The Impact of Foreign Direct Investment and Integrated Economic Zones

Title: The Impact of Foreign Direct Investment and Integrated Economic Zones

Overview:

The presentation will cover the importance and impact of foreign direct investment (“FDI), and development of integrated economic zones (“IEZ”) in Haiti.   FDI has an economic multiplier impact and has direct effects in employment, income and output, indirect effects of re-spending that arise through purchases from local supplier industries and induced effects which are created with payrolls increase and workers in affected industry sectors spend more on local goods and services (household spending effect).

However in order to attract foreign investment critical elements must be in place.  Haiti has not done a good job of either attracting foreign capital due to many of these elements.  The International Finance Corporation (“IFC”) and the Dutch development agency, FMO, funded a study on the importance of integrated economic zones and it impact on development in Haiti. There is strong investor interest in Haiti that could generate 380,000 jobs by 2030. With abundant affordable labor and close proximity to the U.S., Haiti possesses good potential to capture new investments in the apparel, agri-business, construction/building materials, logistics, and tourism sectors in the near term, while transitioning over time to other higher- value industries and services. With highly favorable trade access for apparel products under the U.S. Haiti Economic Lift Program (HELP) Act, both existing and potential new apparel manufacturers in Haiti are well-positioned to capture a greater share of U.S. market demand, delivering up to an additional 35 million dozen knit products (cotton t-shirts, bottoms, and tops) and 80 million woven products (basic chinos, jeans, and uniforms) each year to U.S. buyers at competitive prices. Based on an analysis of demand, over 2,000 hectares (ha) of serviced land will be needed for apparel, agri-business, construction/building materials, logistics and warehousing (including cold storage), tourism, and residential investors over the next 20 years.

However, a variety of market, legal, regulatory, and institutional constraints continue to impede the realization of this potential that is vital to Haiti’s economic growth. In this context, Integrated Economic Zones (IEZs) can facilitate these investment opportunities by providing a precise, targeted, and quickly implementable framework to address these constraints. IEZs can provide serviced land, pre-built facilities, reliable utilities, and a streamlined business environment through transparent procedures and a “one-stop” shop approach. They can also act as platforms to develop clusters and growth poles to energize private sector activity around them. With effective Public-Private Partnership (PPP) approaches, the private-sector could fund IEZs, which can become flexible market-driven platforms to deliver site-specific infrastructure needs for industrial, residential, and tourism uses across Haiti in line with the GoH’s Reconstruction and Development Goals. A number of other countries have done this elsewhere with significant results (e.g., Jebel Ali in Dubai, Aqaba in Jordan, Subic Bay in the Philippines, Panamá Pacífico in Panamá, zones in the Dominican Republic (DR) and Mexico (Maquiladoras), and a number of IEZs on the eastern seaboard of China). Lessons learned from these countries can be applied in Haiti to catalyze investment generation and growth.

Haiti offers a strong competitive position for the apparel, agri-business, construction materials, and other sectors. Specifically, Haiti provides: competitive wage rates (on average, 50 percent less) for unskilled labor; and competitive sea-freight costs (on average, 21 percent less) and shipping times to the U.S. (Figure 1). In addition to preferential market access to the U.S. under the HELP Act for apparel investors, these are among two of the most critical cost factors for potential investors now considering Haiti to establish operations.

Lafito Global is a integrated economic zone being developed 19 km north of Port-au-Prince.  Lafteau is one of the areas identified by the IFC as a high potential area for the development of an IEZ.  The first two phases are well under development, Port Lafito and Lafito Industrial Free Zone.    Industrial development within Lafito Global has already started further industrial development as a new cement plant is under construction.   Lafito Global has signed an agreement to support a teaching and referral hospital.  The next phases include further build out of the lafito industrial free zone, the industrial park, commercial and residential development.   GB Group has been successfully investing in Haiti for over 70 years creating jobs, economic activity and growth and its investment in Lafito Global is another example of continuing to believe in a better future for Haiti.

After completing this session, the participant will be able to understand the importance and impact of foreign direct investment, the role of integrated economic zones and the role the diaspora.

Moderator: Richard Noritake, Executive Vice President, GB Group

Participants: TBA