Originally: Improving the Quality of Life in Haiti
Haiti: Ideas for Political and Economic Development
Panel I: Improving the Quality of Life in Haiti
Presenter: Charles Clermont
I want to express my appreciation to the Inter-American dialogue for inviting me to share some brief remarks with the audience on the challenges ordinary people in Haiti face in their daily struggle to ?manufacture? their lives. One of the 2 questions the organizers want us to focus on is this: what can foreign donors do individually and collectively, to alleviate Haiti?s growing humanitarian crisis and set the stage for broader social and economic development? I contend that this very question, while being formulated in total good faith, contains the seeds of future, even imminent catastrophes.
The fight against poverty is, no doubt, a noble endeavor. However if it is confined to alleviation of the humanitarian crisis, it will not prevent the fall to the abyss prompted by the structural crisis that has been plaguing our country for many years, going back as far as the early 20th century.
I will substantiate my point by focusing primarily on the unemployment/income problem and the role of public infrastructure. My topic will be developed under 4 separate headings:
Recent economic development, policy outlook and economic forecast;
The structural crisis;
How to approach the unemployment/income problem;
The critical role of public infrastructure
Recent Economic Performance, Economic Policy Outlook, Economic Forecast
Economic Performance
The country produces today the same level of output as in the early eighties whereas it?s population grew by approximately 80% during this period.
GDP decreased by an average of 2.5% between 1990 and 2002 and the economy regressed during all of the last 3 years.
The agricultural sector continued it?s downward movement; coffee exports was a meager US$3 millions in FY2002.
Industrial sector contributes less than 20% of GDP whereas the tertiary, in which the informal sector accounts for the majority of urban jobs, represents over 50% GDP.
Economic Policy Outlook
With government revenue totaling only around 10% of GDP and the current level of development assistance, the government policy objective is to reduce the inflationary pressure by constraining credit to the private sector. Fiscal pressure remains low at less than 8%, most of the resources being provided by less than 200 firms of the formal private sector. Central government deficit during FY 2002 was G2.4 bn (US$66 million), 3% of GDP and mostly financed by advances from the Banque de la République d?Haiti, the Central bank.
Structural reforms are not part of the agenda. An SMP was in place in FY2001 and some discussions with the IMF around a Cash Management Program have been held. It remains to be seen to which extent the GOH will withstand the pressures coming from it?s political constituencies.
Economic Forecast
The picture is bleak, to say the least. The most optimistic scenarios show modest growth in the medium term. With 2% population growth, poverty will deepen in a country where close to 4 million people are classified as ?poor? in the sense that they do not possess the resources to buy 2240 calories/day while keeping some income available for a modicum of clothing and shelter.
The Structural Crisis
The Haitian situation is alarming. The peasant economy is a constant regression because of the lack of capitalization and the environmental degradation. Economic, human and social capital is in decay. Unemployment is estimated at around 50%.
In fact, for more than a century, the Haitian economy has been unable to create the real income necessary for the sustenance of it?s population, much less to provide for the investment required to secure an improvement in the living conditions.
This demographic-driven model has evolved in three consecutive phases:
Demography puts pressure on productive land;
Rural-urban migration follows. Urbanization rate went from 20% in 1970 to 35% today. Port-au-Prince had approximately 500 000 people in 1980 and more than 2 millions today;
Outside migration is the 3rd step. In 1999, more than 1.5 million Haitians were living abroad, mostly in the DR and in the USA. Remittances from this Diaspora is estimated to be close to US$600 million, supporting more than half of the import requirement.
How to Approach the Unemployment/Income Problem
All the above lead to a simple conclusion: in order to start reducing poverty, the economy has to grow by a minimum of 5/6% p.a during the next 10 to 20 years. The requirement in terms of job creation is over 300 000. For the Haitian private sector to do that:
First, we need a concept of the sector, which encompasses micro, small, medium-size enterprises. The challenge is to increase productivity across the board, which, in turn, require sizable investment in public infrastructure. We come back to the subject in a moment.
Second, we have a dire need to export and I can think of only 2 sectors with an export potential to stimulate for sizable job/income creation: the garment and apparel industry and cruise tourism.
Regarding garment and apparel, the best way USA and, to be more specific, the US Congress, can help alleviate/reduce poverty in Haiti, is by enacting promptly the Haitian Economic Recovery Opportunity (HERO) bill, which is being currently promoted by a bipartisan group. The employment potential of the Act can be conservatively estimated at 40 to 50 000 jobs over the next 3 to 4 years;
Cruise tourism, if the necessary structure is put in place, can be a great source of employment in the handicraft sector in a region like Jacmel, for example The recent announcement made by the President to the effect of privatizing the port facilities there, goes in the right direction. It remains to be seen, however, how fast the next steps will be taken.
The Critical Role of Public Infrastructure
Most social indicators present poverty as a lack of income. Yes it is but it is to a large extent a denial of access and particularly of access to services provided by assets. While the provision of humanitarian assistance will give to the poor a temporary relief, access to services of the public infrastructure will benefit two ways:
It will contribute to improve the living conditions of the poor. Just think about the cost of water in the slums of Port-au-Prince or imagine those youngsters walking a couple of miles to find lights in a public square where they can study;
It is also an input to production, hence representing a vital revenue booster for all the segments of society. It is worth to point out that the cost of an Industrial Park in Haiti is higher than it is in other countries in the Region, because water, electricity, sewage? have to be privately supplied.
We are still left with the question of how to provide infrastructure during the current period of unsettled politics. A couple of ideas for discussion:
First, the donors community could agree to consider public infrastructure as both humanitarian and development assistance on the one hand; on the other hand, because time is a critical factor, it should receive the highest priority;
Second, while funding cannot be provided directly to the GOH, it could be channeled to private sector projects with heavy infrastructure components. Whereas those projects would be financed on a commercial basis, the infrastructure component could be granted special conditions on tenor and interest rates.
Finally, let us put it simply: when there is a will, there is a way. If the international community is committed to help alleviate poverty in Haiti, it has to go one step further in order to be effective.
THE US CONGRESS SHOULD VOTE HERO NOW!
DEVELOPMENT ASSISTANCE SHOULD GIVE HIGH PRIORITY TO THE IMPROVEMENT OF PUBLIC INFRASTRUCTURE. When so many lives are at stake, we should not wait for an elusive political settlement.