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July 21, 2004
JS-1805 United States Treasury Under Secretary John Taylor
Breakfast Business Session on Private Sector Investment in Haiti
Good morning. I would like to begin by thanking CCAA for organizing this event, especially on such short notice, as well as its co-sponsors, the U.S. Chamber of Commerce and the Association of American Chambers of Commerce in Latin America. I would also like to say at the outset how pleased I am at the level of interest generated by this session, which I hope represents a new era of openness and communication between business leaders and the Government of Haiti.
Just yesterday, the World Bank held a very successful donor conference for Haiti, raising over $1 billion in assistance for the next two years. But this is only the first step. Past experiences in Haiti - and, indeed, with many other donor recipients - have shown that the impact of financial assistance on the ground often falls far short of expectations. The challenge going forward is to learn from our mistakes to ensure that this donor effort translates rapidly into tangible improvements for the Haitian citizens - new roads, clean water and power generation, as well as better access to health and education.
We welcome the steps that the Haitian authorities have taken, in consultation with donors, to define priorities in the context of the Interim Cooperation Framework. As we have stressed in other contexts, the priority now is for all parties to cooperate closely to achieve measurable results by agreed timetables. All of us, Haiti's government and donors alike, must hold ourselves accountable. In this regard, I believe it is important to define measurable results and to agree on a donor lead for assistance in each individual sector. This will help the Haitian authorities to streamline the process for donor coordination and promote donor accountability.
But the critical difference I want to highlight today is agreement on the need to reach out to the private sector. You will be as essential to Haiti's success as the official commitments that were announced at yesterday's conference. Alone, our pledges cannot launch sustainable economic growth. Ultimately, Haiti's prosperity will depend on many of you in this audience - and others like you -- to provide capital, know-how and technology, and create sustainable jobs that raise incomes and lift families out of poverty.
I had the opportunity to visit Haiti less than two weeks ago, where I met with government officials, including the Prime Minister, and representatives of the business community. Many of them echoed the same themes - the importance of job creation and building infrastructure, especially roads. In just over a day, I came to appreciate that the needs - and opportunities -- for investment in Haiti are enormous. The clogged streets and the power outages were compelling illustrations of the challenges that Haiti is facing in reconstruction and development.
The new authorities have shown their commitment to address these challenges immediately - for example, there has already been a dramatic increase in power generation, from 2 to 12 hours a day. In addition, the government has put forward $127 million to meet critical needs, including roads, improving electrical distribution, strengthening institutional capacity and increasing security. These funds will be significantly augmented by the contributions put forward by donors. The key is to get the private sector more involved in reconstruction.
During my visit, it was apparent that the level of private sector activity in Haiti is well below what it could be. The good news is that much of Haiti is bustling with commerce. But most of it appears to be limited to small, informal enterprises. In fact, the World Bank's new needs assessment for Haiti estimates that 95% of private employment is in the informal sector, while the role of the private sector in meeting Haiti's major investment needs remains negligible.
There is also a lot of unmet potential in the export sector. The World Bank reports that the value of imports in Haiti is six times larger than exports. Exports from Haiti are only 1/19 as much as its neighbor, the Dominican Republic. Though exports rebounded in 2003 from a steady decline during the previous three years, the recent crisis has had a dampening affect.
It is not difficult to understand why the development of the private sector has lagged in Haiti - poor infrastructure, difficulty accessing credit, and a weak regulatory environment all constrain business creation. Of course, the recent looting and upheaval was a further setback for Haiti's business community.
While these are difficult circumstances in which to do business, there have already been positive developments in Haiti's political and economic landscape. The security situation continues to improve, and the new authorities have taken steps to stabilize the economy by reigning in spending and pursuing revenue collection.
Under the auspices of an IMF staff-monitored program, the government recently laid out its strategy for containing inflation, maintaining fiscal responsibility, increasing transparency and improving governance.
In addition, I was very encouraged by my discussions with government officials, who emphasized their determination to make Haiti more hospitable to the private sector. This includes plans to support the development of export-oriented firms through initiatives such as regional one stop shop centers, and the establishment of special industrial and commercial free trade zones -- programs which have worked well in other countries. Hopefully you will hear more about these later this morning.
My government also continues to look for ways to assist Haiti in expanding its trade with the United States. As you know, last Friday, the Senate passed the Haiti Economic Recovery Opportunity Act (HERO) proposed by Senator DeWine and others earlier this year. If ultimately passed, this initiative will allow Haiti duty free entry for apparel assembled from third country inputs, potentially providing a significant boost to economic activity.
In closing, I would like to emphasize that the Prime Minister's support for this event - and his request that key economic ministers stay on to represent his government - is another clear indication of the priority he places on developing a stronger partnership with Haiti's business community. I hope that during the ensuing discussions this morning, you can begin a constructive dialogue on what steps Haiti's new authorities should take to spur private investment. The key will be to translate this dialogue into action. Implementing measures to support business creation and generate jobs is absolutely critical for Haiti's future success, and I welcome the authorities' commitment to this effort.
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