Haiti is making a good move toward foreign investment despite existing obstacles to business starting

Haiti is making a good move toward foreign investment despite existing obstacles to business starting

New industrial park has been launched with hopeful perspective while the country is suffering negative perception in international arena.

A new industrial park has been launched in Haiti in the North part of the country, the Caracol Park, in a completely new area removing rural infrastructure and free from urban life. This is the second main industrial park built since thirty (30) years and the existing one is located around the capital, Port-au-Prince, in the middle of the country where political risk and known threatening state is more noticeable. Nonetheless a negative aspect has lessen the positive result from this event since the country has a lower rank in the last Doing Business Report, 2013, published by the World Bank.

This effort happens in a context in which industrial infrastructure has been severely damaged since the 1994 general embargo and infrastructure reconstruction and foreign investment have been repeatedly disrupted by chronic political turmoil and the 2010 major devastating earthquake. From this perspective, the new industrial zone opening is a major move toward rebuilding overall economy, including industrial sectors and FDI attraction.

But this action appears to be only a first step in the light of some considerations:

1. Foreign investment policies are not clearly defined in order to state areas, sectors, geographical location and incentives planned to convince foreign firms or businessmen. This new industrial park is expected to receive mainly textile and garment assembling. But the local demand and potential tourism resources are among competitive advantage for the country.
2. Industrial policies are not explicit pertaining to major decision regarding potential competitive industries like tourism, agribusiness…. This industrial park is achieved from top international Haiti donors’ initiative such as US government and Inter-American Development Bank (IDB) World Bank while Haitian policymakers act as a follower.
3. Consequently from this inconsistency and lack of global goals and strategies, the construction designing and implementation show some disadvantage according to compelling argument from critics and opponents that point out the fact that the location affect future tourism development in the neighborhood area which comprises one of the major touristy reserve classified as world heritage and protected by UNESCO.
4.  The new industrial park capability to rebuild Haiti assembling or textile industry remain limited since the country old park used to provide up to sixty thousands jobs in 1986 or around twenty thousand in 1999 whereas the new park is expected to reach the thirty thousand jobs by 2020 according to IDB prediction.

Nonetheless, the new industrial park bring important change and hopeful perspective for FDI in garment or assembling industries:

1.      First the park is located in a safer place away the well-known politically risky capital, and its overcrowded metropolitan area with awfully heavy traffic creating stress and pressure. A newly modernized international airport is connected to the park.

2.      Haiti garment and assembling industries have access to trade benefits in entering US market. It is especially good for US businessman and firm involving in assembling. For other foreign businessman the rule of origin can be considered as determinant.

3.      Haiti has offered so far a competitive low-rate salary for non-qualified workers

The government has announced new industrial park construction in other distant location in the country. China also shows some interest regarding economic zone construction linking Haiti with other industrial zone in the countries within the region as we know the successful implementation of such economic zones in South-East Asia. Haitian policymakers need to seize the opportunity at hand to blossom the flattered country industrial infrastructure

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Reference:

IDB (2012). Fact sheet: The IDB and Haiti’s Caracol Industrial Park

, http://www.iadb.org/en/news/background-papers/2012-07-06/caracol-industrial-park-key-facts,10054.html

World Bank (2012). Doing business report 2013, http://www.doingbusiness.org/data/exploreeconomies/haiti?topic=paying-taxes.

What makes San-José in Costa-Rica, one of the 15 best cities in the world for foreign investment?

What makes San-José in Costa-Rica, one of the 15 best cities in the world for foreign investment? 

 According to Fortune, San-José city, the Costa-Rica capital, is ranked among the 15 best cities in the world for foreign investment, based on a survey that interviewed executives about their prospective office, plant, subsidiary implementation abroad. Why foreign businessman should go to Costa-Rica?

 Costa-Rica is known as one of the most successful countries in Latin America in attracting manufacturing FDI, comparing to major emerging economies in the region such as Brazil, Argentina, Mexico. FDI have been increased in the country dramatically from 2006 to 2008 by 100% according to Datamonitor. Manufacturing is the most important sector and then high-tech that include medical equipment. Manufacturing sector include also textile, clothing, plastic. Government trade policies promote export which corresponds to the main source for country growth with textile and electronic equipment as leading commodities and the US, the major trade partner.

 To boost its competitive advantage the government has committed in a free-zone reform that grant foreign businessman attractive benefit. The free-zone is a restricted zone without any resident population and a minimum of $150,000 initial fix assets is required for establishing investment inside the zone, outside it is higher. Among the most welcomed firms are those working in assembling for export and export trade for re-export, service industries, support service companies, park –managing companies, scientific research firms involving in enhancing technology level of industry.

 Summarizing, benefit foreign businessman can gain in entering to Costa-Rica range up to all these facets:
1. Tax incentive: income tax exemption for significant employment increase contribution and establishing in rural areas; low income tax payment and differed payment.
2. Access to US market, particularly for textile, clothing product that gain advantage from US free-trade agreement with Central America countries; and specifically US apparel product assembling in those countries can reenter duty-free in the US.
 3. Highly developed manufacturing sector with a variety of sub-sectors or product type: electronic, textile, clothing etc…
4. Skilled workforce because government has been committed in sustainable policies and important expenditures toward education.
5. Also the financial sector is well developed to support various foreign investment needs (Insurance, investment banking and other business financing, mortgage bank, pension funds, house-building companies etc…)

In the battle for bringing foreign direct investment in Haiti, Haitian constituency abroad is the bridge to getaway.

Is foreign direct investment can make the miracle for a country with poor competitiveness? According to Rostow’s theory (1) , for a country to attain development it requires important amount of investment. Then developing countries have more difficulties than developed countries from this perspective due to the weakness of national saving level and therefore they need to call for foreign direct investment. But Michael Porter’s framework” (2) on competitiveness asserts that “demand conditions” and “related and supporting industries” can be considered as feature that can be determinant of country competitiveness at industry level. The more the local firms and industries are developed in the host country the higher is the competitiveness for foreign direct investment: foreign businessman need to ensure that the host country provides adequate related services or supporting industries for supply, outsourcing, R&D etc. Further successful implementation in a host country require to build viable partnership with local businessman or partner that have important knowledge, ties and experience related to the host country. Haiti is carrying out ineffectively a battle to get foreign direct investment while recovering from earthquake is very slow. As many constituencies are maintaining high expectations about that, such as government, civil society groups, political opponents and media, it is very hard for Haiti to draw foreign direct investment due to its poor competitiveness: ineffective regulatory framework causing slow legal proceedings, inadequate infrastructure (road, bridges, airports, electricity plant etc...), high cost for utilities and housing, poor economy, and fragile stability and political risk. Haitian policymakers have been struggling to change the negative perception that appears to international environment and have been involved in communication move toward international potential businessman with the help with former US president, Bill Clinton; but unfortunately it seems unsuccessful. We do admit that the political risk affect mostly the capital, Port-au-Prince, where safety is more an issue than in other part of the country. The truth is the whole country is paying the consequence of an hyper centralized administrative structure that make the capital as the center of business, political, educational and artistic life. Potential advantage coming up from other part of the country regarding safety and competitive resources are overwhelmed and hidden by the negative side of the political risk level in the capital. The government is making an attempt to remedy to the country unbalanced infrastructure allocation by undertaking some important construction work (such as international airport modernization) in the rest of the country, like in the South-east, in the city of Jacmel, not too far from Dominican Republic border and that have valuable potential touristic resources : among of them a well-known and creative carnival , antique western style and attractive landscape (fall and beaches). This is practically the similar situation and pattern for the north side of the country, in the city of Cap-Haitian where infrastructure project is being processed. But there is still a lot of obstacles to overcome. Government officials have to find a way to convince potential businessman to be committed in foreign direct investment. In this enigma Haiti still have a key card to get back on track while foreign investment is scarce or going away. Haitian-based community abroad, particularly in North America, can be a potential source of capital for the country to support the lack of needed investment : in the last thirty (30) years Haitian immigrant who left the country for access denial to social and economic advancement, have seen their offspring achieved financial success that empower them with significant amount of capital . In Quebec, Canada for example, Haitian-descendant citizens are one the most important immigrant community that have built strong relations in business and professional spheres in the city of Montreal and they have established their own Chamber of Commerce. Supporting industries for areas with possible competitive advantage need investment that does not require necessarily involvement from foreign businessman. If the current local business community or entrepreneurs failed to take on the role, Haitian Businessman in North America with dual citizenship must be capable theoretically to rescue these industries; instead of expecting that major foreign entrepreneurs would make the miracle happened one day. Local industries in Haiti are unproductive and immature whereas the country shows many advantage regarding potential agricultural and touristic resources and a high demand for services: for example agribusiness is not so expanded as agricultural product are consumed generally crude and unprocessed and barely distributed throughout the country due to supply chain insufficiency; nevertheless the country have some worldwide competitive agricultural product like mangoes, cocoa and raw fish and various organic product. In area of services there is a shortage regarding the supply: in some services related to entertainment, healthcare, hospitality, printing, Haitian firms and individual consumers rely mostly on Dominican Republic supply for purchase or may go shopping in Miami if the consumer have better income. In addition, cultural considerations matters, Haitian-descendant businessman should have better capability to coop with current difficult situation in Haiti than other foreigner businessman because of their cultural link with the country. Then Haiti needs to build competitive advantage by strengthening local industries first in some important areas. Haiti policymakers need to devise plan to encourage Haitian-descendant entrepreneurs abroad to get committed in local industries through true and soundness investment policies by provide them more incentives and support or encourage partnership, joint venture with other foreign businessman especially in SME implementation. End Notes: 1)W. W. Rostow (1992). “Theorists of Economic Growth from David Hume to the Present: With a perspective of the next century”. Oxford University Press 2)Oded Shenkar & Yadong Luo (2008) .”International Business”. Country Competitiveness, Industry-level determinants, pp.138-140. Sage Publications.