In 2017, Professor Michael E. Porter of Harvard Business School gave an important presentation about a strategy for restoring Haiti’s prosperity. A crucial part of his advice is to “make attracting foreign investment a core strategy“. In this article I will provide a suggestion to implement such a strategy.
The causes of Haiti’s poverty
Poverty in Haiti affects its people in many aspects of everyday life, including housing, nutrition, education, healthcare, infant mortality rates, as well as environment. Haiti has constantly been plagued with low levels of living conditions, with many Haitians moving into the capital city of Port-au-Prince in a bid to escape poverty in the more rural areas of the country. Levels of poverty in Haiti are generally regarded as among the most severe in the western hemisphere. This short article describes the origin of Haiti’s poverty and provides a solution to get the country back in the saddle.
French extortion for re-enslaving
An important cause of this poverty is the debt they ‘owed’ to France after fighting for their independence; France demanded a payment of 150 million francs ($20 billion dollars) as ‘compensation’ for the profit they lost when Haitians freed themselves from slavery on plantations producing coffee and sugar. Most of this was still being paid until 1947.
The United States stealing Haiti’s gold
On July 28, 1915, United States Marines landed in Haiti on the orders of President Woodrow Wilson, who feared that European interests might reduce American commercial and political influence in Haiti, and in the region surrounding the Panama Canal. The precipitating event was the assassination of the Haitian President, Jean Vilbrun Guillaume Sam, but United States interests in Haiti went back as far as the previous century: president Andrew Johnson wanted to annex both Haiti and the Dominican Republic. Twenty years later, Secretary of State James Blaine unsuccessfully tried to obtain Môle-Saint-Nicolas, a northern Haitian settlement, for a naval base. By 1915, the Americans were also afraid that an ongoing debt Haiti was forced to pay to France tied the country too closely to its former colonizer; Germany’s growing commercial interests in Haiti were another major concern. So one of the first actions carried out by the United States at the start of the occupation was to move Haiti’s financial reserves to the United States and then rewrite its Constitution to give foreigners land-owning rights.
During the nineteen years of the United States occupation, fifteen thousand Haitians were killed. Any resistance to the centralized, United States-installed puppet governments was crushed, and a gendarmerie—a combination of army and police, modelled after an occupation force—was created to replace the Marines after they left. Although United States troops officially pulled out of Haiti in 1934, the United States exerted some control over Haiti’s finances until 1947.
Stealing by the Duvalier family
From 1957 to 1986 Haiti was ruled by the corrupt and oppressive Duvalier family. Loans incurred during this period alone were estimated to account for approximately 40% of Haiti’s debt in 2000, before debt relief was granted. These funds were used to strengthen the Duvaliers’ control over Haiti and for various fraudulent schemes. Large amounts were simply stolen by the Duvaliers.
With the devastating effects of the early 2010 earthquake in Haiti there came renewed calls for a further debt cancellation from civil society groups. In light of the tragedy and new borrowing that lifted Haiti’s debts back to $1.25 billion, groups such as the Jubilee Debt Campaign called for this debt to be dropped. Furthermore, during the aftermath emergency money was offered to the Haitian government from the IMF in the form of loans. Civil society groups protested the offer of loans and not grants for such an already heavily indebted country trying to cope with such destruction.
On 28 May 2010, the World Bank announced it had waived Haiti’s remaining debts to the bank. The value of the waiver was only $36 million.
In 2015, France forgave only about US $77 million in a modern debt, unrelated to independence. In 2004, the Haitian government demanded that France repay Haiti for the millions of dollars paid between 1825 and 1947 as compensation for the slaves’ freedom. In 2015, the French government rejected this plan and said that it would consider investing in the country.
The Battle of Vertières on the island of Haiti on 18 November 1803 was the final event that stood between slavery liberty in Saint-Domingue. It involved forces made up of former enslaved people on the one hand, and Napoleon’s French expeditionary forces (who were openly committed to re-enslave the former enslaved people and regain control of the island) on the other hand. The result was that Napoleon’s troops pulled back from Vertières, knowing they were defeated and that Haiti was lost to France.
Because Napoleon had failed to re-enslave Haiti he was missing the plantation revenues. As war with England was inevitable and he could not raise enough assets, Napoleon abandoned his colonial policy. France’ immense territory of Louisiana was sold to the United States on 30 April 1803 by means of the Louisiana Purchase Treaty. It was the birth of what now is considered the most powerful nation in the world, as Livingston made clear in his famous statement: “We have lived long, but this is the noblest work of our whole lives…From this day the United States take their place among the powers of the first rank.”
The West still profits from the international political and economic role that the United States plays in the world. The country contributes to world peace and has liberated Europe twice from German dominance. However, until now, the West has only contributed to Haiti’s poverty. It is my opinion that not much can be expected from the West and that Haiti needs to take into account that it needs to get back on its feet without or with minimal foreign aid.
In order to restore Haiti to its former glory, I suggest the following.
- As France has suggested it would invest in Haiti, a way of doing so would be to implement access to internet all over the country, so Haitians can have access to the open education platforms of e.g. Coursera. The French government could also fund a liaison office of the Institut européen d’administration des affaires (INSEAD) in Haiti that provides open education. INSEAD prides itself that it offers participants a global educational experience. With campuses in Europe (France), Asia (Singapore) and Middle East (Abu Dhabi), and alliances with top institutions, INSEAD’s business education and research spans around the globe. The 150 renowned faculty members from 40 countries inspire more than 1,400 students in the degree and PhD programmes. In addition, more than 11,000 executives participate in INSEAD’s executive education programmes each year. I see INSEAD as an institution that can provide an ideal impuls to develop the level of education that Haiti needs to become an emerging market.
- A very important step to taken, is the implementation of Blockchain technology in a new (to be developed) Haitian offshore banking sector. There are offshore jurisdictions that are working to attract Crypto banks. As an example, Puerto Rico just issued a license for a Cryptocurrency International Financial Entity (Puerto Rico’s version of a banking license). Dominica is also active in the issuance of quality offshore banking licenses and makes allowances for cryptocurrency.
- In addition, a number of open-sourced groups have been formed to increase the availability of blockchain technology for offshore banks. For example, the Enterprise Ethereum Alliance became the world’s largest open-source blockchain initiative on July 18, 2017. With members like MasterCard, Cisco and Scotiabank, I have high hopes for this team.
- A new Companies Act should be drafted, with input from the industry’s stakeholders. Such an act should eliminate the complex and cumbersome approach to formation and operation of companies. A well-functioning Companies Registry to compliment these new laws should eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Haiti should be the direct result.
- With technical aid from the International Monetary Fund, a new International Banking Act should be passed to regulate and supervise all offshore licensed banks. This ensures protection of depositor’s assets and sound banking practice and qualified management are in place.
- A Mutual Assistance in Criminal Matters Act is needed. The aim is to regulate the provision by Haiti of international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
- A new Insurance Act is needed to provide for the licensing, regulation and supervision of insurance business. This is to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
- Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of financial products and further enhances the reputation as a finance centre.
- A new Companies Act should provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas in the legal system.
- The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
- Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only serves the legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the required Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.
- Porter, Michael E. “A Strategy for Haitian Prosperity.” (pdf) In Keynote Presentation. Paper presented at the Forum on Competitiveness and Investment, Port-au-Prince, Haiti, September 22, 2017
- “World Bank cancels Haiti’s debt”. AFP. 29 May 2010.
- Wroughton, Lesley (28 May 2010). “World Bank cancels remaining Haiti debt”. Reuters.
- “Hollande pledges Haiti investment”. BBC News. 2015-05-13.
- “France Confirms Will Not Repay Haiti ‘Independence Debt'”. TelesurTV. 12 May 2015.
Author: R.A.U. Juchter van Bergen Quast