Development co-operation made in Germany. OSW REPORT 2015-07-29

For years, development policy has attracted the attention of public opinion in Germany and been strongly supported by the public. It takes the form of an agreement between equal partners who draw mutual benefits from this co-operation. German development policy is structured to support the German economy. This policy and the state’s significant share in development projects reduces the investment risk incurred by German entrepreneurs who engage their assets in developing countries. Furthermore, bilateral co-operation successfully builds the made in Germany brand as regards both development policy and further economic co-operation, making the beneficiaries of development co-operation indirectly dependent on German goods and services. Development co-operation, along with diplomacy and defence policy, is the third pillar of German foreign policy. In this context it plays above all a preventive function in the case of international conflicts. Investing funds as part of development projects in areas affected by military conflicts or facing a high risk of military conflict is viewed by Germany as its contribution to overcoming crises or removing their causes. This goes hand in hand with the conviction that international conflicts, wherever they appear, adversely affect the German economy, which heavily relies on exports.

Private long-term investment in uncertain times. Bruegel Policy Contribution 2012/23, December 2012

The economic and financial crisis in Europe is affecting the financing of long-term infrastructure investment. There are multiple clearly identifiable channels: reduced demand for long-term investment, a tightening prudential framework for lending, upward adjustment of risk perception, complex transition of the financial system, and increasing macroeconomic, sovereign and regulatory risk. Some of the identified channels are potentially dangerous spillovers from the crisis that entail the risk of a downward spiral (eg increasing regulatory risk), while others are efficient market responses (eg reduced investment demand, correction of pricing of risk). Consequently, public policy instruments should not address the accessibility of long-term finance per se, but should explicitly target the critical channels.

Law and Foreign Direct Investment. IES WORKING PAPER 4/2011

In this paper we examine the effect of law on foreign direct investment outflows with a specific interest in the relationship between international investment law and domestic private property laws. Our results indicate that FDI investor is indifferent to host country property rights, hence shareholder protection by law is not a significant determinant of FDI outflows. We argue that FDI, in contrast with other types of capital flows, can effectively mitigate the agency problem through majority ownership and control, hence reduce exposure to ex-post expropriation by the affiliate. On the other hand, FDI investor remains exposed to risk of expropriation by the host government and is strongly sensitive to the enforcement of law in the host country. In contrast with recent literature we conclude that there are no causal relationship between bilateral investment treaties and FDI.