The Prime Minister's New Paradigm For Haiti
Copied below is a strategy paper that Prime Minister Pierre Louis recently released on how the Haitian government intends to meet its short term goals. I was pleased to see the attention devoted to agriculture, the private sector, and infrastructure development. Unfortunately, the Haitian government has yet to receive one gourde from the Haiti Donors' Conference. Hopefully, Special Envoy Clinton has not lost his touch and will be able to encourage Friends of Haiti to honor their pledges. The paper is brief but balanced and well thought out. Please feel free to post your thoughts about it in the comments section.
Haiti has made considerable strides towards economic recovery and political stability since democratic elections were held in 2006. In 2008, the rise in food and oil prices hit the Haitian population disproportionately and led to social unrest and political crisis. Subsequently, the country was hard hit by a succession of hurricanes and storms that left a trail of devastation, destroying livelihoods and infrastructure with damages estimated at 15 percent of GDP. Now, the global recession poses further threats to the country’s stability through declining export earnings and remittances.
To address these challenges, the Government of Haiti has embarked on a focused action plan to safeguard the gains already achieved and ensure that the country continues on a path towards economic security. The immediate priorities in order to maintain stability are to address the US$175m financing shortfall in the budget mainly for the reconstruction process from the devastation caused by the last four hurricanes and storms. Investments in schools, hospitals and adequate water supply, along with measures that promote food security, form the necessary foundation of any forward looking strategy and are indispensable for social cohesion.
Reconstruction is still underway and concrete measures need to be taken prior to the 2009 hurricane season to avoid a new humanitarian emergency and to decisively reduce the population’s vulnerability to natural disasters. However, while first-order priorities, reconstruction and bridge financing alone will not suffice. At the heart of the government strategy is a plan to create 100,000 – 150,000 new jobs over two years to raise incomes and lay the foundations for social peace.
The majority of new jobs will initially be created in the construction sector through targeted infrastructure projects that lay the groundwork for rapid employment generation in agriculture and manufacturing. Given that each paid worker in Haiti supports on average four dependents these new jobs will directly impact up to 600,000 people. The strategy rests on a new partnership between the Government, the private sector and the international community.
The heightened interest in Haiti, brought about partly by the tragedies of 2008, not only showcased the challenges and setbacks, but also the genuine economic potential the country offers. The Hope II Act for example offers a time-bound window of opportunity to garment exporters to access the U.S. market on preferential terms that are exclusive to Haiti. The Haitian Authorities, in frequent consultation with the private sector, prospective investors and independent experts, have identified two sources that can yield significant results quickly: (i) raising productive capacity in agriculture and (ii) harnessing the full employment potential of manufacturing. These pillars are firmly aligned with the priorities of the National Growth and Poverty Reduction Strategy Paper (NSGPR) and the National Post Disaster Assessment (PDNA).
A delayed recovery and deviation from the path of stability and economic security would have severe consequences and come at great social costs. The international community is therefore urged to support the Government’s efforts. The creation of 150,000 jobs requires concerted action in four areas, namely 1) strategic infrastructure investments in transport, export zones, electricity and ports, 2) targeted measures to improve economic governance and the business environment, 3) improved provision of basic services, especially in the areas most affected by the 2008 hurricane season, and 4) environmental sustainability.
Towards higher productivity in agriculture 60% of Haitians live in rural areas and rely on agriculture for their livelihoods. Natural disasters, soil erosion and lack of transport to markets have hampered the productivity of this sector. Raising agricultural productivity with increased production of grains, cereals, tubers and bananas is vital not only for tackling vulnerability and poverty, but also necessary to ensure that fluctuations in international food prices do not undermine political stability.
stifled by existing legislations on property rights that prevents owning part of a building structure.
The policy measures and investments that directly support the creation of 100,000-150,000 jobs have to be underpinned by basic services to be viable. In the short term, it is indispensable to bring the education and health systems’ service delivery capacity back to at least the pre-hurricane level. Rehabilitating 150 schools, reconstructing 300 others, building two model hospitals and upgrading a medical center, will achieve this. The delivery system of potable water and sanitation capabilities, which were also severely damaged by the storms, need immediate attention.
To maximize impact of available funds, three development poles have been identified: Gonaives, Jacmel and Cabaret. The total cost over two fiscal years is estimated at US$181m. Constructing a school in Haiti takes an average of 14,000 man days and provides a job for 100 workers over six months. The Government of Haiti is committed to avoid the pitfalls of the past and to increase the lifespan of investments in infrastructure by ensuring that (i) the schools and hospitals are built in observance of basic safety standards and are resilient to floods and storms, (ii) they are built on properties free of title disputes and, (iii) they are adequately equipped.
Sufficient funds are also required to cover recurrent expenditures and quality control. The Government is currently moving towards greater decentralization and is gradually equipping local administrations with the necessary staff and expertise to monitor standards. Innovative approaches are being discussed to enhance competition among the multitude of private service providers and ensure that the contribution of NGOs achieves maximum results. The Government has set up a task force bringing together the key providers and financiers of basic services with the objective of designing appropriate mechanisms within the next two months.
Towards a new partnership - Mounting challenges call for strengthened partnerships and a decisive step forward from the divides of the past. The Government understands that the global recession implies tremendous pressures on public finances everywhere. This means that aid budgets have to undergo an even greater prioritization: more has to be done with less.
The role of the private sector and international investors is critical to achieve tangible results over the next two years. The Haitian private sector in particular sees the new economic opportunities and stands ready to make significant contributions. The Competitiveness Committee and a Presidential Committee for the implementation of the HOPE Act are visible examples of this strategic partnership.
The international community continues to provide indispensable assistance. Improved coordination and planning of its assistance as well as a renewed effort to promote national ownership are essential. On February 27th 2009 donors have signed an agreement with the Government that acknowledges the important role of budget support as a strong steering tool for government action.
A joint committee monitors the implementation of measures that enhance the transparency of the budget process, the government’s capacity to account to Parliament and the disbursements of pledged assistance. The Government hopes to see other cooperation partners adhere to this agreement. The Government of Haiti is fully committed to do its part to increase domestic revenues, unblock pledged assistance and achieve the
completion point under the HIPC Debt Relief initiative by June 09. Despite numerous external shocks, the Haitian Government ensured that the PRGF program with the IMF remains on track.
Tools for delivery: budget support and investment finance - The maintenance of macroeconomic stability is a key conditionality for budget support. External shocks put intense pressures on public finances. Today, Haiti is seeking firm commitments of US$175 million in budget support to cover a financing shortfall that would dramatically reduce the Government’s ability to undertake productive investments and ensure the delivery of basic services. Of the US$175m, US$50m would help maintain the required level of public investment, US$75m would cover the withdrawal of the telecom tax, while the remaining US$50m repay the IMF agreed temporary financing of the budget shortfall by the Bank of the Republic of Haiti.
Donors are invited to consider engaging in swap operations by earmarking their support to specific elements in the public investment program in line with the two year action plan. Concrete measures to free funds for public investments by strengthening controls and rationalizing expenditures are being taken.
For example, the size of personnel at the public telecom and Port Authority companies has been drastically reduced. The public electricity company has in recent years been a drain on budget resources. The new tariff structure to be adopted before the end of April and a renewed call for public entities to honor their monthly bills will free up much needed revenues.
Time to act - A firm mutual commitment between the Haitian Government, international partners and the private sector is vital for success. Speedy implementation of the measures laid out above, designed to improve governance and raise Haiti’s competitiveness, is critical. Parliament’s diligence in approving proposed legislation is a requisite.
There is a growing consensus on what has to be done and an understanding that now is the time to act. In some areas, such as the provision of basic services, further dialogue is needed to devise the best mechanisms of delivery. A task force is to produce a clear road map within the next two months. This renewed commitment needs to be mirrored by concrete pledges from Haiti’s partners.
Addressing the US$175m budget shortfall and completing essential reconstruction in time for the 2009 Hurricane season are now a matter of great urgency. To create 100,000-150,000 jobs in two years both public and private investments have to commence swiftly and be well integrated.
The Government has laid out a plan with clear commitments after consulting widely with partners. Similarly, the international community and the private sector is urged to state clearly ahead of the conference what they will bring to the table and where additional reform is encouraged.
The Government will ensure that in each key sector ministry a lead person with direct access to the Minister resolves obstacles to implementation. A forum for periodic dialogue will bring together the lead actors and monitors progress on the basis of mutual accountability. Swift action with clear objectives is now imperative. This is a decisive time for Haiti.
All partners carry responsibility and need to take the step forward to seize the opportunities, create jobs and maintain political, economic and social stability. Making this joint step a success would present a shift of paradigm both for Haiti and its partnership with the international community.