GTZ also establishedtwo working groups: one on gender and one on ruraldevelopment. The KfW does not have an office in Peru,but is considering establishing one. Nonetheless,financial and technical assistance appears to be wellco-ordinated. There is also an office of the GermanVolunteer Service(DED) in Lima.


52

Annex 2

GERMAN DEVELOPMENT CO-OPERATION IN ETHIOPIA(Note by the Japanese Examiner)

Ethiopia remains one of the poorest countries (itsGNP per capita in 1996 was US$110) and has a formi-dable task ahead in achieving steady and sustainabledevelopment in the years to come. But the EthiopianGovernment is committed to carrying out itsprogramme to facilitate such development. Since thedownfall of the military regime in 1991, Ethiopia hasendeavoured to build a democratic and decentralisedsociety. It has also made strenuous efforts to rehabili-tate its war-struck economy and then to transform theeconomy into a market-oriented one.

Germany has a 90-year history of co-operation withEthiopia. In recent years, it has provided substantialassistance in the wake of the epochal changes of 1991.From 1992 to 1996, the German ODA for Ethiopiaamounted to around DM 480 million (commitments).Consequently, since then, it has become the biggestrecipient of German ODA in Sub-Saharan Africa andGermany is one of the largest donors to Ethiopia.

The German Government dialogues on develop-ment policies and negotiates specific programmesand projects with the Ethiopian Government, basedon its “country concept”. In the last negotiations, bothsides agreed to concentrate their co-operation onareas such as 1) economic and social restructuring,2)agriculture and rural development, 3) environmen-tal protection and resource management, 4)watersupply and sanitation, 5)primary education and vo-cational training, and 6)development of federal struc-tures. These sectors are in line with priority areas ofGerman development co-operation. Germany, as afederal nation, is in a position to make a particularlyuseful contribution to Ethiopia’s challenge ofdecentralising its system of government.

In the German Embassy, one staff member sec-onded from the BMZ is in charge of developmentassistance, together with a Foreign Office staff mem-ber who devotes half of his time to it. The GTZ has a

local office with a German head and 20 local staff mem-bers. There is no KfW local office. The Embassy andthe GTZ Office are in close contact with each otherand seem to have fairly good communication with localrepresentatives of the DED and German NGOs. Inaccordance with the GTZ policy of decentralisation,the GTZ office in Addis Ababa is being given greaterresponsibilities for managing local GTZ projects(largely by strengthening its local staff). While thiscould render German assistance more flexible to theneeds of the field, it may take some time to come toterms with problems such as identifying and foster-ing local potentials and improving communicationchannels between Germany and those responsible forthe projects in Ethiopia.

The Government of Ethiopia finds that its own de-velopment policies basically coincide with the OECDPartnerships Strategy. It has its five-year developmentprogramme and scrutinises its development projects,including those assisted by donors. However, Ethio-pia needs to further strengthen both its institutionalcapacity and the capacity of its people in order tomake steady economic and social progress accordingto its development programme.

Donors in Ethiopia are fairly active in co-ordinationon development assistance. Although they mainlyexchange information on development issues andprojects, there are some cases of substantial co-ordination. In the road sector, for instance, the EthiopianAuthority and four donors, including Germany, decidedto repair five main roads extending from Addis Ababa,with each donor assisting one (or two) different road(s).Donors also have co-ordination meetings in severalareas like education, health and food security. (But therecipient side is not necessarily involved in all thosemeetings.) Germany is actively participating in theseco-ordination efforts, though it may sometimes over-load those involved in the management of Germandevelopment assistance to Ethiopia.

ANNEX

53

Annex 3

GERMAN CO-OPERATION AND PARTICIPATORY DEVELOPMENTAND GOOD GOVERNANCE

(Note by the Japanese Examiner on the findings of a mission to Bolivia and Costa Rica)

In the discussion to determine the directionswhich the Development Assistance Committee (DAC)should take in participatory development and goodgovernance(PD/GG), Germany has always taken aleading role. After the endorsement of a policy noteon country co-ordination and a related guidance noteon possible first steps by donors, Germany agreed tolead a country exercise in Bolivia.

In summer 1997, a meeting with the donor repre-sentatives took place in La Paz, organised by Germanauthorities, in order to present the PD/GGco-ordination exercise as an opportunity to institutea dialogue for analysing and implementing the pro-cesses already initiated with the Bolivian authorities.

The challenge was how to operationalise the dia-logue, at different stages, with the involvement of theBolivian people. To have a systematic and practicaldiscussion, four working groups were set up. They are:Popular Participation Law; Democratisation; GoodGovernance; and Human Rights. The groups areheaded by the Netherlands, Sweden, the UnitedNations Development Programme and the EuropeanCommission. Germany works as a moderator.

The mission learned that both the donors and theBolivian people found this exercise exciting and use-ful. For example, the four groups were used to pre-pare the donor paper for the CG meeting in April1998,since the four issue groups are related to the topicscovered in the CG, such as rule of law, public admin-istration, corruption etc.

For donors, it gave a chance to interact among them-selves, to identify duplication of effort and to reach aconsensus before the meeting. And for the Bolivian Gov-ernment, the study of the donor consensus paper helpedit to see its weak points as well as expressing the inter-est of donors in Bolivia’s national development plan.

Positive movement towards participatory devel-opment is evident in both Bolivia and Costa Rica. InBolivia two kinds of decentralisation are being pur-sued. One is handing power and resources to 313 mun-icipalities; the other is strengthening the representa-tion of the central government at the level of the 9pre-fectures to achieve better communication with thepeople. In Costa Rica, also, the trend is to strengthenthe municipalities as stakeholders in development.With their high literacy rate, the Costa Rican peopletake a strong interest in social and political issues.The increased role of local organisations (e.g. byoccupation, by community, by ethnic groups) and thestrengthening of capacity for people to be involvedin development at this level are considered as toppriorities by Germany.

Germany has adopted the “self-help approach”as a core of its development co-operation policy. Themission was able to confirm that this idea was incor-porated into German projects and programmes inboth Bolivia and Costa Rica, in which not only munici-palities and governments, but also individuals orgroup of individuals at the community level are keyplayers. For example, in Costa Rica, GTZ supports themuniciple efforts to take the community (includingindigenous groups) into account. In Bolivia, GTZ’sprogramme was made up of projects at every social-structure level, from the local community to the cen-tral government.

The mission believes that the key to the continua-tion of these efforts lies in the hands of both Boliviansand Costa Ricans (government and public) and thedonor community. Those governments, through thewaves of change to come in the government majorityparties, need to continue their development effortsaccording to the spirit of participatory development,with the empowerment of the people and theirorganisations at every level. Bolivia’s Popular Partici-


54

pation Law is one promising sign in this context, butmore could be done to ensure that tangible results arefelt within society. On the occasion of the ConsultativeGroup(CG) Meeting on Bolivia in April 1997, Germany,together with other donors, expressed its concern thatany change of government subsequent to the electionscheduled that summer, might affect the Bolivian politi-cal reforms, in particular the Popular Participation Law,introduced in 1994, under which considerable progresshad been made. This led to declarations by the majorpolitical parties that they would pursue the reform, andsubsequently the new government formed after the elec-tions announced that it would maintain this commitment.

As for the donors, they need to stand on the con-sensus ground that they will pay full respect to thedecision by their partner country, once they haveagreed to the principal idea of the partner’s develop-ment plan. Moreover, they are expected to speak withone voice to the partner country on the promotion ofparticipatory development. Also, they may undertakecomplementary analysis among themselves on thecomparative advantage of various co-operationmechanisms and schemes at the field level. With thisaim, the mission thinks that the donors could takeadvantage of systems such as the four working groupscurrently being tested in Bolivia.

55

Annex 4

GRAPHS, TABLES AND CHART


56

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

0.430.39 0.39

0.41 0.420.40

0.380.36

0.340.31 0.33

0.28

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0.40

0.30

0.20

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5

Graph 1. ODA net disbursementsAt constant 1996 prices and as a share of GNP

Source: OECD.

$ billion % of GNP

Bilateral % of GNPMultilateral

1 101

1 718

1 297

643

1 177889

897

1 205

181

2 019

329

759

Gross bilateral ODA, 1995-96 average, unless otherwise shown

By income group (US$ m)

LLDCsOther low-incomeLowermiddle-incomeUppermiddle-incomeHigher incomeUnallocated

Sub-Saharan AfricaSouth and Central AsiaOther Asia andOceaniaMiddle East andNorth AfricaLatin America andCaribbeanEurope and unspecified

By region (US$ m)

Source: OECD.

By sector (94-95)

Economic infrastructureProgramme assistanceUnspecified

Other social infrastructureMultisectorEmergency aid

Education, health and populationProductionDebt relief

0% 20% 40% 60% 80% 100%10% 30% 50% 70% 90%

GERMANY

Net ODA 1995 1996Change1996/95

Current (US$ m) 7 524 7 601 1.0 %Constant (1995 US$ m) 7 524 7 895 4.9 %In Deutschmarks (million) 10 787 11 437 6.0 %ODA/GNP 0.31 % 0.33 %Bilateral share 64 % 60 %

Net Official Aid (OA)

Current (US$ m) 4 514 1 329 -70.6 %

Top ten recipients (US$ m)

1 Poland (OA) 1 387 2 Russia (OA) 731 3 China 618 4 Egypt 329 5 Nicaragua 289 6 India 279 7 Turkey 232 8 Bosnia and Herzegovina 188 9 Indonesia 18310 Israel 135

ANNEX

57

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58

Table 1. Main ODA volume indicators

i) Disbursements and commitments

Two-year averages overten-year period

1995 1996 19971986/87 1991/92 1996/97

ODA net disbursements

Current prices and exchange rates ($ million) 4 111 7 236 6 757 7 524 7 601 5 913Bilateral 2 866 4 909 4 117 4 815 4 535 3 699Multilateral 1 245 2 328 2 640 2 709 3 066 2 214

1996 prices and exchange rates ($ million) 7 028 8 726 7 186 7 241 7 601 6 772Bilateral 4 895 5 912 4 386 4 634 4 535 4 236Multilateral 2 133 2 814 2 800 2 607 3 066 2 535

National currency (DM million) 8 105 11 636 10 845 10 787 11 437 10 254Bilateral 5 645 7 888 6 619 6 903 6 824 6 415Multilateral 2 459 3 748 4 226 3 884 4 613 3 839

GNP ratios (%) 0.41 0.39 0.30 0.31 0.33 0.28Bilateral 0.28 0.27 0.19 0.20 0.19 0.18Multilateral 0.12 0.13 0.12 0.11 0.13 0.11

ODA commitments

Current prices and exchange rates ($ million) 5 232 8 988 . . 11 476 10 747 . .Bilateral 3 820 6 333 . . 7 261 7 349 . .Multilateral 1 412 2 655 . . 4 215 3 398 . .

GNP ratios (%) 0.52 0.49 . . 0.48 0.46 . .Bilateral 0.38 0.34 . . 0.30 0.32 . .Multilateral 0.14 0.14 . . 0.18 0.15 . .

ii) Average annual growth rates of ODA disbursements in real terms

For reference: Total DAC

1985/86- 1990/91- 1985/86- 1985/86- 1990/91- 1985/86-1990/91 1995/96 1995/96 1990/91 1995/96 1995/96

Percentages

Total ODA 2.4 –2.2 0.1 3.1 –3.2 –0.1Bilateral 2.5 –4.2 –0.9 3.7 –4.0 –0.2Multilateral 2.1 1.7 1.9 1.7 –1.2 0.2

For reference:GNP growth in real terms 4.2 2.9 3.5 3.4 2.4 2.9

iii) Share in total DAC

Two-year averages overten-year period 1994 1995 1996

1985/86 1990/91 1995/96

Percentages

Total ODA 10.5 12.0 13.2 11.5 12.8 13.7Bilateral 9.9 11.1 11.7 10.0 11.9 11.6Multilateral 12.0 13.3 16.8 15.0 14.8 18.8

Gross national product 7.8 9.7 10.7 10.2 10.9 10.5

Source: OECD.

ANNEX

59

Table 2. ODA net disbursements by main categories

At contant 1996 prices For reference:and exchange rates % of total net ODA Total DAC: Share of

$million total net ODA (%)

1991/92 1995 1996 1997 1991/92 1995 1996 1997 1991/92 1995 1996 1997

Bilateral 5 912 4 634 4 535 4 236 67.8 64.0 59.7 62.6 71.1 68.9 70.5 . .

Grants 5 043 4 227 4 507 3 919 57.8 58.4 59.3 57.9 58.8 61.4 65.9 . .Project and programme aid 806 635 715 ... 9.2 8.8 9.4 ... 16.2 14.2 17.9 . .Technical co-operation 2 242 2 386 2 396 2 266 25.7 32.9 31.5 33.5 21.3 24.3 25.5 . .Food aid 149 121 44 101 1.7 1.7 0.6 1.5 2.8 2.3 1.5 . .Emergency aid(other than food aid) 653 422 294 170 7.5 5.8 3.9 2.5 4.1 5.2 4.9 . .

Debt reorganisation 674 375 774 ... 7.7 5.2 10.2 ... 7.4 6.4 6.3 . .Administrative costs 268 278 273 ... 3.1 3.8 3.6 ... 3.8 4.9 5.2 . .Other grants 252 10 10 ... 2.9 0.1 0.1 ... 3.0 4.1 4.7 . .

Loans 868 407 29 318 10.0 5.6 0.4 4.7 12.3 7.5 4.7 . .

Multilateral 2 814 2 607 3 066 2 535 32.2 36.0 40.3 37.4 28.9 31.1 29.5 . .UN agencies 434 298 313 291 5.0 4.1 4.1 4.3 7.5 7.2 7.9 . .of which: WFP 35 30 30 ... 0.4 0.4 0.4 ... 1.3 1.4 1.0 . .

UNDP 99 89 88 ... 1.1 1.2 1.2 ... 1.7 1.5 1.6 . .UNICEF 14 6 8 ... 0.2 0.1 0.1 ... 0.7 0.6 0.7 . .UNFPA 30 31 31 ... 0.3 0.4 0.4 ... 0.4 0.5 0.6 . .

World Bank group 737 723 1 170 ... 8.4 10.0 15.4 ... 9.9 9.5 7.8 . .of which: IDA 737 712 1 159 ... 8.4 9.8 15.2 ... 9.1 9.2 7.2 . .Regional development banks 110 22 63 195 1.3 0.3 0.8 2.9 2.5 2.2 2.8 . .EC 1 461 1 518 1 355 1 519 16.7 21.0 17.8 22.4 7.2 9.1 8.3 . .Other multilateral 73 46 166 ... 0.8 0.6 2.2 ... 1.9 3.0 2.6 . .

Total ODA net disbursements 8 726 7 241 7 601 6 772 100.0 100.0 100.0 100.0 100.0 100.0 100.0 . .of which: Food aid 463 348 203 ... 5.3 4.8 2.7 ... 5.8 4.5 3.1 . .

Source: OECD.


60

Table 3. Distribution of bilateral ODA commitments by major purposes

For reference:1985/86 1990/91 1995/96 Total DAC 1995/96

$ million % of total $ million % of total $ million % of total % of total

Social infrastructure and services 1 035 35.9 1 400 24.8 2 512 34.4 28.9Education 573 19.9 765 13.5 1 215 16.6 9.8Health 51 1.8 70 1.2 161 2.2 4.4Population programmes 10 0.4 12 0.2 99 1.4 1.5Water supply and sanitation 219 7.6 239 4.2 473 6.5 6.1Government and civil society 116 4.0 149 2.6 208 2.8 3.1Other social infrastructure and services 67 2.3 165 2.9 356 4.9 4.1

Economic infrastructure and services 736 25.5 1 382 24.5 1 734 23.7 24.1Transport and storage 251 8.7 610 10.8 1 104 15.1 11.5Communications 46 1.6 103 1.8 50 0.7 1.6Energy 264 9.1 586 10.4 375 5.1 9.0Banking and financial services 127 4.4 72 1.3 158 2.2 0.9Business and other services 49 1.7 10 0.2 47 0.6 1.3

Production sectors 471 16.3 655 11.6 786 10.8 12.0Agriculture, forestry and fishing 295 10.2 377 6.7 541 7.4 8.5Industry, mining and construction 173 6.0 245 4.3 114 1.6 1.9

Industry 49 1.7 235 4.2 101 1.4 1.2Mining 96 3.3 8 0.1 5 0.1 0.1Construction 28 1.0 2 0.0 9 0.1 0.1

Trade and tourism 3 0.1 33 0.6 74 1.0 1.5Trade 3 0.1 33 0.6 74 1.0 0.2Tourism – – – – 1 0.0 0.0

Other – – – – 56 0.8 0.1

Multisector 3 0.1 154 2.7 286 3.9 5.2

Total sector allocable 2 245 77.9 3 590 63.6 5 317 72.8 70.3

Commodity aid andgeneral programme assistance 92 3.2 511 9.0 293 4.0 5.1

Action relating to debt 250 8.7 612 10.8 619 8.5 6.7Emergency assistance 20 0.7 230 4.1 367 5.0 5.4Administrative costs of donors 43 1.5 187 3.3 281 3.8 4.8Other 193 6.7 219 3.9 6 0.1 0.9Unallocated 40 1.4 297 5.3 422 5.8 6.8

Total 2 882 100.0 5 648 100.0 7 305 100.0 100.0

Source: OECD.

ANNEX

61

Table 4. Allocable ODA net disbursements by major groupings and regions

AverageODA disbursements at constant annual Share of For reference: Total DAC:1995 prices and exchange rates change in bilateral ODA share of bilateral ODA

real terms

$ million Per cent

1985/ 1990/ 1985/86- 1990/91- 1985/ 1990/ 1985/ 1990/86 91 1995 1996 1990/91 1995/96 86 91 1995 1996 86 91 1995 1996

Sub-Saharan Africa 1 501 1 782 1 258 1 249 3.5 –6.8 34.4 34.1 30.9 31.6 30.7 31.5 31.6 30.6Low-income countries 1 457 1 720 1 182 1 177 3.4 –7.3 33.4 32.9 29.0 29.8 29.5 29.9 29.0 28.0Other 44 63 76 72 7.2 3.4 1.0 1.2 1.9 1.8 1.2 1.6 2.6 2.6

North Africa & Middle East 615 1 156 412 693 13.4 –13.7 14.1 22.1 10.1 17.6 23.1 22.5 12.8 20.5Low-income countries 28 40 42 45 7.5 1.6 0.6 0.8 1.0 1.1 0.5 0.6 0.3 0.4Other 587 1 116 370 648 13.7 –14.5 13.5 21.4 9.1 16.4 22.6 21.9 12.4 20.1

Asia 1 480 1 295 1 382 975 –2.6 –1.9 33.9 24.8 33.9 24.7 27.2 27.2 32.7 26.6Low-income countries 1 051 881 1 197 869 –3.5 3.2 24.1 16.9 29.4 22.0 17.9 15.9 22.6 19.2Other 429 415 184 106 –0.7 –19.0 9.8 7.9 4.5 2.7 9.3 11.3 10.1 7.4

America 614 671 580 852 1.8 1.3 14.1 12.9 14.3 21.6 12.8 12.3 13.6 13.3Low-income countries 54 84 196 441 9.2 30.6 1.2 1.6 4.8 11.2 2.2 2.9 4.0 3.7Other 560 587 384 411 1.0 –7.5 12.8 11.2 9.4 10.4 10.6 9.4 9.6 9.6

Oceania 19 17 9 4 –1.5 –18.6 0.4 0.3 0.2 0.1 4.9 3.4 5.2 5.3

Europe 137 302 431 176 17.2 0.1 3.1 5.8 10.6 4.5 1.3 3.1 4.1 3.6

Total bilateral allocable 4 365 5 225 4 072 3 949 3.7 –5.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Memo items:

Least-developed countries 1 445 1 449 1 083 1 124 0.1 –5.3 33.1 27.7 26.6 28.5 30.2 26.9 28.2 25.7Other low-income countries 1 148 1 296 1 893 1 486 2.5 5.4 26.3 24.8 46.5 37.6 20.2 23.2 30.6 28.3Lower middle-income countries 1 378 1 939 944 1 122 7.1 –11.8 31.6 37.1 23.2 28.4 31.4 38.5 31.2 31.9Upper middle-income countries 250 180 147 256 –6.4 2.4 5.7 3.4 3.6 6.5 4.1 4.4 5.4 3.9High-income countries 144 361 4 –39 20.1 n.a. 3.3 6.9 0.1 –1.0 14.0 7.1 4.6 10.1Unallocated 853 775 742 761 –1.9 –0.6 19.5 14.8 18.2 19.3 18.8 21.4 28.2 29.9

(additional to total shown)

Source: OECD.


62

Tab

le 5

.M

ajo

r re

cip

ients

of

bil

ate

ral

OD

A n

et

dis

burs

em

ents

1985

/86

1990

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1995

/96

Cu

mu

lati

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Cu

mu

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ank

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f%

of

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bil

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bil

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1995

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lb

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l19

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bil

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lio

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lem

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on

allo

cab

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loca

ble

mil

lio

nal

loca

ble

allo

cab

le

1In

dia

277

6.4

6.4

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348

6.7

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112

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517

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282

5.4

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297

7.4

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181

4.1

22.1

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272

5.2

23.0

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188

4.7

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172

3.9

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429

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135

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133

2.5

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109

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nya

129

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771.

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108

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771.

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nya

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850

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641.

654

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556

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1.7

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551.

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mal

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l b

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l b

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l b

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add

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tota

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tota

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of r

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141

of r

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156

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.

ANNEX

63

Table 6. Total financial flows

Net disbursements in $ million at 1995 prices and exchange rates

1985/86 1990/91 1994 1995 1996

Official development assistance 7 663 8 628 7 881 7 524 7 895

Other official flows 2 332 2 600 4 091 879 202Official export credits 688 303 278 324 606Equities and other bilateral assets 1 663 2 297 3 999 836 –59Multilateral –19 0 –186 –280 –345

Private non-concessional flows 4 270 5 198 14 575 11 683 12 812Direct investment 203 803 3 403 4 694 3 590Bilateral portfolio investment 2 276 2 670 7 513 3 480 7 250Multilateral portfolio investment 967 –409 210 296 194Private export credits 824 2 134 3 449 3 213 1 778

Private grants 1 097 992 1 134 1 112 1 084

Total non-ODA flows 7 699 8 790 19 800 13 673 14 098

As share of GNP (%) 0.45 0.42 0.84 0.57 0.58

Total flows 15 362 17 418 27 681 21 197 21 993

As share of GNP (%) 0.90 0.83 1.18 0.88 0.91

Source: OECD.


64

Table 7. Official aid and total net flows to Part II countries (CEECs/NIS)

OA net disbursements rates, US$ millions

1990 1991 1992 1993 1994 1995 1996 Total %

Australia 5.50 8.63 5.32 5.55 3.99 4.23 9.57 42.79 0.09Austria 83.87 289.86 349.10 389.11 261.09 313.40 225.72 1912.15 4.22Belgium 20.70 274.40 148.30 81.40 86.26 89.49 69.75 770.30 1.70Canada 11.42 137.95 258.43 79.41 72.85 249.60 180.22 989.88 2.19Denmark 14.67 65.07 82.11 175.51 123.89 170.03 119.69 750.97 1.66Finland 16.76 115.80 44.21 38.50 51.13 76.46 43.88 386.74 0.85France 75.64 456.97 363.81 605.58 649.51 769.88 292.86 3214.25 7.10Germany 1 014.03 2 637.26 3 344.15 2 427.09 2 526.99 4 514.24 1 274.10 17 737.86 39.16Ireland 4.65 15.30 10.36 8.49 15.56 20.61 1.19 76.16 0.17Italy 128.02 382.49 333.64 242.19 195.73 286.30 294.25 1862.62 4.11Japan 153.04 109.70 238.33 529.60 247.17 250.46 167.99 1696.29 3.74Luxembourg 0.70 4.50 5.34 7.03 6.93 6.57 2.05 33.12 0.07Netherlands 61.60 152.20 163.05 249.64 117.70 305.14 13.10 1 062.43 2.35New Zealand 0.00 0.70 0.86 0.75 0.70 0.79 0.00 3.80 0.01Norway 21.11 24.48 65.82 73.97 78.91 60.50 50.12 374.91 0.83Portugal 3.60 21.60 17.46 12.77 28.49 21.71 17.96 123.59 0.27Spain 24.10 162.57 101.63 86.60 157.25 119.98 2.35 654.48 1.44Sweden 2.41 61.69 336.17 64.97 91.22 151.67 178.02 886.15 1.96Switzerland 9.08 50.85 87.60 93.06 119.19 101.72 97.16 558.66 1.23United Kingdom 258.78 326.56 336.49 285.08 292.06 406.14 361.54 2 266.65 5.00United States 338.00 1 832.00 683.00 1 646.00 2 422.00 1 280.00 1 694.00 9 895.00 21.84

Total DAC 2 247.68 7 130.58 6 975.18 7102.30 7 548.62 9 198.92 5 095.52 45 298.80 100.00

Total net flows, US$ millions

1990 1991 1992 1993 1994 1995 1996 Total %

Australia 5.50 91.54 5.32 156.26 3.99 4.23 9.57 276.41 0.23Austria 413.09 650.35 875.59 893.53 705.61 850.90 527.89 4 916.96 4.17Belgium 29.46 114.00 67.20 75.70 322.23 389.16 753.38 1 751.13 1.48Canada 184.84 766.05 665.17 77.41 122.85 240.72 58.37 2 115.41 1.79Denmark 23.73 51.80 123.59 230.83 172.16 362.40 392.89 1 357.40 1.15Finland 42.49 146.21 167.21 –36.44 33.34 114.54 208.91 676.26 0.57France 269.36 618.97 1 095.99 477.36 –1 081.79 2 970.16 1 901.41 6 251.46 5.30Germany 6 263.39 11 964.84 14 352.15 13 411.75 9 435.70 7 424.99 6 333.50 69 186.32 58.61Ireland 4.65 15.30 10.36 8.49 15.56 20.61 1.19 76.16 0.06Italy 128.02 382.49 2 847.87 –830.03 –850.74 –49.26 334.87 1 963.22 1.66Japan 153.04 70.20 160.49 1 443.34 –757.88 847.77 973.84 2 890.80 2.45Luxembourg 0.70 4.50 10.47 7.03 6.93 6.57 2.05 38.25 0.03Netherlands 71.60 720.50 837.85 249.64 117.70 289.51 7.89 2 294.69 1.94New Zealand 0.00 0.70 0.86 0.75 0.70 0.79 0.00 3.80 0.00Norway 62.81 55.48 321.72 86.89 80.51 112.83 60.19 780.43 0.66Portugal 3.60 21.60 34.54 40.20 23.60 187.62 17.02 328.18 0.28Spain 24.10 162.57 436.36 86.60 1 57.25 138.01 17.95 1 022.84 0.87Sweden 27.61 119.39 268.77 60.47 1 31.83 -78.46 121.98 651.59 0.55Switzerland 9.08 95.29 108.99 105.23 –62.67 794.45 376.44 1 426.81 1.21United Kingdom 258.78 326.56 336.49 2.45 980.66 1 421.93 388.22 3 715.09 3.15United States 1 178.00 1 049.00 2 049.00 3 542.00 2 654.00 2 991.00 2 865.00 16 328.00 13.83

Total DAC 9 153.85 17 427.34 24 775.99 20 089.46 12 211.54 19 040.46 15 352.56 118 051.21 100.00

Source: OECD.

ANNEX

65

Table 8. Geographic distribution of German official aid and total net flows to Part II countries (CEECs/NIS)

OA net disbursements, US$ millions

1990 1991 1992 1993 1994 1995 1996 Total %

Russia 254.00 520.00 1 501.60 1 461.20 1 444.20 987.40 474.90 6 643.30 37.50Poland 294.10 219.40 339.40 105.30 92.70 2676.40 96.90 3 824.00 21.60Ukraine 289.00 364.90 538.80 233.40 138.60 55.90 67.60 1 688.10 9.50Belarus 0.00 184.00 244.00 109.50 77.70 136.00 17.90 769.10 4.30Romania 67.80 110.10 22.50 28.10 15.60 20.30 28.70 293.00 1.70Hungary 5.60 66.40 22.50 28.70 24.20 20.90 39.80 208.20 1.20Czech Republic 3.20 8.00 20.00 18.40 15.10 26.80 32.00 123.50 0.70Lithuania 0.00 1.70 5.30 14.40 11.10 65.60 11.50 109.50 0.60Bulgaria 1.50 11.00 8.60 14.90 20.20 14.70 25.00 95.80 0.50Latvia 0.00 1.40 6.20 12.40 10.90 9.80 12.00 52.80 0.30Slovak Republic 1.60 4.00 9.90 7.10 6.00 8.00 12.90 49.40 0.30Estonia 0.00 1.80 5.80 10.50 6.40 6.40 9.40 40.20 0.20Moldova 0.00 0.00 0.00 0.20 0.70 2.60 3.20 6.70 0.00

Multilateral 97.30 504.60 350.10 323.60 560.00 406.90 442.50 2 684.90 15.10CEECs/NIS/Unallocated 0.00 640.00 269.50 59.60 103.60 76.60 0.00 1 149.30 6.50

Total 1 014.00 2 637.30 3 344.20 2 427.10 2 527.00 4 514.20 1 274.10 17 737.90 100.00

Total net disbursements, US$ millions

1990 1991 1992 1993 1994 1995 1996 Total %

Russia 254.00 520.00 2557.20 9 087.50 6 024.70 2 041.70 2 461.50 22 946.50 33.20Czech Republic 674.50 419.80 398.60 451.20 1 050.50 1 275.80 1 676.60 5 947.00 8.60Hungary 1 225.60 985.80 757.20 621.60 1 089.30 1 252.10 7.20 5 938.80 8.60Poland 1 803.40 702.10 594.50 232.30 –532.60 1 413.60 1 266.10 5479.50 7.90Ukraine 289.00 364.90 914.70 894.90 448.40 106.60 27.30 3045.80 4.40Romania 809.20 152.80 245.70 342.80 146.70 221.10 383.30 2301.50 3.30Belarus 0.00 184.00 266.00 465.50 285.50 189.70 –6.10 1 384.60 2.00Slovak Republic 337.20 210.50 198.80 154.90 155.10 191.50 79.00 1 327.10 1.90Bulgaria 773.20 –221.90 –104.50 –33.70 16.40 –70.60 –118.20 240.70 0.30Lithuania 0.00 1.70 7.20 44.50 48.80 103.90 15.30 221.40 0.30Latvia 0.00 1.40 8.10 20.70 31.30 41.30 15.80 118.50 0.20Estonia 0.00 1.80 10.30 11.70 7.50 17.60 25.20 74.10 0.10Moldova 0.00 0.00 0.00 2.80 -0.50 6.80 12.10 21.20 0.00

Multilateral 97.30 504.60 350.10 323.60 560.00 406.90 442.50 2 684.90 3.90CEECs/NIS/Unallocated 0.00 8 137.40 8 148.30 791.40 104.70 227.00 45.80 17 454.70 25.20

Total 6 263.40 11 964.80 14 352.20 13 411.80 9 435.70 7 425.00 6 333.50 69 186.30 100.00

Source: OECD.

67

PRESS RELEASE OF DAC AID REVIEW OF GERMANY

The German aid system is one of the largest in theworld, and it is managed with impressive expertise andskill. Germany’s aid programme is strongly orientedtowards the goals set out in the strategy agreed in theDAC in 1996, Shaping the 21st Century: The Contribution ofDevelopment Co-operation. The partnership principle whichis central to this strategy is shared by Germany. At thesame time, there are significant challenges in adaptinga complex multi-institutional management structure toevolving needs for policy-based, co-ordinatedprogrammes, and also in overcoming persistent pres-sures on the budget. How the German authorities facethese challenges will be important to the success of apeople-centred, results-oriented development part-nerships strategy.

These issues were the focus of the peer review ofGermany’s aid policies and programmes, held on9June 1998 by the OECD Development AssistanceCommittee (DAC). The German Delegation at thisreview was led by Mr. Wolf Preuss, Director-Generalin the Ministry of Economic Co-operation and Devel-opment (BMZ). The examining countries were Japanand Sweden. The Chair of the DAC, Mr.James Michel,summarised the following points that emerged fromthe review:

The Committee noted that since the last reviewof Germany’s development co-operation programmeby the DAC in 1995, Germany has taken several mea-sures to improve the quality and effectiveness of itsaid. These measures include:

• the reformulation of the concept for developmentpolicy to face the new challenges of developmentco-operation at the turn of the century;

• the establishment of guidelines for the integra-tion of poverty reduction and gender into allproject and programme design;

• the conception and implementation ofdevelopment-oriented emergency assistanceprogrammes;

• a new approach to evaluation, with the BMZ nowto concentrate on thematic evaluations of stra-tegic policy themes;

• decentralisation of the German technical assis-tance agency(GTZ); and the establishment of fieldoffices by the financial co-operation agency (KfW);

• more systematic relations with non-governmentalorganisations(NGOs) following the establish-ment of an NGO umbrella institution(VENRO).

The Committee was interested in Germany’sapproach to poverty reduction and gender. Povertyreduction is one of the three basic objectives of Ger-man aid, along with protection of the environment andnatural resources and education and training. Povertyreduction, gender and the protection of the environ-ment are cross-cutting tasks permeating all Germanaid activities. The German concept of poverty reduc-tion focuses on structural reform, self-help and eco-nomic efficiency, emphasizing the importance of par-ticipation. In 1998, new BMZ guidelines for assessingthe poverty orientation of aid projects came intoeffect. The DAC commended the integration of pov-erty reduction and gender aspects in the GTZ througha special cross-departmental advisory team as aninteresting innovation.

The Committee noted the decline in the volume ofcommitments for basic education and health andexpressed the hope that this trend will be reversed. TheGerman aid administration considers that private sec-tor development, which accounts for about onefifth ofbilateral aid, is a key factor in poverty reduction, whileat the same time the emphasis on private sector devel-opment is also related to strengthening Germany as abusiness partner and to promoting jobs in Germany.

DAC Members were also very interested inGermany’s work on development-oriented emergencyassistance, including conflict resolution activities, suchas the integration of ex-combatants. Attention isalso given to tackling the root causes of crises, which


68

involves the promotion of good governance. The Com-mittee noted the significant work of the German Politi-cal Foundations in the good governance area, espe-cially its capacity to work with all political parties.

In line with the recommendations of the last review,the BMZ has reoriented its evaluation activities towardsstrategically important development themes. Evalua-tions of individual projects are left to the implement-ing agencies. The results of evaluations are brought tothe attention of senior management and taken intoconsideration in designing new activities.

While appreciating the various positive measurestaken by Germany, the Committee noted that Germanyfaces some important challenges in the administrationand structure of its aid. These challenges are recognisedby the German aid authorities and a report has beenprepared by the BMZ. The DAC considered that a com-prehensive review of the German aid system could helpto enhance the capacity for concerted adaptation topolicy and programme-based approaches to develop-ment co-operation.

Although Germany remains one of the largestsources of aid for developing countries, the volume

of its aid has been falling significantly in recentyears. As a share of GNP, ODA net disbursementsfell from 0.42 per cent in 1990 to an estimated0.28 per cent in 1997. This decline was related togeneral budget discipline associated with theMaastricht criteria. Assistance for the reform pro-cess in Central and Eastern Europe and the formerSoviet Union, which had involved large amountsduring the first half of the 1990s, also declinedsharply in 1996 and 1997, as debt relief and certainspecial payments phased down.

Germany is the largest contributor to theEuropean aid programmes and its contributions havebeen growing while the aid budget as a whole hasbeen reduced. This situation inevitably has had nega-tive repercussions for the size of the bilateralprogramme and for voluntary contributions to UnitedNations organisations.

The DAC expressed the hope that political lead-ers in Germany would forge a new public commitmentto rebuilding aid levels in the near term, easing thesqueeze in the bilateral programme and enablingGermany to play a more commensurate role in financ-ing UN development agencies.

PRESS RELEASE OF DAC AID REVIEW OF GERMANY

69

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8 10

Net ODA from DAC countries in 1996

As % of GNP

Source: OECD.

DenmarkNorwaySweden

NetherlandsFrance

LuxembourgBelgiumFinland

SwitzerlandGermany

CanadaIreland

AustraliaUnited Kingdom

AustriaSpain

New ZealandPortugal

JapanItaly

United States

Total DAC

$ billion

JapanUnited States

GermanyFrance

NetherlandsUnited Kingdom

ItalySwedenCanada

DenmarkNorway

SpainAustralia

SwitzerlandBelgiumAustriaFinland

PortugalIreland

New ZealandLuxembourg

Total DAC

Averagecountry effort0.40%

UN target0.7%

71

DESCRIPTION OF KEY TERMS

The following brief descriptions of the main development co-operation terms used in this publication areprovided for general background information. Full definitions of these and other related terms can befound in the “Glossary of Key Terms and Concepts” published in the DAC’s annual Development Co-operationReport.

ASSOCIATED FINANCING: The combination ofOFFICIAL DEVELOPMENT ASSISTANCE, whetherGRANTS or LOANS, with any other funding to formfinance packages.

DAC (DEVELOPMENT ASSISTANCE COMMITTEE):The committee of the OECD which deals with devel-opment co-operation matters. A description of its aimsand a list of its Members are given at the front of thisvolume.

DAC LIST OF AID RECIPIENTS: A two-part List of AidRecipients was introduced by the DAC with effect from1 January 1994. Part I of the List is presented in thefollowing categories (the word “countries” includesterritories):

LLDCs: Least Developed Countries. Group estab-lished by the United Nations. To be classified asan LLDC, countries must fall below thresholds es-tablished for income, economic diversification andsocial development.

Other LICs: Other Low-Income Countries.Includes all non-LLDC countries with per capitaGNP less than $765 in 1995 (World Bank Atlasbasis).

LMICs: Lower Middle-Income Countries, i.e. withGNP per capita(W orld Bank Atlas basis) between$766 and $3 035 in 1995.

UMICs: Upper Middle-Income Countries, i.e. withGNP per capita(W orld Bank Atlas basis) between$3036 and $9385 in 1995.

HICs: High-Income Countries, i.e. with GNP percapita (World Bank Atlas basis) more than $9385in 1995.

PartII of the List comprises “Countries in T ransition”.These comprise: i) more advanced Central and East-ern European Countries and the New IndependentStates of the former Soviet Union; and ii) more ad-vanced developing countries.

DEBT REORGANISATION: Any action officially agreedbetween creditor and debtor that alters the termspreviously established for repayment. This mayinclude forgiveness, rescheduling or refinancing.

DISBURSEMENT: The release of funds to, or the pur-chase of goods or services for a recipient; by exten-sion, the amount thus spent. They may be recordedgross (the total amount disbursed over a givenaccounting period) or net (less any repayments ofLOAN principal during the same period).

EXPORT CREDITS: LOANS for the purpose of tradeand which are not represented by a negotiable finan-cial instrument. Frequently these LOANS bear inter-est at a rate subsidised by the government of thecreditor country as a means of promoting exports.

GRANTS: Transfers made in cash, goods or servicesfor which no repayment is required.

GRANT ELEMENT: Reflects the financial terms ofa transaction: interest rate, maturity and graceperiod (i.e. the interval to the first repayment ofprincipal). The grant element is nil for a LOAN car-rying an interest rate of 10per cent; it is 100percent for a GRANT; and it lies between these two lim-its for a soft LOAN.

LOANS: Transfers for which repayment is required.Data on net loans include deductions for repaymentsof principal (but not payment of interest) on earlierloans.


72

OFFICIAL AID: Flows which meet the conditions ofeligibility for inclusion in OFFICIAL DEVELOPMENTASSISTANCE, except that the recipients are on PartIIof the DAC LIST OF AID RECIPIENTS.

OFFICIAL DEVELOPMENT ASSISTANCE (ODA):GRANTS or LOANS to countries and territories on Part Iof the DAC LIST OF AID RECIPIENTS (developingcountries) provided by the official sector with the pro-motion of economic development and welfare as themain objective and which are at concessional finan-cial terms(if a LOAN, having a GRANT ELEMENT of atleast 25 per cent).

OTHER OFFICIAL FLOWS (OOF): Transactions by theofficial sector with countries on the DAC LIST OF AIDRECIPIENTS which do not meet the conditions for eli-gibility as OFFICIAL DEVELOPMENT ASSISTANCE orOFFICIAL AID.

PARTIALLY UNTIED AID: OFFICIAL DEVELOPMENTASSISTANCE (or OFFICIAL AID) for which the associ-ated goods and services must be procured in thedonor country or among a restricted group of othercountries, which must however include substantiallyall aid recipient countries.

PRIVATE NON-CONCESSIONAL FLOWS: Consist ofthe following flows at market terms financed out ofprivate sector resources:

Direct investment: Investment made to acquireor add to a lasting interest in an enterprise in acountry on the DAC LIST OF AID RECIPIENTS.

Bilateral portfolio investment: Includes bank lending,and the purchase of shares, bonds and real estate.

Multilateral portfolio investment: This covers thetransactions of the private non-bank and bank sec-tor in the securities issued by multilateralinstitutions.

Private export credits: See EXPORT CREDITS.

TECHNICAL CO-OPERATION: Includes bothi) GRANTS to nationals of aid recipient countriesreceiving education or training at home or abroad, andii)payments to consultants, advisers and similar per -sonnel as well as teachers and administrators servingin recipient countries.

TIED AID: Official GRANTS or LOANS where pro-curement of the goods or services involved is lim-ited to the donor country or to a group of coun-tries which does not include substantially all aidrecipients.

UNTIED AID: OFFICIAL DEVELOPMENT ASSISTANCE(or OFFICIAL AID) for which the associated goods andservices may be fully and freely procured in substan-tially all countries.

VOLUME: Unless otherwise stated, data areexpressed in current UnitedStates dollars. Data innational currencies are converted into dollars usingannual average exchange rates. To give a truer ideaof the volume of flows over time, some data are pre-sented in constant prices and exchange rates, witha reference year specified. This means that adjust-ment has been made to cover both inflationbetween the year in question and the referenceyear, and changes in the exchange rate between thecurrency concerned and the UnitedStates dollarover the same period.

73

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