The ‘Zukunftscharta’ – Good initiative, poor timing

German minister for economic cooperation and development, Dr. Gerd Müller.

German minister for economic cooperation and development, Dr. Gerd Müller.

At the end of September the German federal ministry for Economic Cooperation and Development (BMZ) published the intermediate result of the ‘Zukunftscharta’ (Future Charter) process. The draft Charter has many positive aspects, but comes at an inopportune time. In addition, the preliminary Zukunftscharta presents itself surprisingly empty and weak in some parts of its content.

Background: The Future Charter process was launched on April 1, 2014 in Berlin by the BMZ as a broad “dialogue process between government, business, academia, civil society, churches, foundations, German states and municipalities”. Its vision is to “bring together in Germany as many actors as possible to define a socially broad-based German contribution to sustainable development within the altered reality both at national and international level”. At the end of a very inclusive and participatory preparation process including an open-to-all online dialogue, thematic forums and a ministerial journey through Germany along the 11th meridian stands the first draft of the new German development charter titled “ONE WORLD – our responsibility”.

Online on the Zukunftscharta website, the draft was open for comments until October 1. I took the opportunity to submit my comments to the draft charter as a representative of the German United Nations Association the federal board of which I have been sitting on for the last three years dealing with issues of development cooperation and the UN development architecture. Please find my full comment here, mind though that it is in German. Now that the commentary period is over, the Zukunftscharta will be finalized and handed over to German Chancellor Dr. Angela Merkel and Development Minister Dr. Gerd Müller on 24 November in Berlin.

On the positive side the Future Charter discusses important issues throughout its seven fields of action that need to both shape the self-understanding of German development policy in the future and align German national politics as a whole coherently and across all sectors with the imperatives of sustainable development. The self-reflexive perspective of the paper, the real challenge for development policy in an era of transition from top-down-designed MDGs focused on poor countries to universally-valid and globally applicable SDGs, is much stronger, much more credible and much more in-depth than in former German position papers. The Future Charter follows the basic tenor of “sustainable development policy begins at home in Germany” (p 2) and formulates the necessity to “rethink and redirect the economy and society” (p 18). Furthermore it promotes the “social change towards sustainable production and consumption patterns” and contains some important concrete commitments – such as the will to implement the UN Guiding Principles on Business and Human Rights with a national action plan. The latter had been requested by the German UNA since early 2012.

However, some important issues have unfortunately not made ​​it into the canon of the Zukunftscharta .The topic of “migration” is not mentioned once literally in 26 pages. In terms of content it is (if any) broached only in one of seven fields of ​​action in the context of the world’s 50 million refugees. At this point the Future Charter has urgent need for improvement. References to migration should be included at least in the fields of action 1,3,4,5 and 7. It must also be ensured that migration is discussed not only as a problem that has to be avoided, but rather with a view to the full scope of its potential for positive contributions to development in both home and host country. Similar to migrants, adolescents and young people are never explicitly mentioned in the Future Charter. Special support to young people and the problem of high youth unemployment as a social explosive in many societies around the world seem to have no place in the future German development Charter so far. It is questionable whether the topic ever had an advocate in the preparation process of the paper. Here, too, content improvements are urgently needed: a Future Charter without reference to those people who are the future is unavoidably weak in significance and incomplete in content.

Still, the most fundamental problem of the Future Charter and the associated nation-wide process is the unfortunate timing of the initiative. ZukunftschartaBy its own claim the Zukunftscharta shall be promoted in the general public in Germany in the ‘Year of Development 2015’ and “last but not least also advance the implementation of the internationally agreed sustainable development goals” (p 3). However, if one considers the limited attention span of a German public anyway not completely enthusiastic of global development issues, the coincidental publishing of both the finalized Future Charter and the new SDG agenda is most unfortunate. In 2015, raising awareness in the German public of a new global development agenda has a much higher priority compared to the campaign for a national, largely decoupled developmental Charter. Similar in content, two target systems for essentially the same political field will yield misunderstanding, confusion and head shaking with many German citizens – understandably so! This situation risks resulting in an ‘own goal’  for German development policy, even if the Future Charter overcomes its weaknesses until November 24 and proves itself a substantive masterpiece. In any case, German development minister Müller should ensure that in 2015 enough time, ministerial will and financial resources are available for a comprehensive information campaign that does justice to the high relevance of the SDGs instead of focusing on sales strategies for his in-house product only.

A further unfortunate coincidence is the fact that the broad stakeholder participation process for the formulation of the Future Charter took place at almost the same time as the non-transparent and hardly participatory formulation of the German negotiating position for the SDG process. This considerably clouds the otherwise joyful character of the Future Charter process. Statements on the Zukunftscharta webpage such as “This is your opportunity to help shape the future – the world needs your opinion!” are misleading, since it is questionable what exactly the German public should be able to shape. The further use of the Future Charter is dealt with in a tight sentence: “From November 25th onwards the realization of our common goals begins: ONE WORLD – our responsibility.” Genuine participation would have meant that the results of the Zukunftscharta process may at least help to shape the German SDG position. However, a feed-in into the German position for global negotiations now going on in New York is not provided. Pity! For a universally valid and globally applicable new development agenda that takes into account national priorities and circumstances would have profited well from finding out what possibilities Germans see to “build a future that allows for responsible action and at the same time does not restrict us in our lives “(Future Charter website).

Raising Funds for the Unfundables

One month before parliamentary elections in Germany, development minister Dirk Niebel – once again – made an unhelpful public statement adding to question marks about his commitment to core development targets. In an interview with the German newspaper “Frankfurter Rundschau” he stated, that “it has to be clarified, what an appropriate measure for an adequate level of future German development funding is”.

Whereas Niebel’s party’s coalition partner (a union formed of the CDU and the Bavarian CSU) shows clear commitment to a so-called ODA quota (ODA is an abbreviation for “Official Development Assistance” and captures the provision of financial, technical and personnel resources in the framework of public development cooperation) of 0.7% of economic output, the development minister himself disparaged the target as being “rigid” and “no more up-to-date”. In his view, the “quality and success of aid” should be emphasized more prominently, not the mere sums. “It’s weird that a successfully implemented and paid-back development loan lowers the quota whereas the default of a development credit adds to it.”

As much as I agree on putting the emphasis on the quality of aid rather than it’s sheer magnitude, international development cooperation still grapples with massive underfunding for some important causes and several highly-relevant organizations. The insistence on delivering better is only valid on the basis of enabling certain organizations to deliver altogether. Additionally, the ODA quota serves exactly those people who cannot afford a development loan that is eventually paid-back. Attacking the 0.7%-target by referring to development loans completely misses the point of the ODA quota. Sure, we need business for development. But here we’re not talking business; we’re talking about raising funds for the unfundables.

Key Constraints for Renewable Energy Investments in the MENA region

One of the biggest challenges for greater renewable energy deployment in the MENA region (Middle East and North Africa) is to overcome the hesitation of investors to put their money into solar energy generation and equipment manufacturing projects. This is mainly due to two key constraints of investing into renewable energy in the region, which consequently lead to limited access to funding: the frequent lack of profitability of RE projects and the associated high risks.

A significant lack of profitability of renewable energy projectskeyconstraints is a problem encountered around the globe. In most cases globally energy production from RE sources is still more expensive in comparison to traditional means of production. Costs for non-renewable energy typically amount to 3-10 $US cents per kWh while energy produced from renewable sources is not only more costly in most cases but often also shows a far greater cost range. Admittedly, most renewable energy technologies “are still at the early commercial development stage” (OECD) which means that they will move down the cost curve over time. Additionally, a sharp price increase for fossil fuels is expected that will improve the renewable’s relative profitability. Still, for the moment this constitutes a complicated obstruction.

In the MENA region profitability problems are aggravated by exceptionally low prices for electricity. In many countries electricity prices “tend to be too low to enable the investor to recover the cost of generating electricity from renewable sources” (OECD) due to high fossil-fuel subsidies. This further worsens the prospects for profitability of most renewable energy technologies and points to a strong necessity for government support to broaden deployment of renewables.

Moreover, renewable energy projects are often characterised IMG_2471by a high level of risk involved. As renewable technologies tend to be capital-intensive and costly they imply lengthy payback periods, typically between 8 and 17 years. The typical structure of a renewable energy business plan is characterised by high up-front costs and small operating costs. Hence, investors depend on strong guarantees by the contracting entity to ensure a continuous flow of income from the project as well as on political and economic stability to secure a conducive environment for the project. The OECD classifies the risks involved as follows: (1) client risks, (2) political and regulatory risks, (3) market risks, (4) technology risks associated with the novelty of the technology.

The consequence is limited access to funding for many renewable energy projects. The above-mentioned lack of profitability as well as the high risks involved often results in reluctance on the side of commercial banks and other private financial actors to provide funding of renewable energy projects. Literature suggests that “the immaturity of the renewable energy sector increases the difficulties associated with accurately pricing relative risk of investments in clean energy, making it more difficult for these technologies to obtain financing at reasonable costs than for fossil fuel technologies” (Kalamova et al. 2011:8).

(This is an excerpt from a broader study entitled “Achieving inclusive competitiveness in the emerging solar energy sector in Morocco” that was conducted by a group of DIE/ German Development Institute researchers (including the blog author) in spring 2013. The final study is still to be published. If you are interested in receiving the final full product, please do not hesitate to contact me via my Twitter account (@mattcurious). Alternatively, just leave a reply below.)

A new inconvenient truth?

“China in Africa” – These three words almost inevitably shape recent debates on development cooperation with Africa. It appears to me that discussions by and large follow one of three general narratives:

Firstly (and probably most importantly) Chinese involvement in developing Africa is referred to as the negative example, the kind of “cooperation” – if you can call it cooperation in any case! – that oozes with economic interests and that nobody really wants. This narrative is quite reassuring for us development boffins from the traditional donor countries, isn’t it? It tells us that – despite some negligible problems – we’re overall on a good track when it comes to our style of cooperation with this bunch of nations between Egypt and South Africa.

Next, there is “China in Africa” as an outright threat. Beware! Time is running out for the good-willing traditional development cooperation community before the less-benign Chinese have settled in each and every niche of development activity in Africa. This notion calls for the West to pull itself together and finally get over some of the fuddy-duddy stuff that only costs time and hinders the usual suspects such as DfiD, GIZ and their companions to secure their right to exist in Africa before it’s to late. Be sure that there will always be three zealous Chinese investors for every scrupulous project evaluator from Germany!

Then there’s the narrative entailing a somewhat positive twist about getting things done in Africa the Chinese way. It urges long-established and hopelessly ponderous development agencies in the West to finally simplify their complicated procedures and cut intra-agency red tape. Because – hey! – just look east and you’ll see that Africa can be developed easily and that it’s infrastructure can be improved without big hassle.

Interestingly enough, this usual set of narratives was shattered by a newly-compiled database providing some insights into what China apparently really does in Africa. Reading the article on AidData in The Guardian’s Global Development blog definitely made western development wonks cringe since the account asked for an overhaul of traditional notions about good and evil in the development arena. While I was absolutely sure so far – probably along with most of the entire development community – that China’s cooperation with Africa focuses overwhelmingly on extractive activities, the smallest number of registered projects in the database is actually resource-related. In the meantime, Beijing apparently builds a multi-million dollar 1,400-seat opera house in Algeria. Pardon? Wait, this does not fit into my world view!

It seems, a new narrative on China in Africa has to emerge. A narrative about the Chinese being a cordial donor that cares as much about health and arts in Africa as it cares about the interior of mines. Maybe it’s a charm offensive (The Guardian), maybe it’s about “upfront sweeteners to win government favour” and a “downpayment for future commercial deals” (Stephen Chan). But evidence is there that China does a lot of good things in Africa – an inconvenient truth for our conventional line of argumentation.