German foreign aid is at a record high and rising. Here is how it works.

Germany has reinvented itself three times in 100 years, following World War I, World War II, and the reunification with East Germany.

"This experience is useful in the international development context and I still think it influences our perspective" said Chris Meyer Zu Natrup, managing director at MzN International, an association of development professionals based in Hamburg, Germany.

A massive aid recipient half a century ago, Germany is now the third largest donor for official development assistance, after the United States and the United Kingdom. From the Wirtschaftswunder — which is German for the economic miracle the country experienced after World War II — to the Energiewende — the transition Germany is now making toward becoming a clean energy economy — the country is drawing on its own experience to provide guidance to its partners.

German Official Development Assistance (ODA) increased by 26 per cent in 2015, with the country spending $17.8 billion — or 52 percent of its gross national income — on official development assistance that year. That was the largest development budget Germany has ever had, and it goes against the trend of declining ODA among other major donors, including the U.S. and Australia. Much of that increase in budget is due to the money the country has spent on refugees, which hit $171 million in 2014, $3.5 billion in 2015, and is expected to have doubled from 2015 to 2016.

With the words Wir schaffen das, or "we’ll manage it," German Chancellor Angela Merkel has pursued an open door policy for refugees. By the end of 2016, more than two-third of refugees coming to Europe find shelter in Germany, and once they are registered, they receive the wide-ranging social services provided to German citizens, said Dr. Martina Fuchs, founder and CEO of the nonprofit humanitarian aid organization Real Medicine Foundation.

While Germany anticipates the crisis will cost the country $86.2 billion over the next four years, it is one of only a few European countries that are not making cuts to its global development budget in order to offset these costs. "Quite to the contrary, Germany has increased its assistance," said Sabine Campe, a partner at SEEK Development.

Between 2016 and 2019, German development aid is expected to increase by more than $8.9 billion than initially planned, not including refugee costs. Minister of Finance Wolfgang Schäuble cited the "increasingly difficult international Environment" as the reason for this 8.3 billion euros in additional funding — which the German media reported on widely given that it was the largest increase in the country's history. But while the country keeps this rising costs for refugees separate from increasing dollars for development assistance, the government sees the two issues as inseparable.

"The migration crisis can be understood as a symptom of unequal living conditions, and if you stop investing in areas like education and health, you will not solve the problem," Campe told Devex.

The crisis, she said, has led Germany to view development cooperation as even more important than it was before. And increasingly, the country is framing its development cooperation as an effort to address the root causes of migration, and a matter not only of humanity but also of stability and security.

Germany is known for the strength of its Mittelstand, or small and medium enterprise sector, and its vocational training and education system has been lifted up as a model for other countries. Today, GIZ, a German Development Agency, is working in close consultation with the private sector to support the reform of vocational training systems around the world.

For example, Energizing Development (EnDev) has trained 37,000 craftsmen, vendors and technicians, and the program continues to experiment with the best model to maintain quality products, as well as a close relationship between producers and consumers for maintenance and repairs.

Germany's three ODA priorities are migration, climate change and food security. Since 2014, the Federal Ministry for Economic Cooperation and Development (BMZ) has launched four special initiatives: tackling the root causes of displacement; stability and development in the Middle East North Africa region; global efforts to fight climate change; and One World, No Hunger.

The initiatives give BMZ more flexibility to allocate funding for these priorities. This may not be good news for GIZ and KfW, a rec given that they have traditionally received the majority of bilateral funding from BMZ, but it allows for new partners to benefit.

On January 18th 2017, Germany revealed a new initiative to increase trade and development on the African continent, calling it the Marshall Plan, in reference to the program that played such a key role in its own economic recovery and infrastructure development following World War II.

"Africa's fate is a challenge and an opportunity for Europe," Müller said in a recent presentation on Germany's new strategy for relations with African countries. "If we do not solve the problems together, they will come to us at some point."

The three pillars of the proposal are economic activity, trade and employment; peace and security; and democracy and rule of law. The Marshall Plan is a living document, and the government has already shifted the name from the Marshall Plan for Africa to the Marshall Plan with Africa, to capture that this is not about aid delivery to Africa but an initiative to support African development. The government seeks feedback ahead of the G20 summit, where the plan will be finalized.

The G20 presidency provides Germany with a new platform for leadership. The three aims of the G20 agenda are building resilience, improving sustainability, and assuming responsibility, said Lars-Hendrik Röller, economic advisor to Merkel, at an event convened by the T20, a network of think tanks and research institutions from G20 countries.

Merkel has said she wants the G20 agenda to focus prominently on the empowerment of girls and women, as well as health, with a focus on pandemic preparedness. Digitalization is one of the areas Merkel highlights in a document outlining priorities for the G20 summit. Another priority for Germany at the G20 is increasing the transparency, openness and reliability of tax systems around the world, building on recent efforts by Germany to come down on tax evaders. In Hamburg, G20 leaders will put together a communiqué, which will lead to new deliverables for German ODA, such as the #Eskills4girls initiative.

Between Brexit, which has made German leadership within the EU more important than ever, the United States presidential elections, which put an "America first" administration in the White House, and the rise of nationalism and populism, the pressure is on Merkel. While Germany is a reluctant leader, the country is likely to lead by example and work in partnership with others to advance these agendas. For example, GIZ staff members are highly sought after around the world for expertise on energy, due in part to the reputation Germany has developed as a leader in the clean energy transition through its Energiewende.

Beyond its own domestic energy transition — and the work Germany is doing to work with partners on their own clean energy transitions — Germany is helping developing countries reach their climate goals. The 2015 annual report for GIZ outlines how the agency supported the governments of 30 countries, from Vietnam to Morocco to Peru, to meet their COP21 commitments to reduce greenhouse gas emissions. At COP22, Morocco and Germany launched the NDC Partnership, a new coalition of developed and developing countries working together on national climate plans. And COP23 will take place at the U.N. Convention on Climate Change Secretariat in Bonn later this year.

2017 is a big year for Germany, not only because of the COP and G20, but also because of its own upcoming elections that will likely shake up the coalition in the Reichstag, the seat of the German Parliament in Berlin.

But despite the rise of nationalism and populism reflected in Brexit, the U.S. presidential elections, and even the rise of the far right Alternative for Germany party, the majority of Germany remains liberal, pro-European and supportive of the free movement of ideas and people across borders, said Meyer Zu Natrup. "The government made clear that where partners are willing to reform to tackle the many problems we all face, they will get support from Germany," he said.