Mobilizing Resources for Development: Transition and Growth Scenarios

Presented to the seminar “Whither Haiti: from Crisis to Development” on Tuesday, February 11, 2003. Seminar convened by the Dante B. Fascell North-South Center of the University of Miami

James R. Morrell
Haiti Democracy Project

 I. Transitional Strategy 2
  A. Resources for Transition 2
  B. Transitional Strategy Outlined 3
  C. A Working Definition of Governance 3
   1. Inter-institutionality 4
   2. Discipline 4
   3. Legitimation 4
    a. A constitutional framework 4
    b. Separation of powers and checks and balances 4
    c. System of representation or indirect participation 4
    d. Periodic elections 4
    e. Open political space 4
  D. Accountability and Transparency 4
  E. Transitional Program Design 5
  F. Next Elections Must Be Unimpeachable 7
   1. Power-sharing 7
   2. Closure 7

 II. Growth and Aid Mobilization 8
  A. Growth Scenarios 9
  B. Aid Scenarios 10

Poor governance and political instability are the major impediments to Haiti?s regaining access to potentially-abundant external resources for development. Figure 1 below starkly portrays the donors? response to the degradation of governance in Haiti. Since 1994?95, disbursements have declined at an average rate of 17 percent annually.


What kind of transitional strategy, then, can bring us to the post-crisis threshold envisioned by the conference organizers? Once there, what strategy can turn around the numbers of Figure 1 and focus the aid on the relief of Haiti?s shattering mass poverty? How much growth could Haiti reasonably be expected to achieve once this threshold is achieved?

 We consider these questions in order.

I. Transitional Strategy

A. Resources for Transition

 When the question of transitional strategy was posed a year ago, after the World Bank completed its country-assistance evaluation, the available components of a transitional strategy were meager indeed. The government in place was as indifferent as ever to its political commitments. The internal alternative seemed weak. The international community was withdrawing and showed no signs of an effective approach.

 Other than an abstract call for the renewal of international nation-building, for which all political prerequisites were lacking, there appeared to be no recourse.

 The very hopelessness of the situation, however, seems to have called forth a renewal within Haiti for some sort of alternative to the current impasse. It is too early to assess whether the Initiative Citoyenne or Group of 184 can repair the deficit of legitimacy which has prevented the current government since 1997 from organizing credible elections. However, it is not too soon to propose a transitional strategy that would capitalize on the precious legitimacy that this civic initiative, if properly supported, could add to the process.

 The initiative?s potential long-term contribution to governance in Haiti is considerable. By the impressive breadth of the organizations it has combined (259 at last count) it has displayed an unequivocal commitment to improved political governance?consensual, rule-governed, just, and inclusive. There have been no coalitions of comparable stature or purposefulness in recent Haitian history, if at all.

Urgency of Devising Transitional Strategy

 The emergence of this center of legitimacy creates new material to work with to bring Haiti to the post-crisis stage. Transitional assistance should be tightly focused on resolving the current political impasse and addressing the root causes of the chronic state of crisis that has enfeebled the country since the ouster of Baby Doc. The solution, as OAS Resolutions 806 and 822 have underlined, centers on conduct of unimpeachably free and fair elections. The accomplishment of such elections will require a broader mandate, greater resources, and broader international sponsorship for the current Special OAS Mission for Strengthening Democracy. No civil-society emergence in Haiti, however broad-based, can relieve the international community of this responsibility.

Findings of the World Bank?s Country Assistance Evaluation, February 12, 2002

? Positive results tend to be found in project components that bypass traditional channels, using NGOs or autonomous agencies
? Efficacy of the bank?s program has been negligible
? Its efficiency has been low
? The critical constraints to development ? governance and public-sector capacity and accountability?have not diminished
? Outcome of the bank?s assistance program is rated unsatisfactory, if not highly so
? Institutional development impact is rated negligible
? Sustainability is rated unlikely
? The bank and other donors erred by offering traditional assistance programs without identifying the fundamental governance and political barriers to development.
? ?It would be hard to argue that, with a few exceptions, the country is any better off for having borrowed at all.?
? A bank transitional-support plan must place highest priority on reform of governance and institutionsB. Transitional Strategy Outlined

 As the World Bank?s Country Assistance Evaluation notes, ?Haiti needs not only the institutions of government, but also the processes and systems to enable them to work.? In the immediate period ahead, then, a transitional program must insure accountability and transparency of any Haitian entity it aids. Such accountability and transparency must be regarded as the sine qua non of any assistance. Without it, assistance is almost sure to be wasted. All assistance must recognize how the realities of the past condition the present and mortgage the future. It is in such historically determined peculiarities that the transitional strategy must be devised.

C. A Working Definition of Governance

 Major disbursements and long-term planning will only be possible with improved governance. A dynamic definition of governance spans both the institutions and the actual processes. These are the salient aspects for the Haiti problem:

1. Inter-institutionality. Governance is a complex, inter-institutional process that establishes the parameters and sets the conditions under which the economy, society, and politics develop.

2. Discipline. Democratic governance applies a discipline to the exercise of raw state power insuring respect for the interests of a majority and adequate protection of those of a minority and other vulnerable groups. Such discipline makes democratic governance a rule-controlled exercise rather the extension of personal power.

3. Legitimation. Such discipline must be legitimated by a referendum conferring on it the imprimatur of popular sovereignty. Typically, this is done by a vote on a constitution as in 1987. Once established, this discipline is imposed on all those called to govern. A number of critical institutional arrangements and processes combine to impose this discipline. Together, these comprise a democratic system of governance. The critical elements are:

a. A constitutional framework

b. Separation of powers and checks and balances

c. System of representation or indirect participation

d. Periodic elections requiring office-holders to take account of the interests of ordinary citizens or risk losing their posts.

e. Open political space assured by freedom of opinion, association, speech, and press.

Political elites and their cronies continue to take kickbacks at every opportunity. Hand-in-glove with corrupt business people, they are trapping whole nations in poverty and hampering sustainable development. Corruption is perceived to be dangerously high in poor parts of the world, but also in many countries whose firms invest in developing nations. ?Transparency International 2002 Corruption Index
D. Accountability and Transparency

 For purposes of designing the transitional program, it is essential to note that in democratic systems control and oversight are vested both within and beyond the state apparatus, as are the appropriate means to sanction poor and unlawful performance. This is crucial in Haiti, which was rated 89 out of 102 by Transparency International?s corruption index. Thus if the above-predicated accountability and transparency cannot be instilled in governmental entities of control and oversight, then the aid should be directed to those nongovernmental institutions which offer accountability. These institutions and ?Current accounts? in government spending
? Outside the normal control procedures
? Virtually impossible to identify actual use, beneficiaries or impact
? Misuse of funds, missing audits, and non-competitive bidding procedures
? Virtual absence of national procurement system makes misprocurement likely
?World Bank, Country Assistance Evaluation, p. 4.their personnel, so reinforced, can provide a supplemental font of legitimacy which may be fused to the deficient state institutions in some future negotiation. Or, should this prove unworkable, these reinforced institutions and personnel could then supply the core of a transitional administration which the civil society and international community would use to conduct the desperately needed free elections.

 Progress along the lines indicated above is essential or the World Bank will once again find itself arraigned by its own internal censors for skirting the overriding political and governance problems. And not only by its own internal censors. The majority of members of the majority party in both U.S. legislative chambers have historically voted to constrict IDA replenishments, thus obstructing poverty relief across Africa and low-income Asia. No doubt the candor of the February 12, 2002 CAE will provide grist for the mill of these detractors, but the clear evidence that the aid community has assimilated these lessons and is applying corrective strategy more than offsets the liabilities of such honest reporting. What would truly undercut broad-based political support for concessional multilateral aid would be a willful repetition of the same errors. No special interest, no matter how well funded, should be allowed to override the necessity to make aid address the central obstacles to poverty alleviation. Any other course for the developmental community would be suicidal, both to itself and the millions who depend on it.

 Returning to Haiti, it is essential to understand how the problematic present is shaped by the pernicious past, and thus to understand that the future must be predicated on a genuinely new beginning, if it is ever finally to free itself from the bonds of this debilitating dynamic.

E. Transitional Program Design

 Aid strategy should endow the Initiative Citoyenne organizations with a broad alternative polling and outreach capacity that looks forward to the proper organization of elections, whether administered by an Initiative-advised electoral commission with its own police and international protection, or conducted by a transitional administration. Unstinting infrastructure aid to the Initiative should begin now to enable it to:

? Establish a presence in all nine departments
? Launch nationwide seminars on its proposal for a social contract (bridging the historical enmity between bourgeois and majority-class)
? Add the Haitian-American diaspora to its ensemble of ?twelve vital sectors?

Working with NGOs?A Relatively Successful Experience

One model that appears to be relatively effective in Haiti?s difficult implementation environment is the use of NGOs or autonomous agencies to distribute services and funds. This is a short-term solution only, which could be used while longer-term measures are being taken to strengthen the country?s institutions . . . Other donors, such as USAID, have also found this approach to be effective. ?World Bank Joint initiative-foreign proposals for the disarming of political gangs, the monitoring and retraining of the national police, and the physical protection of the initiative against mounting threats should be funded as part of the transitional strategy in the absence of regime willingness to proceed on these fronts.

 All should be done with the physical presence of the international community as needed. The current OAS mission would need to be substantially reinforced, both domestically by pairing with the Civil Society Initiative mediators and internationally by the renewal of U.N. participation.

 The above strategy would follow current U.S. Agency for International Development guidelines in channeling all current resources through nongovernmental organizations, but it would pose a challenge to the World Bank and Inter-American Development Bank, who see their comparative advantage in working with governments. Their initial transition plan foresaw a serious dialogue with the government: ?No strategy will be effective without government ownership, so the first step should be to create a climate of trust and mutual cooperation between the government and the donors.? Similarly, the OAS democracy mission has sought to instill government ownership of democratization but has met with repeated frustration. The same historically-conditioned noncooperation awaits the bank if, against all experience, it puts all its eggs into this particular basket.

 A recent discussion paper on post-conflict recovery in Africa found that ?Effective intervention . . . requires that there be a reasonably functioning governance structure, accepted by a large part of the population and supported by the international community. When these conditions are not met, economic assistance can be counterproductive . . .?

 This raises the possibility that aid might not merely be wasted, but could actually do harm. This might apply to Haiti because of the supercharged political context in which the government seeks a renewal of foreign aid. The government would use the approval of the aid as a tool of political legitimation to be wielded against the opposition and civil society striving to create an alternative. The aid?s political aspect might be far more significant in the country?s life than its economic.

 A more realistic concept would be to redirect foreign legitimation to the far more consensual Initiative Citoyenne and other civil-society organizations which have the capacity to serve as incubators of democratic governance.

F. Next Elections Must Be Unimpeachable

 The muscular intervention of the international community in 1994, by returning the country to the status quo ante, effectively demonstrated that thenceforth victory at the polls would be the unique route to power. A similar demonstration that this victory can only be won by fair elections is now urgently needed. There is a cynical refrain that the ritual of elections is better than no elections at all. On the contrary, the next elections must not only be acceptable in form but unimpeachable in conduct and faithful in their results. Only by this means can the continued fragmentation of Haiti be halted and a center of legitimacy created. There is no other route to stability and to creation of a propitious environment for the mobilization of anti-poverty resources.

 The satisfaction of this fundamental demand for unimpeachable elections can only be met if the international community not only finances the elections, but this time provides the full measure of its physical presence and moral support. From a sheer management point of view, considering the enormous investment already sunk in Haiti and the potential future liabilities, no other course makes sense.

 If mismanaged in the manner of the 1997 and 2000 elections, the next elections could plunge the country into an irreversible state of crisis disastrous for the population of Haiti and more than embarrassing for the superpower which took responsibility for this country in 1994. Given the rapport des forces that would prevail at the next balloting, a good election can be reasonably expected to produce a genuine multi-party presence in the legislature and local jurisdictions. The true diversity of opinion, and the natural disadvantages of incumbency in a collapsing socio-economic situation, have become evident in the widespread protests of recent months. An accurate election registering this diversity would accomplish two essential objectives:

 1. Power-sharing. It would demonstrate that the power and prerogatives of office must be shared, thus cutting loose cleanly from hegemonic, one-party and one-personality rule.

 2. Closure. It would provide a definitive closure to the extended interregnum since the departure of Baby Doc.

 Thus properly-organized elections will provide a definitive answer to the ?Who shall have it? question bequeathed by Dessalines and his successors for nearly two hundred years. The answer is not one person but a result that is consensual and internationally sanctioned?the only possible way to redeem the abysmal actual state of Haiti as its lurches to the bicentennial of its glorious revolution.

 With this answer, Haiti will make clear its own changed political realities as it enters the twenty-first century. There is no better way to celebrate the bicentennial of what is a shining marker in human freedom than such a liberating break with the more recent past. There is no better time for a point of no return, when the past must finally become the past. This election will loosen the stranglehold of the past on the present and end the ultimately futile efforts to reproduce the past.

II. Growth and Aid Mobilization

 Once truly free and fair elections are held, we proceed to the task of mobilizing the resources of more than twenty bilateral and multilateral aid donors who over the period 1994?2000 disbursed $2.6 billion and committed to a far larger amount. The giving record follows:

(In $millions)

Canada 195.8
France 137.9
Germany  24.3
Japan  88.3
Netherlands  25.6
Switzerland  34.1
Taiwan  92.8
United States 723.6

European Union   292.4
IDA   226.1
IDB   353.3
IMF    65.1
U.N. organizations   205.8
Others   106.1
Total 2571.2

Source: World Bank

 Analyzed against the commitment of the mid-1990s consortiums, $1.3 billion has been lost:

($ millions)
Consultative Group commitment 2800
Disbursements: 96/97  -378
97/98  -371
98/99  -330
99/00  -266
37621  -189
Balance 1267

   Source: Figure 1.

 This $1.3 billion is then the minimal documented amount of foreign aid that the post-1996 political degradation has cost Haiti. As I have often told reporters who ask how much is being  ?blocked,? the maintainance of some commitments on the books or their cancellation is a minor bureaucratic detail. Those technically maintained are scarcely closer to disbursement than those formally canceled. The decision by the Clinton administration and European Union to withhold aid in protest of the May 21, 2000 electoral miscount only ratified a process well underway, and the oscillation away from that decision in OAS Resolution 822 will not affect the overall trend.

 The breadth of aid donors, the creditable disbursement record and even more impressive commitment record reveal the potential to be mobilized. With the basic institutions and procedures of good governance established, these actors will be able to move more deliberately and systematically than they have over the past tumultuous sixteen years. And they will be able to apply the many lessons learned from their clearly substantial investment.

A. Growth Scenarios

 The challenge is to recover from a decade?s negative growth and restore Haiti to growth patterns at least comparable to Latin American norms, if not the faster pace set by the Dominican Republic. During the past decade these rates were registered:

GDP growth (annual %) average for Haiti and comparator countries, 1990?99

Haiti Latin America Low-income Dominican Republic El Salvador Honduras Cambodia Burkina Faso Guinea Togo
– 0.6 2.9 3.0 4.6 4.9 2.8 4.5 3.8 4.0 1.7


 The following crude approximations are attempted in lieu of more definitive IFI exercises, which, to my knowledge,  have not been published since the mid-1990s. During the past decade, Latin America as a whole logged a growth rate of 2.9 percent. Recovering from a low level, Haiti?s growth rate would likely be higher. Nevertheless, applying this conservative figure to Haiti?s next decade, Haiti?s growth would resemble the following:

Haiti?s GDP by Year in $Billions
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
3.8 3.9 4 4.1 4.3 4.4 4.5 4.6 4.8 4.9 5

 By this growth scenario, then, Haiti would increase its GDP by $1 billion a year in seven years.

 However, should Haiti grow at the rate registered by the Dominican Republic over the past decade, 4.6 percent, its growth would look like this:

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
3.8 4 4.2 4.3 4.5 4.8 5 5.2 5.4 5.7 6


 It would thus increase by $1 billion a year by 2007 and by $2 billion a year within a decade.

 While the first scenario would barely keep up with population increase, the second would outstrip it, significantly reducing mass unemployment by generating jobs in light industry and tourism in particular.

B. Aid Scenarios

 I am not aware of any public exercises in which donors have projected their level of commitments to a post-crisis Haiti. The extreme caution with which they now approach Haiti precludes such speculation. However, it is possible to venture a guess (it is only that) on historical evidence.

 There have been two notable moments at which the World Bank-led donor consortium confronted favorable parameters from Haiti and made large pledges: 1991 and 1995?96.

1991 Paris 1995?96
$511 million, multi-year $2.8 billion over five years
= $200 million a year Equals $560 million a year

 Both pledging sessions expressed deep goodwill toward Haiti and relief that a country which previously could not be effectively aided now had seemingly become available. However, the disbursement schedule of 1991 was disrupted by the coup and that of 1995 by the subsequent governance breakdown that continues to this day.

 Each country has an unofficial quota at the IFIs and when circumstances long prevent a country from using its ?quota? (this is not the specified quota at the IMF but a purely notional amount), then a presumption is built in favor of compensation for the missed years. Haiti benefited from such a mentality in both the 1991 and 1995 commitments. In particular, in late 1994 and 1995  the IFIs, the U.S. Agency for International Development, and Canadian aid made extraordinary efforts to aid Haiti, well beyond even those prefigured in my 1992 ?Mobilizing Resources for Development.? The commitment was to provide the equivalent of Haiti?s entire GDP over five years. The effort was crystallized by Inter-American Development Bank president Enrique Iglesias?s remark to a visiting delegation of NGOs in late 1994: ?We?re going to break the rules for Haiti!? It was embodied in the indefatigable efforts of Mark L. Schneider, assistant administrator of AID, before skeptical appropriations committees.

 A post-crisis Haiti presupposes re-creation of the two political moments, 1991 and 1995, that drew forth such extraordinary commitment from more than twenty bilateral and multilateral donors. Clearly, then, the design and success of the transitional program is crucial in order to place Haiti on such a favorable threshold. Should the various components of the transitional program be provided and implemented as suggested on pages 2 to 6 above and the free election held, the goodwill and sense of relief would approximate that of 1994?95.

 Admittedly, there is no sign of it today. There are no hard data for such a guesstimate. Nevertheless, I consider achievement of the transitional program capable of producing a psychological breakthrough that seems perfectly inconceivable in the current exasperating deadlock, because I have seen it before. Given the political pressure for a positive policy toward Haiti, and the growing self-consciousness of the Haitian-American community, and assuming a true breakthrough in governance signaled by pluralistic results of free elections, I consider the donors capable of commitments to the very limit of Haiti?s absorptive capacity, or up to $500 to $600 million a year for several years.
 To repeat, this high level is only conceivable after removal of the governance barriers identified in the 2002 CAE. It is impossible to get in current circumstances and no special interest or lobbying campaign can pry it loose. Such a campaign indeed only undermines Haiti?s case before the donors. The high level can only come as an expression of the IFIs? laudable, if belated, recognition of governance and human rights as crucial enabling factors of economic development.

 By this analysis, a strategy to aid Haiti in removing those governance barriers is precisely the strategy most capable of maximizing its take from the donor community. This is a community dedicated in recent years to the lowest-income countries and, because of the weight of the United States, especially attuned to the plight of the lowest-income country in this hemisphere.

Conference Agenda