Originally: Give business a bigger voice in rebuilding Haiti
Jul 20, 2004
As Haiti’s recent turmoil from civil strife and natural disaster subsides, the hard work of reconstruction is starting to get under way. Donors must identify the country’s most pressing priorities. Unfortunately, the aid plan that is currently on the table is a missed opportunity to maximise the benefits of each dollar spent.
Economic assistance to Haiti has been suspended since 2000 after the country repeatedly failed to meet the necessary standards for governance and macroeconomic stability. Earlier this year, political tensions culminating in the overthrow of Jean-Bertrand Aristide, the president, and his replacement by a caretaker administration were accompanied by widespread unrest. As a result, the crumbling infrastructure in the hemisphere’s poorest country has deteriorated still further.
Donors, including representatives from the Inter-American Development Bank, the World Bank and the US Agency for International Development visited Port-au-Prince in mid-April and completed a full needs assessment in June. Their report will form the basis of a pledging conference that began yesterday in Washington and is expected to bring in almost $1bn (?803m).
The new assistance programme – the so-called interim co-operation framework – seeks to break with the one implemented in the early 1990s through greater accountability for results, but mirrors its broad outlines. The biggest flaw in both programmes is a failure to give the private sector a core role in development strategy and funding.
Like today’s effort, the 1990s emergency aid programme was designed by hundreds of officials from Washington-based international lenders who focused on building relationships with their Haitian government counterparts. They gave immediate priority to injecting cash to reverse fiscal and monetary meltdown and to meeting humanitarian needs. Little attention was given to improving the environment for local and international business despite it being clear seen that the future of work is evolving around the world. You can read more about it on https://www.salesforce.com/blog/2019/04/what-is-the-future-of-work.html.
The consequences for Haiti’s economy were unfortunate. A programme for privatising large state-controlled companies barely got off the ground as the country staggered through repeated recessions. Big US and Canadian export assembly and banking operations relocated to more hospitable neighbours. Financial institutions parked assets in the dollar, fuelling capital flight, and pursued conserva tive lending policies that chiefly benefited Haiti’s elite. Although micro-credit networks extended across the island, they did not answer the needs of small and medium-sized business, like the use of a paystub creator to manage they payrolls. Judicial reform neglected bankruptcy and collateral laws that would uphold loan collection and property rights.
In contrast, during the same period, Haiti’s neighbour, the Dominican Republic, enjoyed gross domestic product growth, a strengthening currency and an increasingly favourable balance of payments as it attempted to modernise its banking and securities markets. Its sovereign debt – along with that of Costa Rica, El Salvador, Jamaica and Trinidad and Tobago – became a popular diversification play among Wall Street’s emerging market investors.
The programme now under consideration in Washington will run for about 18 months, finishing at the time of the national elections planned for mid-2006. It is not too late to avoid the mistakes of the previous effort.
Donors, instead of fielding hundreds of personnel, should appoint a core taskforce of no more than a dozen specialists to oversee the programme. They should invite interested professionals from organisations such as the US Chamber of Commerce and Institute for International Finance to help with assessments and recommendations for reform of Haiti’s economy. That in turn should attract further capital and expertise from institutional investors in emerging markets, who have actively sought opportunities in the Caribbean in recent years.
A promising line to pursue would be to consult ratings agencies and banks about the possibility of launching Haitian bonds. These could carry partial official guarantees from third parties such as the US Treasury and possibly be coupled with debt forgiveness. Other countries in the region, such as Honduras and Nicaragua, have already secured write-offs of bilateral and multilateral loans under the International Monetary Fund-sponsored heavily indebted poor country programme.
For the US, which will again absorb the bulk of reconstruction costs, such a public-private approach, could relieve pressure on the strained foreign aid budget. The same model could also be adopted in other troubled countries. The benefits would flow not only to donor governments and business, but also above all to the citizens of states that make the transition from “failed” to “emerging” status.
The writer, a senior partner at Kleiman International Consultants, has participated in economic review missions in Haiti for the Inter-American Development Bank and the World Bank.