The German development ministry's survival plan

A new plan by the German development ministry BMZ, published Oct. 7, shows that it is strategically refocusing its efforts on economic cooperation and private partnerships that will aim to benefit the German economy. The proposal is notable because it has support from both parties governing the country in a coalition — the center-right Christian Democrats, or CDU, and the center-left Social Democrats, or SPD — a win for the coalition government. But experts are skeptical that this public declaration will have a significant impact. German institutions have talked about engaging more with the private sector for years. The hurdle has less to do with BMZ policies, however, and more with the fact that German companies are not equipped to assist development projects at scale. “[German companies] are typically in the wrong sector,” Heiner Janus, a senior researcher and project lead at the German Institute of Development and Sustainability, or IDOS, told Devex. “They tend to be in niche high-tech, not in large infrastructure or construction projects,” he said. Those areas, he added, are where “Chinese companies dominate the global market.” OECD data shows that despite efforts to engage more with private companies at home, BMZ projects have historically overwhelmingly gone to companies outside of Germany. The plan falls in line with the global trend of foreign aid in the last year — from the United States to the EU, the world’s biggest donors have cut traditional development assistance and are launching plans to partner with the private sector. “When you look at the proposal for the EU budget, it’s almost the same language,” Anita Käppeli, director of policy outreach for Europe at the Center for Global Development, told Devex. “It’s about strategic interest, critical raw materials, trade promotion. So Germany’s really just jumping on the train.” Here’s how it works When any development ministry, including the BMZ, puts projects up for tender, the OECD recommends that these projects be “untied” — which means that companies in any country can apply to be the contractor. From 2022 to 2023, 100% of Germany’s BMZ projects were untied. Of those, 95.5% went to companies outside of Germany, according to OECD data. While these numbers are not entirely trusted by experts — projects that go to Germany’s technical and financial institutions, GIZ and KfW, respectively, are included in that 95.5%, and the reporting processes aren’t entirely clear — it does show that the majority of German-led projects are not being carried out by German institutions. Germany, Spain, and Italy are at the far end of the scale, but other EU countries, such as the Netherlands, Luxembourg, and Portugal, also have a low percentage of in-donor projects — meaning the percentage of projects awarded to companies within their borders. For developing countries, studies show that untied aid has significant benefits. Aid tied to a specific country leads to a 15%-30% increase in the cost of goods and services, leading to a negative impact on effectiveness. The OECD also says that effectiveness is impacted because the priorities are focused on the donor rather than the receiver of the aid. This percentage goes up to 40% when the aid is focused on hunger or food insecurity. The OECD says that it also “undermines recipient country ownership and the coherence of development policies.” Käppeli expressed concern that this new push by the BMZ will increasingly favor at-home economics rather than low- and middle-income countries. She pointed out a line in the plan that says, “In selected partner companies that are strategically important for the interests of German industry, companies will in future be involved in project development.” Experts on the EU’s development budget have had similar concerns. “[The development budget] uses scarce aid money for objectives that include boosting EU competitiveness, securing investment opportunities for European companies first and foremost, and advancing the EU's geopolitical goals,” María José Romero, policy and advocacy manager at the European Network on Debt and Development, or Eurodad, told Devex. “This is not a credible offer to Global South countries, and represents a major departure from the EU's development cooperation mandate,” Romero added. Political maneuvering The launch comes against a backdrop of intense political and fiscal pressure on the ministry. Earlier this year, German budget negotiations and rising pressure to invest in defense put the BMZ on the chopping block. Some politicians called for major funding cuts to the ministry, while others called for it to be abolished and its responsibilities split between the ministries of economics and foreign office. Ultimately, it survived, but austerity measures, which followed previous reductions in 2023 and 2024, resulted in the finalized 2025 draft budget for the BMZ falling by approximately 8%, a cut of around €910 million ($1 billion) compared to the previous year. “The context of this [plan] is a fairly new government that is now in charge of a ministry that was almost abolished,” Janus said. “Now the ministry is under political pressure to launch comprehensive reforms.” Käppeli called it a “fight for survival – a fight to stay relevant.” “They’re trying to get more bang for their buck,” she added. “But how much do you undermine actually effective development cooperation by trying to aid your own company?” Companies are going to invest where it’s safe to invest, Käppeli said, and she’s doubtful that the BMZ’s announcement will create enough interest in the development industry to encourage growth in infrastructure and construction. “[BMZ is] making the case that aid is worth investing in,” she said. “But I don’t think that we need to create returns for the German taxpayer, I think people want to see efficient use of money.” BMZ has been described as the only remaining freestanding development ministry in the West. Now, it’s stuck between turning inward to German companies to boost its popularity — whether or not those companies have the necessary expertise — and having a future at all. It has time, however. The ministry won’t be up for debate until the country’s next election, which must be held before March 2029.