Development Economics in Haiti Grade 12 Economics case study

1. Overview of Haiti

Haiti is a country located on an island in the Caribbean Sea, which borders the Dominican Republic. The population is nearly entirely descendent from African slaves and gained it’s independence from the French in 1804.

Haiti has experienced economic, social and political difficulties along with many natural disasters, which has left the country in poverty and with low levels of development. Due to the nature of its economic and developmental struggles, it has over the years received a lot of foreign aid, especially after the 2010 earthquake, which left the capital in ruins and much of the population without a home and other basic needs.

Agriculture is the largest sector of the Haitian economy, employing roughly two-thirds of the labour force but accounting for only about one-fourth of the gross domestic product (GDP). Haiti’s soils and fishing zones are threatened. Although only one-fifth of the land is considered suitable for agriculture, more than two-fifths is under cultivation. Major problems include soil erosion (particularly on mountain slopes, which are seldom terraced), recurrent drought, and an absence of irrigation.

Many farmers concentrate on subsistence crops, including cassava (manioc), plantains and bananas, corn (maize), yams and sweet potatoes, and rice. Some foodstuffs are sold in rural markets and along roads. A mild arabica coffee is Haiti’s main cash crop. Haitian farmers sell it through a system of intermediaries, speculators, and merchant houses. Sugarcane is the second major cash crop, but since the late 1970s Haiti has been a net importer of sugar.

2.Comparing Development

No single indicator is powerful enough to illustrate satisfactorily the complex issue of development. It is therefore preferable to rely on several indicators synthesised into a single variable. This is going to be presented below, where multiple indicators as well as composite indicators (HDI) will be used to evaluated the level of development in Haiti compared to more more highly developed nations such as Singapore, Germany and the USA.

Source: Gapminder

Literacy refers to the quality or state of being literate, esp. the ability to read and write. Literacy rate refers to the percentage of people who are able to read and write vs those who are not. The literacy rates in Haiti are 48.7, which means that less than half the population is not literate, which is an indication of underdevelopment, especially in terms of education. This has an effect on the skill level that the workforce has, which means it is limited to low-skill jobs, that only generate low incomes.

Source: Gapminder

Life expectancy is defined as the average period that a person may expect to live. In Haiti the life expectancy is 62.7 years, which is lower than other developed countries such as Singapore and Germany. This can demonstrate the low standard of livings that exist in Haiti, since health-care could be sub par leading to low life expectancies.

When comparing development it is also important to compare an LEDC with another LEDC as to better understand the problems they may cause the development, both human and economic to be lower or less than other MEDCs. Therefore, Haiti will be compared to other LEDC economies as to better understand the factors that may have led to the slowed development of the Haitian economy and population.

  • GDP v GNI of Haiti: 1,728 USD (2015) v 810 USD (2015)
  • GDP v GNI of Germany: 45,408 USD (2015) v 45,940 USD (2015)

3. Domestic Factors and Economic Development

Education: The literacy rates in Haiti are 48.7, which means that less than half the population is not literate, which is an indication of underdevelopment, especially in terms of education. This has a large impact on the development in a country since the work force is low-skilled so the industries that the country can run are limited to low skill labour.

Property Rights: Real property interests are negatively affected by the absence of a comprehensive civil registry, and the authenticity of titles is difficult to confirm. The judicial system performs poorly because of antiquated penal and criminal procedure codes, opaque court proceedings, lack of judicial oversight, and widespread judicial corruption.

Appropriate use of technology: When the news of the earthquake broke, several groups and companies sprang into action very quickly. Ushahidi, a portal originally built to track election violence in Kenya, created Haiti.Ushahidi.com. The site, developed by Patrick Meier, director of crisis mapping at Ushahidi, tracks incidents, search and rescue operations and people in Haiti. The volunteers monitor text messages from people in Haiti who are stranded and need food or aid.

One of the best benefits of appropriate technology use is the freeing-up of valuable time from demanding daily chores so that a Haitian has time for a “job” instead of spending all day trying to access basic needs such as water, food, fuel, and sanitary conveniences.

Access to credit and micro-credit

The highest rate of access to credit is found in Cité de l’Eternel; it is only 11.50%, which is a low percentage.
In Haiti, micro-finance institutions are more towards traders than any other groups. Most of these traders are in the informal sector. The highest rate of access is 14% and is observed among the traders. The household where the chief is an housekeeper do not have access at all to microcredit services. The access rate is 0% for this group.

Women's Empowerment: Political instability, chronic poverty, and crime all contribute to a high prevalence of gender-based violence and discrimination against Haitian women and girls. While Haiti’s Constitution protects women from workplace discrimination as well as physical and sexual abuse, and guarantees the right to political participation, in practice women routinely face exclusion and harassment in public and private life. Haiti has an active women’s movement, yet women face higher rates of unemployment, are more likely to suffer poor health outcomes, and are less likely to own land or hold political office than men. Despite these challenges, important progress has been made in recent years to advance women’s rights.

Key Challenges to Women's Empowerment

  • Gender-based violence (GBV): Poor legal protection, fear of reprisals and the social stigma attached to being a victim of sexual violence contributes to under-reporting. Domestic workers, especially young girls who live and work with other families, and lesbian, gay, bisexual, and transgender women are particularly vulnerable to GBV.
  • Weak judicial system: Laws criminalizing rape and domestic violence were not enacted until 2005, and women and girls often face unequal legal protection and enforcement. Sexual harassment often occurs without reprisal, and victims frequently find themselves blamed for rape and abuse.
  • Health outcomes: Women have poor access to health care and correspondingly low health outcomes—the maternal mortality rate is over five times the regional average.
  • Drop-outs for school: Girls are more vulnerable to school drop-out than boys, especially at the later stage of schooling. While boys tend to re-enroll, girls are less likely to come back to school.

USAID Strategies and Activities to improve Women's Empowerment

  • Connecting women farmers and entrepreneurs to resources: Feed the Future Haiti supports women-led farmer associations, provides master farmer training and connects women to markets. USAID invests in female entrepreneurs and helps connect women to formal banking services and credit.
  • Democracy, human rights & good governance: USAID supported the Haitian parliament and the executive branch to pass and enact legislation that positively impacts the lives of women and children. USAID activities work with the Electoral Council and Haitian civil society advocacy groups to ensure that women are fully integrated into every aspect of the electoral process.
  • Protecting mothers and infants: USAID activities promote nutrition, prevention of mother-to-child transmission of HIV, family planning, and training for health care providers in maternal and child health.
  • Safe school environment: USAID works with the Ministry of Education to maintain schools that are free from any refusal and bias based on gender and to promote awareness of GBV.

Political Stability: Politically and socially, Haiti seems to be always in a state of transition. Although democracy is desired by many, for a long time the political climate has been shaped by a key result of Haiti’s bloody independence war: the largely mulatto elite who retreated to congested urban areas, took over the reins of government, and eventually left the rural areas to be divided among a scattered black farming population in the interior.

Degree of Corruption: In 2016 Haiti had a corruption perception score of 20, where the scale runs from 0 (highly corrupt) to 100 (very clean). The corruption in Haiti has been decreasing over the years, starting at 19 in 2012, 2013 and 2014. However, it dipped to 17 in 2015 but increased to 20 in 2016. This can be reflected in a government integrity graph comparing it to the world average.

4. International Trade and Economic Development

Haiti is the 149th largest export economy in the world and the 139th most complex economy according to the Economic Complexity Index (ECI). In 2014, Haiti exported $1.06B and imported $3.63B, resulting in a negative trade balance of $2.57B. In 2014 the GDP of Haiti was $8.71B and its GDP per capita was $1.73k.

Its top imports are Rice ($243M), Other Cotton Fabrics ($170M), Refined Petroleum ($165M), Heavy Pure Woven Cotton ($138M) and Sauces and Seasonings ($108M).

Trade Balance: As of 2014 Haiti had a negative trade balance of $2.57B in net imports. As compared to their trade balance in 1995 when they still had a negative trade balance of $531M in net imports.

Over- specialisation on a narrow range of products

  • economic complexity is low (-1.69) which shows that much of the industries are related to sustenance farming
  • 139th most complex country
  • the great majority of Haitians are at work almost every day in the so-called “informal” sector, which includes street vending, doing odd jobs, working abroad (and mailing remittances to family members in Haiti), and engaging in illegal activities such as smuggling

The top exports of Haiti are Knit T-shirts ($449M), Knit Sweaters ($187M), Non-Knit Men's Suits ($144M), Knit Women's Undergarments ($31.2M) and Non-Knit Men's Shirts ($27.8M), using the 1992 revision of the HS (Harmonized System) classification.

Inability to access international markets

Bureaucratic barriers may discourage foreign investment. Haiti’s already strained financial infrastructure has become even more fragile. Many economic transactions are conducted outside of the formal banking sector, and scarce access to financing severely hinders entrepreneurial activity.

5. Growth and Development Strategies aimed at Increasing Trade

Over the years Haiti has exported a wide variety of products including coffee, copper and aluminium ores and various processed and manufactured textiles. Below is a timeline of the evolution of Haiti's export industries and markets, showing how their attempt at diversification in the 1970's which ultimately led them to become overspecialised in a market that seemed profitable. This overspecialisation has hence limited their trading capacity on the international market as they have focused too many resources in one industry: the production of clothing using imported textiles.

1965
1975
1985
1995
2005

The Haiti Economic Lift Program (HELP) Act is designed to create sustainable support for Haiti’s economy by expanding tariff benefits for certain Haitian textile and apparel exports to the United States. HELP will allow the expansion of duty-free access to the U.S. market for Haitian textile and apparel exports and extend existing trade preference programs for Haiti. HOPE/HELP has stimulated the creation of 11,000 jobs within the garment industry, bringing the assembly sector overall employment figure to about 36,000 as of June 2015.

6. Aid, Trade & FDI

Foreign Direct Investment

Foreign direct investment, net inflows (% of GDP) in Haiti was 1.14 as of 2014. Its highest value over the past 23 years was 3.38 in 2006, while its lowest value was -0.15 in 1993.

Graph showing amount of FDI inflow as % of GDP

The inflows of FDI into the country rose in 2012 and 2013 (USD 160 million in 2013), but fell in 2014 to USD 99 million. Although there are certain barriers to the development of foreign investment in the country, such as corruption, long-term political instability and burdensome bureaucracy, the Government continues to offer tax exemptions to investors. The business climate however remains mediocre.

Following an exceptional IDA (International Development Association) allocation post-earthquake, IDA’s new allocation amounts to US$111 million. This allocation could be leveraged through global trust funds.

The World Bank’s portfolio in Haiti comprises 13 projects, with a net committed amount of US $ 718 million (as of September 2016). The program finances government project in areas such as disaster risk management, housing, electricity, transport infrastructure, water and sanitation, agriculture, education, health, regional development, private sector growth, and public financial management.

Although significant challenges remain, Haiti has seen a number of positive developments since the earthquake:

  • Of the 1.5 million internally displaced people, more than 1.4 million have left the camps and relocated.
  • Haitians children have benefitted from better access to primary education, where participation rates of school-age children rose from 78 to 90 percent. However, the quality of education and learning remains a challenge. Only one third of all children aged 14 are in the appropriate grade for their age.
  • Extreme poverty has fallen from 31 to 24% over the last decade, especially in urban areas, and foremost in Port au Prince. However, sustainability, targeting, and coverage remain significant challenges. Only 8 percent of the Haitian population received noncontributory social assistance benefits in 2012, such as scholarships, food aid, and other transfers.
  • The tourism sector is growing with several new hotels in Port au Prince and an increase in international travelers by nearly 20% in the last couple of years.

Therefore, it can be seen that a large amount of the development in Haiti is generated from the FDI given by the World Bank and the International Development Association.

7. Impact of Debt on Economic Development

At peak, Haiti's total external debt was estimated at 1.8 billion dollars, including half a billion dollars to the Inter-American Development Bank, Haiti's largest creditor. In September 2009, Haiti met the conditions set out by the IMF and World Bank's Heavily Indebted Poor Countries program, qualifying it for cancellation of some of its external debt. This amounted to a cancellation of $1.2 billion. Despite this as of 2010 calls for cancellation of its remaining $1 billion debts came strongly from civil society groups such as the Jubilee Debt Campaign in reaction to the effects of the earthquake that hit the country.

The earthquake struck just as Haiti’s economy was just starting to grow again. The U.S. Congress had just approved a hugely beneficial trade agreement. The Haitian Hemispheric Opportunity Through Partnership Encouragement (HOPE) Act was signed in 2006. The earthquake created between $7.8 billion to $8.5 billion in damage.

Haiti is sleepwalking towards a debt crisis after the 2010 earthquake because international help for the earthquake-hit country is being given in the form of new loans, anti-poverty campaigners are warning.

With pressing humanitarian needs on the ground, the International Monetary Fund last week agreed $102m (£62.9m) in new lending to help provide emergency assistance and rebuild Haiti's shattered infrastructure. Charities point out that this will bring Haiti's total debts close to the unmanageable $1.3bn level hit in 2005, when it qualified for debt relief from the international community as a "heavily-indebted poor country".

Credits:

Created with images by Roaring Jellyfish - "I Love Haiti" • Henri1407 - "shop smaller download jungle" • Feed My Starving Children (FMSC) - "IFMSC Distribution Partner - Church of Bible Understanding" • msjennm - "helping people volunteer poverty" • DVIDSHUB - "U.S. Coast Guard Member Gives Aid to Haitian Refugee"

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