Last month, Germany’s Free Democratic Party (FDP) proposed merging the country’s Federal Ministry for Economic and Development Cooperation (BMZ) with its Federal Foreign Office (FO), claiming this would result in “enormous” gains in effectiveness and efficiency. Put forward against a backdrop of domestic fiscal pressures and geopolitical tensions, this merger was proposed as a way to enhance the alignment of Germany’s development finance with foreign policy interests. While the proposal was met with dismissal from both the Development Minister and Germany’s main opposition party, the re-emergence of the proposal (which was previously put forward by the FDP in 2009, and subsequently struck down by Angela Merkel) raises questions about why mergers are proposed and what—if anything—they typically achieve.
In this blog, we explore mergers of this nature from a comparative perspective. We argue that mergers alone rarely achieve the desired gains in “efficiency and effectiveness”, and that Germany should consider the organizational design that not only aligns with the needs of today, but sets it up for the future.
Background: How are development systems organized, and how is Germany’s cooperation system structured?
Broadly, members of the Organisation for Economic Cooperation and Development’s (OECD) Development Assistance Committee (DAC) have tended to use four main models for managing their development programs (see Figure 1, below). For the most part, recent mergers in DAC member countries—such as those in Canada (2013), Australia (2013) and the United Kingdom (2020)—have tended to consolidate fully autonomous development agencies or ministries (Model 4) into foreign ministries (Models 1 or 2, depending on how and where development is located following the change). Following these mergers, the fully autonomous ministry responsibility for policy and implementation (Model 4) has now fallen out of use.
Figure 1: Main Organizational Models used by OECD-DAC Donors
Source: See Dissanayake and Calleja (2024), adapted from Figure 3.1 in the OECD’s “Managing Aid–Practices of DAC Member Countries”
Based on these broad models, Germany’s development cooperation has typically been classified as a Model 3, using a policy ministry (BMZ) to set the strategic direction of cooperation, with separate implementing agencies—Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and Kreditanstalt für Wiederaufbau (KfW)—taking responsibility for implementing technical and financial cooperation, respectively. However, Germany’s system is currently unique, as it remains the only DAC member with a dedicated development ministry for policy-setting; other Model 3 structures set policy through the foreign ministry. Additionally, Germany’s development system is notoriously complex, with 13 other federal ministries also providing development cooperation, including the Foreign Office which is responsible for humanitarian aid. The Christian Democratic Union (CDU)/FDP-government transferred additional competencies from BMZ to the Foreign Office in the area of transition aid in 2011.
Why do mergers happen and what can they achieve?
Mergers of independent development cooperation ministries or agencies in other countries over recent years largely followed a similar logic to the FDP’s proposal: namely, that the co-location of development within foreign ministries could—or should—allow for more policy coherence or alignment between the objectives. In most cases, the implications are an explicit call to ensure that development budgets are clearly aligned with the national interest. Recall, for instance, how Boris Johnson questioned the rationale for providing equal support to Zambia and the Ukraine (prior to the current conflict), given the security importance of the latter. Other typical justifications for merging include potential efficiency gains, presumably through fewer bureaucratic bodies, and performance improvements resulting from more joined-up foreign policy action.
Yet evidence that merging development administrations is an effective tool for achieving these aims is thin at best. Cross-comparative analysis of administrative efficiency and policy coherence for development shows that countries which integrate development within foreign ministries often have lower performance on both measures. While the effectiveness of development spending is much more difficult to quantify, especially over time, some evidence has suggested that regardless of the overarching structure, cabinet-level representation for development can “safeguard for inferior aid quality” by ensuring a clear locus of leadership and responsibility for development performance. Such evidence, however, assumes that the effectiveness sought through organizational changes relates to the quality of development spending, rather than to the pursuit of domestic policy goals via development resources.
What are the main risks associated with merging?
Experience from other countries has shown that merging development administrations carries three main risks:
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Loss of development expertise: At a time when developing countries expect partner governments to engage in substantive dialogue on a range of development issues including debt, energy transition, and decarbonization, competent and professional development, expertise is critical to building mutually beneficial partnerships. This development expertise can be seriously harmed through mergers. In Australia, up to 2000 years of development expertise was lost following the merger, undermining the long-term quality of development activities, and weakening global country networks and relationships that support diplomacy.
For Germany, retaining expertise for development could prove challenging. Simply drawing on current BMZ staff would require a comprehensive overhaul of the foreign service career system. The German Foreign Service has already recruited a number of "experts", particularly on climate change. But these experts do not have the same status or career opportunities as diplomats. A second-class status for development experts would certainly not be a good incentive to attract, retain, and develop first-class expertise. -
Subordination of development and dilution of results: From the development perspective, a key risk of mergers is always the potential to subordinate development objectives to other foreign policy interests; for the FDP, this seems to be the stated aim. While development policy is always driven by a some combination of developmental and self-interested objectives, mergers can make it easier to instrumentalize development budgets for short-term national interests, potentially undermining standards of effective development practice and reducing the likelihood of targeting development budgets in ways that advance developmental aims.
For Germany, the question is how narrowly national and geopolitical interests are defined and how to avoid undermining the credibility of development policy? While narrow self-interests present serious risks to Germany’s soft power and credibility as a development partner, there are good reasons to exploit synergies between development and more “enlightened” or longer-term self-interests, such as promoting global public goods or (democratic) participation. Climate change, for example, must be approached with a clear development focus. The success or failure of climate action depends on this kind of localisation. Such an approach goes far beyond diplomacy. -
Merging risks efficiency loss in the short term, and does not guarantee more coordinated policy action: Despite being a key justification for merging, there is little evidence machinery of government changes are able to strengthen coherence or coordination across government. In fact, evidence from other countries has shown medium-term inefficiencies when combining foreign and development ministries due to different organizational cultures and ways of working (i.e. different tolerance for innovation, risk and failure) which can be time-consuming to align; in the Canadian case, merging cultures was seen to take between five to ten years. At the same time, part of the challenge is undoubtedly linked to fragmentation in development systems and the overlapping responsibilities for different aspects of development action across government. With growing global challenges and interdependencies, all policy areas increasingly have an international dimension, as was painfully demonstrated in health policy in the context of COVID-19. This means that despite a clear need to establish better working relationships and structures between government departments, the broad range of departments involved in development cannot be coordinated by merging foreign policy and development alone (consider defense for instance, which is a key pillar of foreign policy yet notably absent from the FDP’s proposal).
While there is no blueprint for better government coordination, there are valuable experiences that could inform Germany’s actions. For example, some administrations have experimented with matrix structures where different ministers have access to the same services and staff. Another example is the newly established 'National Security Council' in Germany, where relevant government departments coordinate strategically on security issues. Greater decentralisation to field offices could also help to overcome frictions within governments.
What can Germany learn from others?
Perhaps the key lesson emerging from similar mergers undertaken elsewhere is that machinery of government changes alone are not a panacea for enhancing the “efficiency or effectiveness” of development budgets, especially over short-term political timelines. Instead, factors like leadership, and strategic clarity remain crucial to the success of any organizational model, each of which presents its own strength and weaknesses which must be understood from the perspective and constraints of the country’s bureaucratic system. In the German case, for instance, a key consideration could be how(or whether) co-locating development in the foreign ministry could reasonably improve the strategic coherence of Germany’s development spending with foreign policy, especially given the broader coordination challenges that exist across its relatively fragmented cooperation system.
Additionally, while merging development and foreign policy is often viewed as politically expedient, machinery of government changes are costly exercises which, in similar cases, reaped little benefit. The lesson for Germany is not to maintain the status quo without warrant—there are good reasons to re-think organizational forms, especially in a rapidly shifting development and geopolitical landscape where donors are grappling with questions about their continued resilience and relevance—but it is worth considering a broader range of options. Indeed the most important structural question facing donors today is how to design a development management system that is fit for meeting the challenges of the future. Other options proposed in the German context includes transforming BMZ into a “ministry of global cooperation”, capable of responding to a broader range of interlinked challenges including climate change and peace and security, or combining GIZ and KfW to bring together the technical and financial instruments utilized as part of Germany’s development cooperation, though there are surely also others.
The future of German cooperation
While it seems that there is currently little political appetite to move forward on the FDP’s proposal, the frequency of calls for organizational change to Germany’s development cooperation system suggests that the conversation is likely only on pause. For the German development community, perhaps it is time to think through alternative options for re-designing Germany’s cooperation system in a way that addresses any long-standing challenges, supports policy coherence, and ultimately, remains suited to tackling the complex and interrelated challenges of the future.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
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