A Blueprint for Rebuilding Haiti

Since late afternoon on Jan. 12, images of human suffering in Haiti have been at once wrenching and overwhelming. One senses the need and feels compelled to help in the moment, confident that every little bit helps. When the lens pulls back, the enormity of the challenge takes on intimidating dimensions. The reality that many knew, but that was routinely swept under the rug of small gestures, is now displayed for all to see. Just a brief flight from U.S. shores, 3 million people are stacked along a narrow foothill that rapidly escalates from seashore, to hills, to mountains. The country’s largest city lies along a corridor less than three miles long, covering barely 50 square miles, about the area of Manhattan.

In that densely populated space that all the world now knows, most people lack the rudiments of modern life. Roads and streets are potholed and rarely paved. There is no sewer system. There is little electricity: barely 80 megawatts of usable capacity from public utilities. Potable water is a luxury, drawn usually from a community tap and hauled in 3- to 5-gallon containers by an army of girls. And beyond the capital, 6 million more endure even more challenging conditions.

Nature has forced the issue painfully, pre-empting the social eruption Haitian American academics and business executives have sought to warn U.S. government officials about for decades. Haiti is a country of over 9 million people, crowded in a small landmass and juggling an economy barely fit for 1 million. The much-touted claims recently of 1 percent to 2 percent growth are nonsense. The country produces little that it can export.

Faint signs of expansion are the result of 20 years of remittance transfers from Haitians abroad averaging $1.2 billion a year. The spending power of nearly 10,000 peacekeepers, UN administrators and technicians, a large USAID operation and the U.S. embassy staff adds to the small pile of economic activity. The rental of houses with indoor plumbing and underground water tanks supplied by water trucks is certainly robust. Diesel generators provide electricity in these villas, pleasant by any standard, and ringed with security walls. Racks of batteries wired to inverters capture what little power flows sporadically through the public lines and then releases it to light a few hours of the night.

The Misery Industry

Haiti, the poorest country of the Western Hemisphere, is a major player in the misery industry. Until last week’s calamitous event, it had become more profitable to be an NGO director or a consultant to USAID, the EU or the UN than to run a medium-size T-shirt sewing factory that might employ 200 people. Government officials and the small commercial elite had grown accustomed to the moderate but steady inflow of aid. The man and woman on the street used their brand new cell phones (often funded by relatives) to call those relatives in the United States and Canada and France to implore them to send more money. Haitian ministers—and even prime ministers who traveled to Washington—always had requests for more money at the top of their agendas.

For aid workers, Haiti is not bad duty. The assignment is akin to a poor African country, but just a quick flight from Miami. The people are poor but gentle, grateful and welcoming. The food is excellent; the mini-markets are well-supplied with French wines and delicacies at duty-free shop prices. When Port-au-Prince’s permanent traffic jams and cruddy streets overwhelm, there is Jacmel, a quick 18-minute flight south with its two-story New Orleans-style houses, wrought-iron balconies, international bohemian air and fresh seafood.

Real growth and real infrastructure development remained puny to nonexistent. Recent high-profile and well-meaning efforts have fallen flat. The death of micro-projects in Haiti was long overdue. These ad-hoc measures were meant to engender lasting initiatives. But as Max Weber noted, to grow and modernize a society requires the indispensable quality of ambition. But many of the people in Haiti are locked in another Weberian model. Their satisfactions are limited and routinized and bound to habits that ensure the quality of life that pleases; no more, no less.

Who does one see when visiting Port-au-Prince? You meet with the people who maintain an anarchic, pre-capitalist, mom-and-pop economy. You dine at the same five restaurants in Pétion-Ville. You hobnob with the same 10 families and the same 10 officials who have served serially in high government positions for the past 20 years. You meet with members of a phantom government. A recent New York Times account found much of the ministerial cabinet ensconced in a national police substation.

Barring Talent

Former President Bill Clinton quickly sensed the dilemma six months ago when he consented to serve as the UN Secretary General’s special envoy to Haiti. Early on, he stressed the importance of amending Haiti’s 1988 Constitution, which forbids double citizenship and thereby excludes a vast talent pool, Americans born in Haiti and their descendants, from holding office.

In 2007, a nominee to the post of prime minister was disqualified because he failed to produce documented proof of his grandmother’s birth in Haiti. Ericq Pierre had represented Haiti on the board of the Inter-American Development Bank in Washington for nearly 25 years—as a Haitian citizen. That was deemed not authentic enough. Many believe the real reason Parliament turned him down was that he refused to commit, before his confirmation, to divvying up the take from the international community with his future colleagues on the cabinet and members of the legislature.

The earthquake has destroyed over 60 percent of Haiti’s asset base. The 30-year-old shells that make up the manufacturing infrastructure, totaling about 2.5 million square feet, are cracked or mostly gone. The port is severely damaged and its only crane is in the water. The crane was just recently installed when shipping-line representatives passed the hat to come up with $3 million.

Those concrete blocks and slab houses, folded like accordions, street after street, block after block, comprise the entire savings accumulated by the country’s small middle class. Many of the structures were built with help of relatives in the United States. By some estimates, 1 to 2 million persons of Haitian origin reside in the United States. Over half are now U.S. citizens. These hard-working folk keep Haiti’s economy afloat with small but regular transfers of cash. These pay for their nieces’ and nephews’ tuitions and medical fees throughout Haiti—and they pay for houses and additions to houses. Based on earlier Inter-American Development Bank reports, it is fair to estimate that $15 billion of transfers over 25 years became deadly rubble in 60 seconds on the day of the earthquake.

Rethinking Aid

Whatever the United States had on stream to help Haiti—private, charitable, bilateral and multilateral—will have to be totally reconfigured. The practice of handing over U.S. taxpayer money for fanciful $15 million to $30 million projects must come to an end. Here is one example: a three-year mango marketing project funded at $24 million by USAID when Haiti’s total mango export in 2007 was $7 million. Doesn’t make sense? But wait, the big marketing project means hiring a program director, preferably a retired USAID official and several consultants. American and Haitian NGO partners are required; studies and reports will be commissioned. Expatriate staff in Haiti with salaries and living expenses will average $150,000 a year. What with the overhead and staff in the Washington office, any way you slice it, a three-year marketing project is cheap at $24 million.

Even when the U.S. Congress designs and enacts a big idea program, the aid bureaucracy finds ways to crush it down to size. The Haitian Hemispheric Opportunity through Partnership Encouragement, or HOPE Act of 2006, is such a big idea. Those who fought for the bill, especially New York Rep. Charles Rangel, (the ranking Democrat on the House Ways & Means Committee) and the United States Conference of Catholic Bishops foresaw the creation of 100,000 to 150,000 new living-wage jobs in the assembly industry. Those who know Haiti, realize that the local private sector simply lacks the organizational bench, savvy or interest to create so many new jobs. What was hoped was that work now performed in China and other Asian countries would be lured back to the Western Hemisphere. Blocks of assembly capacity would have to be transferred almost intact to Haiti, with all the needed equipment, engineering and supervision. Once there, the labor would come from Haitians.

The productivity of Haitian workers is widely acknowledged in assembly circles. Haitians work well and very hard in light factory environments. Factory operations in Haiti brim with modernity. It is as if one had made it to another country, as if la-ba or overseas. It was the case 30 years ago, when you walked onto the factory floor at Alpha Electronics near the Port-au-Prince airport. You sensed palpable excitement among young men and women who began work promptly at 7:00 a.m. and left at 3:30 p.m., six days a week. They cut and strung electrical wires into harnesses and terminated them with connectors. Others assembled and soldered circuit boards.

There were 3,000 employees when the late Andre Apaid Sr. commanded his most successful venture. Between 1981 and 1985, Alpha became a model for other Haitian entrepreneurs, who secured their own assembly contracts, opened plants and developed ventures that supported manufacturing. Employment in the assembly sector reached a peak of (100,000?) before disappearing. It was not political turmoil that ended electronic assembly in Haiti; it was the stunning ability of the Chinese to deliver a finished product at a fraction of what it cost to make components in the United States and ship them elsewhere for assembly.

But an important 2008 piece of U.S. legislation, dubbed HOPE II, gives Haiti a fighting chance. The rules governing apparel imports into the United States are complicated. But under Hope II, goods assembled in Haiti with or without U.S. material will enjoy duty-free treatment entering the United States. Combine this with Haiti’s competitive labor rates and even Chinese firms supplying Wal-Mart might see the wisdom of diversifying their production sourcing. An added advantage, for example, is that denim for blue jeans made in north Georgia is most economically cut and sewn in Haiti. Absent an expanding jeans production capacity in Haiti, the Trion, Ga., plant will soon close.

Yazaki North America, based in Detroit, is one of the three largest automotive harness manufacturers in the world. The company proposed in 2004 that the HOPE act’s precursor, the so-called HERO act, grant duty-free access to automotive harnesses with 50 percent content from the United States and Haiti. Yazaki assembles harnesses in 34 countries and employs 1,500 to 10,000 workers in each. From 2003 to 2006, they tested their proposal with a 300-employee plant in Haiti. They were very satisfied with the performance of the workforce and the trade preferences available at the time. They gave up, however, because of erratic security and problems obtaining electricity, water and logistical support. The ability to ship goods in and out on time is crucial to the automotive harness industry, which sells to automakers with strict just-in-time parts delivery protocols. In a bad year for auto-making, the United States imported $6 billion of harnesses. And HOPE sets no limit on the quantity Haiti can export.

Haiti is allowed to ship up to 2 percent of all U.S. apparel imports. Americans spent about $67 billion on imported clothes in 2009, a drop from $96 billion two years ago. In 2009, Haiti’s apparel exports broke above $500 million. The 25,000-worker sector has averaged 15 percent growth in exports over the past three years, and with minimal public infrastructure support.

One solution for Haiti is to build up major export capacity rapidly to take full advantage of the HOPE II provisions before these expire in 2018. Haiti urgently needs fully integrated free-trade zones with guaranteed full-service logistics. These zones need to be established outside Port-au-Prince on land not now used for agricultural production. The U.S. Congress, sensing the same need, directed the Department of State and Commerce to assist Haiti in achieving the production and employment goals the act foresaw. Little has been done in three years by any agency.

On Nov. 17, 2009, the House Ways & Means Trade Subcommittee held a hearing entitled “Operation, Impact and Future of the U.S. Preference Program.” Mary Ott, the deputy administrator of USAID, testified that in the first seven months of 2009, with USAID support, Haiti’s leading garment manufacturer had attracted “three new clients, created 375 skilled, semi-skilled, and administrative jobs, and saved an additional 200 jobs that otherwise may have been filled in one of the highly competitive Asian countries.”

That’s a long way to 100,000 jobs. Clearly these efforts are not in line with the task. And part of the $1.6 million spent on this effort went to support an Investment Facilitation Center and HOPE Act clearinghouse. Both entities are one-man, three-secretaries and one-chauffeur operations staffed on the recommendation of the government of Haiti. These operations were inadequate and ill-fated long before the day of the earthquake.

The challenge the United States confronts in a wounded Haiti is not unlike its travails in Iraq, Afghanistan and several other countries. How can we allocate the minimum resources in a cost-effective manner to help people gain the maximum benefits? Before Jan. 12, Haiti needed far more expertise than what was available from local and temporary expatriate resources to grow. The requirements now are even more demanding. Parliamentarians without staff and an executive branch that can rarely boast of a competent and knowledgeable minister are not up to the task either. Pretending that they can be dangerous is a huge waste of time and money.

Haiti will need to design and implement effective credit programs immediately that spur the construction and food distribution sectors. The United States should avoid exacerbating dependency and somehow find practical ways to stimulate the Haitian private sector. Reconstruction will be an urgent task, but all should resist the temptation to sole-sourcing tasks to the Halliburtons and Bechtels what can be performed by Haitian construction companies, even if they must take on foreign partners. Some tasks will surely call for major foreign expertise, such as the port. The expansion of the airport in Cap Haitian, the second largest city, should be accelerated. Road construction that is already funded should come under even greater scrutiny and be expedited. But the controls must be rigorous and a contingent of professional procurement officers and supervising engineers must be quickly assembled.

There are schools to be built, but this can be done without wasting hundreds of thousands of dollars on plumbing fixtures in U.S.-style school bathrooms. As those built in Iraq have shown, they will not last a school year. The water pressure will not be there. The water must be supplied first. And staff will be needed to maintain and repair these facilities. Americans need a mix of generosity and hard-nosed realism to proceed. Where other countries have more suitable techniques and approaches, we need to step back.

Public administration building, hospitals and churches must be rebuilt. There will be a rush for patronage and unsubstantiated claims of competence for money allocated within Haiti and abroad. It may be instructive to review what controls were in place in building the National Palace, the Parliament and the other government structures that collapsed in the earthquake. Most were erected during the U.S. occupation from 1915 to 1934.

And there was one constant complaint, beyond the outrage over perceived human rights transgressions by the occupying Marines. Haitian politicians hated the strict budgetary control established by American authorities and enforced by an American comptroller. In her memoir, the wife of former President Dumarsais Estimé calls July 10, 1947, the day financial control was turned over to Haitians, “the anniversary of the financial independence of the Republic of Haiti.” It then became possible to do creative accounting again, as Haitian governments had on countless occasions in the preceding 143 years of independence.

We can help Haitians rebuild, and for that Haitian-Americans, immigrants and their grown U.S.-born children will have to step in. All of us have a stake in making this work. Haiti must become the assembly engine it can be. American, Chinese, Korean, French and other manufacturers need the high performance of its labor. Haitians need the means to rebuild their homes and institutions. I have watched and listened to masons and ironworkers shouting in Creole while working in Nassau, Miami and Santo Domingo. On these sites, their competence is undeniable. With effective guidance and proper tools, the work of Haitians will stand up to that performed by anyone, anywhere.

Yves Savain, a native of Haiti, is a Maryland entrepreneur who has been a consultant to Haitian companies and business associations.