Haiti tackles business reforms to boost recovery, job creation

The stacks of Calvin Klein t-shirts get smaller by the minute as busy Costco shoppers grab them off the shelves as if they were the season’s hottest items.

Plain white t-shirts are fixtures in any American wardrobe but these particular ones, made of finely woven cotton, seem to provide more bang for the buck.

Little noticed by customers is the ‘Made in Haiti’ label --a seal of workmanship in one of the US’s most competitive markets, the textile industry, which seems to be opening up opportunities for Haitian entrepreneurs and investors.

Codevi, the maker of Calvin Klein t-shirts and other brand garments, employs more than 6,000 Haitians in its Ouanaminthe factory -- a significant contribution to full-time employment in a country where 80 per cent of the workforce is self-employed or works informally.   

Decision makers, experts and regular folks on the western half of Hispaniola, agree that more quality jobs are really the only factor that can improve Haiti’s long-term prospects and boost the country’s immediate recovery.

World Bank President Jim Yong Kim hopes to add momentum to this proposition on his first visit to Haiti since taking the helm of the multilateral institution.

Kim will impress the importance of boosting jobs upon Haiti’s senior leadership, including President Michel Martelly and Prime Minister Laurent Lamothe as well as on business leaders, who he’s scheduled to meet over the next two days.

“While there has been much progress in rebuilding Haiti, the country's reconstruction and development will require a sustained effort for a long time. We are committed to supporting Haiti as it moves from emergency reconstruction to economic development in order to create new opportunities for all,” Kim said.

Private investments in the service sector, which tends to create the most jobs, are on the increase.

Power plant E-power, Codevi industrial park, Vietnamese telecom Viettel and the Leopard capital fund are just some recent examples of large local and foreign investments made in association with local entrepreneurs. These ventures, supported by IFC, are creating thousands of well- paying jobs in Haiti.

But it’s not quite enough. The informal sector is still a strong magnet, attracting the majority of Haiti’s 4 million-strong workforce. Mostly made up of unregulated micro and small businesses, the informal sector pays low salaries and provides precarious working conditions, a reflection of low-productivity and lack of economies of scales, according to experts.

Haitians know this and have embarked on a series of reforms to improve the country’s business environment and investment climate --both linchpins of a modern economy. A crucial element of this plan is to develop reliable infrastructure services, improve regulations and provide better access to finance for job creators: small and medium enterprises.

With the cost of opening a new business in Haiti more than 8 times the regional average, Haiti ranks 173rd out of the 185 countries surveyed for their ease of ‘Doing Business’ in the 2013 report

The reforms target those sectors with the most potential for growth and job creation: construction, tourism, light manufacturing, garments and agriculture, which can leverage Haiti’s competitive advantages. Such advantages include a large and untapped workforce, proximity to major markets, free-trade agreements with the US, Europe and Canada, unique cultural and touristic assets and a sound financial system.

Integrated Economic Zones --clusters of industrial, commercial, and
residential areas-- are an important component of the government’s strategy to promote economic growth and create jobs in the formal sector. A recent IFC study finds that such zones could create more than 380,000 jobs in Haiti over the next two decades.

“A jobs strategy in Haiti has to take the dual approach of promoting the creation of new, stable, formal sector jobs, while improving the working conditions in the vast informal sector”, says Senior Financial Sector Specialist Juan Buchenau.

However, barriers limiting investments --especially in the garment, light manufacturing, construction and tourism industries-- need to be lifted in order to boost Haiti’s formal economy, Buchenau notes.

Some of those barriers include improving the regulatory and institutional frameworks that govern secured transactions, insolvency rights and Integrated Economic Zones.

Tourism is the only other industry to rival textile production as a source of quality jobs in Haiti.

The country’s North is being eyed by investors and entrepreneurs as a prime spot to develop a tourism mecca.

The National History Park, hosting the famed Citadel Henry and the Palace of Sans Souci; the historic city core of Cap Haïtien; and many picturesque beaches and cultural events are just a few examples of Haiti’s top attractions and tourism assets.

One such northern beach, Labadee, has been conceded to Royal Caribbean Cruises International until 2050. Currently visited by over 700,000 cruise passengers per year, Labadee has contributed the largest share of Haiti’s tourist revenue since 1986.

However, direct linkages to the local economy are minimal. Most tourists do not leave the Labadee enclave because of inadequate transportation, leisure infrastructure and appropriately maintained attractions. Such constraints also deter neighbouring tourists, from the Dominican Republic and Port au Prince, from visiting the North.

Experts like Buchenau think that several thousand new jobs could be created by simply addressing these constraints.

IFC's combined investment and advisory projects are supporting the creation of 5,000 new jobs as well as safeguarding 5,000 existing jobs.