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The private sector & development cooperation: Germany and The Netherlands compared

Companies create jobs and can boost local economic growth. The private sector is a crucial partner for low and middle income countries aiming to eradicate poverty. Over the last years institutions providing development cooperation have therefore prioritized sustainable economic development, reaching out more to companies in developing and developed countries alike. Programs have been set in place to support entrepreneurship and to improve the local business climate. Germany and The Netherlands follow a remarkable similar approach in this, with a strong ambition to contribute to a better world.

The private sector and development cooperation

The Organisation for Economic Co-operation and Development (OECD) serves as a platform to exchange views on development cooperation. In addition to the peer reviews in which development cooperation policy of a country is assessed [1], the OECD has taken the initiative for thematic peer learning activities. It started a pilot on working with and through the private sector. Country missions have been undertaken to The Netherlands, Sweden, Germany and the USA. Furthermore, two thematic workshops have been held: on innovative instruments in Copenhagen and on additionality in Luxemburg.

Working for the Sustainable Economic Development Department of the Ministry of Foreign Affairs in The Hague, I took part in organizing the incoming mission to the Netherlands November 2015. The mission was conducted by a team of experts from the OECD, Australia, Canada and Denmark. I also joined the team with colleagues from the OECD, Luxemburg and South-Korea visiting Germany early 2016. We met with the major agencies involved in international private sector development in Berlin, Bonn and Cologne.

Neighbour countries look alike

In comparing the motivation, objectives and focus for working with the private sector in international cooperation for development, it is striking how much Germany and The Netherlands have in common. The major policy document for Germany is the Sector Strategy on Private Sector Development [2], and for The Netherlands the letter to Dutch Parliament ‘Ondernemen voor Ontwikkeling’ [3]. Both countries motivate why they come up with a more economic focus in their policies. The papers refer to major results achieved in development cooperation, while acknowledging that challenges in eradicating poverty cannot be met alone with support from governments. Clearly, developing countries need substantive efforts and resources far beyond those traditionally counted as Official Development Assistance (ODA) provided by governments. Germany and The Netherlands recognize the crucial role of the private sector to generate investments, create employment and foster economic growth.

Both countries have identified a set of strategic pillars, addressing the need: a) to improve the business climate in developing countries; and b) to provide support to entrepreneurs, in particular smaller companies. The Netherlands and Germany also engage with companies in their own country. They advise and if needed assist them to work more in and with developing countries. They promote responsible business and highlight the importance to effectively address youth and women in private sector development.

Striking differences

Besides the similarities, the approaches by the two countries show interesting differences. Germany more explicitly refers to a desired balance between economic growth and social and environmental concerns, with a strong program for example in sustainable energy. The Netherlands works from an integrated agenda of aid, trade and investment. The Dutch seek policy and institutional synergy between working through the private sector in development cooperation, with the objective to support Dutch companies to work more internationally on sustainable development. In engaging with their home country companies, each country relies on specific economic advantages. For Germany this is the well-organized Mittelstand and strong vocational training, and for The Netherlands competitive sectors like agriculture, water management and trade/logistics.

In implementing their policy GIZ [4] is a main agency in Germany. The Netherlands makes use of several implementing partners. Support to Dutch companies is provided primarily through RVO.nl [5]. The Netherlands has started to report on results delivered in private sector development with an annual communication to Parliament. In Germany results are reported primarily at the program level.

Conclusion

It is striking that both countries have been able to swiftly adopt modalities to work through, with and for the private sector in developing countries. For this, they have been relying on a long history of working with companies in (traditional) development cooperation, in combination with growing interests of the private sector in their own countries to do business abroad, including in developing countries.

The two neighbour countries work to achieve similar objectives in a comparable manner, with differences rooted in their history, culture and economy. As such, both Germany and The Netherlands feel a strong responsibility for gaining a better ‘One World’.

Marcel Vernooij

Sustainable Economic Development Department

Ministry of Foreign Affairs, The Netherlands

  1. Further information and reports of country reviews
  2. Sector Strategy on Private Sector Development. BMZ Strategy Paper 9, 2013.
  3. Ondernemen voor ontwikkeling, House of Representatives 2013-2014 session, 33625, no. 38, 2013. Summarized in 9 factsheets: (sub: ‘onze bestanden’)
  4. German corporation for International Cooperation (Deutsche Gesellschaft für Internationale Gesammenarbeit, GIZ)
  5. Netherlands Enterprise Agency (RVO)

Ministry responsible