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".