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Economic development, growth and employment

Economic policy – creating an enabling environment for development


Ein Eingangsstempel wird auf ein Dokument gedrückt. Urheberrecht: Presse- und Informationsamt der Bundesregierung, Bienert

The economic systems in many de­vel­op­ing coun­tries are far from being fully functional: there is a lack of competition, and access to resources is in­equit­able as is the dis­tri­bu­tion of wealth and income, all of which hamper growth and de­vel­op­ment.

The precondition for in­clu­sive eco­nom­ic growth and for boost­ing public in­come in these coun­tries is the intro­duc­tion of an en­abling en­vi­ron­ment for private-sector ac­ti­vi­ties. The pros­pects of success and the effi­cien­cy of economic policy depend essentially on the quality of state structures and institutions. State actors must be able to draft pro-growth economic policy and to translate this policy into practice.

German de­vel­op­ment co­op­er­a­tion aims to support co­op­er­a­tion coun­tries as they adopt policies that will encourage sus­tain­able economic growth and economic stability. In the long term this will make the economies in these de­vel­op­ing coun­tries more competitive and more resilient to crises.

The guiding vision – a social and ecological market economy

German de­vel­op­ment co­op­er­a­tion takes its lead from the guiding vision of a social and ecological market economy.

The fundamental idea behind the social market economy is to ensure economic efficiency and protect the liberty of all citizens, while redressing social in­equa­li­ties. The social market economy com­bines the principle of per­for­mance with the principle of equal opportunity and a social safety net, and allows as broad a section of the popu­la­tion as possible to benefit from growth. This makes the concept par­tic­u­lar­ly attractive for de­vel­op­ing coun­tries.

The concept has now been expanded to embrace ecological sus­tain­ability. Economic de­vel­op­ment must not be bought at the expense of the en­vi­ron­ment. Rather it must take into account the stress limits of local and global ecosystems. This is vitally im­por­tant for de­vel­op­ing coun­tries, because they tend to be dis­pro­por­tion­ate­ly hard hit by the impacts of climate change and pollution. Yet many of these coun­tries have a vast potential to be both economic­ally success­ful and ecologically sus­tain­able. One aspect is their potential for harnessing renewable energies.

In any de­vel­op­ment advisory services, the specific economic and cultural background of the co­op­er­a­tion coun­try must be taken into account. This is why German de­vel­op­ment policy does not deliver a one-size-fits-all solution. It always takes into account the specific circumstances prevailing in a coun­try when devising and realising de­vel­op­ment strategies.

De­vel­op­ment-policy strategies

In the field of economic policy German de­vel­op­ment co­op­er­a­tion pursues the following strategy:

  • We support co­op­er­a­tion coun­tries in their efforts to put in place economic-policy analysis, planning and implementation capacities.
  • We foster the establishment and consolidation of the institutions and processes required in a social and ecological market economy (including properly functioning competition and ecological tax reforms).
  • We help develop appropriate economic-policy reforms.
  • We support adjustment and transition processes, such as those required in coun­tries that have hitherto had centrally planned economies.
  • We deliver advisory services on how to put national pov­er­ty reduction strategies into practice.

In the field of economic policy, Germany is most active in coun­tries that demonstrate the will to reform and have good prospects of achieving tangible results. Since the advisory services we deliver are based on the model of the social and ecological market economy, special attention is paid to ensuring that economic growth is inclusive and environmentally sus­tain­able. German de­vel­op­ment policy is also active in integrating co­op­er­a­tion coun­tries better into global markets and regional economic areas. And Germany fosters sus­tain­able de­vel­op­ment at decentralised level and in disadvantaged regions.

German de­vel­op­ment co­op­er­a­tion has at its disposal various options for pursuing its economic-policy approaches. Alongside technical and financial cooperation (involving political dialogue, capacity de­vel­op­ment and pro­vid­ing financial support), these include in particular the secondment and placement of experts.

The overarching nature of economic policy means that many interfaces exist to other areas of de­vel­op­ment co­op­er­a­tion, such as governance and human rights, as well as social and environmental policy.

To complement the bilateral measures undertaken by German de­vel­op­ment co­op­er­a­tion, the German gov­ern­ment brings its positions, interests and values to multilateral and in­ter­na­tional debates on policy design. Germany works closely with other donors on issues of economic policy within in­ter­na­tional bodies, including the Working Group on Green Growth of the Donor Committee for Enterprise De­vel­op­ment (DCED).

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