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To merge or not to merge? Lessons for Germany from Global Britain

Written by Nilima Gulrajani

Who's an ex-diplomat of all people to complain if the wrapping is prettier than what's inside.
John LeCarré, 'A Delicate Truth'

Pretty wrapping is certainly a way to describe how some German diplomats present the efficiency, coherence and effectiveness arguments for merging their development ministry (BMZ) into the Federal Foreign Office. The evidence from past mergers in Canada, Australia and, most recently, the UK is far more circumspect.

Notwithstanding heightened German merger talk, observers seem relatively unperturbed. This is because speculation on departmental configurations grows in the lead-up to a German federal election. Eventually, it subsides because the reality of coalition-building includes the ability to horse-trade ministerial posts. As coalition talks enter their final stages in Germany, it does look like a separate development ministry will be retained.

There's been some finger-pointing to the 2020 UK merger between the Department for International Development (DFID) and the Foreign and Commonwealth Office (FCO) – to support both sides of the German merger debate. While it is still early days for the Foreign, Commonwealth and Development Office (FCDO), an examination of donor experiences with integration may be instructive for Germany and others looking to take stock of a busy decade for development mergers.

1) Mergers have costs

While the UK merger was never about financial efficiencies, integration has costs. The direct expenses relating to the merger of the FCO and DFID in its first six months is estimated at £4.9 million and likely to rise; a mid-sized merger in the British civil service costs upwards of £15 million.

More importantly, there are significant opportunity costs from changing departmental boundaries. In the UK, the merger was announced suddenly, at the height of the coronavirus pandemic in June 2020, with the challenge of integration likened to ‘changing an engine mid-flight’. Nearly 200 charities argued it provided an expensive distraction that undermined Britain's response to the pandemic.

Mergers can also negatively impact staff productivity. Transition teams can find themselves with high workloads as operational and strategic planning functions are defined for the new department. This strain was significant in the UK, where a holistic re-examination of British foreign policy in an ‘Integrated Review’ had just been relaunched. The uncertainty for staff can be debilitating; one MP on the International Development Select Committee that scrutinises FCDO sensed that ‘things had just stopped’ during its inaugural year.

FCDO's institutional creation predates a clear statement on the direction of British foreign policy, while the new UK development strategy is still forthcoming. If the cardinal rule of efficient and effective organisational design is form follows function, the sequencing of the UK merger represents an obvious violation.

A German decision to merge needs a theory for how the resulting arrangement will be more efficient for delivering the visions behind BMZ 2030 or the Sustainable Development Strategy, or their policy successors. Avoiding a major structural reform can give the government greater space to quietly work out cost-effective – if less visible – institutional improvements that do not distract from the urgent task of reigniting development progress, which has rapidly unwound over the pandemic.

2) Mergers risks bleeding development expertise

If development mergers signal 'hostile takeover', this is because they usually fold development bodies into foreign ministries rather than the reverse. Previous mergers have struggled to keep specialists in-house. The former head of AusAID's human resources claimed that almost 1,000 years of expertise were lost after its 2013 integration, while retaining sufficient sectoral development expertise and fostering a shared culture is an ongoing challenge for Global Affairs Canada.

In the UK, the merger ended representation by an independent development minister while giving ambassadors full responsibility over development programming. The nature of these structural changes can reduce entry points and career paths for development specialists along the chain of bureaucratic command. When FCDO's new management board was announced in August 2020 and ex-DFID staff only comprised two of its seven senior directors, it hinted at some neglect of development expertise and leadership in the new department. Experts' perception of their secondary status can drain morale. Though FCDO has yet to officially publish staff turnover figures, its first Annual Report states staff numbers have fallen due to a recruitment freeze.

There is a strong donor dividend to be had from an institutional structure for development that privileges ‘flexible, highly expert policy assistance’, grounded in field-based expertise built on long-term country-based relationships and knowledge of ‘what works’. Yet, mergers have not placed deliberate value on the chains of expertise and skills necessary for effective programmes. Diplomats may excel at smoothing political relations in short stints overseas, but they are less attracted to transaction-heavy interventions that rest on a bedrock of deep experience, local knowledge and public scrutiny. A study of the micropolitics of Canadian diplomacy suggests the 2013 merger of the Canadian International Development Agency (CIDA) triggered internal clashes as integration challeged the elite status of foreign service officers. FCDO's upcoming strategic workforce plan will need to consider mechanisms and incentives for reconciling such tensions, while retaining the legacy of DFID's competitive technical edge.

Any structural reconfiguration in Germany should place deliberate value on technical expertise. To some degree, Germany is insulated from an expert exodus because its vast network of 22,000 local and international specialists resides in its arm's length technical agency (GIZ). At the same time, this expertise is, even in its current configuration, hindered by diplomatic constraints on its authority and responsiveness at embassy level. To preserve Germany's technical advantages, a merger or any other institutional reform needs to enable diplomats voluntarily drawing on its repository of knowledge to allow for joined-up engagement across the diplomatic–expert boundary.

3) Mergers don't resolve coherence challenges

Policy incoherence is a common justification for merging development and diplomatic departments. Nevertheless, problems of policy coherence are often caused by deliberate decisions made by the same political forces calling for a merger. Over a decade of Conservative leadership, the UK's share of official development assistance (ODA) allocated beyond DFID increased more than double between 2010 and 2020, while the number of bureaucratic channels expanded sevenfold. The 2015 UK Aid Strategy deliberately grew the budgets of other departments and funds at the expense of DFID, the resulting fragmentation arguably strengthening political demands to merge. A similar type of political sabotage occurred in the lead-up to the Canadian merger, as CIDA was politically and institutionally weakened such that a merger seemed a necessary corrective.

Historical and contemporary evidence shows that integration increases the probability of development policy subordination to diplomatic priorities and interests. Mergers in Canada, Australia and the UK reflected desires for a new balance between development and diplomacy. This new normal typically involves anchoring development more intimately to the task of economic and geopolitical statecraft by generating domestic, commercial and competitive advantages and expanding international spheres of influence. Mergers per se do not cause aid cuts to social sector spending or drive allocations away from the poorest countries; rather they are symptoms of the same political forces that create these downstream effects.

If mergers deliver coherence, they risk doing so in a silo. Ministerial and departmental independence is a safeguard that gives development greater chance for self-defence in the hurly-burly of executive agenda-setting dominated by domestic prerogatives. It also increases opportunities for more pluralistic consideration of policy methods and actions in cross-cutting areas like climate, gender and global health. A development ministry is not inherently incompatible with foreign policy coordination, while a merger does not resolve incoherence by the stroke of a pen.

The real source of policy incoherence is the multiple, uncoordinated entry points into the broad agendas of global development, exacerbated by loose policy leadership and contested intergovernmental relations. The coherence challenge for UK development policy was less about DFID, and more about weaknesses in executive leadership and policy-making functions at the heart of government.

In Germany, machinery-of-government issues are the real threat to coherence. While the respective roles and division of labour between BMZ and its four implementing organisations are understood clearly, bureaucratically reconciling its global sustainability objectives with its domestic and European policy positions remains a challenge. An SPD-led government is unlikely to resolve policy inconsistencies by subsuming development to foreign policy prerogatives, with perhaps the thorny exception of migration. Closer integration with the Ministry of Environment is more probable given Germany is a sizable and preeminent climate donor, which may throw up new coherence challenges between the objectives of inclusive prosperity, climate resiliency and pathways to net zero.

Germany continues to view sustainable development as intrinsically valuable and grounds its actions in global solidarity (as distinct from charity, its poor paternalistic relation) and shared vulnerability, not national self-aggrandisement or economic competition. Such an approach is strategic, principled and in Germany's long-term interest. With merger talk now almost over, Germany can get to the real business of improving systems for negotiation, coordination and collective action that deliver the policy coherence that its international development ambitions richly warrant.