FEATURE-Haiti looks to private capital to power recovery

Thu Oct 7, 2010 12:57pm EDT

Related Topics

* Donor aid seen falling short for post-quake rebuilding

* Government urged to quickly improve business climate

* Hotel, textile plans announced, infrastructure is key

* Hope that coming Nov. 28 elections will help, not hinder

By Pascal Fletcher

PORT-AU-PRINCE, Oct 7 (Reuters) - On the edge of Haiti's earthquake-ravaged capital, a freshly-painted square blue and gray building dabs a bright sign of renewal on an otherwise depressing palette of destruction.

The brand-new plant containing electricity generators is the "power house" of E-Power, a $56.7 million Haitian-South Korean private investment that has forged ahead despite the chaos inflicted by the Jan. 12 earthquake which wrecked the coastal city and killed up to 300,000 people.

Standing not far from Port-au-Prince's biggest slum and in sight of blue and white tents of quake survivors' camps, the plant is a torch-bearer of private sector enterprise that Haiti's government and its aid partners hope can light a path to sustainable recovery for the crippled Caribbean state.

"We hope this will be an example to others," said E-Power's CEO Carl-Auguste Boisson, who said the 30 Megawatt (MW) power project was conceived in 2004 and would come on line in January, burning heavy fuel. Key equipment was delivered just weeks after the quake, as port installations reopened.

"Everyone was telling us: 'No, it's not possible, we have to go to Dominican Republic and unload there and bring it around by truck'. We said: 'No, we want to unload everything in Port-au-Prince', and we did, without incident," Boisson said.

As the Western Hemisphere's poorest nation struggles to rise up from one of the most destructive natural catastrophes in recent history, Haiti and the huge international aid operation assisting it are looking to private enterprise and investment to be the powerhouse of reconstruction.

If this is forthcoming, government officials hope for an 8-10 percent growth bounce-back next year, after a 7 percent contraction this year due to the quake impact. But calls for private sector support have become more urgent as Haiti's leaders realize the limits of institutional international aid.

Despite $11 billion pledged by donors to help "build back better" over the next decade, Prime Minister Jean-Max Bellerive told Reuters the money, while undoubtedly generous, would simply not be enough to rebuild a new Haiti from the ruins.

He said the aid commitments work out at $110 a year for each of Haiti's 10 million people, a per capita sum which paled in comparison with huge needs in housing, infrastructure, health and education, on top of daunting humanitarian costs.

"The only way to find more is to attract private money to do business in Haiti and make it profitable," Bellerive said.

VICIOUS CIRCLE OF DEPENDENCY

Even before the devastating earthquake struck Haiti's capital city and economic heart, left 1.3 million homeless and killed around a third of the government's senior and mid-level technocrats, the country was far from being an investment paradise.

In the 2010 Doing Business report prepared by the World Bank, which ranks business conditions around the world, Haiti already lagged at 151 out of 183 economies. Major obstacles listed included the long time needed to start a business (195 days), difficulties and delays in registering property and land, and perceived weak levels of protection for investors.

"It is very important for the government to address the business climate issue in Haiti," said Ary Naim, country head for Haiti and the Dominican Republic for the World Bank's International Finance Corporation, which is supporting E-Power and a string of other private investment initiatives.

"The ultimate objective is to get out of the vicious circle of aid dependency for the country," said Naim. "It is extremely important ... that the reconstruction effort comes from the private sector, but also trickles down from large and medium firms to the small and individual enterprises," he added.

Amid fears that the huge influx of international humanitarian food and medical aid immediately following the quake may have crowded out domestic private enterprise, some reconstruction-linked investment projects have been announced.

They include plans for an industrial park and garment manufacturing operation involving Sae-A Trading Company Limited, one of South Korea's leading textile manufacturers, in a potential investment of between $10 million and $25 million being backed by the IFC and the U.S. State Department.

This will take advantage of moves to expand duty-free access for Haitian garment products to the nearby U.S. market.

Last month, an Argentine entrepreneur announced a project with the Haiti-based WIN business group to build a $33 million, 240-room airport hotel for businessmen in Port-au-Prince.

The hotel plan, combined with resumed construction of another new hotel, the Oasis, which the IFC has backed with $7.5 million, are the first investments since the quake in the hospitality sector, which hopes to cater for a wave of aid and business visitors participating in the reconstruction.

"The foreign investors are observing. Once we start doing things in a sensible manner, they are going to see the difference and start coming, either in tourism, manufacturing, in sea and airports, everywhere," Haiti's central bank governor Charles Castel told Reuters.

PLANNED ECONOMIC ZONES

The IFC's Naim said his organization was working with the government on plans to create several special economic zones across the country. These would concentrate private businesses and investments in manufacturing, tourism and services, creating essential jobs and housing and driving development.

Such zones, which already exist in countries like China, Panama, Vietnam, Bangladesh, El Salvador and Jordan, would operate under their own special regulatory and land title regimes, which could cut through legislative or bureaucratic blocks and delays to business that might exist normally.

Naim and Haitian officials and businessmen said they saw a consensus coming together between the government and private sector -- often bitter antagonists in the past -- on the need to seize the opportunity of the post-quake rebuilding to lever the country out of its aid trap into viable growth.

"I think the quake has ... provided a kind of shock, and I see of lot of expression of alignment, inclusiveness, and this gives me a lot of hope," the IFC representative said.

Essential for fomenting more business and investment are projects in infrastructure, such as E-Power, whose 30 MW of additional power will be a boost to the chronically deficient power situation in Port-au-Prince, where electricity blackouts are very frequent.

"More power will help, because more power gives more possibilities for businesses, for example, if we can have more assembly industries, those big job generators," said Boisson.

Plans are also underway for new roads, ports and airports.

Everyone from U.N. peacekeepers to government officials and private investors are hoping the upcoming presidential and legislative elections on Nov. 28 can choose a new leadership that will make Haiti's "build back better" goal a reality.

All agree that political stability -- in a state that since winning its independence from France in 1804 has had a turbulent history of uprisings, foreign interventions, dictatorships and enduring poverty -- is a must for the reconstruction from the devastating quake to be successful.

"We need the jobs yesterday, but it's going to take some time," said E-Power's Boisson.

(Additional reporting by Guy Delva and Simon Denyer; Editing by Kieran Murray)

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