OFFICE OF THE SPECIAL ENVOY FOR HAITI

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PRIVATE SECTOR

Key Statistics Prior to the January 2010 Earthquake

Foreign direct investment of private sector (2008): US$30 million1

Doing Business Ranking 2009 (rank out of 181)2:

Doing Business Ranking 2009
Rank Doing Business 2009
Ease of Doing Business 154
Starting a Business 176
Dealing with Construction Permits 126
Employing Workers 35
Registering Property 128
Getting Credit 145
Protecting Investors 164
Paying Taxes 91
Trading Across Borders 146
Enforcing Contracts 92
Closing a Business 153

The Haitian private sector is relatively small and fragmented. The formal sector in Haiti generates not more than 10 percent of all employment.3 The majority of private businesses operate in the informal sector. These small and medium enterprises (SMEs) employ about 80 percent of the total work force.4 Several business associations have been established, such as the Haitian Industries Association (Association des Industries d’Haiti, ADIH) or the Haitian Chamber of Commerce which has branches in all ten Departments of the country. In addition, a number of joint Chambers of Commerce, such as the American-Haitian Chamber of Commerce (AMCHAM), plays a significant role for private sector development.

Tourism is currently underdeveloped in Haiti, but an association of entrepreneurs (Haitian Touristic Association, ATH) has become very active in lobbying for the development of this sector.

I. Strategy & Priorities

Although no formal overarching strategy for private sector development exists, the Government of Haiti has put in place several measures to promote this sector. Two Presidential Commissions, on Competitiveness and on Information Technology, were established in January 2009. Their mandate is to submit concrete recommendations to the government by January 2010, with the following objectives: facilitating sustainable economic growth; reducing obstacles to investment; and increasing productivity. Moreover, the Ministry of Tourism has developed a strategy to promote tourism, focusing on specific geographic areas.

(i) Government Priorities:

Increased involvement of the private sector in the Plan for Reconstruction and
Economic Recovery (presented by the Government of Haiti at the April 2009
donors conference in Washington D.C.)

Establishment of free enterprise zones

Increase in foreign direct investment

Job creation

Tourism

(ii) International Community Priorities:

Investment in free trade zones

Establishment a coherent business regulatory framework

Promotion of partnerships between international and national investors

Improved business climate to encourage investment

II. Challenges & Issues

Investment climate: Haitian institutions and the legal/regulatory framework remain weak and enforcement capacity is limited.

Security of investments: This is a key issue, particularly for tourism as there is little security regarding property rights and no officially designated tourist zones.

Taxes and tax evasion: The vast majority of the private sector is informal and subsequently does not pay taxes. At the same time, tax collection from the formal sector remains a challenge.

Inadequate Infrastructure: Haiti’s infrastructure (roads, electricity etc.) is inadequate and suffers from neglect, lack of investments, and limited regulatory capacity. This significantly increases the cost of doing business and discourages potential investors, in particular in manufacturing and agriculture.

Limited access to credit: The banking penetration ratio of loans to GDP is low, a credit bureau is missing and the banking sector is reluctant to lend funds to small and medium size enterprises (SMEs).

Shortage of qualified human resources: The majority of SME owners lack basic business and managerial skills. This is compounded by the brain drain of skilled professionals and the difficulty in attracting the Diaspora to return to Haiti.

Image of the private sector: Despite progress made over the past years, the Haitian private sector suffers from a negative image. The private sector has now begun to engage more pro-actively and to assume social corporate responsibility.

Image of Haiti: The perception of insecurity and corruption in Haiti has had a negative impact on potential investments, in particular in the tourism industry.

  1. IMF, International Financial Statistics Database (2008) Doing Business 2009, World Bank/IFC, p.2 link (PDF)
  2. Technical Assistance in Support of the Haiti DCA Program: Haiti SME Market Sector Assessment. USAID Summary Report, p. 2. link (MS Word)