The private sector in focus
Why closer cooperation with the private sector is essential and how this relates to the new geopolitical situation.
The world is changing dramatically. Old alliances are crumbling and new centres of economic power are emerging. Everything is in motion. It is not yet clear where this journey will take us. There is no doubt, however, that Germany’s role in the world is changing and with it the work of GIZ.
In this period of upheaval, Germany’s contacts around the globe are more important than ever. This is especially true of the Global South, which plays an important role in all major issues on the international agenda – from the energy transition to species loss, from climate change to disease control, and from securing the supply of raw materials to migration. The Global South is also experiencing rapid economic growth.
There can only be one response to all of these changes, and that is to build and maintain relationships in which equal partners pursue common objectives. And this has to be done at many different levels – bilaterally and multilaterally, with civil society, the scientific and research community and, more than at any time in the past, with the private sector.
Thorsten Giehler was appointed as Director of the Economic and Social Development, Employment Division in late 2024. Before that, he was Regional Director of GIZ East Asia in Beijing for many years.
GIZ – opening doors for the private sector
There are two reasons why the private sector is crucial in this context: firstly, the funding requirements for the Sustainable Development Goals (SDGs) are huge. According to UN calculations, the 2030 Agenda is underfunded by more than USD 1.5 trillion every year. At the last count, just 16 per cent of SDG indicators were on track to be achieved. Additional efforts and significantly more financing are therefore required.
As this cannot be achieved with government funding alone – neither from OECD countries nor from the Global South – private investment plays a vital role. Technical cooperation (TC) can open doors and provide support for German companies looking to invest in emerging economies and developing countries. Indeed, partner countries themselves increasingly expect TC to be integrated into economic relations in this way.
Secondly, the new geopolitical and geoeconomic realities also pose major challenges for the German economy. The WTO, once a driving force for transparent and rules-based economic relations between countries, is faltering, and more and more countries are creating their own rules and demands. The tariffs policy of the Trump administration is just one example of this. On the one hand, sanctions, export controls, subsidies and tariffs are a reaction to the erosion of global rules. On the other, however, they also contribute to agreements giving way to unregulated fragmentation.
Safeguarding long-term prosperity
In this context, the German and European economies need flanking support through a new form of ‘economic cooperation for sustainable prosperity worldwide’, as German Development Minister Reem Alabali Radovan recently put it. It is about good framework conditions at the local level, but also about concerted action by technical and financial cooperation and the economic development institutions at federal level. In June, GIZ concluded a Memorandum of Understanding with the credit insurance group Allianz Trade that provides for the early coordination of export credit guarantee instruments and new TC projects in partner countries.
Building on existing partnerships with the private sector
Up to now, GIZ has consciously taken different approaches to cooperation with the private sector depending on the policy area, with one approach used for climate policy on behalf of the German Environment Ministry, another for bilateral foreign trade projects on behalf of the German Federal Ministry for Economic Affairs and Energy, and yet another for development cooperation projects.
Examples of economic cooperation in the climate and energy sectors include energy partnerships with countries such as India and the Project Development Programme, which paves the way for German investment.
In foreign trade projects on quality infrastructure with emerging economies or industrial data ecosystems, the focus is on common standards – in areas such as medical technology, vehicle construction and data traffic – or on simple but critical solutions, such as harmonised sockets for electromobility. At GIZ, we influence partner countries accordingly and, in so doing, aim to facilitate the work of German companies abroad or to achieve reciprocity. This takes place within the framework of official bilateral cooperation and therefore differs from economic development. The two approaches complement each other. Each instrument has its own special characteristics. How they interact is key.
German companies have always played a role in development cooperation, for example through the develoPPP programme, which has been in operation for 25 years. It supports companies where they generate development benefits through their activities. For example, if a company builds a kindergarten next to a production facility or works with coffee producers committed to sustainable cultivation methods, this can result in a development partnership with the private sector. In future, however, development cooperation also plans to work ‘for’ and not just ‘with’ the private sector.
GIZ’s previous work provides a good foundation to build on. Its activities in the areas of foreign trade, energy and climate action are tried and tested and relevant today. While there is potential for further upscaling, what is needed most is a broader view – one that incorporates aspects of economic security. After all, raw materials, diversified supply chains and a reliable energy supply have been key concerns here for some time, not just since the COVID-19 pandemic.
Factoring in the private sector from the outset
The crucial question is: how can we better align our work with private sector activities without taking on a paternalistic role? Economic cooperation would suffer if Germany were to suddenly act solely in its own interests. Cooperation is based on partnership. The goal, therefore, is to find the best ways to refine existing principles and practices.
One approach would be to ensure that GIZ pays particular attention to the activities of German industry in the relevant country from the early stages of project development. For instance, industry-specific export and investment interests could be integrated into project design. Another option would be to take action to promote an investment-friendly climate in bilateral or EU projects or implement targeted measures, for example to boost energy efficiency. All of this would not only help companies, but also amplify the positive effects in the partner country – everyone stands to benefit.
We are currently actively engaged in developing these and other proposals. Ultimately, it is the German Government that has to make the final decision. But GIZ is ready to respond, having read the sign of the times.