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Y 4.F 49/20:111-111 j1 q &
REBUILDING HAITI'S COMPETITIVENESS
AND PRIVATE SECTOR
POLICY AND TRADE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
MARCH 16, 2010
Printed for the use of the Committee on Financial Services
Serial No. 111-111
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
LUIS V. GUTIERREZ, Illinois
NYDIA M. VELAZQUEZ, New York
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
BRAD SHERMAN, California
GREGORY W. MEEKS, New York
DENNIS MOORE, Kansas
MICHAEL E. CAPUANO, Massachusetts
RUBEN HINOJOSA, Texas
WM. LACY CLAY, Missouri
CAROLYN McCARTHY, New York
JOE BACA, California
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
DAVID SCOTT, Georgia
AL GREEN, Texas
EMANUEL CLEAVER, Missouri
MELISSA L. BEAN, Illinois
GWEN MOORE, Wisconsin
PAUL W. HODES, New Hampshire
KEITH ELLISON, Minnesota
RON KLEIN, Florida
CHARLES A. WILSON, Ohio
ED PERLMUTTER, Colorado
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
ANDRE CARSON, Indiana
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
SPENCER BACHUS, Alabama
MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
RON PAUL, Texas
DONALD A. MANZULLO, Illinois
WALTER B. JONES, JR., North Carolina
JUDY BIGGER, Illinois
GARY G. MILLER, California
SHELLEY MOORE CAPITO, West Virginia
JEB HENSARLING, Texas
SCOTT GARRETT, New Jersey
J. GRESHAM BARRETT, South Carolina
JIM GERLACH, Pennsylvania
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia
PATRICK T. McHENRY, North Carolina
JOHN CAMPBELL, California
ADAM PUTNAM, Florida
MICHELE BACHMANN, Minnesota
KENNY MERCHANT, Texas
THADDEUS G. McCOTTER, Michigan
KEVIN McCARTHY, California
BILL POSEY, Florida
LYNN JENKINS, Kansas
CHRISTOPHER LEE, New York
ERIK PAULSEN, Minnesota
LEONARD LANCE, New Jersey
JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel
SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE
GREGORY W. MEEKS, New York, Chairman
LUIS V. GUTIERREZ, Illinois
MAXINE WATERS, California
MELVIN L. WATT, North Carolina
GWEN MOORE, Wisconsin
ANDRE CARSON, Indiana
STEVE DRIEHAUS, Ohio
GARY PETERS, Michigan
DAN MAFFEI, New York
GARY G. MILLER, California
EDWARD R. ROYCE, California
RON PAUL, Texas
DONALD A. MANZULLO, Illinois
MICHELE BACHMANN, Minnesota
ERIK PAULSEN, Minnesota
Hearing held on:
M arch 16, 2010 ....................................... .................................................... 1
M arch 16, 2010 .................. ............................................. 35
TUESDAY, MARCH 16, 2010
Birdsall, Nancy, President, Center for Global Development .............................. 12
Boisson, Pierre-Marie, Chairman, Sogesol .................................................... 8
D'Sa, Mark, Senior Director, Sourcing & Production, Gap Inc. ......................... 10
Fairbanks, Michael C., Founder, SEVEN Fund .................................... ........ 5
Skrobiszewski, Francis J., Associate, VisionAmericas LLC .............................. 15
M eeks, H on. Gregory ...................................................... .......................... 36
Birdsall, N ancy ........................................................... ............................. 40
Boisson, Pierre-M arie ...................................................... ........................ 46
D 'Sa, M ark .............................................................. .................................. 60
Fairbanks, M ichael C. ..................................................... ......................... 62
Skrobiszewski, Francis J. .................................................. ....................... 74
REBUILDING HAITI'S COMPETITIVENESS
AND PRIVATE SECTOR
Tuesday, March 16, 2010
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON INTERNATIONAL
MONETARY POLICY AND TRADE,
COMMITTEE ON FINANCIAL SERVICES,
The subcommittee met, pursuant to notice, at 10 a.m., in room
2128, Rayburn House Office Building, Hon. Gregory W. Meeks
[chairman of the subcommittee] presiding.
Members present: Representatives Meeks, Waters, Watt,
Driehaus; Miller of California, and Paulsen.
Ex officio present: Representative Bachus.
Also present: Representatives Clay and Maloney.
Chairman MEEKS. This hearing of the Subcommittee on Inter-
national Monetary Policy and Trade will come to order.
For the record, and without objection, all members' opening
statements will be made a part of the record.
What I will do is open up with an opening statement at this
time. Before I begin, I would like to thank my friend and colleague,
Representative Miller from California, the ranking member of this
subcommittee, for his help in planning this hearing, and to express
again my gratitude for our ability to work in a truly bipartisan
manner in seeking solutions to the critical situation in Haiti.
This hearing is the second in a series of hearings on the situation
in Haiti, and I was so thrilled to see such strong bipartisan support
last week for the Haiti debt relief bill, which passed with unani-
mous support out of the full House, following its passage out of this
Finally, I want to reiterate my sincere thanks to the chairman
of this committee, Barney Frank, and the ranking member, Spen-
cer Bachus, for their continued support for Haiti and the work of
I want to give a special thank you to Representative Bachus for
his touching remarks on the plight of Haiti on the House Floor last
week in support of the bill, where he reiterated how Haiti from
even its very beginnings, its own independence, was riddled with
debt because they had to pay for that independence. He was very
eloquent on the Floor of the House last week.
I would like to thank our panel of witnesses for appearing here
today and for sharing their thoughts and experience on rebuilding
Haiti's competitiveness and private sector.
Haiti's recovery will happen in my opinion in three distinct if not
overlapping phases. Phase one consists of the crisis response, fo-
cused on basic survival needs which began in the hours imme-
diately following the devastating earthquake of January 12, 2010.
Phase one is likely to be ongoing for some time, particularly for the
most vulnerable groups in Haiti.
Phase two, which is in its very early stages of development
today, consists of rebuilding the basic physical and governance in-
frastructure of Haiti. This phase will take several years to com-
plete, but must get under way quickly, and it is critical to allowing
the government and the people of Haiti to get back to work and to
retain some minimal sense of normalcy.
Phase three, the plan which is being developed today and for
which this hearing is trying is cover, is a continuation of the exten-
sive work already underway prior to the earthquake. It consists of
implementing a long-term economic strategy for Haiti, allowing it
to grow prosperous and to move beyond the dependency on aid
which has characterized the country for decades. As our witnesses
will address here today, much of the preparatory work for phase
three was already being done prior to the earthquake under the
leadership of President Preval.
These plans have been modified as a consequence of the earth-
quake, but not fundamentally changed.
It is my hope that today's hearing and the testimony of our panel
of witnesses will shed some light on how we can empower the Hai-
tian institutions and the private sector to enable the successful and
rapid progression of Haiti from phase one, crisis response mode,
where it is today, to phases two and three, of long-term economic
planning in a manner that lays the foundation for a new sustain-
able, stable, and prosperous Haiti, providing hope and opportunity
for all its population and not just the privileged elite.
You cannot rebuild without the private sector. It has to be that
joint venture between the public and the private sector. We know
how important that is.
I look forward to hearing about how we can ensure the effective
coordination of the multitude of development efforts including espe-
cially the multilateral and international development institutions
under the leadership and stewardship of the Haitian people them-
Eventually, we have to move so that the Haitian people can lead
and govern as they build a future for themselves and according to
their plans, their culture, and their vision for a resurgent Haiti.
With that, I yield back the balance of my time and recognize the
ranking member, my friend and colleague from California, Mr. Mil-
Mr. MILLER OF CALIFORNIA. Thank you, Chairman Meeks. I
would like to associate myself with your comments regarding the
cooperation of processing the previous bill that we experienced on
the Floor last week.
You have been an effective and strong voice for the needs of the
Haitian people and I want to publicly commend you for that. I
know it is a passion for you and it is a good effort we have under-
I would like to thank you for holding this hearing to discuss
ways American resources can be leveraged to more effectively help
Haiti recover from the massive earthquake that devastated the
country and economy.
I was pleased when this committee and subcommittee of this
Congress were able to pass legislation last week supporting the
international debt relief effort in Haiti. I am currently working on
legislation that we discussed previously to involve American labor
and American expertise in the process of rebuilding Haiti. Because
we are going to be expending American tax dollars, we should be
looking also at how do we employ American workers, who have the'
expertise, in benefitting and helping to recover from the impact in
Last week, Congress overwhelmingly passed legislation origi-
nating from the subcommittee requiring the Secretary of the Treas-
ury to instruct the U.S. executive members of the IMF, the World
Bank, the Inter-American Development Bank, and other multilat-
eral development institutions to seek immediate and complete can-
cellation of all debts owned by Haiti to such institutions.
Unfortunately, this is only part of the recovery effort that must
be undertaken in Haiti. The IDB estimates a total cumulative con-
struction cost of at least $14 billion, which is double Haiti's na-
tional GDP. According to State Department figures, an estimated
230,000 people died, which included up to 40 percent of the coun-
try's civil service. Further, 28 to 29 government ministry buildings
were destroyed, 70 percent of the population is unemployed, and a
third is illiterate.
At present, international aid efforts are focusing on meeting Hai-
ti's basic survival needs. Haiti's long-term economic recovery re-
building will need to rely on public/private partnerships and inter-
nationalists to supply the nation with heavy equipment and tech-
nical expertise needed to clear the estimated 78 million cubic yards
of rubble to begin rebuilding an infrastructure that can more effec-
tively withstand disaster in the future.
Impeding efforts to rebuild are lack of uniform building stand-
ards, mistrust in the government by Haitian people, a high percep-
tion of government corruption, and a total lack of heavy machinery
and equipment needed to undertake a task of this proportion.
Recently, the Washington Post quoted Haiti's largest contractor,
who estimated the entire nation of Haiti has nearly 100 excavators,
nowhere near the amount needed to clear the public rubble they
have experienced. If you took the rubble that we are facing in Haiti
and stacked it 727 feet on the Mall, that is equivalent to what we
have to move with 100 pieces of equipment.
We need to effectively make sure that the resources are there
needed to deal with this impact and the American labor force who
need to be employed are also put there, and I think at that point,
we can benefit the people of Haiti.
I yield back the.balance of my time.
Chairman MEEKS. Mr. Bachus?
Mr. BACHUS. Thank you, Mr. Chairman. I thank you for holding
this important hearing. This is the second hearing that the sub-
committee has held on Haiti. I applaud you and Mr. Miller and
other members of the committee for your continued efforts to re-
spond to the distress and suffering citizens of this devastated coun-
If you picked a capital in any country in the world that could
least deal with an earthquake, it would be Port-au-Prince, Haiti.
The human tragedy following the January 12th earthquake is over-
whelming, and as Haitians seek to rebuild, we must stand along-
The House took the first step to provide assistance last Wednes-
day, agreeing to legislation which I was proud to support, that
helps address Haiti's national debt.
Haiti was born into debt. The French upon leaving Haiti imposed
a heavy debt on the Haitian people and they have suffered under
that debt and additional debt for their entire history. I think that
explains to some extent why they have never had the funds to
achieve any type of economic independence.
Rebuilding Haiti will not be an easy task. Some estimates place
reconstruction costs as high as $14 billion. Such a challenge will
require a comprehensive coordinated effort.
The United States and Haiti cannot afford to have resources sto-
len or wasted on redundant efforts by various groups working com-
pletely independent of one another without any coordination what-
Additionally, Mr. Chairman, this effort must have the buy-in and
support of both the Haitian Government and the Haitian people.
The goal must be to break the cycle of aid dependency that has
kept Haiti mired in poverty for generations. Rather, we should pro-
vide the tools for Haiti to become a competitive, self-sustaining
country. That is really what the Haitian people desire.
To bring this about, the private sector should be an important
engine towards sustainable growth. International aid can take the
Haitian economy only so far.
Achieving this goal will require consultation with the Haitian
Government and its people to ensure that aid is delivered in a
transparent and fair manner and to those in need. We must make
certain that the policies implemented are not undermined by cor-
ruption that siphons off limited resources and disenfranchises the
The United States has always been a benevolent and caring
country. Even during our current economic challenges, we have not
lost our compassion. In fact, our present travails have in some re-
spects, I believe, given us a greater appreciation for the desperation
and suffering of those facing challenges and hardships, although
the hardships and challenges that Haiti faces are almost unimagi-
nable for most Americans.
Providing assistance to a nation devastated by a natural catas-
trophe is consistent with our principles. We can lead by example
while we lend a helping hand.
Mr. Chairman, I again commend you and Mr. Miller for your
commitment to this matter. You have assembled before us today a
distinguished group of panelists, each of whom will be able to pro-
vide us with unique insights into how to help the Haitian people
to realize their potential and achieve sustainable development.
This legislation is important to help the people of Haiti get back
on their feet, and I look forward to working with you and other
members of this committee going forward.
With that, I yield back the balance of my time.
Chairman MEEKS. Thank you, Mr. Bachus. Before you got here,
I mentioned that I wanted to publicly thank you for your eloquent
statement you just made on the record on the Floor of the House
as we passed the Haiti debt relief bill.
At that time, Chairman Frank and the gentlelady from Cali-
fornia, Maxine Waters, also just talked about how for a long time
you have been working collectively in a bipartisan manner with'
them to try to overcome poverty and debt problems to help Haiti.
I just want to thank you for your commitment and your hard
work in this endeavor. We really appreciate you.
Without objection, each witness' statement will be made a part
of the record. You will be recognized for a 5-minute summary of
your testimony, but your written testimony will be considered part
of the entire record.
First to testify, we have with us Mr. Michael Fairbanks. Mr.
Fairbanks is the co-founder of SEVEN, a philanthropic foundation
run by entrepreneurs whose strategy is to produce films, books,
and original research to markedly increase the rate of diffusion of
enterprise solutions to global poverty.
He is the founder and chairman emeritus of the OTF Group, a
strategy consulting firm based in Boston, and the first venture-
backed U.S. firm to focus on developing nations. He was a U.S.
Peace Corps teacher in Kenya.
His most recent projects include advising the president of the
Inter-American Development Bank on opportunities for the major-
ity initiative, working for the president of Rwanda to improve the
competitiveness of that nation's tourism, coffee, and agro industry
sectors, and advising the minister of finance of Afghanistan on pri-
vate sector reforms.
He has co-authored many books, including the Harvard Business
School's landmark book on business strategy in emerging markets,
"Plowing the Sea, Nurturing the Hidden Sources of Advantages in
Developing Nations," which Business Magazine said, "points the
way towards creating prosperity in developing nations."
He co-conceived and contributed to the global bestselling book,
"Culture Matters, How Value Shape Human Progress," and I just
finished reading his most recent book entitled, "In the River They
Swim: Essays from Around the World on Enterprise Solutions to
Poverty," which was released, I believe, last year.
With that, let me welcome Mr. Michael Fairbanks.
STATEMENT OF MICHAEL C. FAIRBANKS, FOUNDER, SEVEN
Mr. FAIRBANKS. Thank you, Mr. Chairman, and members of the
subcommittee. Thank you for the opportunity to discuss enterprise
solutions to poverty and the United States' aid policy in Haiti.
I would like to start with a couple of foundational concepts, and
I am going to build on those towards the end.
The first thing I want to talk about is prosperity. It is the ability
of an individual, group or nation to provide shelter, nutrition and
other material goods that enable people to live a good life according
to their own definition.
Prosperity helps to create the space in people's hearts and minds
so that unfettered by the everyday concern of the material goods
that are required to survive, they might develop a healthy emo-
tional and spiritual life, again, according to their own preferences.
There's another definition of "prosperity" that is equally impor-
tant, and that is using the stock view of prosperity. This is in re-
gard to the enabling environment. In every country, whether it is
Haiti or the United States or anyplace else in the world, this coun-
try has seven types of wealth.
There are natural resources. There is man-made capital. There
is financial capital. These are the easy to see, easy to measure
forms of wealth that exist in every nation.
The more important types of capital are the ones that are dif-
ficult to measure, impossible to see sometimes, and these are what
I call the "higher forms of capital." Institutional capital, like rules
of law and democracy, both of which are very positively correlated
with economic growth.
Knowledge capital, like databases and ideas. International pat-
ents would represent a robust level of knowledge capital.
Human capital, which is skills and abilities and insights that are
basically knowledge capital with legs. It can leave the country, and
this is very pertinent to the case of Haiti.
Finally, we have the most important type of capital, which is cul-
tural capital. Not just the explicit articulation of culture, fashion
and music and design, food and language, but the ideas and the at-
titudes, the beliefs, the assumptions and the goals of people who
can either promote innovation and prosperity or can diminish inno-
vation and prosperity.
With that as a foundational base of my comments, I would like
to make several further points. First of all, most foreign aid never
achieves its desired impact. This is according to one of the most
prominent aid organizations on the planet Earth whose leader
showed me their internal report before he had to shelf it because
if he were to make these findings public, he would not be able to
do his job any more.
According to him, and it is a name we all know, 80 percent of
all the foreign aid around the world never achieves its desired im-
pact. In fact, there are reasons to believe the opposite.
Aid largesse can distort private initiatives, stifle democracies,
amplify ethnic based patron/client relationships, and promote cor-
The former Finance Minister of Afghanistan, Ashraf Ghani, who
is known to everybody in this room, is short-listed to lead the
United Nations, short-listed to lead the World Bank, observes that
aid can even "sever the sovereign relationship between people and
What I want to talk about today is the microeconomic founda-
tions of growth, how growth really occurs, where do taxes come
from, where does employment come from.
The greatest quote that I have ever heard with regard to this is
that every farmer in Haiti is the private sector. Every fisherman
in a little boat off the Haitian Coast is the private sector. Every
kid selling chiclets or Coca-Cola on the street corner is the private
We should not think of the private sector as monolithic family-
owned conglomerates that engage in rent-seeking activities, monop-
olistic access to government favors, raw materials, and markets.
The private sector is the farmer. We need to keep that in mind.
Nations that do not create wealth for their citizens share much
in common. Our evidence suggests that they are overreliant on nat-
ural resources, including cheap labor, and they believe in simple
advantages of climate, location, and government favors.
My recommendations for Haiti are to build modern institutions
on top of traditional values, to find new segments of the market in
which to cooperate, and my recommendation for the United States
Government is to consider focusing on our own values and atti-
tudes and what we can do better, not what the Haitians can do,
and to focus very particularly on USAID procurement services. It
is the most non-competitive aspect of the American economy.
The consultants we send overseas are mediocre. They are under-
appreciated. They are overpaid. The fact is what we are finding is
that the vendors to USAID are really nothing more than head
hunters who extract a rent for providing a service to the U.S. Gov-
ernment. They have no intellectual property. They do not train
their consultants. They do not understand the needs of the coun-
tries in which they work, and their real client is the United States
Government, not the poor nations of the world.
I ask you very much to look at my written comments for some
support of those.
Thank you very much for the opportunity to speak to you today,
and I hope you and your staff will rely on me for further briefings
as you may require them.
[The prepared statement of Mr. Fairbanks can be found on page
62 of the appendix.]
Chairman MEEKS. Thank you. Next, we have Mr. Pierre-Marie
Boisson. Mr. Boisson is the founder of Sogesol, Haiti's largest
microfinance company and a 50 percent owner of the subsidiary,
Sogebank, Haiti's largest commercial bank.
He is also an economic advisor to Sogebank's executive com-
mittee and was the bank's chief economist for 15 years.
Sogesol was created 10 years ago and is a long-term partner of
Mr. Boisson is also vice president of the Board of Sodaphetees,
a private development finance corporation, and secretary of the
board of E-Power, an independent power producer. He is a member
of the Presidential Working Group on Competitiveness and the Pri-
vate Sector Economic Forum, and sits on executive committees of
Before joining Sogebank in 1991, he led USAID-sponsored reor-
ganization of Haiti's professional banking association in 1990.
He is a former staff member of the World Bank's IFC, where he
spent 2 years, and he also worked a total of 9 years with the Hai-
tian public sector.
He holds an MBA from Harvard University and an MSM from
Arthur D. Little's Management Education Institute, and a BS in
civil engineering from the State University of Haiti.
STATEMENT OF PIERRE-MARIE BOISSON, CHAIRMAN,
Mr. BOIssoN. Thank you, Mr. Chairman. Mr. Chairman and hon-
orable members of the House Subcommittee on International Mone-
tary Policy and Trade, thank you for inviting me to talk to you
about the Haiti reconstruction effort and especially the precious
role that the private sector can and should play in that country's
Two months ago, Haiti suffered one of the most terrible catas-
trophes ever to hit a nation. Over 200,000 people died and 1.2 mil-
lion got displaced and millions more are still traumatized.
Beyond suffering, however, lies a real opportunity to build a bet-
ter Haiti, more prosperous and more equitable. Haiti has a real
chance to create over a million jobs and attract $5 billion worth of
private investments over the next 5 years.
The Presidential Working Group on Competitiveness, with the
help of the OTF Group, and following extensive international dia-
logue, identified five priority clusters where we could spur inclusive
growth and generate tax resources.
The Group is supported by the Private Sector Economic Forum,
which includes the main business associations and major financial
groups. The Forum believes that the private sector must partner
with government and civil society to create a new social compact
Granted, Haiti's poverty and cultural mistrust raises doubts
about social commitment to private led growth and public/private
corporations. The good news is that Haiti was already moving to-
ward removing such doubts way before the earthquake.
In fact, 2009 was the fifth consecutive year of growth with a 2.9
percent mark even in the midst of a world recession. Inflation had
been in retreat and more than $700 million of private investments,
including FDIs, were recorded over the last 5 years.
Many signs of public/private corporations emerged as well, in-
cluding the creation of the Commission itself, which reflects serious
efforts by President Preval to partner with civil society.
I have listed a lot of examples of corporations over the last 10
to 15 years in my written remarks. Those are maybe considered
episodes of goodwill but they reveal serious change in the mentality
of Haitians. They reveal profound mutations of Haitian society in-
cluding the growth of the Diaspora itself.
I am confident that the earthquake itself will urge Haitians to
unite against fatality and reinforce our will to build partnerships.
The vision of both the Group and the Private Sector Forum is
that without economic growth and increased fiscal revenue, popular
demand for subsidies and welfare will always be the domain of
donor and this is as Professor Fairbanks has explained, and we
agree with that, a mixed blessing for Haiti.
We are encouraged that the private sector will be more respon-
sive to social needs and really to be disciplined taxpayers, but in
fact, the most important thing is to really build growth which is
the basis for the revenues that the state will have to do the needed
We have identified five clusters where significant investment can
be done to empower the private sector to really act for the common
We listed the food and tubers' sector, which is agriculture, where
we could create 300,000 jobs over the next 5 years with investment
of $190 million in post-harvest centers, crop insurance, etc.
Animal husbandry, where we could create 400,000 jobs, also with
$180 million of investment that I have listed in my written re-
marks, including sea ports, quality assurance, laboratory, dairy co-
operatives, etc. All of those are in my written remarks.
The garments sector has already benefitted from significant U.S.
help in the form of the HOPE II legislation. There, we can create
a lot of jobs and help, because one of the things the earthquake has
taught us is that it is very important to have a more balanced
growth in Haiti.
Fourth is tourism, facing a lot of challenges, but a sector also
that could be really powerful in creating jobs and attracting invest-
ments and boosting Haiti's image.
Lastly, the earthquake really brought housing and urban devel-
opment as a major growth sector for the next 5 years. It is really
a place where we will need more foreign aid. This is not something
that we can do alone. We will not have enough to provide for the
$4.5 billion that will be necessary for rebuilding 250,000 units of
We will need to avoid the crowding out of private investment
that can be consequential to the huge amount of dollars that will
enter the economy because of that.
On the governance, we really support the creation of an entity
that will really better coordinate foreign aid and better coordinate
also the insurgence of policy making into the exercise. That is al-
ready approved in fact by the government itself, but it needs to be
approved by the parliament, but we think this kind of governance
instrument will be necessary to manage this huge flow of foreign
aid and dollars, regardless of the real impact it will have on the
Mr. Chairman, in closing, I once again thank you for this oppor-
tunity to address such a crucial matter for my country. I will be
happy to answer your questions and contribute to your thoughts
about how the United States can help restore our nation and the
dignity of our people.
[The prepared statement of Mr. Boisson can be found on page 46
of the appendix.]
Chairman MEEKS. Thank you very much. Next, we have Mr.
Mark D'Sa, who is the senior director of sourcing and production
for Gap Inc. His responsibilities include directing product develop-
ment, placement strategies, and procurement in North, Central,
and South America and parts of Asia.
He is currently located in Miami from where he leads a team
that oversees price negotiations, placement, execution, quality,
product integrity, logistics, and other supply chain operations re-
lated to the product made for Gap Inc. in the Americas.
He has 38 years of global experience in the textile and apparel
industry, having lived and worked in India, Thailand, Canada,
Singapore, and the United States.
He has previously worked with several brands including Polo,
Ralph Lauren, and Levi Strauss & Company.
In the 1980's, he was a consultant to the Government of Thai-
land for quota negotiations, and more recently he was actively in-
volved in Gap's efforts to support the passage of ATPDEA.
STATEMENT OF MARK D'SA, SENIOR DIRECTOR, SOURCING &
PRODUCTION, GAP INC.
Mr. D'SA. Thank you. Thank you, Mr. Chairman, and members
of the subcommittee. Thank you for inviting me to be a part of this
Gap Inc. has been sourcing product in Haiti for a number of
years and we remain committed to continue doing business there.
Even before the tragedy, we were exploring internal recommenda-
tions to improve the business environment and how we could en-
courage more investment to come to Haiti so that companies might
want to establish a footprint in that country and help build out the
Prior to the earthquake, we had determined that it made good
sense to source out of Haiti because of the quality, the competitive-
ness, the efficiency of the factories, the workforce, and the prox-
imity to the United States.
As you may know, goods shipped from Haiti can reach the
United States in 3 to 4 days, as compared to 5 to 6 weeks from
some of the locations in Asia.
Despite the recent devastating tragedy, we are committed to
Haiti resuming its rightful place in the sourcing community. Our
staff is working with Gap Inc.-contracted factories to facilitate a
full return to business while working with the Haitian Government
and Departments of the U.S. Government to explore some of the
ways that the environment might be improved in order to attract
potential investors to that country.
Haiti needed help before the earthquake and it needs it more
than ever now. The apparel industry employed approximately
28,000 people before the earthquake and we believe more sustain-
able jobs could be created in textiles and apparel if the current
trade legislation were amended to allow a wider mix of product
from Haiti to have duty free access to the United States.
My colleagues and I have met with people in the various commit-
tees with jurisdiction over trade policy and we are hopeful that
some of the current legislation can be more liberalized in order to
make the environment more conducive to investors to want to come
Currently, there are investors standing in the wings looking criti-
cally at what we are doing at this point in time.
Haiti is important to U.S. retailers from a supply chain perspec-
tive. Its geography and its workforce are its two major strengths.
The workforce is motivated, dedicated, and friendly. The resilience
of the people came across stronger than anything else after the
Despite their personal losses and tragedies, people were back at
the factories 72 hours after the earthquake.
I remember one of our vendors telling me that he spoke to his
workers offering them time off but people said no, we have lost our
houses, we have lost our near and dear ones, but we need to work.
They live from day to day and that is their situation.
Another strength of that country is its proximity. In order to le-
verage the proximity and human capital, we need to ensure that
the legislative environment that currently exists, the HOPE II
agreement, which is largely underutilized because of the way it is.
constructed and because of some of the exclusions under the tariff
preferential limits need to be re-examined and made more user-
friendly and more applicable to the industry as it stands today.
We have encouraged both the Haitian and United States Govern-
ments to focus on infrastructure development which would benefit
both local and foreign companies as well as the Haitian people
Improvements to the ports and roads, power supply and commu-
nication, as well as urban transportation are critical to long-term
sustainable development. In the short term, of course, progress
must continue to be made in ensuring delivery of food and the pro-
vision of better shelter for the Haitian people.
One thing we have to be cognizant of is there are large commu-
nities of people today living in tents. They are out in the open.
There is no drainage and sewage.
In a couple of months, the rainy season will start. That could
bring on a number of health problems. Something has to be done
immediately to help and remediate that situation.
Following the earthquake in Haiti a few months ago, our com-
pany and our employees joined forces and have made donations to
Mercy Corps, which works on short-term efforts as well as long-
term reconstruction for the country. At the same time, the factory
that makes our clothes was among the first to be able to put Hai-
tian employees back to work and continues to provide them with
food, clothing, and shelter. We also continue to explore other ways
that the company might be able to help.
I want to thank the U.S. Government for taking such strong and
proactive action in the aftermath of the earthquake as well as for
their commitment to supporting a real recovery in the textile and
apparel production sector, which can continue to create more sus-
tainable jobs for Haiti.
We appreciate the swift action and encourage this committee to
work with your colleagues here in Congress and all the relevant
governmental agencies to coordinate an effort that can be lasting
and sustainable for the investment environment in Haiti.
Gap Inc. remains committed to sourcing in Haiti and we continue
to explore how we can increase our sourcing over time with a goal
of fostering the sustainability and growth of the industry over the
Thank you, Mr. Chairman, and members of the subcommittee for
your commitment to and interest in Haiti, and thanks again to you
and the committee for inviting me to be a part of the discussion
[The prepared statement of Mr. D'Sa can be found on page 60 of
Chairman MEEKS. Thank you. Next, we have Ms. Nancy Birdsall,
who is the Center for Global Development's founding president.
From 1993 to 1998, she was executive vice president of the Inter-
American Development Bank, the largest of the regional develop-
ment banks, where she oversaw a $30 billion public and private
Before that, she worked for 14 years in research, policy, and
management positions at the World Bank, including as director of
the Policy Research Department.
She is the author, co-author or editor of more than a dozen books
and over 100 articles in scholarly journals and monographs. Short-
er pieces of her writing have appeared in dozens of U.S. and Latin
American newspapers and periodicals.
She received her Ph.D. from Yale University and her MA from
Johns Hopkins School of Advanced International Studies.
Prior to launching the Center, she served for 3 years as senior
associate and director of the Economic Reform Project at the Car-
negie Endowment for International Peace where her work focused
on globalization, inequality, and the reform of the international fi-
STATEMENT OF NANCY BIRDSALL, PRESIDENT, CENTER FOR
Ms. BIRDSALL. Thank you very much, Chairman Meeks, Ranking
Member Miller, and other members of the subcommittee. As al-
ways, it is a great privilege to have this opportunity to speak with
I would like to set out three principles for how the United States
might follow up on the tasks you have set out so well in Haiti, and
suggest three specific actions that I hope this subcommittee will
First, the three principles. The first is that it is about more than
aid, you said this yourself, Chairman Meeks. It is about all the
other ways the United States can support Haiti-trade, invest-
ment, support of the Diaspora-and I will return to that issue in
The second principle is about coordination. I think there is end-
less discussion of the need for donor coordination. We just cannot
let the ideal be the enemy of the good.
It is true that it is not going to be easy in Haiti until the govern-
ment itself is ready to coordinate the donors. That could take some
time. It is good that the initial step Mr. Boisson mentioned has
been taken, but we have to recognize that prior to the earthquake,
the government was weak on this issue compared even to some
countries in Africa which are becoming more assertive in taking
What can the United States do? I think as one of the largest sin-
gle donors, it can lead on pushing the other donors, including the
United Nations, to set out who is the lead donor on key sectors.
For example, on reconstruction, is it the IDB or the World Bank?
On social sector provisioning in the short run, who is it? Is it the
British? Is it the Canadians? Is it USAID? And so forth.
More important, I urge this committee to push USAID in par-
ticular to set the tone on transparency of what it is doing and what
the other donors are doing. The only way to create accountability
to Haitian taxpayers, Haitian citizens, and to U.S. taxpayers is to
maximize the information about what each donor is doing in a
timely way to all of you and to civil society groups in Haiti.
How to do that, it means thinking through what should be pub-
lished on a Web site, whether there can be a platform that all do-
nors would use for monthly information about their plans, their
commitments, their actual disbursements.
The third principle has to do with the way we organize ourselves
in this government, and that is the need to make it very clear that
USAID is not only the lead agency, as the President designated Dr.
Rajiv Shah, the administrator, for humanitarian relief, but is the
lead agency for this medium-term development challenge that you
all have emphasized in your opening remarks.
And that USAID should take the lead, at least for its own activi-
ties, and the activities of other U.S. agencies on planting now the
seeds of good, rigorous evaluation and a process of learning as the
aid program and Haiti's own development programs evolve, so that
adjustments can be made, so there is a dynamic process of evalua-
tion, and an openness to innovation and new ways of doing things.
Let me go to the three actions. The first has already been re-
ferred to indirectly, but let me try to be as clear as possible.
This subcommittee, this committee, could push hard for provision
of duty-free/quota-free access for Haitian exports, including ap-
parel, and making that access permanent. Already, we see the ben-
efits of the recent rounds of legislation on opening up the U.S. mar-
ket to Haitian exports before the earthquake.
The issue now is to take further steps to encourage investment
even more than has been the case so far. First, to lift the current
quota on Haitian apparel exports, which may be discouraging po-
tential investors. Gap is going ahead. There might be more without
the current quotas that are imposed.
Second, there should be full product coverage, as Mr. D'Sa men-
tioned. Third, change the program rules to allow the broadest pos-
sible sourcing of fabric and other inputs rather than restricting key
imports. This would get the Haitian preference closer to what we
have in the African Growth and Opportunity Act.
Finally, make these preferences permanent. There could be an
opt-out for the Congress or the U.S. Administration in the case of
a coup or human rights' violations that were egregious in some fu-
ture government of Haiti.
This, by the way, would have minimal effects on U.S. textile pro-
Action to create more flexibility in our immigration policy to
allow in more Haitians. I would refer you to the written testimony
for more clarity on this, but the idea could be to have a numbers
neutral improvement that is substituting again some of the other
existing ways to get in, and allow something like 10,000 more Hai-
tians a year to come here.
This would reduce greatly the embarrassment that I see in the
future and that colleagues of mine see when we are turning back
boats of Haitians in the next year or more.
An action to take every possible step to channel as many of the
U.S. resources as can be reasonably channeled through the multi-
lateral development banks, through the trust fund that Mr. Boisson
I do not know which bank, IDB or World Bank, maybe both of
those. In particular, the IDB has the multilateral investment fund
which was a George H.W. Bush initiative in the late 1980's, works
on the private sector, and would make a lot of sense.
Let me also add that these two banks, as you know, are now
seeking capital increases, and I think one of the big reforms that
could be encouraged is that they develop more insurance and risk
Haiti benefitted from an $8 million payout against a very small
insurance program that the World Bank had set up. It should and
could be more because these small, very poor nations are subject
to all kinds of weather and other external shocks.
Thank you very much, Mr. Chairman.
[The prepared statement of Ms. Birdsall can be found on page 40
of the appendix.]
Chairman MEEKS. Thank you. Last, but far from least, we have
Mr. Skrobiszewski, who has 30 years of experience spanning in-
vestment fund management, socioeconomic development, crises
communications, public affairs, government agency reform, and
strategy development working in the United States, Europe, Africa,
Asia, and the Middle East.
For much of his career, he has been called upon to conceive and
implement innovative solutions to extraordinary challenges. At the
outset of communism collapse in 1989, he was called to the White
House by President Bush to discuss strategies for the redevelop-
ment of the Polish economy, and later to meet Lech Walesa within
days of the fall of the Berlin Wall.
In 1990, he prepared a forward-looking U.S. Labor Department
strategy anticipating the fall of the remaining Soviet bloc regimes.
He was recruited to draft a business plan for the Polish-Amer-
ican Enterprise Fund, a successful private equity firm conceived by
the President and the U.S. Congress to promote development of the
Polish private sector and the institutional foundation for a market
He served initially as an officer of the PAEF and later in its sis-
ter enterprise fund in Hungary, where he conceived and managed
the latter's cutting edge, high-tech VC fund.
He is also director of portfolio management of a Polish privatiza-
tion fund, advised on the establishment of the Eurasian Develop-
ment Bank, and serves today on the Investment Committee for the
Polish National Capital Fund, financing new high tech VC funds
STATEMENT OF FRANCIS J. SKROBISZEWSKI, ASSOCIATE,
Mr. SKROBISZEWSKI. Thank you, Mr. Chairman, and members of
the subcommittee. I am pleased to be here to describe my experi-
ences as an officer of the Enterprise Funds in Poland and Hungary
and to discuss how this model could be instrumental in today's re-
building of Haiti.
The Miami Herald's Jacqueline Charles recently observed that
the prospects of massive spending already has groups jockeying for
roles in Haiti's revival. For such spending to be effective, we must
address fundamental questions of what are we doing to empower
the Haitian people to help themselves? How do we support the Hai-
tians in revitalizing their own country and give the little people a
chance they never had before?
In building back better, an enterprise fund designed for Haiti
would focus beyond relief and reconstruction, provide in a delib-
erate and prudent manner essential financing Haitian businesses
need, to create jobs that are sustainable and offer genuine oppor-
tunity for the Haitian people at the grassroots level.
In 1989, the enterprise fund was an innovative vehicle conceived
by visionaries in the U.S. Congress and the first Bush Administra-
tion to support Central and Eastern Europe's unprecedented trans-
formation by jump starting the local private sector.
Congress recognized that capital would be the catalyst to build-
ing private businesses and to be effective, that capital had to be
professionally deployed. Financial investors were not ready to take
unknown risks and enter those markets.
Thus, through the SEED Act of 1989, Congress authorized the
establishment of initial enterprise funds with publicly sourced cap-
ital of $240 million for Poland and $60 million for Hungary to be
privately managed by bipartisan boards of investment and other
professionals appointed by the President, with the mandate to pro-
vide financing and related support to viable private businesses.
In following years, Presidents Bush and Clinton created addi-
tional enterprise funds under the SEED Act and for countries of
the former Soviet Union under the Freedom Support Act.
Later, without the benefit of congressional legislation, the Clin-
ton Administration also created a modified form of enterprise fund
chaired by Ambassador Andrew Young for post-apartheid empower-
ment of local SMEs in Southern Africa.
Such an innovative business-to-business approach applied to a
developmental mission was driven by private sector strategic think-
ing, decision-making and risk taking, and was executed by employ-
ing sound operational standards and established commercial dis-
ciplines, subject, of course, to appropriate public oversight.
This model proved exceedingly effective in terms of achieving
Congress' primary development objectives but also performed be-
yond expectations in financial terms. This is illustrated by the de-
tailed results outlined in my written materials.
The enterprise funds put their publicly sourced capital to work
financing tens of thousands of local businesses, those little people,
the little farmers, the entrepreneurs, the small people and across-
the-board to larger enterprises.
They established banks and other institutions to extend their
reach and created underpinnings of market economies, and in the
aggregate, diligently grew their assets through prudent investment
Thus, on the completion of their missions, the enterprise funds
in the CEE region are in varying degrees returning their capital to
the U.S. Treasury, and with the residual investment proceeds, they
are establishing charitable foundations in their host countries to
carry on developmental work.
For example, the Bulgarian-American Enterprise Fund with an
initial capital base of only $55 million from Congress returned its
public funding and established a $400 million foundation in Bul-
Most Central and Eastern European enterprise funds have also
raised private capital, enabling them to expand their operations
while returning their public capital.
The Polish-American Enterprise Fund's now independent invest-
ment team has raised over $1.8 billion in a series of private funds,
and in doing so, they demonstrated to global investors the opportu-
nities that existed in Poland and attracted competing funds with
billions of dollars more in capital.
There is no reason a congressionally-mandated enterprise fund
for Haiti could not likewise achieve significant private sector devel-
opment objectives while maintaining the value of its assets by oper-
ating in a commercially disciplined manner as its predecessor en-
terprise funds have demonstrated is possible.
To do so would take one, a critical mass of capital that can be
freely and flexibly deployed, for example, providing long-term eq-
uity financing for businesses, capitalizing SME and microenterprise
loan facilities to provide working capital, creating modern financial
institutions for mortgage banking, ag financing, leasing, traditional
commercial lending, and related institutional infrastructure.
Two, appointment of a bipartisan board comprised of investment
and knowledgeable professionals who understand their fiduciary
responsibilities and are allowed to freely employ private sector ap-
proaches unencumbered by bureaucratic constraints as could be
mandated by Congress.
Three, a commitment by donors to sustainable development
through financing local Haitian businesses, which create real sus-
tainable jobs and will empower a new Haitian middle class of pri-
Thank you, Mr. Chairman, and subcommittee members. I would
be happy to answer any questions.
[The prepared statement of Mr. Skrobiszewski can be found on
page 74 of the appendix.]
Chairman MEEKS. Thank you all. Thank you for your extremely
Let me start with Mr. Boisson. One of the things that I hear
often is the situation in regards to Haiti about Haiti's long-term de-
pendency on aid and the fact that we have over 9,000 NGOs which
things are going through in Haiti.
There seems to be a general sense among the general population
and among Haitian government institutions that the model of
NGOs basically governing things must change after the earth-
What is your opinion on that and how do you think we could be
of assistance there?
Mr. BOIssoN. Thank you, Mr. Chairman. My answer to that
would be the large number of NGOs working in Haiti reflect a per-
ception that Haiti needs to be assisted, that it is a poor country.
What I have observed myself is there are many Haitians who on
profitable businesses can build productive capacity, it is just a mat-
ter of giving them the proper environment.
The more you mistrust the private solutions, the more you handi-'
cap them. One example is because there is so much money coming
from aid and charity and NGOs, that crowds out completely the in-
centive to create private enterprise. That crowds out even the eco-
nomic signal. The attention of the government is completely out of
private investors, out of businessmen.
NGOs are necessary but just to supplement, not to replace pri-
vate enterprise and the real support to create a viable economy.
Chairman MEEKS. Mr. Fairbanks, let me ask you really quick,
Mr. Watt and I traveled not too long ago to Rwanda. We had a
chance to speak with President Kagame and go see what was going
on over there with the microenterprises.
What are the key success factors that are observed in Rwanda
and other places that you think Haiti will have to implement so
that it can be the success story that basically we were seeing tak-
ing place in Rwanda?
Mr. FAIRBANKS. Thank you for that question. Rwanda is the
greatest success story in the history of Africa in terms of its eco-
nomic growth, justice, and participation of women in government.
Paul Kagame will go down in history with President Nyerere,
President Mandela, and others as the greatest leaders in Africa.
He did two or three things that nobody ever thought he could do.
The first thing was he built modern institutions on top of tradi-
If there is one thing we take away from my part of this discus-
sion, it is that when he needed to get something done, he did not
listen to the multilaterals, he did not listen to fancy academics, and
frankly, he did not listen to me, and what he did was he went deep
into the history of his culture and he found the historical almost
archaeological mechanisms and to upgrade and improve and he
made them modern, and that improved the receptivity to the entire
nation to do something.
For example, when he wanted to clean the country, he found the
notion of Umaganda, which was something the villagers used to all
go out once a week and clean their villages. He made Umaganda
a national phenomenon, and then he role-modeled this by going out
the third Saturday of every month and sweeping the sidewalk in
front of his own house.
Gacaca courts, which I am sure you heard about when you were
there, was a traditional village system of justice that was actually
more adaptable to trying hundreds of thousands of perpetrators of
the genocide than any modern court system that could be imported
from any other part of the world. Paul Kagame found a way to rely
on traditional values to solve modern problems.
The second thing, in his relationship with the multilateral sys-
tem and the bilateral system, Paul Kagame insisted on four things.
Number one, there be a shared vision between the provider and the
recipient. You do not get to do the strategy, I do. I am the elected
president of the country and you should be willing to be guided by
my vision and if you are not, then you have to go.
Number two, disbursement has to be made through national and
indigenous institutions. He is very upset with USAID and he loves
DFID because DFID will work with him in that way.
Number three, he wanted investment to increase competence be-
yond applying for more aid. This is what was being discussed a few
minutes ago. An entire nation will turn its attention and configure
to receive more aid rather than build the private sector, build the
academy and build civic institutions, and he will not let that hap-
Finally, there were no parallel donor structures that undermine
all of the above. Right now, we are talking about a big reconstruc-
tion institution in Haiti. I think that is probably appropriate when
the population is vulnerable to natural disasters, but it is never
going to build the nation.
It has to be given a very finite timeframe, like 36 months, a
short timeframe, where it can work to alleviate the suffering of vul-
nerable populations, but then the locus of responsibility for build-
ing a nation has to put on the shoulders of the Haitians. You know
what? Whether they are ready for it or not.
The 5 or 10 percent of leakage through corruption is worse than
the 40 percent of leakage through the insufficiency of aid bureauc-
Chairman MEEKS. Thank you. One more question and then we
are going to go another round. I want to ask Ms. Birdsall a ques-
tion. We always talk about capacity building and the need to build
capacity, especially human capacity. In the earthquake, Haiti has
lost almost 40 percent of its public servants.
I was wondering if you had any ideas of where the international
community should invest mostly in rebuilding local and human
capital and if there are any models you know of that can help that
Ms. BIRDSALL. Thank you, Chairman Meeks. I think there is a
model that was developed at our Center for Global Development on
the basis of a gift that our chairman made to the President of Libe-
It is a model under which young people are recruited, people who
are in their early 30s, and go to work in the public service of the
government, and through being special assistants to key ministers,
actually provide unimaginably important service to those ministers
who are completely beleaguered and overwhelmed.
In the case of Haiti, for some time it is not going to have very
much support within their own ministries, partly because so many
Haitians will be going to work for all the NGOs and for all the do-
nors who are now flooding into Haiti.
I think Mr. Boisson mentioned not only does this influx of aid
from so many different players crowd out private sector initiatives,
it actually can undermine the ability of the government itself to
manage the donors and to manage its own expenditures.
This is one example of a model which I think could be built on
to have maximum use and deployment of the very skilled Haitian
Diaspora, particularly in this country, if there were any arrange-
ments set up, say by USAID or another agency with encourage-
ment from the Congress, that made it easier for members of the
Haitian Diaspora to go for 6 months, for a year, for 2 years into
public service in Haiti, then that would be part of building up the
capacity of that public service.
This has worked very well in the case of Nigeria, in the case of
Malawi, in the case of other countries in Africa where there has
been some mechanism by some private donor often to create a
channel that provides a framework for people to go into the public
service at different levels.
The model we have, I think, is a very low-cost one which does
not take away management functions from the key ministers be-
cause people go when they are young and they are special assist-
ants. They do many of the things that no doubt you have staff help
on yourself and your colleagues have here on Capitol Hill, which
can be very important, and which can be part of a larger process
of gradually recruiting and building up local Haitian capacity in
key functions that are very nitty-gritty, not glamorous.
Just to give you a feel, we had as many as a dozen of these spe-
cial assistants in Liberia being paid $30,000 to $35,000 a year,
which was far more than most of the public servants but far less
for most of them than they might have been earning here. Half of
the people who applied to do this activity were Liberians them-
selves and several have ended up as vice ministers and in other of-
fices of the government.
Chairman MEEKS. Thank you. Mr. Miller?
Mr. MILLER OF CALIFORNIA. Thank you, Mr. Chairman.
This hearing today was based on some conversations we had in
the previous hearing and my concerns with what we have to do in
Haiti. I really enjoyed all the testimony today.
If we are looking at long-term development of an economy, that
is one issue. We are dealing with the immediate impact to a dis-
aster today in Haiti.
If you just look at the 78 million cubic yards of rubble that have
to be dealt with, the entire nation has about 150 excavators, we are
not talking about what you would see on American construction
sites. We are talking about old, worn-out, antiquated units sold off
to that country by many contractors in the United States and other
countries, and they are not capable of doing the work.
They do not have the technical expertise within the labor force
and the construction industry to deal with the infrastructure needs
of electrical, roadways, bridges, sewers, storm drains, and if that
is debatable, go look at what they had, and it will tell you clearly
they do not have that expertise.
The United States is going to be the largest donor helping Haiti,
no doubt about it. As I talked to the chairman and other members,
we need to look at providing the ability to rebuild this country.
I really enjoyed the comments of Mr. Fairbanks where you were
saying that 80 percent of the aid never gets to the purpose in-
tended, and Haiti is prolific with corruption, as many countries are,
because you have a disaster today of $14 billion with a GDP of half
We are going to have a tremendous amount of money going into
Haiti in a very short period of time, and for that reason alone, I
think we need to take the responsibility as the United States Gov-
ernment if we are going to provide this aid, let's provide the exper-
With 15 million people unemployed in this country and tremen-
dous labor force in the construction industry who have the exper-
tise to immediately deal with the impact on this nation and the re-
construction of this nation, we should do that.
Mr. D'Sa with Gap, you have done a great job. You employ peo-
ple. You put them to work. In order to do that, you have to have
everything in place to do that.
Haiti has an ability we do not have in this country as far as envi-
ronmental standards and labor standards. They do not have to deal
with things American labor deals with, and we are going to deal
with trade issues and investment issues later, and when we do
that, we need to look at the impact we have on American indus-
tries in the future, too.
Like China has a tremendous benefit over the United States'
workforce and businesses as far as trade standards. They have vir-
tually wiped out the manufacturing industries and the furniture in-
terests, specifically in North Carolina and California and other
States in our Nation. They no longer can compete with China.
We do need to look at helping the Haitian people without a doubt
once reconstruction occurs, but we have to reconstruct immediately.
My concern and the chairman's concern is throwing money into
a nation and thinking 80 percent of it or 50 percent or 40 percent
could disappear based on corruption, putting the dollars in the
hands of individuals who are not used to dealing with these types
of dollars and expending that amount of currency in a very short
period of time to deal with the immediate impact and disaster that
we are facing over there.
None of my comments should be taken in a negative term. It is
not meant that way.
We need to help these people. The best way to help these people
is to provide the expertise, talent, and the resources necessary to
immediately mitigate the impact on this country. I believe if we do
not take some oversight over it based on the American tax dollars
we are investing in it, we will not be doing a service to the Haitian
people and there is a tremendous labor force available in Haiti,
manpower to get out and do specific jobs, but they do not have the
expertise, and that is not impugning the people, they do not have
One hundred and fifty pieces of equipment, that would be an em-
barrassment on an American construction site. In fact, these units
would not even be allowed on American construction sites because
they do not meet the standards and the environmental require-
ments placed on them by the government here.
Mr. Fairbanks, I would like to let you respond and maybe if you
think I am incorrect in some way, I would like to have you expand
Mr. FAIRBANKS. No, sir. I think what you are saying is a very
valuable perspective on the short-term needs versus the long-term
I think our points of view reconcile around the way that the work
is procured. I would make two suggestions. The first one that I
would hazard a guess we would agree on and the second one, we
will not agree on, but I would like to put it out anyway.
The first one is as we go out to procure services through USAID,
we should envision contracts where the vendors are punished for
poor performance and rewarded for superior performance.
Right now, what we are seeing is too much responsibility in the
proposal process and too little responsibility over the outcomes.
That is the way to characterize aid vendors right now.
In the proposal, they can do anything. You have a problem, I can
fix it. You have a problem, I already solved it somewhere else. Six
months later, 2 years later, I could not do it because the people are
stupid. I could not do it because the government is corrupt.
We go from too much responsibility to too little responsibility.
Mr. MILLER OF CALIFORNIA. If we invest American expertise in
our companies, combined with Haitian labor, the result will be
what we need it to be, and that is beneficial to the people of Haiti
and it will be done in a proficient way, done properly, and the re-
sources that are there when we leave are going to be long-term re-
sources. They are not going to be substandard electrical systems,
substandard bridges, substandard highways, substandard sewer
systems. They will be done in a fashion that they should be done
in and the Haitian people can build upon that when we pull back
Mr. FAIRBANKS. That is correct, sir. In fact, you get development
twice. You move the rubbish and you leave behind skilled people.
That is a great vision.
What I want to focus on is the procurement process to make sure
the contracts are done right so that the incentives are-
Mr. MILLER OF CALIFORNIA. I agree with you 100 percent on
Mr. FAIRBANKS. That is really broken right now. The vendors get
away with murder.
The second comment I would like to make which I do not think
we will agree upon but I would love the opportunity to test it with
you, is that I think eventually USAID needs to go to untied aid,
which means we have to give aid that is not tied to American sup-
I know this is not the time in our Nation's economic cycle to have
that discussion. The fact is other countries already do this, Japan
and the United Kingdom. They are much more accepted as develop-
ment partners around the world. You also get development twice.
If we were to put out a contract that procured services from the
Dominican Republic or governance consultants from Rwanda, we
would also get development twice because we would be helping the
Haitians solve a problem and we would be helping the other coun-
tries to develop that capacity.
This is not the time or place for that argument, but some day,
it has to happen.
Mr. MILLER OF CALIFORNIA. In closing, we are dealing with an
immediate disaster. I cannot think of any group more capable of
dealing with that than the American workforce and American con-
tractors, in combination with Haitian labor.
When that immediate disaster is dealt with, we pull back out,
the Haitian Government takes control of their own destiny, and
hopefully at that point of time, the infrastructure is in a situation
and modernized enough where it really will benefit the Haitian
people in the future, plus it gives the Haitian people a matrix that
they can look at on how things should be done. It gives Haitian
contractors an opportunity to work with American companies to re-
alize how things can better be produced for the long-term benefit
of their people.
I feel strongly, Chairman Meeks, we need to look at that. We
need to not only be concerned about the Haitian people. We also
need to be concerned about the American workforce and how that
American labor in conjunction with labor of the Haitian people can
resolve the impact on these people immediately, deal with the dis-
aster, and move on and then let their country take over.
I yield back.
Chairman MEEKS. Mr. Watt?
Mr. WATT. Thank you, Mr. Chairman. Let me thank the chair-
man for convening the hearing. It has been a very interesting hear-
Mr. Miller's questions actually helped me try to reconcile some
of the things the panelists were saying, particularly Mr. Fairbanks.
When I first heard his testimony, your oral testimony, not having
read the written testimony, I was a little concerned that we were
going to read too much into it, but then I went back and skimmed
quickly what you said in your written testimony, and just wanted
to make sure that we do not overhead what you were saying.
It sounded like initially you were saying, let's do away with this
aid and not bother with it. You are more concerned about how it
plays itself out. I think that is a concern that Mr. Miller expressed
and all of us are concerned about.
Let's make sure that we are just not providing fish, we are really
teaching or supporting the ability to learn how to fish, so there is
a longer-term impact. That is really what you are saying, I think.
Mr. FAIRBANKS. I would take it even further, Congressman, by
suggesting that we should be teaching the Haitians how to export
the world's most sophisticated fishing rods to the world's most de-
manding fishermen for the highest possible price points.
Mr. WATT. Gotcha. I would not argue with that as a general
proposition. I do not think any of us would.
There is some notion that we are really better-positioned to do
that with Haiti than in some other locations because we really
have never had a direct or for a while we have not had a direct
relationship with the Haitian Government because of the U.S. con-
cerns about corruption and what-have-you.
A lot of the infrastructure that is there that we have worked
through has been through NGOs that give the capacity to have a
different relationship with non-government organizations, although
I am not sure Mr. Miller or any of us would think building up and
supporting a more robust and honest and transparent government
is not also necessary.
This is somewhat a philosophical discussion about very concrete
needs and some of these things can by necessity be done more ef-
fectively through government structures than through private sec-
tor or non-government organizations.
I guess what we are trying to figure out here is how you appro-
priately balance those things in somewhat of an emergency situa-
tion and play it out long term so there are some skills left at the
end of the day.
Any arguments with any of that-the gentleman whose name did
not roll off your lips either-I was kind of hoping at some point
Stephane, who has that French flavor to his presentation might do
some of these introductions. I think a lot of these names might
have been done a better service.
I think at the end of the day, it sounds to me like everything that
all five panelists are saying is reconcilable and perhaps maybe
more so in Haiti than in some other settings.
Mr. SKROBISZEWSKI. Thank you, sir. We had capital and we came
into Poland with the capital in the early days, and we worked with
the government when it was appropriate to work with the govern-
ment to influence policy change, influence development of institu-
tions, but at the same time, our focus was on developing the pri-
vate sector by providing capital to build businesses.
In building those businesses, you build the fundamentals and on
that basis, you create the ecosystem from the bottom up.
Mr. WATT. Basically, what you are suggesting is we follow the
same or a similar approach in Haiti?
Mr. SKROBISZEWSKI. Commerce is taking place every day in Haiti
by the little people and those little people need capital to grow. By
helping them build their businesses, you also help build the other
institutions that support those businesses.
Mr. WATT. I am not arguing with that. I agree with you. I do not
want us to walk away from here with the message that I thought
I was hearing first from Mr. Fairbanks, and I came full circle when
I read it, that this can be done solely through that mechanism as
opposed to supporting a robust, honest, transparent government
that has an important role to play.
Mr. SKROBISZEWSKI. It is one piece of a large pie, exactly. In the
SEED Act in 1989, there were a range of traditional aid programs
and the enterprise fund, which was an innovative unprecedented
Mr. WATT. I think I have heard that message and I do not dis-
agree with it. I think we need to be cognizant of that. I thank the
gentleman for recognizing me and for convening the hearing, and
I yield back.
Chairman MEEKS. Ranking Member Bachus had a number of
questions that he wanted to ask, and we talked about how he had
been instrumental before, and he left the questions, so I am going
to allow Mr. Miller to ask the questions of Mr. Bachus.
Mr. MILLER OF CALIFORNIA. Thank you. Mr. Skrobiszewski? Cor-
Mr. SKROBISZEWSKI. Correct.
Mr. MILLER OF CALIFORNIA. I did that pretty good for a German.
Mr. WATT. You did not do all that well either.
Mr. MILLER OF CALIFORNIA. I was going to give you a lesson in
that but I said not to my friend.
His question, first of all, is how did the enterprise funds avoid
local government corruption, private enterprise corruption?
Mr. SKROBISZEWSKI. As I stated to mention to the previous ques-
tion, it takes two to tango. We had the capital. If we smelled any-
thing, we did not put the capital into the particular venture. We
had the local authorities, we had the national authorities working
closely with us because they wanted to see-
Mr. MILLER OF CALIFORNIA. You also kept control of it, it sounds
Mr. SKROBISZEWSKI. Pardon me?
Mr. MILLER OF CALIFORNIA. You also kept control.
Mr. SKROBISZEWSKI. We kept control of the money. We had con-
trol. We took a disciplined approach. If we smelled anything of cor-
ruption, we did not do it. We did not put the money out. Money
Mr. MILLER OF CALIFORNIA. I agree. What are the fundamental
reasons for the enterprise fund's success in helping rebuild the pri-
vate sector of Central and Eastern Europe?
Mr. SKROBISZEWSKI. I would say first and foremost, the profes-
sional management that was appointed to bipartisan boards and
the professionals they hired that were able to take a disciplined ap-
proach in putting out the capital.
Mr. MILLER OF CALIFORNIA. Qualified expertise.
Mr. SKROBISZEWSKI. Exactly. They were primarily American
driven. We brought over our capabilities, and of course, we had the
benefit of a lot of Polish Diaspora that came to the United States
during the marshal law period, as there are many Haitian Dias-
pora here today.
We also had the freedom to operate freely. That is we did not
have to go back and ask permission. We made commercial decisions
because we had provisions in the legislation that allowed us to do
Mr. MILLER OF CALIFORNIA. I think that is a great pattern for
American investment, too, in the future.
Mr. Fairbanks, you point out that, "Aid largesse can distort pri-
vate initiatives, stifle democracies, amplify ethnic based patron/cli-
ent relationships and promote corruption."
Given the amount of aid that is likely to flow into Haiti, how do
you prevent such negative side effects?
Mr. FAIRBANKS. All of those side effects are going to occur, so it
is a question of balancing the benefits with these disadvantages.
Any time you put a lot of money into a situation, you get Dutch
disease, which is inflation to the local economy. You also get the
leadership distracted, as Mr. Boisson had mentioned very elo-
quently, and you also promote cultural values that are anti-innova-
tion, paternalism, looking at wealth as a series of bureaucratic re-
lationships and so on.
These things are unavoidable and you still need to go ahead and
do it, as you pointed out, sir, in the short run, to alleviate catas-
The important point is we decide at what point in the near fu-
ture we are switching from dealing with acts of God and starting
to deal with acts of man.
My own sort of swag at this is it is very short, 36 months. At
that point, the budget is declining. The locus of decision-making is
moving from the metro polls of North America, Europe and Asia
onto the Haitians themselves, and that they know about this.
That we set up punishment and reward systems, allocate deci-
sion rights, and look at very clear metrics of performance, and then
we get out of the way.
There will still be problems, but it will promote, if you excuse
this paternalistic phasing in itself, the maturation of that society.
Mr. MILLER OF CALIFORNIA. I agree with you 100 percent. A gen-
eral overall question for the panel, whomever would like to respond
to it. He says, how can the United States navigate through the
tricky waters of helping Haiti rebuild speedily without seeming to
take jobs away from the Haitians and are there some instances in
which speed of reconstruction is more important than maximum
employment of the Haitian workers and if so, who would make that
Mr. BOIssON. I would like to address your question and complete
what Mr. Fairbanks was saying. I think that what we need to do
is two things. First of all, we have to build a new Haiti, not only
in response to the emergency, but build a new Haiti.
That means if we lose sight of that, we are going to provoke a
catastrophe because the catastrophe was partly manmade. It was
bad governance, for example, with there was a complete lack of
control of the construction center, it was because of bad govern-
ment. Yes, we have to respond to the emergency but we have to
build human capacity and its institutions.
As the private sector is concerned and the importance of buy-
ing-using Haitian resources, there must be almost an obligation
of U.S. companies, be they competent as they are, to build local ca-
pacity. There also must be an obligation of multilateral and bilat-
eral donors to build capacity.
That means, for example, if you have a rubble contract, yes, its
expertise lies with the U.S. company, but there is nothing that pre-
vents them from sourcing from some of the manpower in anything
they can source from Haiti and building capacity so that in 2 to 3
years time, you may have a Haitian firm ready to do any job of
Mr. MILLER OF CALIFORNIA. We have trained them.
Mr. BOIssoN. Train them. In a sense, this is exactly the same
image we should use for the international community.
If you have, for example, that big unit that is going to manage
and you do not address the issue of institution and political institu-
tion in Haiti, and how that society can control their government
and avoid corruption, you just are pouring money, you may just in-
crease the corruption.
Mr. MILLER OF CALIFORNIA. You are; yes.
Mr. BOISSON. Building institution and being able to provide pub-
lic or private services, we must have a result where there is as
much competition as possible, and that is what Mr. Fairbanks was
saying. I support it. I think by having-the reason why the private
sector works, be it in Haiti, the United States or anywhere, is be-
cause private entrepreneurs are penalized, they disappear, when
they do not manage well. That does not happen somehow in pro-
viding international aid supported public services, and that is bad
for the economy and that is bad for the society.
Mr. MILLER OF CALIFORNIA. Thank you. I yield back the balance
of my time.
Chairman MEEKS. I would just want to say this, if there is any-
one who has been focused on Haiti through all of its time, up's and
down's and around, the person who has been focused on Haiti and
making a difference and keeping Haiti on the forefront here in the
United States Congress, one of those individuals is the gentlelady
from California, who was the writer of the debt relief bill that we
passed unanimously in the House last week, and I yield to the
Honorable Maxine Waters.
Ms. WATERS. Thank you very much, Mr. Chairman. I certainly
appreciate the leadership that you are providing on this issue and
the fact that already you have held two hearings and not letting
this issue die after the crisis is focused on for a few weeks or so,
and your commitment to have a redevelopment plan, a national
plan for Haiti. I think that is very important.
I am sorry that I was not here to hear all of the witnesses this
morning, but I have quickly glanced at some of the testimony that
has been given, and in going through the testimony, I see that a
lot of what has been said seems to be basically a growing consensus
about the direction that all of the funding agencies and donors and
USAID and everybody needs to take in order to deal with the rede-
velopment of Haiti.
Let me just say that on my last visit to Haiti a couple of weeks
ago, we organized about 130 would-be business people who are ba-
sically lawyers, doctors and educated people in Haiti who have not
been involved in business per se in Haiti, not been involved nec-
essarily in government. I think it is typical of the middle class that
has been left out and the middle class that has not been developed
I am convinced that we have to develop through our work a mid-
dle class in Haiti. That, I think, can be done in a number of ways.
One of the testimonies that I glanced through talked about the in-
vestment in education and all of that in order to develop this mid-
dle class and the creation of jobs, etc.
I think that is all true. I want to say that USAID is working
very, very hard. The U.N. is working very, very hard. They are
working despite the fact they have lost some of their own per-
But it is very frustrating to see that the only way that services
can be delivered in Haiti is through the NGOs. I hear numbers
anywhere from 6,000 to 10,000 NGOs in Haiti, and while I agree
that there are a lot of social services that must be delivered and
work that must be done, I get this feeling that increasingly some
of the NGOs are taking over what should be business in Haiti.
That is frustrating.
I want to give you an example of that. I have some pictures we
took, Mr. Chairman, and I will pass them down to you, of the tem-
porary shelters that are being built in some locations. This is very
slow getting off the ground.
As a matter of fact, they are disseminating the plastic sheets to
provide some kind of shelters. The need is so great until even these
temporary shelters, not many of them are going to be built, and the
NGO that is kind of responsible said maybe they might get 20,000
of them built, I doubt it.
This is a business. This should be done by business people. This
should not be done by a nonprofit. I talked to the persons who were
working on it and the guy who really knew how to do it, who was
on payroll, really should have been the business that owned this
operation and providing this temporary shelter.
I think we have a job to do working with the government to try
and do everything that we can in this crisis to help create some
small businesses, and to help get people who have some expertise
in contracting, in building, and doing some things into some new
business opportunities rather.
I invited USAID to send over the contracting officer with the 130
business persons that I organized, and he was very generous and
he came over. He brought with him basically the requirements for
doing business with USAID.
The first thing is, it was all in English, it was not in Creole, not
even in French. We had interpreters there. We had people, a lot of
them could speak English, but when you start to use terminology
that people may not be familiar with, you really have to translate
it, even for some of the English-speaking people.
Everybody started to laugh at one point when he said that for
unsolicited proposals, you need to have 3 years of audited receipts.
We were talking to people whose homes and everything else was
blown away and everything they owned. Even the government
downtown in Port-au-Prince, the government buildings, all their
papers are still on the ground.
This young man was great. He was intent on talking about how
to do business with USAID, but I had to talk with him and say this
will not cut it, this will not do it.
That is one of the problems we have. It is a problem. It is an in-
nocent problem. It is not a contrived problem. It is an innocent
problem. A lack of knowing how to understand the culture and deal
with the people you say you want to help.
There are several things that we have to do. First of all, all of
the clusters in Haiti, local people are not involved. The NGOs run
them. You have health clusters, education clusters. They meet
every day. It is a secured operation. Local people cannot get into
the clusters where the planning is going on for the very people who
they are planning for.
The other thing is, just reverting a little bit back to what is going
on now, many of the camps that have opened up are not getting
I was in a camp of 650. They have tarps. They still need latrines
and some of those things. The way it works, the camp has to be
identified by an NGO. The camp has to organize its little com-
mittee with who is going to be in charge of some things. Then they
cannot get the tarps, they cannot get the food, they cannot get the
water and they cannot get the latrines until the NGO gets to them.
This crisis, they should have these plastic sheets on some flatbed
trucks rolling around putting them everywhere they can put them
and not the organizational structure that ensures the NGO is run-
ning it and in charge. I think that is important. That is something
that can come, but the way that it works, until again the NGO
identifies the camp, they have to sit there and wait.
I was in a camp that had nothing. They had been building
frames for the tarps to go over, and we finally went to USAID and
brought them out there on a Sunday and met with the people who
had already formed the committee, etc.
The point of all this is there is a lot of room for business. Not
only the big business that some of us are talking about, but small
business that Haitians could be doing, that would help them not
only to earn money but to become better at being business persons.
I just think that we cannot have redevelopment without Haitian
involvement and Haitian ownership. That is really important. The
development of the middle class, Haitian ownership, and I would
like to see-I have talked with the chairman about this-credits
given to American firms, any other firms that come in to do busi-
ness that have included in that proposal a way that they are going
to include people on the ground in Haiti. I think they should be
given credits for that.
I think American firms, firms from Canada or France, everybody
has a role to play. We cannot play that role in the absence of in-
volvement and ownership of the Haitian people.
Just yesterday, there was a meeting that was put together by the
Inter-American Development Bank, some of you may be aware of
it, in Haiti, with the international community.
I talked with the director and I said I want to know if you think
you have some people who are smart enough to be in business, Hai-
tians, who are invited to this conference, and not just the same, for
lack of a better description, five families.
We know where people turn because this is what people know
and understand about Haiti, that which is referred to as kind of
the business elite, etc., that is involved in all the export/import,
etc., and the fact that this emerging middle class or would be mid-
dle class have not been involved.
They said no, we gave them 10 names because they were almost
at capacity, to invite some of the business people that we had at
the meeting of the 130 where USAID had come out and they have
agreed to come to some other meetings that we will be setting up
with the middle class or emerging middle class.
In all that we do in the redevelopment of Haiti, encouraging
those firms who really want to do good business, and you are right,
we are not talking about shoddy business, who really want to do
good business, to come in and include joint ventures and participa-
tion on the ground and maybe not even joint venture ways, but
some ownership ways that can be created.
Unless we do that and we have an appreciation for the culture
and we have Creole that is used in the explanation of how our cul-
ture works and what we expect, we are going to make the same
mistakes that I think we have made historically in Haiti.
I just want to thank all of you for your expertise and your back-
ground and for what you had to offer, but let us all collectively
work very hard to do it and do it right, and to make sure that
working with USAID and with the U.N. and with the Inter-Amer-
ican Development Bank and others that we include the kind of ap-
proaches and training and development of those that we want to
understand what we are talking about with how to do business
I cannot do business with USAID. Many of the minorities we rep-
resent cannot do business with USAID. We cannot follow this so
we cannot comply with it.
We have to undo the mystery of it and get right down to getting
Thank you for the time, Mr. Chairman. I yield back and I appre-
Chairman MEEKS. I ask unanimous consent that Mr. Clay be
permitted to participate in today's hearing. Without objection, it is
Mr. WATT. Can I object? Oh.
Mr. WATT. Can I reserve the right to object, just long enough to
tell Mr. Fairbanks that he probably has been surprised at how en-
trepreneurial and community-oriented we are on this panel. Some-
times, we get accused of being anti-business. I think you could re-
late to the comments that Representative Waters made in a special
kind of way.
With that, I will not object to my friend participating in this
Mr. CLAY. I thank my friend from North Carolina and let me say
Amen to what Ms. Waters said and thank the chairman for con-
ducting this hearing and allowing me to be a part of it. I appreciate
Let me thank all of the witnesses for their testimony and along
the same lines as Mr. Miller and Ms. Waters, I have heard from
several members of my church who minister in Haiti who have
talked about some of the more immediate concerns that they have,
especially with the rainy season here, with the situation not really
moving like they would like to see it move.
Let me just say I put this question out to the panel. Going for-
ward, what should we do differently as far as rebuilding the infra-
structure of Haiti, as far as involving Haitian citizens?
Will there be groups like Habitat for Humanity involved in help-
ing rebuild homes? Will there be new building codes for building
these structures, to make them somewhat earthquake resistant?
Will the Haitian people, as Ms. Waters mentioned, benefit from
getting some skills and being able to support themselves and their
families with a job?
Is there a timetable for that? Can anyone try to answer? Yes, sir?
Mr. SKROBISZEWSKI. Yes, sir. Thank you. I can respond to some
of those questions. It is really stimulating the local Haitian private
sector and putting capital in their hands, as we did with our first
program at the enterprise fund addressing the very concerns that
Congresswoman Waters was raising, that avoided the complexities
of the USAID requirements.
We did community lending. That was one of the first programs
we did. Thousands of Poles lined up to get the money. They did not
understand some of the aspects. We had a small application and
we went back and cleaned it up. It was all in Polish. Some of them
learned more about their business than they ever knew before in
just filling out the application, even though they might not have
gotten the loan. That ended up making 10,000 loans over the 10-
year period, and we did another 126,000 micro-loans.
That establishes the foundation, and then if you are also work-
ing-it is the private sector that is making investments in these
kinds of firms that are imposing the standards. They want to see
construction according to certain standards, if they are making in-
vestments in that construction, because it is a longer-term return
you are looking for.
When we created a mortgage bank, when we invested in con-
struction companies, we impose those kinds of standards, and then
that filters down through the economy.
Mr. CLAY. Yes, Ms. Birdsall?
Ms. BIRDSALL. When I was listening to Congresswoman Waters,
Congressman Clay, I got a little depressed. I endorse fully the re-
marks of Mr. Skrobiszewski regarding having these enterprise
I want you, because you, with all due respect, you representing
the Congress are part of the problem of USAID's complex arrange-
ments. As he said in speaking, in Poland and in Eastern Europe,
we avoided the complexities of USAID, went around them.
I think if you want to have something happen differently in
Haiti, one important step would be to support USAID having the
flexibility to do the kinds of things that Congresswoman Waters
was talking about, without having to worry so much about an ac-
cretion of rules, an accretion of procurement arrangements, the
problems of everything being tied in terms of aid that Michael
Fairbanks referred to.
Mr. CLAY. Would that require some kind of legislative change or
allowing them to waive the rules that they operate under now?
Ms. BIRDSALL. One approach would be to say since Haiti is so
special, it is so close to the United States, let us give the new Ad-
ministrator of USAID some special period of greater flexibility and
test it out and see what happens.
There is a lot of eagerness at USAID to clean up and have great-
er capacity to do exactly the kinds of things-
Mr. CLAY. Their hands are tied now?
Mr. BIRDSALL. Their hands are largely tied. I think if this sub-
committee could use Haiti as a vehicle for also helping our Admin-
istration get much greater value for money and work much more
effectively with the government of Haiti on building government
capacity, that would be tremendously good.
The second thing I would say is it is not politically easy, I under-
stand this, but to the extent possible, I urge the Congress to put
some of the resources, as much as possible, through the multilat-
Why? They have more open procurement. You reduce the prob-
lem of coordination. If every donor insists on putting her flag or her
flag on every health clinic or every can, then you are creating this
burden for the government of Haiti to finally take charge in the
way that you are making it harder for the new administration in
Haiti to do what President Kagame was able to do in Rwanda, as
other members of the panel have said.
It is just a thought in response to the very good statements you
are all making, that there is a way perhaps to have Haiti, a re-
sponse in Haiti, be the leading wedge of a larger reform that
should be on the agenda.
I am sure you know that some of your colleagues in other com-
mittees are thinking about new foreign assistance legislation.
There has not been new authorization legislation in decades.
To support that new legislation as well, but perhaps to build
some momentum for it by having some special interim arrange-
ment for Haiti.
Mr. CLAY. Any other thoughts on the panel?
Mr. SKROBISZEWSKI. Yes. I just want to clarify that we work
closely with USAID. They had their capabilities and we had ours,
and ours was focused on commercial practices. That is investing
and lending on commercial terms, according to commercial dis-
That worked very well together. They brought other resources to
bear. We had that flexibility that I mentioned because Congress
granted it to the enterprise fund specifically in the SEED Act, that
gave us the capability to do our investments in a way that were
Mr. CLAY. Thank you for your responses. I thank the chairman
for his indulgence.
Chairman MEEKS. Thank you. Before we close out, Mr. D'Sa, let
me just ask you a question. Gap is still doing business and pursu-
ant to some of the questions that Ms. Waters talked about, do you
have any examples? Are you using Haitians now? Are you still get-
ting your shipments in and exports and imports in now? Can you
just tell us what you are doing in regard to Haitians on the ground
Mr. D'SA. Thank you, Mr. Chairman. Ms. Waters, I love the story
you told us about USAID and the missing Creole translations.
In one of my first visits to Haiti, when we usually walk around,
we do an evaluation of the factories. I talked to the people on the
floor, and the owners, of course, told me what a wonderful factory
they had and how strong the management was, and how they could
take care of productivity efficiency and quality.
I speak a little bit of French, no Creole. I asked one of the Creole
supervisors there to explain to me why he did what he did, and he
could tell me what he did but he could not tell me why he did it.
As I dug deeper, what I found was the management of the fac-
tory, the senior management was from Asia. The middle manage-
ment was from the Dominican Republic. You had people who spoke
English, who spoke Spanish, one or two spoke a little bit of French,
and nobody who spoke Creole.
Just like you had with USAID, we had disconnects 3 years ago
in our factories as well. We have been working to change that.
Mr. Chairman, coming to your question, we have been working
with Haiti and with Haitian suppliers of services and some foreign
investment as well. We had identified certain impediments to in-
vestment and challenges before the earthquake.
Since the earthquake, those challenges have only been exacer-
bated, but yes, we have been working with our suppliers there and
things have been moving along, and yes, we have Haitian services
The one thing that Gap does in most of the countries that it
works in is capacity building and empowerment to the labor. A few
years ago, there was hesitation on the part of Congress and there
was a requirement for certain elevations in the factories that we
worked in, sustainability, social responsibility, labor standards,
With the expertise we have, the intellectual property we own
within the company, we rolled out workshops, not just for our sup-
pliers, but for all suppliers in several Central American countries,
to help them elevate their standards, taught them situational lead-
ership, enlightened management, and then for the workers, you
have to keep in mind that in most of these countries, people who
work in the apparel industry tend to be illiterate. They do not
know when they are eligible for overtime or how to manage their
own wages, etc.
Simply teaching them not just the entrepreneurial skills but self-
management skills, how do you track what your earnings are, what
are you entitled to, how do you manage your funds at home, how
do you do budgeting, these are the kind of classes that we roll out.
This is the kind of education that we do.
In several countries in Asia today, Gap is involved in what we
call the competitive literacy initiative, teaching people to read and
write and from there on, creating career advancement opportuni-
There is another program we have called PACE, which stands for
personal achievement and career enhancement. To a smaller ex-
tent, some of these have already started to be rolled out in Haiti
in cooperation with a company called TC2 out of North Carolina,
that started with training the trainers who are Haitians, and then
the Haitians go out and start training workers in factories to be
able to manage their careers, to be able to manage their personal
That is one place where we are beginning to empower the Hai-
tian labor, the Haitian supervisors.
Yes, we are working with Haitian services, transportation, cater-
ing services in the factories.
Around the apparel industry, yes, there are a number of opportu-
nities for Haitian medium and small enterprises and it is begin-
ning to happen and hopefully if HOPE II is reconstructed to be
able to, as Ms. Birdsall and I have referred to, if we raise the TPLs
and we open the product offering that is available, we should be
able to do a lot more for the Haitian people.
Chairman MEEKS. Thank you. Let me, at this time, thank all of
the witnesses for your testimony. I think it has been very enlight-
ening. As I think Mr. Watt has indicated, and if there is something
that is uniting, it has been your testimony that we need to create
jobs for the Haitian people.
We need to get money in their hands so they can provide for
their families. We need to teach them how to sell that exclusive
fishing rod to us in the United States, so they can participate in
the global economy.
With that also comes the human capacity building of a govern-
ment so that the people can gain the confidence and have con-
fidence in it as was beginning to happen prior to this earthquake.
We are going to stay focused. This subcommittee will continue to
stay focused on Haiti, even when the cameras are gone. We are al-
ready preparing our next hearing on Haiti, which will be dealing
with microenterprises, so we can make sure that there is con-
Congresswoman Clarke, for example, she has some ideas, and I
believe she is working with you in trying to make sure we create
We will be continuing to move forward for a marshal plan for
Haiti because as I think Ms. Birdsall said and Ms. Waters, we need
coordinating of all this, so we know what we are doing and it is
not one hand working against the other. We are all pulling in the
same direction and working in the same direction for making a dif-
ference with Haiti.
Again, thank you for your testimony. Thank you for being here.
I look forward to having conversations and dialogue with you in the
With that, the Chair notes that some members may have addi-
tional questions for this panel which they may wish to submit in
writing, and without objection, the hearing record will remain open
for 30 days for members to submit written questions to these wit-
nesses and to place their responses in the record.
This hearing is now adjourned.
[Whereupon, at approximately 12:00 p.m., the hearing was ad-
March 16, 2010
Rebuilding Haiti's Competitiveness and Private Sector
March 16. 2010
Representative Meeks Prepared Remarks
Before I begin, I would like to thank Representative Miller, the ranking
member of this subcommittee, for his help in planning this hearing, and
to express again my gratitude for our ability to work in a truly bipartisan
manner in seeking solutions to the critical situation in Haiti. This
hearing is the second in a series of hearings on the situation in Haiti. I
was thrilled to see such strong bipartisan support last week for the Haiti
debt relief bill, which passed with unanimous support out of the full
house, following its passage out of this subcommittee. Finally, I want to
reiterate my sincere thanks to Chairman Frank and Ranking Member
Bachus, for their continued support for Haiti and the work of this
subcommittee, and especially thank Representative Bachus for his truly
touching remarks on the floor of the house last week, in support of the
Haiti debt relief bill.
Now, I would like to thank our panel of witnesses for appearing here
today, and for sharing their thoughts and experience on rebuilding
Haiti's competitiveness and private sector. Haiti's recovery will happen
in three distinct, if overlapping phases. Phase one consists of the crisis
response, focused on basic survival needs, which began in the hours
immediately following the devastating earthquake of January 12, 2010.
Phase one is likely to be ongoing for some time, particularly for the
most vulnerable groups in Haiti. Phase two, which is in its very early
stages of development today, consists of rebuilding the basic physical
and governance infrastructure of Haiti. This phase will take several
years to complete, but must get under way quickly as it is critical to
allowing the government and the people of Haiti to get back to work,
and to regain some minimal sense of normalcy.
Phase three, the plan for which is being developed today, and is a
continuation of extensive work already underway prior to the
earthquake, consists of implementing a long-term economic strategy
for Haiti, allowing it to grow prosperous, and to move beyond the
dependency on aid which has characterized the country for decades.
As our witnesses will address here today, much of the preparatory work
for phase three was already being done prior to the earthquake, under
the leadership of President Preval. These plans have been modified as
a consequence of the earthquake, but not fundamentally changed.
It is my hope that today's hearing, and the testimony of our panel of
witnesses, will shed some light on how we can empower Haitian
institutions and the private sector to enable the successful and rapid
progression of Haiti from phase one, crisis response mode, where it is
today, to phases two and three of long-term economic planning, in a
manner that lays the foundation for a new, sustainable, stable, and
prosperous Haiti, providing hope and opportunity for all its population,
and not just a privileged elite. I also look forward to hearing about how
we can ensure effective coordination of the multitude of development'
efforts, including especially the multilateral and international
development institutions, under the leadership and stewardship of the
Haitian people themselves, as they build a future in accordance to their
plans, their culture, and their vision of a resurgent Haiti.
"Rebuilding Haiti's Competitiveness and Private Sector"
Testimony for the House Financial Services Subcommittee on
International Monetary Policy and Trade
President, Center for Global Development
March 16, 2010
Thank you Chairman Meeks, Ranking Member Miller and other members of the subcommittee. I
appreciate the opportunity to appear before the subcommittee today to discuss how the U.S. and
the international institutions can support Haiti's reconstruction and recovery following January's
Humanitarian relief efforts remain an urgent concern in post-quake Haiti. At the same time, the
disaster has prompted soul-searching and debate in the development community. Why haven't
previous efforts to assist Haiti resulted in a more resilient society? How can the United States
and the international institutions like the World Bank, International Monetary Fund (IMF) and
the Inter-American Development Bank (IDB) support Haiti's reconstruction and recovery,
especially when Haiti's government and institutions have been crippled by the earthquake?
In my remarks, I'd like to propose three key principles for the U.S. and international response in
Haiti and three policy actions that would have a big impact on the lives of Haitians as they seek
to rebuild and replenish their nation.
1. It's about more than aid.
Aid is the first response in the aftermath of major natural disasters, and rightly so: helping Haiti
pull it citizens from the rubble, and providing emergency medical care, water, and shelter is
paramount. But to build a capable state in Haiti and an independent middle class, aid will not be
sufficient. What Haiti needs from the United States are other kinds of support: policies to
encourage investment and open our consumer market to Haitian exports; special programs to
encourage deployment of the considerable talents of members of the Haitian diaspora in
rebuilding public services in Haiti; and a new program to allow more Haitians to emigrate to the
U.S. I suggest specific actions below.
2. Ultimately only the Haitian government can "coordinate" the donors; meanwhile the
U.S. should encourage lead donor arrangements by sectors and should lead on
There are now more than 25 official donors, including at least 10 United Nations agencies plus
the U.S., British, French, Canadian, European Commission, Brazilian, Chinese and hundreds of
international organizations operating in Haiti. Since the January earthquake, there has been the
usual drumbeat among official donors on the need for coordination. But coordination of the
international community's input by the international community itself is a hopeless ideal. Since
the earthquake, the Obama administration has made good efforts to avoid adding to the
confusion by emphasizing that the government of Haiti must be in charge of the aid-funded
In Haiti, this is tricky because many of Haiti's government and civil society institutions have
been destroyed and many officials, police and other leaders have died. What can be done in the
short run? The U.S. is likely to be among the largest if not the largest single donor/creditor in
Haiti (the U.S. currently accounts for 32 percent of total humanitarian assistance in Haiti). The
U.S. should work with the Haitian government to identify who among the official donors is in
charge of what. For example, one of the multilaterals (i.e. the Inter-American Development Bank
or the World Bank) might take the lead on reconstruction; the U.S. might lead on leveraging
private sector investment through USAID and the Overseas Private Investment Corporation;
another large donor might lead on social sector investments, etc.-in all cases working with
other donors but being the principal counterpart for the government. These are just examples, but
clarity about who is in charge of what would go a long way to support the Haitian government's
own efforts and to make sense of the panoply of actors and interests currently operating in the
The U.S. should also take the lead on transparency. I urge a special focus by all U.S. agencies
involved to make their plans, commitments, deployment of personnel and disbursements fully
available to the public on an ongoing basis on a public website for the indefinite future; arid for
USAID to commission the creation of a platform that would make it easy for private donors to
do the same. That or some other initiative should be taken to provide the government of Haiti the
information in usable form to increasingly take charge themselves. It would also allow Haitian
civil society the information to permit them to hold their own government gradually more
accountable. (Similarly, the Congress and U.S. taxpayers would have more timely and useable
information about U.S. resource deployment.) This approach would also minimize the risks of
waste and corruption that are ever-present when large new inflows of outside aid for
reconstruction begin to flow.
3. Put USAID more clearly in charge of the U.S. effort and call on USAID to focus on
innovation and evaluation.
President Obama designated USAID Administrator Raj Shah "our government's unified disaster
coordinator" immediately following the earthquake. USAID has a long history of disaster
response as well as transitioning from humanitarian crises to long-haul development. But amid
the growing and visible roles of the Pentagon, State Department and other federal agency
responding to the earthquake, we are running the risk of confusion about who is really in charge
of the U.S. strategy and response.
Even the perception of poor coordination among U.S. actors can weaken the effectiveness of our
response. President Obama, Secretary Clinton, the U.S. Congress and others should continue to
make it clear that Dr. Shah is not only the president's designated disaster coordinator but also the
head of the primary U.S. agency for development. They should give him the profile and tools
and authorities to do the job he has been asked to do. Getting this part right can help Haiti put its
country back together again, and might in turn, help strengthen our own development apparatus
I urge this committee to in turn urge USAID to take steps to ensure that there is adequate
emphasis on defining objectives for all U.S. aid programs in Haiti, in terms--wherever possible--
of measurable outcomes on the ground (jobs, gains in school enrollment and learning, reductions
in infant and child mortality, etc.); testing new approaches; and investing now in the baseline
information for systematic and independent evaluation. This is vital if we are to improve the
process, which elsewhere has been plagued by difficulties, of shifting from emergency
humanitarian programs to long-term development investment.
There are a number of things that can be done in the short-term to help Haitians recovery from
the earthquake: ensure Haiti's adolescent girls are protected from sexual violence while they are
in temporary settlements; consider using cash transfers to get the economy going; create a jobs
and emergency works program; and provide, as appropriate, police force resources. But there are
three major policy changes very much in the jurisdiction of this committee that would have
immediate and lasting impact.
1. Provide duty-free, quota-free access for Haitian exports, including apparel, and
make that access permanent.
Haitian-Americans and Haitians (some of whom came to the U.S. after the earthquake in order to
see U.S. Trade Representative Mark Kirk and members of Congress) are asking for one thing:
more trade with the United States which can result from further opening of the U.S. market to
Haiti already has duty free access for most goods it might export to U.S. markets under current
preferences.' And exports-especially of job-intensive apparel and textiles-deserve some credit
for the small but significant improvement to Haiti's economy before the earthquake (see annex).
SThe Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II) and Caribbean Basin Trade
But more can be done as my colleague Kim Elliott has argued in a recent blog post on "Haitian
Recovery, Sweatshop Jobs and the Role of Trade Preferences.2 First, the current quota on
.Haitian apparel exports should be lifted-the current quotas are likely discouraging potential
investors even now. Second, there should be full product coverage. Third, change program rules
to allow the broadest possible sourcing of fabric and other inputs rather than restricting key
imports from Haiti to those using American inputs. And fourth, make preferences for Haiti
permanent (the increase in Hope II to 10 years clearly helped; a permanent program would be
even better). While the programs should be permanent, there can be an opt-out for the U.S. in
the case of a coup or other significant human rights violation.
These are among the recommendations in a forthcoming CGD Trade Preference Working Group
report3 that Kim Elliott chaired. The report makes clear that better access for all least developed
countries-including Haiti-would have a minimal negative effect on U.S. firms and jobs. The
report indicates that increased access for all least developed countries might reduce U.S.
production of textiles by one half of one percent. Such access for Haiti can contribute to both
more and better jobs for Haitians trying to survive in the wake of this terrible tragedy.
Increased trade access to the world's largest consumer market-the U.S.--has the potential to
create jobs quickly and have a lasting impact on Haiti's economy. Customers, not charity is a
critical part of the equation for Haiti's long-term recovery.
2. Create a Golden Door Visa for a limited number of Haitians to emigrate to the U.S.
To help Haiti's earthquake victims, change U.S. immigrations laws. CGD fellow Michael
Clemens has called for a new Golden Door Visa for a limited number of Haitians and other
people in the world's poorest countries.4 Haitians will continue getting on boats in large numbers
to try to escape Haiti in the weeks to come. But most of them will be forced to do so without
permission, because there is no provision in current U.S. immigration policy to reserve even a
single visa to the U.S. for people simply because economic opportunity is abysmal where they
are. (Refugee visas are only for people threatened by war or persecution, and don't apply to
natural or economic disasters; the 'Diversity Visa' does not apply to Haiti.)
A Golden Door Visa would change that. It doesn't need to mean more immigrants, though it
might; it could be made "numbers-neutral" so that the number of all immigrants stayed the same
but became slightly weighted toward places where people need more opportunity. It could be
given in more limited numbers when the U.S. economy is weak, greater numbers when it's
strong. Even small numbers would be tremendously helpful: 10,000 per year would represent a
50% increase in the number of legal Haitian immigrants, but only 1% of total U.S. immigrants.
SKim Elliott, "Haitian Recovery, Sweatshop Jobs, and the Role of Trade Preferences", Center for Global Development, January
25, 2010, http://btlos.cdev.ore/elobaldevelopment/2010/01/haitian-recovery-sweatshop-iobs-and-the-role-of-trade-
3 Kim Elliott leads the Center for Global Development's Trade Preferences Working Group
(http://www.cgdev.org/section/initiatives/ active/reformingtradepreferences/elobal trade preference reform).
4 Michael Clemens. "Reactions to My Proposal for a New Visa to the Unites States,", Center for Global
Development, January 25, 2010, http://blogs.cedev.ore/globaldevelopment/2010/01/reactions-to-my-proposal-
Creating some degree of flexibility in this way would help reduce the embarrassment of forcing
poor people who will be trying to leave Haiti back into the disaster zone. It may also be the most
successful way to help Haitians lift themselves out of poverty. According to calculations by
Clemens and CGD visiting fellow Lant Pritchett, 82 percent of Haitians who live on more than
$10 per day live in the U.S. Only the top 1.4 percent of people in Haiti had that living standard
even before the quake. So for most of the Haitians who left, leaving Haiti was the cause of
In addition to creating a Golden Door Visa, there should be support for Haiti's diaspora members
to return to Haiti to shore up public functions, especially at the government ministries. CGD
founder Ed Scott helped create the Scott Family Fellows program aimed at recruiting young
professionals to support the government of Liberia as it recovers from 14 years of civil war. The
fellows fill a huge capacity gap and work in Liberia as special assistants to senior Liberian
government officials, primarily cabinet members. Since its inception, the program has attracted
both Liberian nationals and U.S. citizens. A similar program could help rebuild and re-staff the
Haiti's vital government infrastructure.
3. Channel more resources through the multilateral development banks.
The World Bank and Haitian officials are expected to establish and run a "multi-donor trust
fund" similar to the one set up after the 2004 Asian tsunami. The Bank's trust fund is expected to
include an "executing agency" led by Haitians, while the United Nations and other international
staff will supervise the massive rebuilding projects. A trust fund could also be established at the
Inter-American Development Bank, which could help raise resources from Latin American and
Caribbean neighbors, and or U.S. resources could supplement the existing Multilateral
Investment Fund at the IDB for work in Haiti over the next five years; the MIF was started as a
U.S. initiative at the IDB to support private sector investment and public-private partnerships in
the'Latin America and Caribbean region.
Both the World Bank and the IDB are in the process of seeking capital increases. Among the
reforms the United States should urge at those banks is increased attention to risk management
instruments, including insurance and guarantee products for low-income countries against
natural disasters and other external shocks, as I have recommended in earlier testimony before
s Nancy Lee, Guillermo Perry, and Nancy Birdsall, "The Age of Turbulence and Poor Countries: The Case for MDB
Help with Risk Management", November 17, 2008, http://www.cgdev.or/gcontent/publications/detail/967322 and
Guillermo Perry, "Beyond Lending: How Multilateral Banks Can Help Developing Countries Manage Volatility",
Center for Global Development, May 13, 2009, http://www.cgdev.org/content/publications/detail/1422098.
Haitian apparel exports to the United States rose from $450 million dollars in 2006 to $512
million dollars in 2009, but make up less than one percent of the share of total U.S. imports,
meaning improved trade opportunities could create the jobs that are so desperately needed in
Haiti, with minimal negative effect on the U.S. or other exporters.
Jilmln App.arl E\p.lrn in tlhe I lllt'd StJ eS ( umllion dJd ll.ar I
2006 2007 2008 2009*
lotal 450 453 412 512
Share of total U.S. imports 0.6% 0.6% 0.6% 0.8%
Extrapolated from January-November data.
Sources: U.S. Department of Commerce, Office of Textiles and Apparel; U.S. International
The Haiti Reconstruction Effort
How Can the Private Sector Best Contribute
To Haiti's Sustainable Rebirth
Testimony before the House Subcommittee
On International Monetary Policy and Trade
Pierrre-Marie Boisson, Economist
Member of the Presidential Working Group on Competitiveness
And of the Private Sector Economic Forum
March 16, 2010
Mr. Chairman and Honorable Members of the House Subcommittee on International
Monetary Policy and Trade,
Thank you for providing me the opportunity to talk to you about the Haiti
Reconstruction Effort and especially on the precious role that private investment and
the private sector can and should play in the rebirth of our country.
Two months ago, Haiti suffered one of the most terrible catastrophes ever to hit a
nation. Over 200,000 people died, 1.2 million got displaced and more importantly,
millions more, even not directly hurt by the disaster, are still traumatized and in doubt
about their future. Beyond suffering, however, lies a real opportunity not to just to
rebuild but to build a better Haiti. The January catastrophe was a wake-up call to
remind us that not only our buildings but our whole society is in need of repair. We can
and should use this new crisis as motivator to create a new Haiti, more prosperous, but
also where prosperity is widely shared and not just for the few lucky ones.
Opportunities indeed exist for Haiti's economy to grow fast, create over a million jobs
in the near future and attract US$5 billion private investments in a relatively short
period. Over the course of last year, the Presidential Working Group on
Competitiveness, with help from the OTF Group and following a truly participative
process, identified five priority clusters, namely fruit and tubers, animal husbandry,
garments, tourism and urban development, where we could spur private-led inclusive
growth, generate tax resources and thus offer better social services and welfare to our
citizen. Together with the Competitiveness Group, the members of the Private Sector
Economic Forum, including the main business associations and major financial groups,
believe not only that developing these clusters can achieve our national goals but also
that the Forum itself can truly partner with our government, civil society and
international community to create a new social compact for all Haitians.
Granted, the ideas that private investment is the key to growth and shared prosperity
and that public-private partnership can work are old ones. Haiti's abject poverty and
cultural individualism and mistrust among private and public players raise legitimate
doubts, first about private sector commitment to play his role and secondly about
government faith in private-led growth. The good news is that Haiti was already
moving toward removing such doubts way before the earthquake.
The Past as an Indication of a Better Future
Indeed, the disaster hits us exactly when positive signs of a new Haiti were emerging.
2009 was the fifth consecutive years of economic growth, with a decent 2.9% mark, even
at a time when the whole region was suffering recession; agriculture, which occupies
60% of the population, grew at over 5% in 2009; inflation had been in retreat since 2004;
This Pae is No Yet
Jr t i: Si
This Pae is No Yet
Jr t i: Si
providers, the international organizations involved, the business sector and even
the persons living with the diseases.
I do not want to exaggerate the meaning of the above. These have been episodes of
goodwill and constructive behaviors in a society that remains largely plagued by a
significant degree of suspicion among different elites and social classes. These episodes
however reveal a true process of mentality and attitude change, driven by the profound
mutations of Haitian society and its people. Several factors influence significant
behavioral and cultural changes, including the growing Haitian Diaspora, the
development of mass communication and the presence of large contingents of foreign
workers in the country. I am also personally optimistic about the prospect for the recent
catastrophe to increase the urge to unite ourselves against fatality and reinforce our will
to build partnership for the good of all.
Vision for a New More Prosperous and Equitable Haiti
The Private Sector widely believe that the only real way to fight Haiti's poverty and
boost welfare is to attract large private and public investment in Haiti's most
competitive productive clusters, build a solid tax base and create a large middle class
through publicly-funded education, health and human development effort. One of our
key challenges is of fiscal nature: Haiti currently generates about 15% of the Dominican
Republic's GDP and the State only collects 10% of GDP as taxes against 18% for the DR.
The two countries having similar populations (10 Millions), this means that Haiti's
Government collects less than 10% tax revenue per capital than its neighbor. With such
limited means, popular demand for subsidies and welfare state cannot be faced other
than by way of donor support, perpetuating the poverty-dependency trap we have
been digging ourselves into over the last 20 years. The only way out of this trap is: (i) to
rapidly grow the economy and (ii) increase fiscal pressure at the same time. The Private
Sector Economic Forum has come to a large consensus that both must be achieved in
parallel. We are determined to show a strong commitment for fiscal responsibility and
transparency, to the extent of demanding high fiscal and ethical standards as a
condition to be accepted as member of the Forum.
On Economic Growth and Building Large Middle Class
The Presidential Working Group on Competitiveness (GC), with the help of OTF, spent
last year analyzing data, conducting surveys and workshops with business, students,
civil society and government leaders through different regions of Haiti. The goal was to
come with an ideal selection of productive clusters where Haiti could create large
number of jobs, increase productivity and create hundreds of thousands of micro, small
and medium microenterprises (SMEs), the backbone of any economy.
Among selection criteria, major consideration was given to export potential, import
substitution, environmental sustainability, rapid implementation and potential for
migration from low to high value-added products. The GC also took gender, age and
rural-urban divide into account in its cluster selection process. A survey of 750
respondents was first conducted, including 120 students, analyzing, among other
factors, mental models and cultural factors. Forty-two clusters were initially selected
and, after discussing with various groups and government officials, it was narrowed
down to the five with the greatest potential to lift economic growth. The chosen.
portfolio balanced the imperative of job creation with long-term structural
transformation of the economy. The five priority dusters were:
Two in agriculture, namely fruits and tubers and animal husbandry.
Two dedicated to serve urban areas, including outside of Port-au-Prince:
garments production and tourism,
I* A fifth selected mostly for its ability to attract young urban people, namely
technology-based Business Process Outsourcing (BPOs).
Five cross-cutting clusters were identified to support the growth clusters, namely
construction, education, finance, information and communication technology and the
business enabling environment. We calculated that actively developing these clusters
could generate about 500,000 jobs over the next few years.
In addition to selecting priority clusters, the Competitiveness Groups worked to
identify: (i) public policies and measures that could have an immediate impact of the
business enabling environment (quick wins); (ii) social marketing strategies to promote
entrepreneurial culture and positive attitude among Haitians; and (iii) public policies
and programs to support SMEs.
The GC's final report was submitted to President Preval and his government last
December. Based on the report's content and its prospect to constitute the basis for a
new economic strategy, the President decided to empower the Group for a second year
mandate with OTF assistance, whose main objectives would be to: (i) establish
"business plans" for each cluster; and (ii) start a social marketing campaign to instill the
attitude change identified as a key success factor for the strategy.
Post Earthquake Revision
Consistent with his mandate, the GC reconvened only 10 days after the January 12
earthquake to revisit the strategy. We quickly realized that the vision established last
year was even more adapted to Haiti's post-disaster needs than before. Indeed, January
121 would not have been so tragic if Port-au-Prince was not so densely populated.
Decentralizing and diversifying the economy away from the capital thus becomes the
focal point of any recovery strategy. GC approach, by boosting agriculture and
industrial production could actually serve as a magnet to attract people outside of Port-
The main post-earthquake revisions to our rapport, however, was the need to make
housing and urban development a priority growth cluster and to raise the total target to
one million jobs, 70% of which from agriculture. We decided to de-emphasize the BPO
cluster to make room for housing. The GC then revised its Executive Summary and
started working on roadmaps for the five growth clusters.
While approving the new strategy and asking for financial support to GC from USAID,
the President expressed his desire that the GC work serve as a basis for Haiti's post-
earthquake economic recovery strategy. He formally asked GC to team with the Private
Sector Economic Forum to work with his Government in preparation of the next Donor
Conference to take place on March 31,2010, at UN headquarters in New-York City.
In view of the March Conference, GC just produced the following elements of the five
duster roadmaps, which were discussed in an IDB-sponsored Meeting yesterday:
1. Fruit and Tubers
Haiti has made a good start in fruits, selling organic mangoes in the US market at $6 a
dozen against $4 for Mexico. Favorable climate, abundant labor, proximity to sizable
consumer markets and possibility to export year-round provide mango with good
export and job creation potential. The country can also produce organic bananas and
price-competitive pineapple for the US market. The GC found that 300,000 jobs could be
created in fruit and tubers production and processing all over the country during the
next 5 years. The following investments, amounting about US$188 millions, have been
identified to support the fruit industry over this period:
Invest in higher value processing and export facilities ($10M)
Invest to create 200 post-harvest centers at $35,000 each ($8M over 5 years)
Establish mango plantations in 3 priority zones ($15M)
Establish 2,500 hectares of SME accessible ferti-irrigation banana
Establish Crop Insurance capability ($10M)
Using the post-harvest centers as delivery points, establish farmer to post-
harvest center capacity building program ($27.5M over years)
Create a brand and marketing strategy ($150k)
Organize two way FAM trips ($1.25M over 5 years)
Prepare and finance a large-scale marketing campaign ($5M over 5 years)
Control watershed in key agricultural priority regions ($7.8M)
Establish a Partial Guarantee Fund for investment into the sector
(Minimum 70% coverage)
Build new key roads to improve access
Invest in product standardization & quality monitoring capability &
ongoing system ($5M over 5 years)
Develop deep sea ports in Ft. Liberty and Les Cayes through transparent
bidding mechanism ($420M); to that effect, joint public/private
partnership is required to revisit public bidding law and procedures and
boost effectiveness and efficiency of the Commission Nationale des
Marches Publics (CNMP), the organ in charge of public procurement.
Associated public policies also need to be considered including, as for all export and
import substitution industries, weaker currency, custom acceleration and equipment
import fiscal incentives, together with incentives for financing and capacity building
support to small farmers and revision of land-lease ownership laws for state land to
2. Animal Husbandry
Favorable weather and soil condition combine with abundant labor force and strong
government support to make animal husbandry one of the most promising dusters for
Haiti. Eggs imports currently reach 44 million every month, with 80% from neighboring
Dominican Republic. With adequate policy support, chicken and eggs could be
competitively produced and replace import. Pork and fish farming are two other
segments with great potential. The GC found that about 400,000 jobs could be created
over the next 5 years. The following investments, amounting about US$179 millions,
have been identified to support animal husbandry over the period:
Invest in 2 Incubators / Hatchery ($1.52M)
Invest in 12 Feed mills ($65M)
Invest in 12,925 Farms ($56.4M)
* Invest in 1 Slaughterhouse ($40M)
Invest in 25-50 new dairy cooperatives ($2.5M)
Invest in an animal husbandry training institute ($5 M over 5 years)
Create a comprehensive sector strategy ($400k)
Support the establishment of appropriate points-of sale, through risk
guarantee for these types of operators ($10M)
Invest in a national animal husbandry laboratory ($500k)
Build new key roads to improve access
Invest in product standardization & quality monitoring capability &
ongoing system ($7.5M over 5 years)
Develop deep sea ports in Ft. Liberty and Les Cayes ($420M) through
transparent bidding mechanisms after reform of public auction system.
Associated public policies also need to be considered including weaker currency as for
all exports and import substitution, enhanced credit conditions, appropriate road
systems, simplification of law/procedure to attract FDIs and incentives to microcredit
extension to farmers.
Thanks to proximity to the US market, abundant, highly trainable and eager workforce,
lowest labor cost in region, the US Hope II legislation and well organized local industry
group, Haiti's garment industry offer great prospects for job creation in urban areas
both in Port-au-Prince and provincial towns. The GC found that the garment cluster can
create 120,000 jobs over the next 5 years. The following investments, amounting about
US$357 millions, have been identified to support this cluster over the period:
Establish 3 new industrial parks including investment or operating
incentives, one in Port-au-Prince, one in the North in Cap-Haitien and one
in the South in Les Cayes ($300M)
Re-build existing firms, and cover losses ($36.8M)
Support the establishment of full-service product development firms, such
as TC2 or Astralis ($5M)
Establish 2 new training institutes capable of training 200-400 persons
every 8 wks, possibly with Senai-Cetiq ($10M)
Re-open CHF / USAID training institute
Sell Haiti through the improvement of HOPE II, especially through
increasing maximum allowable Haiti export to 256 million SME per year
(1% of US market)
Launch a full-scale marketing campaign to attract business to Haiti ($5M
over 5 years)
Establish an garments sector guarantee fund
Improve laws regarding truck transit from DR to Haiti ($150k)
Improve access to and cost of electricity
Revise labor laws to allow for more flexibility with shifts ($150k)
Associated public policies to be considered include a weaker currency, as currency
strength was a significant impediment to industry performance and ability to pay
higher salaries to workers, rental cost subsidy for park tenants depending on extent of
currency depreciation, enhanced credit conditions and reduction of electricity tariffs.
As a Caribbean nation with attractive natural resources such as many gorgeous beaches,
favorable climate, multiple historical sites, reputable art and music, Haiti enjoys great
tourism potential and the Haitian Government is determine to use tourism
development as a way to boost the Haiti's image. The country's poorly developed
infrastructure, coupled with currency strengthening, lack of tailored tax and credit
incentives and regulations have combined to greatly constrain the development of the
industry over the last 50 years. Current prospects for job creation are thus limited
compared to other clusters: the GC has found that 29,000 jobs could be created by
tourism during the period. The following investments, amounting about US$521
millions, have been identified to support this cluster over the period, out of which we
distinguish between the capital (US$168 M) from provincial towns (US$353 M):
A. In the capital, Port-au-Prince
Invest in development of 500-1000 new medium to high end hotel rooms
Build a state of the art convention and exhibition facility, as a centerpiece
of PAP's new zoning and reconstruction ($50M)
Invest in development of 500-1000 new medium to high end hotel rooms
Build a state of the art convention and exhibition facility, as a centerpiece
of PAP's new zoning and reconstruction ($50M)
SPrepare and finance a large-scale marketing campaign ($10M over 5 years)
Revise laws that directly impede tourism development (DR crossings,
condominium law) ($150k)
Improve the procedures for tax incentives
Establish "cluster basics" in each target zone, including a medical facility,
schools, electricity & sanitation ($300M)
Upgrade the Cap-Haitian airport ($35M) through transparent bidding
mechanisms after reform of public auction system
Upgrade the Les Cayes airport ($75M)
B. In provincial towns
Investment to create 2000 new rooms in the target regions ($300M)
Upgrade the Citadelle Product and the historical north ($35M)
Invest in development of networks of cultural experiences ($10M)
Rebuild downtown Jacmel (TBD)
Establish regional branches of a world-class tourism training institute
Organize FAM trip ($1.25M over 5 years)
Prepare and finance a large-scale marketing campaign ($10M over 5 years)
Revise laws that directly impede tourism development (DR crossings,
condominium law) ($150k)
Improve the procedures for tax incentives
Establish "cluster basics" in each target zone, including a medical facility,
schools, electricity & sanitation ($300M)
Upgrade the CH airport ($35M) through transparent bidding mechanisms
after reform of public auction system
Upgrade the Les Cayes airport ($75M)
Associated public policies to be considered include a weaker currency, as for all export
activities, enactment of tax and credit incentives, reduction of electricity tariffs, revision
of outdated condominium laws and procedures for FDI.
5. Housing and Urban Development
Up to recently a poorly developed cluster with rudimentary building codes and poor
enforcement by Central State and municipalities, the prospects for housing and related
urban development have suddenly exploded as a direct consequence of the earthquake.
Thanks to potential donor-supported billions of investments, this cluster is likely to be
the most important contributor to growth, job creation and foreign exchange generation
over the next 5-10 years. The GC has found that US$3.8 Billion, mostly coming from
foreign sources, will be needed to build 250,000 units of housing to replace the ones
destroyed by the earthquake. Out of the total, 200,000 (80%) will be social housing,
costing US$10,000 per unit, and US$50,000 (20%) will be moderate to low cost housing,
averaging US$36,000 per unit. The amount needed to build other type of housing
(commercial and administrative) has not yet been forecasted. Additional investment
amounting US$700 millions will also be needed for community infrastructure. 75,000
jobs will be created during the period. In addition to building houses and
infrastructure, the following investments, amounting US$45 millions, have been
Build advocacy capacity of builders association, AHEC ($350 K)
Subsidize memberships in regional and international associations ($100 K)
Upgrade capacity of technical schools ($1 M)
Vouchers for training schools ($10 M)
Encourage OTJ training through strategic subcontracting ($5 M)
Financial guarantee fund & reduce bonding requirements ($25 M)
Establish equipment leasing program ($500 K)
Requirements for local firm and labor ($100 K)
FDI campaign to attract specialized anchor firms ($500 K)
Development of zoning plans for provincial, satellite and capital ($1.5 M)
Elaboration of construction standards and norms ($250 K)
"Haiti Home" design competition: $250 K
Key issues facing this cluster's development and positive related outcome for the
economy are however: (i) poor competitiveness of local builders and likelihood that
many contracts might be rather awarded to foreign providers; (ii) lack of skilled labor,
constraining local builders and reducing value-added to the economy. Accordingly,
effective State strategies should be undertaken to make sure that foreign contractors be
forced to sub-contract a decent fraction to local companies. This, combined with
training, would allow local providers to progressively build capacity and at some point
dominate the market, thus enhancing benefit for the local economy. Other key policy to
support the cluster would be to offer partial guarantee to local financing of housing.
On Governance and the Role of Donors
The above-mentioned investment in the five selected cluster amount to US$5.8 billion,
to which must be added cross-cutting investments of transversal nature. While GC has
no precise estimate of this endeavor, it is likely that its cost bring the total to be invested
in the Haitian economy close to US$10 billion. This would literally mean that annual
foreign aid would quadruple vis-a-vis the recent average observed. Such a large
increase cannot possibly be managed by existing administrative structure, both in terms
of financial control and coordination of the concerned financing partners. Based on
recent international experience, notably during the reconstruction effort of the Aceh
province in Indonesia, two different structures, both involving partners, i.e.: (i) a
National Steering Committee in charge of conducting the Reconstruction Program, co-
managed by the Government and International partners; and (ii) a multi-donor trust
fund, which would receive all funds invested by different donors and use them to
finance projects approved by the National entity. This solution, coupled with strict
arms-length management and transparency rule, would certainly greatly enhanced
funds management and donor coordination. It will however require formal
endorsement by the Parliament to become effective.
On top of contributing to good financial management, what should be expected from
this structure is a focus on overall cluster-oriented strategy, to make sure that public
funds are not wasted and economic benefits are maximized. In effect, while Aceh was
an undeniable success in term of financial management, positive impact for the
economic has been a subject of debate. During the first few years of post-disaster
management, the economy was mostly dominated by construction and related trade
business, the other economic sectors, including agriculture and manufacturing showing
poor performance, preventing the economy to diversify out of oil, construction and
trade. This remains a serious risk for the Haitian economy, especially considering that
the huge inflow of dollars resulting from the construction and infrastructure effect,
might well contribute to further currency strengthening and "Dutch Disease effects",
reducing export and import substitution activities' competitiveness.
Beyond partnering with the public sector in building a strong economy through
selected cluster development, the Private Sector Economic Forum is determined to take
this unique opportunity to build a "new social compact" among all members of society.
We sincerely hope to be able to contribute, not only fiscally, but also through corporate
social responsibility principles and actions, particularly in providing support to
workers and contributing to human development endeavors in health and education.
As already said, our fiscal focus will be primarily to discipline our members and
increase fiscal responsibility and transparency. We are however supporting also
supporting all efforts to enlarge the tax base as a major requirement to bring fiscal
pressure to the 18% level from current 10-11% low base. A comprehensive strategy
centered on five pillars, namely jobs and economic opportunity, food and
environmental security, health and education, housing and economic security and
government and institutional capacity, is being currently brainstormed among private
sector leaders, with help from Dalberg Global Development Advisors. It is bound to
become the new guiding chart of the Private Sector Economic Forum, truly rebranding
Haiti's Private Sector as true partner for State, civil society and the people.
Mr. Chairman, Honorable Congressmen,
In closing, may I once again thank you for this opportunity to address you on such a
crucial matter for my country as the post-earthquake recovery strategy and the new role
that Haiti's Business Sector intends to play for building a new nation, more prosperous
and more equitable for all Haitians. I will be happy to answer your questions and
contribute to your thoughts about how the US could help us restore our nation and the
dignity of our people.
Testimony for Mark D'Sa
Senior Director, Sourcing & Production, Gap Inc.
Hearing on Haiti
Subcommittee of International Monetary Policy and Trade
Tuesday March 16, 2010
Good morning Mr. Chairman and members of the International Monetary Policy and
Trade Sub-Committee. My name is Mark D'Sa and I am the Senior Director for
Sourcing and Production at Gap Inc. and I thank you for inviting me to be a part of
the discussion today.
Gap Inc. has been sourcing product in Haiti for a number of years and we remain
committed to continuing to do business there. Even before the tragedy we were
exploring internal recommendations to improve the business investment
environment in Haiti so that more companies might want to invest in the country and
to help build.put the infrastructure.
Prior to the earthquake, we had determined that it made good sense to source out of
Haiti because of the quality, the competitiveness, the efficiency of the factories and
workforce, and the proximity to the U.S., our largest market.
As you may know, goods shipped from Haiti can reach the U.S. shore within 3 days;
this is much quicker than many other locations where retail companies, including
Gap, source products.
Despite the recent devastating tragedy, we are committed to Haiti resuming its
rightful place again in the sourcing community. Our staff is working with Gap Inc.-
contracted factories to facilitate a full return to business while working with the
Haitian Government and departments of the U.S. Government to explore some of
the other ways that the infrastructure might be improved in order to attract more
potential investors to the country.
Haiti needed help before the earthquake and needs it more than ever now. The
apparel industry had employed approximately 28,000 people before the quake and
we believe more sustainable jobs could be created in textiles and apparel if the
current trade legislation were amended to allow a wider mix of products from Haiti to
have duty free access to the U.S.
My colleagues and I have met with people in the various committees with jurisdiction
over trade policy and we are hopeful that some of the current legislation can be
more liberalized so that investors could come to Haiti with confidence. This would
create good jobs for the people of Haiti and offer a sourcing location with strategic
proximity to support the needs or rapid response that U.S. retailers and brands
require in today's environment.
Similarly we have encouraged both the U.S. and Haitian governments to focus on
infrastructure development, which would benefit both local and foreign companies as
well as the Haitian people themselves. Improvements to the ports and roads, power
supply and communication, as well as urban transportation are critical to long-term,
sustainable development. In the short to medium term, of course, progress must
continue to be made in ensuring delivery of food and the provision of better shelter
for the Haitian people.
Following the earthquake in Haiti a few months ago, our company and our
employees joined forces to raise more than $300,000 for Mercy Corps' recovery
efforts, and, at the same time, the factory that makes our clothes was among the first
to be able to put Haitian employees back to work. We also continue to explore other
ways that the company might be able to help.
I want to thank the U.S. Government for taking such strong and proactive action in
the aftermath of the earthquake as well as for their commitment to supporting a real
recovery in the textile and apparel production sector.
We appreciate the swift action and encourage this committee to work with your
colleagues here in Congress and all the relevant governmental agencies to
coordinate an effort that can be lasting and sustainable for the investment
environment in Haiti.
Gap Inc. remains committed to sourcing in Haiti and we continue to explore how we
can increase our sourcing over time, with a goal of fostering the sustainability and
growth of the industry over the long term.
Thank you, Mr. Chairman, for your commitment to and interest in Haiti and thanks
again to you and the Committee for inviting me to be a part of the discussion today.
ENDING GLOBAL POVERTY IS SERIOUS BUSINESS. SEVEN
Mr. Chairman and Members of the Sub-Committee: Thank you for the
opportunity to discuss Enterprise Solutions to Poverty and U.S. Aid Policy in
Not so long ago if one spoke about competitiveness and private sector
development as a core principle of economic development, they were met with
something between indifference and antagonism. Now, the concepts are
discussed in the corridors of the multi- and bi-laterals, and viewed as a critical
part of any nation's strategy to help its people.
There are still many misunderstandings over the role of the private sector in
national development, so, please allow me to respectfully brief you on a couple
of foundational concepts concerning prosperity and a strong society. I have
spent the last nearly twenty years working in developing nations, advising
governments in the aftermath of crises, including Rwanda, Afghanistan,
Colombia, El Salvador, Tartarstan, and Serbia. Based on this experience, I believe
Haiti is now at a critical juncture in its development.
I also ask your indulgence. My comments are meant to be frank and evaluative;
they are based on 30 years experience from grass roots development as a Peace
Corps volunteer in Africa to my role as an advisor to some twenty presidents
around the world.
What is Prosperity?
Prosperity is the ability of an individual, group, or nation to provide shelter,
nutrition, and other material goods that enable people to live a good life,
according to their own definition. Prosperity helps to create the space in peoples'
hearts and minds so that, unfettered by the everyday concern of the material
goods they require to survive, they might develop a healthy emotional and
spiritual life, according to their preferences. Prosperity can only be achieved
when a nation's leadership sets its own vision, and follows a self-determined
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Cambridge, MA 02140
We can think of prosperity as a flow and a stock. Many economists view it as a
flow of income; the ability of a person to purchase a set of goods, or capture
value created by someone else. We use a notion of income called purchasing
Prosperity is also the enabling environment that improves productivity. We can
therefore look at prosperity as a set of stocks. I have listed below the seven kinds
of stock, or what I call, the Seven Forms of Capital, the last four of which
constitute social capital. In this conceptualization we see all forms of prosperity
falling into the following categories: natural endowments such as location, sub-soil
assets, forests, beaches, and climate; financial resources of a nation like savings and
international reserves; human-made capital which are buildings, bridges, roads,
and telecommunications assets; institutional capital such as legal protections of
tangible and intangible property, government departments that work with little
hidden costs to the economy, and firms that maximize value to shareholders, and
compensate and train workers; knowledge resources such as international patents,
and university and think tank capacities; human capital which represents skills,
insights, capabilities; and culture capital which means not only the explicit
articulations of culture like music, language and ritualistic tradition, but also
attitudes, beliefs and values that are linked to innovation.
Figure 1: The Seven Forms of Capital
Culturl T angle Aduations
.---- Heath ad PopuaFion
Humnl Educaon andTraning
Amttudes and Mobaton
S* Ouahtave,. uanCave Ota
i*.. 1 "Good Ctean Govemanc"
SInst.n.onal j* usta System
Firanc 31 i Pnvate Wealt
M* Transportation. Cm nication
Man.M3ae e p ,
Water and Sewerage
.N1u Eironrnrmal Issues
N3r31 ; Raw Menafs
EndoJwl-tsn Cte and Locaton
* Arctate-e, Mus Langag
SRange ofAcceptabe Behaiors
STrust, a ,atth Cration At as, Long-rrn
* Nutno MeKi & Mental Heath
* Pmar & Seconday, TechnKal
* Seff-resposniity. acien-ornentation
* Staiscs, Opi Recon d
* Theoes Presses Poedures
* LAeskies R&D, ,Mark*et Learirng
STransparency, No Hdden Costs
* Pmpre roecty P o Preddabe
* Chamber of Commerce, Uthons
* Banks. Stock Market
* ank Deposis
* Bank Reserves Taxes, Dtie&s, Acecorwrn
* Roads. Ports. Tephone Systems
* Elenc Grids. Generaon Capaty
* Pines, Pumpng Statons
* Consvation, Restoration
* AgriculWa, neral Petrolm
* Pr .iMyf oMarkets
Moving away from a conceptualization of prosperity as simply a flow of per
capital income enables us to consider a broader system, and the decisions for
investment in an enriched and enabling "high-productive" environment. Nobel
laureate Amartya Sen suggests that, "The advantage of a stock view would be to
give us a better idea of a nation's ability to produce things in the future."
Why Does Prosperity Matter?
We know that individuals around the world have vastly different purchasing
powers, and countries possess stocks of wealth in different proportions.
According to Thomas Sowell, "We need to confront the most blatant fact that has
persisted across centuries of social history vast differences in productivity
among peoples, and the economic and other consequences of such differences."
There are intimate connections between poverty and malnutrition; but poverty is
more insidious than statistics can indicate. Poverty destroys aspirations, hope,
and happiness. This is the poverty you cannot measure, but you can feel. There is
a rich literature on correlation between incomes and such progressive human
values as: productive attitudes toward authority, tolerance of others and support
of civil liberties, openness toward foreigners, self-esteem, sense of personal
competence, interpersonal trust, and satisfaction with one's own life. Ronald
Inglehart writes that higher rates of self-reporting of both objective and
subjective well-being are correlated with the levels of national prosperity.
Most Aid Never has Impact
Eighty percent of assistance from the aid agencies, the not-for-profits, and the
United Nations never achieves the desired goal of improving the wealth of
nations; this is according to an aid agency that shelved their own report. Aid
should be used in situations such as Haiti to mitigate the impact of natural
disasters on vulnerable populations, but it has never been sufficient to lift nations
out of poverty. In fact, there are reasons to believe the opposite.
The United Nations has 17,000 peace-keeping forces in Congo costing billions of
dollars, but never addresses the underlying issues that caused the war: lack of
governance, degrading poverty, and intolerance. The U.N. Millennium Village
program created high expectations, but failed to coordinate with national
governments. They have programs for visitors that officials call "Poorism."
Tourists pay to visit villages and buy small crafts and agricultural products. One
official showed me a brochure that sets rules for the busloads of visitors. The first
rule is, please do no not feed the villagers.
These places are less like the model villages of the new millennium and more like
the Potemkin villages of the last millennium: Russian towns built like theatrical
sets, with large fires that glowed in the distance to portray economic activity.
Not-for-profit organizations are uneven in their impact. Pioneers like Paul
Farmer who founded Partners in Health, or Greg Mortenson of "Three Cups of
Tea" fame, are respected for starting with only a vision, and accomplishing great
Other not-for-profit leaders, especially some of those who refer to themselves as
Social Entrepreneurs, claim they borrow the best ideas of the private sector, and
focus on innovation to serve the poor. Yet, they often spend more money on
public relations than on R&D and training their own staff; and they place their
headquarters closer to media centers and the affluent rather than the needy.
Their impact is tiny compared to the multilaterals, or faith-based initiatives, or
even the development aid provided by the Pentagon.
Aid largesse can distort private initiatives, stifle democracies, amplify ethnic-
based patron-client relationships, and promote corruption. Former Finance
Minister of Afghanistan, Ashraf Ghani, who has been shortlisted to lead the U.N.
and the World Bank, observes that aid can even "sever the sovereign relationship
between people and their leaders."
It is for these very reasons that Haiti's private sector must be empowered.
What is Competitiveness?
Nations that do not create wealth for their citizens share much in common. Our
evidence, and that of others, suggests that they are over-reliant on natural
resources, including cheap labor; and that they believe in the simple advantages
of climate, location, and government favor. Because of this they often do not
build the capacity to produce differentiated goods and services that create
greater value for demanding consumers who are willing to pay more money for
By focusing on these easily imitated advantages, on these lower forms of capital,
they compete solely on the basis of price, and therefore, tend to suppress wages.
It is exports based on poverty, not exports based on wealth creation; and the only
competition they are in is to see which country can stay the poorest the longest
until its society disintegrates.
A nation's ability to create both price and non-price value for consumers inside
and outside the country is what determines its productivity, therefore its
prosperity, and most importantly, its impact on the goals, assumptions, attitudes,
and values of its people.
Three Recommendations for Haiti:
1.Invest in the Highest Forms of Capital: Institutions, Specialized Knowledge,
Human Abilities, and Pro-Innovation Beliefs, a "Culture of Innovation."
I will focus today on the last one. Pro-innovation beliefs include: competition is a
force for positive changes, wealth is a product of human initiative and not sub-
soil assets, one may spontaneously socialize and trust fellow countrymen, and
perhaps the most important of all, self-determination.
In Haiti, Interpersonal Trust is low, especially between the public and private sectors.
The majority of respondents identify the lack of trust in Haitian society as a huge
issue, with only 16% of respondents saying that there is trust between the
government and the private sector.' Although the analysis focuses on the public
and private sectors, our hypothesis is that this lack of confidence is widespread.
This represents a major constraint to the articulation of a shared vision. Lack of
trust in Haitian society is, perhaps, the greatest hidden tax on their economy.
Figure 2: Haiti Competitiveness Survey Example
Generally speaking, do you think that you can trust
your fellow citizens or can't be too careful in your
dealings with them ?
There is a high level of trust between the government
and the private sector.
The government has in mind the best interests of all
The private sector has in mind the best interests of
Distribution of Responses
Can trst Cantb toocareful
Distribution of Responses (I to 7 scale)
Four segments of opinion exist in Haiti with regard to competition. 30% of leaders
surveyed want to see an immediate change; 32% are cautious followers and said
they favor maintaining the status quo; 30% favored a comparative advantage
based on cheap labor and low costs. Only 7% see the need to develop a
competitive advantage based on innovation and productivity. These segments
also point to the need to build a consensus around competitiveness.
I "Haiti Competitiveness Survey" Haiti's Presidential Working Group on Competitiveness and
OTF Group, May 2009, n=752.
Figure 3: The Four Segments of Haitian Society
4Comparative Source of Advantage Competitive
Change 0 -r.-_
Comparaie L active
-2 Ad.vntage Caus Advantage
-5 -4 -3 -2 -1 0 1 2 3 4 5
2. Build Modem Institutions on Top of Traditional Values
Key elements of Haitian culture and society date back to independence. When
Haiti won its independence, two national traits emerged. The first is a sense of
'fierce individual survival. For many Haitians, self-sufficiency takes precedence
over working together to better their society. Second, there is a deep mistrust of
foreigners, whom they perceived as occupiers and meddlers in Haiti's history.
The great challenge, therefore, is how to layer modem management and
institutions on top of these traits to come up with a uniquely Haitian model.
Another discussion that we could begin here is how the proposed multi-donor
reconstruction agency can integrate aspects of Haitian culture, while introducing
the transparency and accountability that the donors require. This could be a
precursor to Haitian-managed institutions. Given the likely importance of this
reconstruction agency, it will be useful to develop and introduce some case
studies or lessons learned on how this should work.
3. Place the Locus of Responsibility for Haiti's Growth Strategy on its Private
Over the past year, OTF Group has worked with Haiti's Presidential Working
Group on Competitiveness (GC). Created by President Preval in January 2009,
this group of twenty professionals from the private sector, government, and civil
society initiated a process to develop a "Shared Vision for a Competitive and
Prosperous Haiti"2. This vision, finalized in November 2009, contains three broad
recommendations to upgrade Haiti's competitiveness:
Create a Culture of Innovation and Competitiveness: the GC firmly believes that
national mindset change must be a cornerstone of Haiti's transformation.
They envisioned an ongoing communications campaign to change
mindsets and promote pro-innovation behavior.
Articulate and implement strategies for priority growth clusters: creating and
selling great products and services, usually in a different way than
conventional wisdom would dictate, are at the heart of competitiveness
and prosperity. The GC identified five priority clusters, which it believes
will drive Haiti's economic transformation.
Implement "quick wins" to improve the business environment: according to the
IFC's "Doing Business" rankings, Haiti's business environment is among
the worst in the world. The GC foresees close collaboration with the
Government of Haiti to quickly reform the economy as Rwanda did in
Post-earthquake, we have renewed our partnership with the GC to develop a
medium-term Economic Recovery Roadmap that reflects a broad consensus in
the Haitian private sector on what is required to rebuild the country's shattered
The Case of Rwanda
A mini-case study may illustrate some of the above strategy initiatives in a
context of national renewal: President Paul Kagame of Rwanda says,
"Sometimes, the best strategy is reconciling what others believe are opposites."
2 "A Shared Vision for a Competitive and Prosperous Haiti", Presidential Working Group on
Competitiveness and the Government of Haiti, November 2009.
He applies this strategic, contrarian attitude to the environment, justice, and
economics; but in a very specific way. Paul Kagame builds modern institutions
on top of traditional values.
Everywhere you stand in Kigali provides a long view of a peripatetic group of
Africans, cooking fires, farm animals, and small expertly cultivated farm plots,
an immaculate nation. There isn't a mango peel on the roads. The President
made the importation of plastic bags illegal; he wants clean streets, and the bags
are not biodegradable.
The last Saturday morning of each month, bus service is suspended and
businesses close. All citizens, irrespective of class, gender and including the
President himself, sweep the area in front of their homes. The tradition is called
Umuganda, and means, "We work together." This initiative builds interpersonal
trust and civic engagement.
In the aftermath of the genocide, modem courts were incapable of handling the
hundreds of thousands of perpetrators. International legal advisors were
flummoxed. Kagame introduced the traditional Gacaca system to give the
perpetrators of the genocide the opportunity to tell the truth and ask the
community for forgiveness.
President Kagame even asked those who took farms from the killers who ran
away, to return them. Some say they will because the President asked them to do
so; others say they will because God would not have spared them from the
genocide to do otherwise.
The economy was a priority from day one. The economy shrunk for five years
before the genocide. The President explained to me, "When economic scarcity
occurs, human values deteriorate: with poverty comes mistrust, impatience, and
Many international advisors told him that exporting green coffee was impossible
because the Vietnamese and Brazilians were flooding the market, and Rwanda's
logistics made it hard to compete. Still, there were 500,000 subsistence farmers
whose traditions and lives would be ruined if Rwanda gave up on coffee.
Kagame decided that Rwanda would invest in washing stations, advanced
transportation logistics, and new distribution relationships. Recently, they
exported some of the finest coffee in the world to Costco and Starbucks.
His own tourism operators insisted that he lower the price of admission to the
game parks to compete with the Kenyans. Kagame, instead, raised prices to
attract only the world's best tourists, and then built roads, lodges and invested in
guides so they could create a one of a kind experience.
The facts speak for themselves: The economy has grown at an average of 8%
since 2001, grew at 11.2% in 2008, and around 7% in the throes of 2009. More
importantly, wages in these sectors increased by up to 30% each of the last nine
years. Women represent 56% of the legislature and hold the key cabinet posts,
and this summer, the nation looks forward to free and closely scrutinized
One Recommendation for the USA:
The United States' aid procurement systems exist for a time in which we no
longer live, and must be changed and upgraded.
There are features of successful aid programs:
1. A shared vision by both the provider and recipient,
2. Disbursement through national and indigenous institutions,
3. Investment that increases competence beyond applying for aid,
4. And, no parallel donor structures that undermine all of the above.
According to some leaders in the developing world, the United States Agency for
International Development (USAID) is one of the worst at meeting these criteria;
the U.K.'s DFID is the 'best of the West.'
In addition, the few firms that supply services to USAID, and to a lesser extent,
the multilaterals represent an oligopoly. Their largest departments are, almost
without exception, their legal departments; they have no R&D departments and
virtually no training for consultants. Their core competence is attracting former
USAID managers, and drafting winning proposals. This latter competence
should not be underestimated; it represents a barrier to entry for new firms,
spinouts, carve outs, and mergers-all signs of healthy competition and
innovations. Consultants are considered mediocre by the American private
sector. In fact, one might consider the vendors to USAID to be little more than
Head Hunters, possessing little intellectual capital and a lamentable record of
1. US aid, to be effective, should be untied to American providers. Japan, the
UK, and many other nations already do this. It creates real competition,
fosters innovation, and in the case where consultants are chosen from
other developing nations, sources more relevant skills, saves money, and
creates development impact, twice.
2. Aid vendors should be punished for poor performance and rewarded for
superior performance. This avoids the "over responsibility" inside the
proposal, and the "under responsibility" over the outcomes of the project.
Consistently poor performers should be forced by competitive global
market forces to leave the industry.
Mr. Chairman and Members of the Sub-Committee, Haiti is crippled by natural
disasters, by models of government-private sector relations and wealth creation
that are archaic, but also, by a culture that is fatalistic, event driven, intolerant of
new ideas, and paternalistic.
Haiti's challenges will never be surmounted by the current approaches: massive
infusions of aid, top down regulatory advice, and decisions taken in the
metropoles of wealthy nations. America's foreign aid vision lacks coherence, is
uninformed, does not balance the past with the future, and is over-influenced by
donor fashions, entrenched vendors, and sentimentality concocted by PR
executives with skinny passports and foisted on the American public.
Before the earthquake, my foundation, the SEVEN Fund, identified some of the
best entrepreneurs in Haiti. Their personal narratives of achievement under
difficult conditions, are not only inspiring, they could be a much-needed salve on
the wounds of a nation. We are reaching out to them even now to make sure that
they have what they need to resume their businesses, and that we document
through film over the next three years, their rise to prominence and productivity
We in the United States should do more of this; it is what we can do better than
anyone: focus on "Enterprise Solutions to Poverty." The greatest thing we could
do to build international trust, encourage self-determination, and help poor
people is to stop protecting industries where the rich nations have lost authentic
competitive advantages. We should broaden our definition of international
security from geo-strategic to upgrading firm-level relationships between our
societies; and, we should bond with the thousands of entrepreneurs in Haiti and
other poor nations who are already successful and give them 'rocket fuel' by
connecting them to global networks of productivity, trade and investment. The
best way to create many new entrepreneurs is to show that great ones, though
few in number, are already there to emulate.
Thank you, Mr. Chairman, for this opportunity to speak to you. Please do not
hesitate to have your staff ask me to focus deeper into any or all parts of my
comments. I will be at your service.
Written Statement of Francis J. Skrobiszewskil
U. S. House of Representatives
Committee on Financial Services
Subcommittee on International Monetary Policy and Trade
"Rebuilding Haiti's Competitiveness and Private Sector"
March 16, 2010
The "Enterprise Fund" Model Employed as
a Tool in Haiti's Reconstruction
Rationale for Creation of a Haitian Private Enterprise Development
The widespread destruction in Haiti offers the donor community an
opportunity, in the words of President Clinton, to "build back better." Ultimately,
it will be the Haitian people who will be responsible for the success of donor
assistance programs. And for reconstruction aid to be sustainable, Haitian
entrepreneurs must be empowered like never before to "buy-in" and participate
in the rebuilding of their own country.
The transformational experiences in Central and Eastern Europe (CEE)
and southern Africa indicate that motivating the indigenous private sector can
best be accomplished on a business-to-business basis using the proven model of
the Enterprise Funds. To build local businesses and demonstrate the merits of a
market economy, these innovative financial vehicles successfully provided
developmental capital on a commercial basis under difficult conditions to many
thousands of emergent entrepreneurs.
SFrancis J. Skrobiszewski has been involved deeply in the transformation of Central and Eastern
Europe since President George H.W. Bush called him to the White House in July 1989 to discuss
strategy for assisting Poland's economic recovery. Skrobiszewski drafted the ground-breaking
business plan for the Polish-American Enterprise Fund, where he served as Vice President;
subsequently, he assisted in the restructuring of the Hungarian-American Enterprise Fund,
where he served as Senior Vice President. At HAEF, Skrobiszewski was instrumental in raising a
parallel private fund, and he conceived and managed HAEF's Hungarian Innovative
Technologies Fund. He also has advised the Southern Africa Enterprise Development Fund, the
Eurasian Development Bank and the MCC on its fund in the Republic of Georgia. He serves on
the Investment Committee of the Polish National Capital Fund, a fund-of-funds investing in
emergent venture capital funds financing innovative SMEs. Skrobiszewski has spoken widely on
the Enterprise Fund model in private sector development and its applicability in post-conflict
reconstruction. A fuller resume is attached.
With a small portion of the billions of dollars being allocated for Haitian
redevelopment earmarked for an Enterprise Fund, mandated with the full
flexibility of the CEE model (explained in detail below), donors can introduce
similar creative, flexible and market-driven approaches to achieve sustainable
development in Haiti. In doing so, the donor community would replicate for
Haiti approaches business professionals managing the Enterprise Funds have
conceived and implemented during the past 20 years.
For Haiti, such Fund would ultimately require an authorized capital base
of approximately $200-300 million to ensure the "clout" needed to have
meaningful impact in the marketplace, to establish financial intermediaries (e.g.,
SME and micro-enterprise loan programs to provide short-term working capital,
leasing companies, modern mortgage, Ag and commercial banks, etc.), to invest
equity capital flexibly in a wide range of private businesses, to provide supportive
technical assistance, and to attract the seasoned investment professionals critical
to properly managing these assets.
When the initial Enterprise Funds were conceived by the US Congress and
the first Bush Administration in 1989, there were no roadmaps. It took a full year
from the time the Polish-American Enterprise Fund was legislated to the
completion of its first investment in Poland. Later, when the Hungarian-
American Enterprise Fund launched its venture capital subsidiary, the Hungarian
Innovative Technologies Fund was able to close its first investment in half that
time. Haitian businesspeople need financing immediately, and experience exists
today to further accelerate the start-up of a Haitian Private Enterprise
Development Fund and provide such financing in a disciplined way in accordance
with sound commercial practices and procedures designed to protect the Fund's
Moreover, while the US Government was the sole funding source for the
Enterprise Funds, it would be possible to consolidate public-sourced capital from
a host of donors in a single Fund created and overseen by a lead donor. Also,
since there are practical limits to what such a Fund gearing-up can responsibly
disburse and prudently manage (and the Haitian economy could realistically
absorb), the proposed Fund's entire capital base need not be available to it at the
outset. In fact, the Enterprise Funds were provided funding over a multi-year
period as progress in deploying capital dictated. Thus, with an initial donor
commitment of $25-50 million, the organization of the Haitian Private
Enterprise Development Fund could begin, and be expanded when the more
substantial targeted funding can be committed.
Like its predecessors, the Haitian Private Enterprise Development Fund
should be organized as a not-for-profit corporation managed by a non-partisan
Board of Directors comprised of prominent professionals. This Board would hire
executive management, develop strategy to carry out the Fund's mission, impose
disciplined investment practices and operating standards, and be empowered
with flexibility to set direction and take action to achieve objectives without
political interference or bureaucratic constraints, but subject to sound
governance principles and appropriate donor oversight.
Meaningful and sustainable economic development in Haiti must mobilize
the Haitian private sector, and an Enterprise Fund for Haiti built on the
approaches employed in the CEE region and southern Africa adapted
specifically to needs, conditions and objectives in Haiti must be an essential
tool in the donor development assistance arsenal.
History and Rationale for the Creation of Enterprise Funds in
Central and Eastern Europe and Southern Africa
Faced with widespread socio-economic and political upheaval in the wake
of Communist'regimes collapsing in Poland and Hungary, US political leaders
knew that tangible action had to be taken quickly to instill hope in the local
populations and contribute to stability. They recognized that making an
unprecedented transformation from entrenched command economies to free
markets would require jump-starting the local private sector from the bottom-up.
and that capital injections in new businesses would be the critical catalyst in this
process. Traditional development assistance would be needed, but alone was
insufficient for the task at hand. Reliance on commercial practices executed by
business and investment professionals would be necessary to allocate resources
quickly, yet in an effective and efficiently manner to achieve the immediate and
long-term successes needed. Yet, private investors would be reluctant to put
their capital at risk where conditions were so unpredictable and the risks were
As the Soviet Empire was collapsing in Central and Eastern Europe during
the late 198os and early 1990s, officials in the US Congress and George H.W.
Bush Administration conceived of "enterprise funds" and innovatively placed
pools of public capital into the hands of private investment professionals to
finance entrepreneurs initially in Poland and Hungary on a traditional business-
to-business basis. The fundamental concepts behind the Enterprise Fund model
were succinctly captured by Kenneth Juster, then-Senidr Advisor to the Deputy
Secretary of State, at a Rand Corporation conference on September 21, 1990:
"The enterprise funds are a bold experiment in a new way of
delivering economic assistance. Rather than have the U.S.
Government provide a one-time grant to Poland or Hungary, we
have developed, instead, the enterprise funds as a means for
tapping into private sector expertise to manage U.S. Government
grants. The President, in consultation with Congress, has asked a
group ofprominent private citizens from the United States, and
from Poland and Hungary for each of the two funds, respectively,
to form a corporation to use U.S. Government money to make
loans, grants, equity investments and other forms offinancial
transactions designed to promote private sector development in
Poland and Hungary. The hope is that these enterprise funds will
be able to manage the U.S. Government grants in a way that an
investment banker might do unencumbered by the bureaucratic
constraints normally associated with government activities and
that they will be able to multiply many times over the financial
impact of the initial grant."
In November 1989, the US Congress enacted the Support for Eastern
European Democracy Act (the SEED Act), which, among other things, provided
$240 million for a Polish-American Enterprise Fund (PAEF) and $60 million for
a Hungarian Fund (HAEF) to simply promote:
(1) development of the Polish and Hungarian private sectors; ... and,
(2) policies and practices conducive to private sector development in
Poland and Hungary, through loans, grants, equity investments, feasibility
studies, technical assistance, training, insurance, guarantees, and other
Under the first Bush Administration, two other Enterprise Funds were
created; President Clinton established six others for most of the remaining
countries of the former Communist Bloc. All were under Congressional
legislation. President Clinton later expanded the concept to accelerate private
sector development in 11 countries of "post-apartheid" southern Africa. As that
Fund was not created by Congress, it was subject to bureaucratic constraints that
did not permit it to operate as freely and flexibly as the original Enterprise Funds
did in the CEE.
Arguably, dependent upon the lead donor, it might be possible to create
the proposed Haitian Private Enterprise Development Fund with similar ability
to make commercially-based decisions and to act quickly and effectively without
bureaucratic encumbrances, as the CEE Enterprise Funds were able to do.
However, given the critical need for an Enterprise Fund vehicle in Haiti, if the US
Government were to take the lead, the less flexible model could be established to
initiate the flow of professionally-deployed capital to Haiti's private business
sector, pending appropriate Congressional legislation that would free the Fund to
operate with the freedom of a traditional private investment firm in accordance
with sound business practice.
Twenty+ Years of Measurable Results and Successful Performance of
Enterprise Funds in Central and Eastern Europe and Southern Africa
The developmental impact of the first Enterprise Funds indeed was
demonstrated quickly by the hope in a better future they instilled through
tangible action backed by real capital provided to hundreds and then thousands
of emergent Polish and Hungarian entrepreneurs who applied for financing. The
basic commercial standards imposed by the Enterprise Funds for venture
funding provided local entrepreneurs a rich learning experience in the operation
of free markets and the need for instituting their own sound business disciplines.
The pioneering SME lending programs and other intermediaries the Enterprise
Funds established helped provide the institutional infrastructure for the market
economy and influenced local policy development from the bottom-up. They also
built local capacity in their hands-on training of the emergent local investment
and finance professional, who worked for the Enterprise Funds and also in the
management support they provided to local firms receiving their financing. The
Enterprise Funds' eventual financial results, under the difficult conditions faced,
also have generally been impressive.
Keeping in mind that the Enterprise Funds were conceived to achieve
primarily a developmental mission, but operated largely according to commercial
principles, their collective results by close of their 2009 Financial Year can be
summarized as follows. 2
Of $1.105 billion the US Government provided in the aggregate to the 1o
Enterprise Funds in the CEE region for investment purposes (most, if not all,
were also provided a small pool of funds devoted to targeted technical
assistance), total net assets of these Funds, including distributions, stand at
$1.612 billion, which equals 144% of such capital provided by the Government.
Moreover, in a key measure both of developmental and financial success in
demonstrating the indigenous investment opportunities they and their host
countries offered, six such Enterprise Funds have attracted a total of $2.714
billion in parallel private equity funds that are continuing to be invested as the
original Funds themselves wind-down. (This sum does not include the
competing capital of independent investment funds which have entered these
markets on the basis of foundations laid by the Enterprise Funds).
With regard to wind-down, six Enterprise Funds have already started
returning their public-sourced capital to the US Treasury and established
charitable legacy foundations, whose collective capital totals $652 million, to
carry-on development activities in their host countries and beyond.
Through its SEED Act authorization of $240 million, the Polish-American
Enterprise Fund alone made 50 equity investments totaling over $200 million,
established a series of banks and other intermediary institutions, extended
10,000 small business loans and over 125,000 micro-loans and recouped $374
million. Ten years after commencing operations, the Polish Fund was the first of
the Enterprise Funds to establish the tradition of returning its capital to the US
Treasury and of creating its legacy foundation which PAEF has capitalized with
$250 million. Also, PAEF's now independent investment team has raised over
2 See attachment on "Building Free Markets SEED Act 1989-2009 Enterprise Funds a closed
chapter or a model to be followed?" by Krzysztof Bobinski at www.seedact.com
$1.8 billion in a series of private funds, and in the course of these efforts,
demonstrated to the global investment community the true risks and the real
opportunities of investing in Poland. This has attracted billions of dollars more
in competing private equity funds to Poland.
These successes in Poland are not isolated examples indeed, the
Bulgarian-American Enterprise Fund, with its $55 million in original funding,
also has returned capital to the US Treasury and created a $400 million legacy
foundation in Bulgaria.
Not only has the Enterprise Fund model been successfully employed in
the CEE region, but President Clinton's post-apartheid Southern Africa
Enterprise Development Fund has also achieved significant results. Its
Chairman, Ambassador Andrew Young, in endorsing the concept of an Enterprise
Fund for Haiti, reported his Fund's successes, as follows: 3
"SAEDF has invested more than $80 million tax dollars in 25 new
business operations owned by formerly disadvantaged indigenous
people. Those businesses have employed over 2,ooo workers and
have created employmentfor an estimated 50,000 people in spin
off jobs. SAEDFs investments have returned over $67 million to
date, and its remaining investments are worth almost $50 million
and appreciating. SAEDF has also trained and mentored more
than 50 indigenous staff members, at least 20 of whom are now
senior managers of other local investment funds and businesses,
representing a new generation of investment professionals in
In the face of unprecedented socio-economic transitions, for which there
were no roadmaps, the Enterprise Fund approach has proven to be an effective
and efficient tool bringing private sector decision-making and risk-taking to
development assistance. Clearly, this model, which has been successfully
deployed in Central and Eastern European and southern African countries, can
be specifically adapted to needs, conditions and objectives in Haiti to similarly
achieve meaningful and sustainable results in the development of Haitian private
3 Huffington Post, posted January 26, 2010 05:46 PM
Building Free Markets SEED Act 1989-2009
Enterprise Funds -a closed chapter
or a model to be followed?
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nance. This is where the dedicated investment professionals proved to be so valuable in the
Enterprise experience. They brought to the Funds not only their wide ranging knowledge of
business but also the imagination and courage to take risks which officials tend to avoid by
their very nature. John Birkelund, Pat Cloherty and John Klipper admit success is not gua-
ranteed in every case but on balance the Enterprise Funds experience shows that the overall
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Enterprise Fund experience where private sector professionals deployed public capital in locations
where private funds considered the risk too high could prove useful to the EU which is currently
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May 2009, is aimed at initiating and supporting reforms in six eastern European countries (Ar-
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building in schemes which look set to be heavily oriented towards bureaucratic interaction.
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