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Building big in Haiti

Yves Savain

Over more than two decades, Haiti’s economy has relied heavily on remittances —US$1.8 billion in 2008 according to the Inter-American Development Bank (IDB). As a result, before the earthquake two million literate young people already wandered the streets of Port-au-Prince, Cap, Gonaïves, Jacmel and Les Cayes looking for work. Transfers will continue to be allocated mainly to immediate consumption rather than long term investments; thus, what is needed now is a sustainable plan for infrastructure construction, economic growth and job creation that the Haitian state, the people of Haiti and its diaspora can validate.

With much of Port-au-Prince destroyed, a million or more homeless, plus a large backlog of unattended infrastructures, we could be looking at US$50 billion of fresh capital needed over the next eight to 10 years for new construction. So how should Haiti attract the necessary foreign direct investments and create half to one million export-based living wage jobs that will expand the economy for all?

A basic requirement is to limit the role of aid missions in long-term development. Even with the best of intentions they distort Haitian reality and waste much time and resources trying to comprehend a society that mystifies them.

Then, it is high time to consider the long standing proposal to entrust the co-ordination and execution of Haiti’s economic development to an independent authority. This body that would focus exclusively on infrastructure construction, economic growth and job creation could be called the Building Haiti Authority (BHA).

Unlike current efforts, it would be led by professionals of Haitian descent whose credentials would include recent global experience in financing, building and managing billion dollar projects. Activities would preferably include the creation of or improvements to airports, manufacturing facilities, commercial space, multi-family housing, ports, utilities, hydroelectric dams, profitable agricultural ventures and world-class free trade zones.

The BHA would work in tandem with the Haitian government while enjoying irreversible autonomy along with the authority to raise money from capital markets. Repayment of loans would be guaranteed by a documented regime of fees, tolls and revenue from leases. And to ensure the success of these ventures, the government would enact comprehensive legal and regulatory reforms protecting investments, private property and rationalizing corporate law to promote entrepreneurship.

Precedents for the proposed BHA can be found in recent American history when independent super agencies were organized to remedy major economic and structural deficiencies. The institutions Robert Moses created with the autonomy granted by the State of New York first come to mind. Beginning in 1924 through 1960, he used this permission to finance and build the highways, tunnels, bridges, Jones Beach and more, giving rise to a state-wide park and highway system and today’s compelling greater New York City area.

Another case in point is the Tennessee Valley Authority (TVA) created in the midst of the Great Depression. Exercising broad federal prerogatives, the TVA quickly built a dozen hydroelectric dams through the Second World War. Today, it still oversees a vast network of energy producing facilities, as well as irrigation and transportation canals that continue to fuel the prosperity and growth of agriculture and manufacturing in Tennessee and five neighbouring states.

Finally, the Municipal Assistance Corporation (MAC) established jointly by the City and State of New York, which faced impending bankruptcy in 1975 is another good example. Under the leadership of financier Felix Rohatyn, the MAC restored New York to fiscal health.

These three examples show how crucial the introduction of rigorous fiscal and economic discipline to the planning and implementation of programs impacting public interests has been in securing their success. Unlike aid projects that rarely meet basic viability criteria, private-public authority ventures must pay for themselves.

With these and other precedents in mind, the BHA could be structured quickly and set immediately to tackle long-standing failings of Haiti’s economy. The mission that would govern its operations would include the priorities that follow.

First, the BHA would work promptly to secure between US$3 to US$5 billion in credit and equity yearly. These sums would complete strategic projects that BHA would optimize by undertaking joint ventures with qualified private sector partners.

Second, priorities should include basic infrastructure development and the creation of industrial zones that will attract manufacturers mainly from Asia to lease millions of square feet of new facilities with easy access to fully equipped ports and airports, and a regulatory and trade climate that supports the gainful employment of 150,000 to 250,000 people. The productivity of Haitian workers in apparel and electronic assembly has been demonstrated for over 30 years and is a guarantee for growth in foreign exchange revenue.

Third, targeting Port-au-Prince and nearby towns impacted by the earthquake, the BHA would devise suitable financing instruments. Loans would be made available to individuals and institutions interested in building residences, schools and commercial establishments in accordance with revised national building codes and design standards.

Fourth, to serve five million residents in rural areas, the BHA would manage a development strategy also predicated on profitability and growth. Emphasis would be on fresh food production to meet increased demand from employed workers in towns. The BHA would also provide the necessary incentives to generate electricity, build and manage water resources, improve land usage, involve local contractors in feeder road construction and maintenance, and move ahead with reforestation.

This is not a proposal to be considered in an undetermined future; the matters at hand are critically urgent. The free trade zones needed outside Port-au-Prince to put people to work should have been completed soon after the U.S. Congress granted unprecedented trade access to Haiti. It is year two of the amended Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE II), which aims to provide the country with 10 years of tariff exemptions, and still nothing meaningful has been undertaken. Weeks after the earthquake, the call for action is deafening and the need to act palpable.blue square

Yves Savain, originally from Haiti, is the President of KeyBridge International, a Maryland trade, marketing and consulting company that operates in the Caribbean, Central America, the United States and Canada.

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