Haiti - Economic memorandum

Report No. 3931-HA Economic Memorandum on Haiti May 25, 1982 Latin America ad the Caribbean Regional Office FOR OFFICIAL USE ONLY U Document of the YVrAld Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization  CURRENCY EQUIVALENTS Currency Unit: Gourde (G) $1: G5 Gl: $0.20 (The Gourde has, since 1919 been pegged to the US dollar at the rate of G5=$1).  FOR OFFICIAL USE ONLY This report is based on the findings of an economic mission to Haiti in February-March 1982, consisting of Mr. Dominique Hachette (mission leader), Ms. Caroline Doggart and Mr. Hursit Calika (consultants). This report was subsequently discussed with the Government in May 1982 by Messrs. GUnter Koenig, Alexandre Nowicki, Horst Scheffold and Dominique Hachette. T his document has a restricted distribution and may be used by recipients only in the performance of I their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PREFACE AND ABSTRACT Haiti is suffering its worst economic crisis in several decades. Measures aimed at alleviating the balance of payments situation and the fiscal tightness were decided during fiscal year 1981 and 1982 which, if carried out, will improve the short term financial situation. A Five-Year Plan has been prepared for the period 1982-86. It includes a public invest- ment program, which responds to priority requirements but whose size is over- ambitious as a set of constraints will limits the absorptive capacity of the public sector. Most important among the constraints will be the availability of counterpart funds for foreign assistance which has financed lately about two thirds of total domestic investment. The greater potential for Haitian economic growth lies in an export-led development strategy. This strategy will require a reduction in market and production distortions, a revision and simplification of custom duties and incentives, a reduction of institutional constraints to new investments, and outside Haiti, measures to improve the access of Haitian goods to foreign markets (GSP and textile agreement, marketing) and to promote foreign investment in Haiti through business asso- ciations in the capital exporting countries and the strengthening of invest- ment incentives in favor of Haiti and other LDCs.  HAITI: ECONOMIC MEMORANDUM Table of Contents Page No. COtNTRY DATA SUMMARY AND CONCLUSIONS .......................................... -vi I. RECENT ECONOMIC PERFORMANCE ............................ 1 A. Overall Trends .................................. 3 B. Economic Growth ...... ....................... 3 C. Public Finance ...... ........................ 5 Central Government . .......... .................. . 6 Public Enterprises .............. . ............... 11 D. Balance of Payments ............................... 12 E. Financial Intermediation ......................... 13 II. PUBLIC SECTOR INVESTMENT PROGRAM ....................... 17 A. Public Sector Investments Programs in Haiti ....... 18 B. The Third Five-Year Public Investment Plan ..* ..... 20 General Objectives ............. .. ............... 20 The Composition of the Investment Plan Issue .... 20 The Financing Issue ..... ........................ 28 The Public Investment Decision-making Process Issue .............. .. ................. 32 III. PRIVATE SECTOR AND EXPORT GROWTH POTENTIAL .... ......... 37 A. The Domestic Framework ............ .. .............. 37 Structural Changes . ............ . . . ............... . 37 Human and Financial Resources . .................. 40 Incentives and Tax Reforms . ...................... 42 The New Tariff Schedule and Protection Measures . 45 Tax and Tariff Reform Recommendations .... ....... 47 The Outlook of Assembly Industries ............ . . 48 B. International Environment for Private Sector Growth 50 Haiti's Potential: Best-Kept Secret in the Caribbean ......... ............................ 50 Foreign Incentives and Constraints to Haiti's Export Growth and to Investment in Haiti ...... 53 Assistance to Haiti in Grasping the Opportunities Available ......... ........................... 54  Table of Contents (Continued) Page No. List of Tables of Main Text 1. Indicators of Economic Performance, 1977-81 .... ........... 1 2. Expenditures on Gross Domestic Production, 1977-81 Annual Percentage Changes .............................. 4 3. Public Sector, 1976-81 .................................... 5 4. Central Government Revenues and Expenditures, 1976-81 ..... 6 5. Central Government Revenues, 1976-81 ...................... 8 6. Overall Situation of Public Enterprises, 1976-81 .......... 11 7. Net International Reserves, 1976-81 ....................... 12 8. Balance of Payments, 1976-81 .............................. 13 9. Credit Extended by the Banking System, 1977-81 ........... . 15 10. Banking System Liabilities to the Private Sector, 1977-81 16 11. Sectoral Allocation of Public Investment Expenditure, 1972-86 .18 12. Sectoral Allocation of the Third Development Plan, 1982-86 20 13. Source of Finance of Public Investment, 1977-81 .29 14. Financing of the Investment Plan, 1982-86 .30 15. Assembly Industry: Value Added per Dollar of US Components for Major Export Groups, 1976 and 1980 .45 16. Tariff Reform, 1981 .46 17. Minimum Wages in Caribbean Assembly Industries in December 1981 ..51 18. Haiti's Share of Less Developed Countries' Offshore Assembly and GSP Exports in 1980 .52 ANNEXES I. Summaries of Programs Included in the 1982-86 Development Plan .56 II. Procedural Factors and Information Gaps for the Evaluation of Plans in Haiti .97 III. Fiscal Incentives to Agricultural, Industrial and Tourism Enterprises .99 IV. The Draft New Investment Code. 101 V. List of Restricted Imports .103 VI. Qualification Criteria for Access to the US General System of Preferences and Tariff Items 806.30 and 807.00 105  Table of Contents (Continued) STATISTICAL APPENDIX A.1 Gross Domestic Product by Sector, 1976-81 A.2 Gross Domestic Product by Expenditures, 1976-81 A.3 Gross Domestic Product by Expenditures, 1976-81 A.4 Savings and Investment, 1976-81 A.5 Summary and Public Sector Operations, 1976-81 A.6 Central Government Revenues and Expenditures, 1976-81 A.7 Central Government Revenues, 1976-81 A.8 Summary Accounts of Principal Public Enterprises 1976-81 A.9 Balance of Payments, 1976-81 A.10 Exports, F.O.B., 1976-81 A.11 Volume, Unit Price and Value of Principal Export Products, 1976-81 A.12 Exports of Light Manufactures to the United States, F.O.B., 1976-81 A.13 Composition of Imports, C.I.F., 1976-80 A.14 Accounts of the Banking System, 1976-81 A.15 Origin, Destination, and Financing of Bank Credit, 1976-81 A.16 Changes in Consumer Price Index for Port-au-Prince A.17 Petroleum Consumption A.18 Sectoral Allocation of Public Investment Expenditure by Years, 1972-82 A.19 Disbursements by Sector, Second Five-Year Development Plan, 1977-81 A.20 Tentative Disbursement Targets for Major Programs/Projects under the Five-Year Plan, 1982-86 A.21 Government Forecast of External Aid for Financing of the Five-Year Plan, 1982-86 A.22 Major Ongoing Investment Programs/Projects and Sources of Finance, 1977-82 A.23 Rates of Disbursement by Sector against Budgeted Public Investment Expenditure, 1972-81 A.24 External Aid to Haiti, 1977-81 A.25 External Aid to Haiti, 1980 A.26 Selected Tariff Changes Introduced in 1981 A.27 Employment in Assembly and Non-Assembly Plants in Port-au-Prince, 1981 A.28 Minimum Daily Wage by Industrial Branch, 1982 MAP IBRD 13769RI  ACRONYMS CAMEP Metropolitan Water Supply Company CARE Catholic Relief CBI Caribbean Basin Initiative EEC European Economic Community EFF Extended Fund Facility FDI Industrial Development Fund FPH Florida Program for Haiti GDP Gross Domestic Product GSP General System of Preferences HDF Haitian Development Foundation IDA International Development Association IDAI Agriculture and Industrial Development Finance Company IFC International Finance Corporation IHSI Haitian Institute of Statistics and Computing IMF International Monetary Fund IRS Internal Revenue Service LAAD Latin American Agribusiness Development Corporation LDC Least Developed Countries ONG Other Non-Governmental Organizations OPIC Overseas Private Investment Corporation SODEXOL Societe d'Exploitations d'Oleagineuses SNEP National Potable Water Service SPIDHA Societe des Paches Industrielles d'Haiti TELECO National Telecommunications Council UNICEF United Nations Children Fund  HAITI - COUNTRY DATA 1/ AREA POPULATION DENSITY 180 per sq. km. 37,800 sq. km. 5,009.0 (1980) 358 per sq. km. Rate ofCrowth: 1.8% (from 1975 to 1980) POPULATION CHARACTERISTICS (1975-1980) HEALTH Crude Birth Rate (per 1,000) 36.8 Population per Physician (1979) 7,200 Crude Death Rate (per 1,000) 14.5 Population per Hospital Bed (1980) 1,095 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP % of National Income = highest quintile n.a. % % owned by top 5% of owners n.a lowest quintile n.a. x % owned by smallest 10% of owners n.a ACCESS TO SAFE WATER (1980) ACCESS TO ELECTRICITY % of Population total 12.6 X of dwellings total 6 urban 43.7 rural 0.7 NUTRITION (1980) EDUCATION Per capita supply of calories (as % of requirements (1975) 86.4 Adult literacy rate (%) 25 Per capita protein intake (grams per day) 41.1 Primary School Enrollment (Z) 58 GROSS NATIONAL PRODUCT IN 1981 ANNUAL RATE OF GROWTH (% in constant prices) US$ Million % 1965-75 3/ 1970-75 3/ 1975-81 4/ GNP at Market Prices 1,610,0 100.0 1.4 3.8 5.0 Gross Domestic Investment 237.6 14.8 11.8 14.2 5.1 Gross National Savings 2/ 34.2 2.1 13.7 19.7 -4.4 Current Account Balance -103.4 6.4 - - - Export of Goods, NFS 5/ 226.1 14.0 1.2 11.9 4.8 Import of Goods, NFS 5/ 411.7 25.6 4.7 10.0 7.7 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1980 Value Added US$ Million % Agriculture 335.0 32.7 Industry 6/ 235.2 23.0 Services 453.0 44.3 Total/Average 1,0123.2 100.0 GOVERNMENT FINANCE General Government 7/ Central Government C Million % of GDP G Million % of GDP 1981 1975 1981 1981 1975 1981 Current Receipts 1.173.4 13.1 14.4 657.8 9.3 8.1 Current Expenditures 1,248.5 11.7 15.3 835.4 8.2 10.3 Current Surplus(+) or Deficit (-) -75.1 1.4 -0.9 -177.6 1.1 -2.2 Capital Expenditures 757.9 7.5 9.3 615.4 5.5 7.6 External Assistance (net) 8/ 567.0 5.2 7.0 501.5 4.5 6.2 MONEY, CREDIT AND PRICES 1970 1976 1977 1978 1979 1980 1981 (Million G Outstanding End Period) Money and Quasi-Money 198.2 779.9 930.6 1,159.7 1,353.5 1,593.5 1,801.8 Bank Credit to Public Sector 189.2 346.3 288.9 332.0 392.2 605.6 837.9 Bank Credit to Private Sector 65.3 519.7 658.0 791.5 921.8 1,010.4 1,118.3 (Percentages or Index Numbers) Money and Quasi-Money as % of GDP 10.0 17.7 18.5 22.5 23.0 22.2 22.1 Consumer Price Index (Base 1955 = 100) 124.0 247.3 264.4 257.5 291.0 343.7 402.1 Consumer Price Index in Annual Percentages Changes 3.3 10.2 6.9 -2.6 13.0 18.1 17.0 Bank Credit to Public Sector -2.1 8.9 16.6 14.9 18.1 54.4 38.4 Bank Credit to Private Sector 9.9 15.2 26.6 20.3 16.5 9.6 10.7  HAITI - COUNTRY DATA BALANCE OF PAYMENTS MERCHANDISE EXPORTS (Average 1978-81) US$ Million % 1975 1976 1977 1978 1979 1980 1981 (US$ Million) Coffee 56.4 34.2 Cocoa 5.2 3.2 Export of Goods, NFS 105.7 147.3 181.0 203.6 209.1 288.1 226.1 Essential Oils 6.9 4.2 Import of Goods, NFS -165.1 -225.5 -269.2 -292.2 -342.2 -414.0 -411.7 Bauxite 17.9 ID.9 Resource Gap (deficit - -) -39.4 -78.2 -88.0 -88.6 -133.1 -125.9 -185.6 Assembly Industry (net) 30.3 18.4 Small Industries and Handicraft 22.5 13.7 Interest Payments (net) 7.0 -7.2 -12.1 -14.7 -13.4 -14.3 -17.8 All Other Commodities 25.6 15.5 Other Factor Payments (net) .. .. .. .. .. .. .. Total 164.8 100.0 Net Transfers 39.4 65.0 63.5 67.9 79.8 77.3 100.0 Balance of Current Accounts -27.0 -20.3 -36.6 -35.4 -66.7 -62. -lD3.4 EXTERNAL DEBT, SEPTEYMBR 30, 1981 1/ US$ Mlillion Direct Foreign Investment 2.7 6.8 8.0 10.0 12.0 13.0 15.7 Public Debt including guaranteed 277.3 Net MLT Borrowing 19.7 24.8 60.5 40.3 32.5 33.1 57.7 Non-Guaranteed Private Debt Disbursements 24.9 33.3 68.9 49.5 39.5 43.0 66.0 Total Outstanding and Disbursed Amortization 5.2 8.5 8.4 9.2 7.0 9.9 8.3 Other Items n.e.i. -18.5 0.1 -19.1 -4.6 -36.2 5.0 -3.3 DEBT SERVICE RATIO FOR 1981 % Increase in Reserves (-) 23.1 -11.6 -12.8 -10.3 -14.0 11.8 33.3 Public Debt, including guaranteed 7.8 Gross Reserves 10/ 9.9 22.7 31.0 38.9 54.7 40.3 19.4 Non-Guaranteed Private Debt . Net Reserves 11 -3.8 7.7 20.5 30.7 44.7 32.9 -0.2 Total Outstanding and Disbursed Fuel and Related Materials IBRDJIDA LENDING (March 31, 1982) US$ Million Imports 12.9 17.1 23.6 24.5 34.5 63.0 61.0 Exports - - - - - - Outstanding and Disbursed 88.0 Undisbursed 43.2 Outstanding including undisbursed 131.2 1. Dates refer to PY ending September 30. 2. Does not include current transfers. 3. IHS, Compten de la Nation, 3/31/81. 4. World Bank eotiraten. 5. Net of imported inputs for assembly industry exports. 6. Mining, nasofacturiog, public utilities and construction. 7. Cosnslidated Accounts of Central Government and Public Enterprises. B. Net disborsements of loans and grants. 9. N.A. is non-applicable. 10. Monetary Authorities. 11. 1981 Debt Figures are not available yet. - Not applicable. LCIDC ..Not available. May 14, 1982.  SUMMARY AND CONCLUSIONS 1/ Recent Economic Performance i. Official disposable foreign exchange holdings fell rapidly in Haiti to a negligible level during the first quarter of 1981 and the acute shortage of foreign exchange which followed has seriously hampered economic activity until today. A combination of interrelated factors contributed to the deterioration of the economic situation. The dominant force was initially the fall in coffee exports due to an unfortunate combination of the biannual drop in production, aggravated by the destructive effect of Hurricane Allen, and by the drastic plunge in coffee prices in the world market. The impact of the drop in export revenues was compounded by the increased food import, as an aftermath of the unfavorable weather, and an acceleration in the Central Government spending which seriously jeopardized the fiscal balance during 1981. The large budget deficit was partly financed by 1arSe > ntral Bank credit which created additional pressure on the scarce foreign reserves. ii. Simultaneously, the failure of the Government to comply with budgetary targets, coupled with rumors of devaluation and widening of inte- rest rate differentials against Haiti, precipitated a loss of private sector confidence in the Haitian Authorities' economic management and a concommit- tant flight of short-term capital, contributing to a further loss of scarce international reserves. iii. A series of measures aimed at reducing the pressure on the demand for foreign exchange and at improving the fiscal situation were decided during 1981. They included a wide variety of interventions to limit imports--from administrative measures to new custom duties, quotas and pro- hibitions on either luxury goods or on goods which would eventually substi- tute for domestic production. In addition, surrender requirements for private remittances were introduced. Authorities expected to achieve also a significant reduction in the fiscal deficit by a combination of new taxes, restrictions on public expenditures, and improvement in revenues administra- tion. But these measures, by being only partially operational during 1981, could not stem the tides in deficit on either the fiscal side or the balance of trade. iv. The new fiscal year which started in October 1981 looks more promising due to the expected impact of all the measures decided earlier, combined with normal agricultural production. However, unexpected low coffee exports, a necessarily tighter fiscal and credit situation, lower prices for traditional exports, and private sector reluctance to invest will hamper a significant surge in the economy. But to the extent that Authorities--whose composition has changed recently to bring into place a new economic team--are able to bring quickly a new feeling of confidence among domestic and foreign business groups and to obtain balance-of-payments support, economic activity will improve with respect to 1981. 1/ All figures in this report refer to Haitian fiscal years (ending September 30) unless otherwise specified.  - ii - The Public Sector Development Program V. A new Five-Year Plan has been prepared for the period 1982-86. It gives particular attention to, and aims for a more balanced division of, population and economic activity over the national territory. It also attaches importance to the administrative reform, a continuous process to improve and adopt by public administration to function as a developmental vehicle in a modern state. Finally, increased employment and preference of labor-intensive methods remain among the new plan's major objectives. vi. In sectoral allocations, the Third Five-Year Plan places heavy emphasis on agriculture and power, as well as on social infrastructure (in particular, water supply and sewerage, urban development and housing), while the relative share of the allocations for the transportation (still the third largest item) will decline. Though the sectoral allocation is not defined in terms of specific and well justified and prepared projects, but only as a list of large programs, it seems that they may well be -- with a few excep- tions -- in conformity with Haiti's highest-ranking developmental needs, subject, of course, to the availability of relevant resources to carry them out. vii. The Government envisages an investment program of G 7.4 billion, at current prices, over the period 1982-86 to be financed by current budget surplus (17.1 percent), by savings of public enterprises (15.2 percent), by external grants and loans (67.7 percent). Public investment expenditures are overestimated, as a set of constraints--summarized below--will limit the absorptive capacity of the public sector. An alternative forecast of G 5.9 billion in current prices is suggested as a more realistic base of refer- ence. Similarly, even on the assumption of consistent improvement in the revenues' administration and the pricing of public enterprises services, and the addition of some excise taxes, public savings are also overestimated, as is the expected foreign aid from traditional donors. A revised forecast is presented which implies that only 7 percent of total development expenditures could be financed by public sector savings, under the conservative assumption outlined above, 58 percent, by expected donors' assistance. Domestic finan- cing from the banking sector could account up to 12 percent of the required financing while 23 percent would have to come eventually from other sources. viii. Successful implementation of the 1982-86 revised investment program will require overcoming several major constraints which have been hampering Haiti's development efforts in the past. Very low income level, insufficient fiscal discipline and inadequate administration of the public apparatus do not allow the accumulation of an adequate level of public savings to build and maintain the necessary infrastructure and to support directly productive projects. The quality of planning for resource allocations and financial management in public sector has not yet attained the desirable standards. Project preparation and monitoring remain grossly inadequate. Absorptive capacity of soft sectors limits the efficient and rapid handling of most urgently needed development programs. Most of these constraints are so over- whelming that, foreign assistance, though expected to be limited, does not seem to represent a main bottleneck in the medium-term development prospects of Haiti.  - iii - ix. Efforts, short of reducing significantly the already contracted public investment program, should lead to increasing the current suplus of the public sector, and to improve the versatility of foreign aid. Public savings could be enhanced if decisions are taken: (i) to restructure thoroughly import duties by preferring a strictly enforced, relatively low, more homogenous tariff schedule with exemptions kept at a minimum; (ii) to create a broad sales tax to be applied also on imports, as suggested by the International Monetary Fund. This tax would replace the collection of exist- ing "droits d'accises" and could be complemented by additional discriminatory consumer taxes on specific commodities or services (e.g. luxury goods); (iii) to strengthen the accounting and auditing of public institutions and keep improving both internal and custom revenues administrations; (iv) to improve the pricing of goods and services produced in particular by the Minoterie, the Telecommunications Company and Port Authority; (v) to phase out com- pletely extra-budgetary expenditures. x. Pending a reversal of current trends, donors could also consider adopting a more flexible view on the domestic counterpart requirements, and judge the Government's efforts, on the basis of other criteria than the counterpart itself: e.g. public revenues improvements, elimination of exemp- tions to the payment of custom duties, auditing of specific public institu- tions, cadaster, etc. In this framework, external "budget-support type" assistance could be very beneficial to maintain the public investment level at an even keel. In addition, the Government could husband its domestic financial resources in such a way as to maximize the flow of external grants and soft loans in support of high priority projects. xi. However, domestic public financing could also be enhanced carefully by recurring to credit by the Central Bank. A prudent assistance to the public institutions could improve substantially, during the period analyzed, the absorption capacity of foreign aid. But still, additional financing would be required. xii. The Government may have to reduce its targets of public investment during the period 1982-86 beyond the limits suggested above. A more meticu- lous definition of priorities and projects will be required for this endeavor, issue which will be discussed in the next section. xiii. Although considerable progress has already been made in recent years to set up a comprehensive planning organization, the process is still far from achieving its objectives in its entirety. Areas of major improve- ments could be in (i) the intensification of project identification and preparation and its monitoring; (ii) the evaluation of project proposals and pre-investment work; (iii) the maintenance of up-to-date project inventories; (iv) the strengthening of planning units in ministries and autonomous organi- zations starting with two or three of them of undisputable importance as agriculture (DARNDR); (v) the coordination among different planning depart- ments to maintain the project work into the framework of the plan's original concept and objectives; (vi) the granting of governmental support at the highest level to the Ministry of Planning to carry out most of this endeavor; (vii) the extension of auditing and accounting control of the Ministry of  - iv - Finance to development as well as to current expenditures of all public institutions. To achieve full effectiveness of some of the measures suggested above, the Ministry of Planning could be assisted by an effective project pre-investment unit. This unit would set adequate standards and realistic programs or all project pre-investment work. It could be supported by technical and financial foreign assistance. In addition, the recently created "comissions techniques" could play an important role in the future to the extent that in-depth developmental problems and priorities in each sector are given the appropriate weight against "aid pledging" aspects. The Private Sector and Export Potentials xiv. Haiti's economy is dominated by subsistence farmers, and controlled by a few related or associated groups of individuals who operate the export- import trade, tourism facilities, construction and the manufacturing sector. The groups are split by intense rivalries. Hitherto, the Government has had a generally supportive attitude towards the private sector elite, which has been allowed to trade and invest with considerable freedom. Entrepreneurial response was particularly positive in the 1970's, but state interventions in agriculture have had generally unfavorable results. An apparent shift in the Government's laissez-faire policies has taken place since 1980. New tax, foreign exchange and trade restrictive measures were introduced, and the Government became directly involved in three large and controversial indus- trial projects. The resulting uncertainty has slowed private investment, except in assembly industries, which can expect relative immunity from local policy changes. xv. Incentives granted to agro-industrial, manufacturing and tourism enterprises helped institutionalize the private sector's freedom of action by exempting profits from tax and imported inputs from customs tariffs. The granting of incentives was done without much adherence to criteria theoretic- ally imposed by the laws, while administrative procedures were lax and often arbitrary. This aspect of the generally weak institutional framework may have acted as a deterrent both to large foreign enterprises and to Haitian entrepreneurs who were unable to pull strings. The incentives proved to be neutral as to the use of resources (labor vs. capital) and as to market orientation (domestic vs. exports). xvi. One of the main objectives of the Haitian economic policy is to improve the growth performance of the seventies. The small size of its domestic market, the vicinity of large outlets for its products, the success- ful opening of the economy during the seventies, the rapidly growing need of imported energy sources suggest the appropriateness of an outward-looking strategy to reach this objective. Favorable conditions, such as cheap and easily trainable labor force, its relatively most plentiful resource, stable institutional environment and, to some extent, its agricultural potential could provide an adequate base and the necessary resources to expand exports tied to tourism, assembly industries and directly or indirectly to agricul- ture.  -v - xvii. This challenge will require overcoming some constraints. While open, the economy has been closing lately at the margin. As a consequence of the direct involvement of the Government in some large industrial projects, and of a critical foreign exchange situation, trade barriers (quotas, prohibitions and custom duties) have been raised and controls over export earnings have been installed. This may direct scarce resources towards less efficient uses in import-substitution. Such an inward-looking policy should be reversed if Haiti is to take full use of its comparative advantages. In addition, lagging agriculture production has limited the benefits of traditional exports while it has hampered the growth in the domestic value added of industrial exports. The shortage of skilled labor, the lack of medium-term financing promotion and of marketing experience, all are constraints to the expansion and diversification of the assembly industries and tourism. High income tax may also restrain foreign investments in export-oriented manufacturing in Haiti while trade barriers in the major recipients countries of Haitian exports, and international agreements (textile and clothing) have already limited sharply a relevant Haitian potential. xviii. There are several areas where specific actions could be taken by the Government of Haiti and its private sector with the support of major donors. (i) Trade Management 1. Recent market and production distortions could be reduced by phasing out quantitative restrictions on imports; 2. Authorities could find it advantageous to gradually reduce custom duties across the board towards a more homogenous tariff schedule but, concurrently, to eliminate also gradually, most exemptions on capital equipment and intermediate imports; 3. Efforts could be made to reduce institutional constraints such as negotiations for franchises and factory space, delays in clearing imports, while incentives such as effective institutional support and free zone facilities could be strengthened. (ii) Incentives to Investment 1. Local vocational training needs particular attention in relation to the development of required manpower for the export surge. The private sector, which has been so far, the only source of support for this endeavor, is expected to keep playing an important role. Credit for exports may be developed through the existing financial institutions or mechanisms and through such as private development banks;  - vi - 2. The Haitian Govertnment could improve the operational environ- ment for foreign investors in the non-assembly sub-sector by (i) reducing the rate of income tax (top rate is 66 percent), while phasing out tax holidays, subject to existing commitments, and (ii) to initiate discussions on treaties for the avoidance of double taxation with the US (main partner); 3. Tourism could grow if the Government, with the strong backing of the private sector, could organize efficient promotion campaigns and disseminate the relevant information to attract foreign capital and know-how. (iii) Outside Haiti The development of Haiti's private sector will continue to depend on the outside for the provision of markets and for inflows of capital and technology. Access to foreign markets, particularly those of the US and the EEC could be improved without threatening the developed countries' home industries. In the case of the US, a more sympathetic handling of the textiles agreement would be welcome by Haitian exporters and would boost employment. A further trade aid could involve setting up an efficient warning system for Haitian exports to the US under the GSP system. xix. A key factor in developing Haiti's trading links is more of the right kind of investment. Promotion of investment in Haiti could be improved through business associations in the capital exporting countries with contacts with the Haitian business associations. Similar initiatives to those of US OPIC and State of Florida (1981) should be encouraged as part of the economic assistance programs of EEC countries, specifically France and West Germany, which have long standing links with Haiti. In the case of Japan, there are opportunities for publicizing Haiti's potential as an export platform, both for North America and the EEC. Finally, the developed countries could strengthen investment incentives in favor of Haiti and other LDCs. In particular, the US, in the context of the CBI, could consider the introduciton of "tax-sparing" to allow US companies to benefit from tax holidays offered in Haiti, possibly in the context of specific tax treaty provisions and/or introduce tax-free investment allowances.  I. RECENT ECONOMIC PERFORMANCE A. Overall Trends 1. Official disposable foreign exchange holdings fell rapidly to a negligible level during the first quarter of 1981 and the acute shortage of foreign exchange has seriously hampered economic activity until today. At present, US currency does not circulate as widely as before. A small premium on the US dollar is being charged on transactions in the informal financial market, and for the first time since 1970, six to nine months arrears on foreign payments accumulated in the private banking system during 1981. 2. A combination of interrelated factors contributed to the deterio- ration of the foreign exchange position and the economic activity up to the present time. The dominant force was initially the fall in coffee exports due to an unfortunate combination of the biennal drop in production, aggra- vated by the destructive impact of Hurricane Allen that struck Haiti in August 1980, and by the sharp plunge of coffee prices in the world market. The impact of the drop in export revenues was compounded by increased food imports, as an aftermath of the unfavorable weather and an acceleration in the Central Government spending--of 60 percent in the first quarter of 1981 as compared to the same period in the previous year--which seriously jeopar- dized the fiscal balance during 1981. Although new fiscal measures intro- duced in February-March 1981 were apparently instrumental in keeping low the Central Government deficit during the last three quarters of 1981, the finan- cial imbalance of the first quarter could not be redressed. The large fiscal deficit, mostly attributable to extra-budgetary appropriations on top of a reduction in current revenues created additional pressure on imports. In addition, in spite of the use of foreign grants and loans to finance invest- ment expenditures, central bank credit was required to finance a large share of the deficit. As a consequence, ceilings established within the framework of an Extended Fund Facility (EFF) of the International Monetary Fund (IMF) were exceeded at the end of the first quarter of 1981 and prevented the use of the remaining funds made available by this facility to redress or alle- viate the already acute shortage of foreign exchange. Table 1: INDICATORS OF ECONOMIC PERFORMANCE, 1977-81 1977 1978 1979 1980 1981 GDP growth rate (1976 prices) 1.9 4.7 3.6 5.4 -2.1 Public Sector Deficit (as % of GDP) 6.7 8.5 7.9 8.3 8.9 Domestic Deficit Financing (as % of GDP) -1.1 0.8 1.0 2.9 3.1 Current Account Balance (as % of GDP) -3.8 -2.5 -5.2 -4.8 -7.3 Net Foreign Reserves (US$ million) 8.7 22.9 39.0 29.8 -2.0 Official 20.5 30.7 44.7 32.9 -0.2 Private Banks -11.8 -7.8 -5.7 -3.1 -1.8 Excess Reserves of Private Banks: Actual Reserves as % of Required Reserves n.a 104.7 99.3 131.6 112.9 (June) Exports of Goods (rate of growth at current prices) 23.0 12.4 -10.3 53.2 -27.6  -2- 3. Simultaneously, the failure of the Government to comply with budgetary targets coupled with rumors of devaluation, a widening of interest rate differentials against Haiti, and a loss of private sector confidence in the Haitian Authorities' economic management precipitated a flight of short term capital, contributing to a further loss of scarce international reserves. The shortage of foreign exchange which ensued prompted the Government during 1981 to "introduce surrender requirements for private remittances and export receipts and to establish priorities for the payment of imports," both measures equivalent to the introduction of exchange controls for the first time in many years. 4. Concurrently, fiscal revenues already severely affected by the drop in coffee exports -- the main single source of fiscal revenues -- diminished further due to the reduction, though modest, in revenues from import duties caused by a reduction in import volumes as a consequence of foreign exchange shortages and capital flights. Moreover, the pressures of the extra- budgetary expenditures on the Treasury, by squeezing available resources of counterpart funding for development projects, reduced disbursements on foreign medium- and long-term loans under projected levels, and reduced public investment expenditures to its lowest level since 1978. 5. A series of measures aimed at reducing the pressure on the demand for foreign exchange and at improving the fiscal situation were adopted in February-March 1981 and reiterated in August of the same year since, by that time most of them had not yet become effective. These measures, described more fully ahead, included a wide variety of interventions to limit imports -- from administrative measures to new custom duties, quotas and prohibitions on either luxury goods imports or on goods which would eventually substitute for domestic production. In addition, by a combination of new taxes, restrictions and further controls on public expenditures, and improvement in revenues administration, Authorities expected to achieve a significant reduc- tion in the fiscal deficit. But these measures, by being only partially operational during 1981, could not stem the tides in deficit on either the fiscal side or on the balance of trade. 6. The new fiscal year, which started in October 1981, Looks more promising due to the expected impact of all the measures adopted earlier expected to be applied eventually, combined with normal levels of coffee exports and agricultural production. However, an unexpected low level of coffee exports, a necessarily tighter fiscal and credit situation, lower prices for traditional exports, and private sector reluctance to invest will hamper a significant surge in the economy. But to the extent that Government -- whose composition has changed recently to bring into place a new economic team -- are able to induce quickly a new feeling of confidence among domestic and foreign business groups and to obtain balance of payments support, economic activity would improve with respect to 1981. 7. It is hoped that some of the measures taken, geared towards alleviating the balance of payments directly or indirectly through the fiscal position, will be short term in character as they are inconsistent with the need to improve resource allocation, to stimulate efficiency (quotas and import prohibitions), to maximize foreign exchange availability (exchange controls) and to increase fiscal revenues in the medium term (additional income tax). Some of the measures, such as prohibition of certain  -3- imports, quotas and other import controls will also certainly impose an addi- tional burden on a poorly equipped and already overburdened Customs Administration. These measures are discussed more fully ahead. B. Economic Growth 2/ 8. After growing at an average annual rate of 4.5 percent between 1977 and 1980, and at 5.4 percent in 1980, Haiti's real GDP fell by 2.1 percent in 1981 relative to 1980 (Tables 2, A-1, A-2 and A-3). This reduction in the growth rate can be attributed mainly to the impact on agricultural production of Hurricane Allen and to the two-year cyclical pattern of coffee produc- tion. Other factors also contributed to the plunge in economic activity. On the one hand, the decline of sugar and bauxite production and, on the other, a reduction in domestic aggregate demand as an indirect result of lower world prices and of lower agricultural sector and fiscal management performances. 9. Although agriculture's contribution declined steadily in terms of GDP from 38 percent in 1976 to 32 percent in 1981, its importance is still strongly felt on GDP rate of growth, which accelerates or decelerates depend- ing on the performance of the agricultural activity which is heavily influenced by the production cycle of coffee. As coffee exports -- proxy for production -- increased by 84 percent in 1980 and fell by 46 percent in 1981, agriculture value added rose by 5.1 percent in 1980 and was reduced by 4.7 percent in 1981 (both in real terms), explaining the major cause of GDP fluctuation. The indirect impact of this cycle through services -- commerce in particular -- being procyclical, helps to explain major fluctuations of the Haitian economy. During 1981, the situation was made worse by further reduction in sugar cane yields and in bauxite mining. Sugar cane fields are being severely affected by smut disease, prevalent in the Caribbean region, reducing yields to as low averages as 7.5 percent sugar per ton of cane -- compared to 12 percent in the Dominican Republic. Due to a steady decline in the alumina content of ore and rising export taxes, bauxite production fell in 1981 by one third with respect to the previously agreed level after a new contract was ratified by the Government specifying new annual production target of 400,000 tons -- and setting a lower tax burden. The contract is to remain in force until 1983. 2/ The measurement of recent economic growth performance and that of the past decade has been significantly distorted by the absence of adequate and consistent data and by the subsequent constant revision of figures, especially for the agricultural sector. Though an effort is being made by the Haitian Institute of Statistics and Computing (IHSI) to prepare a series on a new base and methodology, its unavailability compelled the mission to make estimates of its own using the new base and an adapta- tion of the "new" methodology. The results presented in this report are only tentative though they are believed to show the basic trends and main short term changes.  - 4 - Table 2: EXPENDITURES ON GROSS DOMESTIC PRODUCT, 1976-81 ANNUAL PERCENTAGE CHANGES 1977 1978 1979 1980 1981 I. Current Prices Consumption 15.3 0.3 19.3 19.8 15.7 Investment 20.0 3.6 4.6 23.8 -6.1 Public Sector 22.2 30.3 -5.7 6.4 -6.0 Private Sector 17.2 -30.0 29.1 53.8 -5.8 Total Expenditures 16.0 0.8 17.1 20.3 12.7 Exports GNFS 22.9 12.5 2.7 37.8 -21.5 Imports GNFS 19.2 8.6 17.1 21.0 -1.6 Gross Domestic Product 16.2 0.8 14.2 23.2 9.7 National Income 15.8 -0.4 15.6 24.7 9.7 II. At Constant 1976 Prices Consumption 6.2 2.6 5.3 2.4 0.6 Investment 10.5 -5.7 -4.1 6.9 -11.7 Public Sector 11.1 18.6 -13.6 -8.1 -11.6 Private Sector 8.0 -36.4 18.3 32.8 -11.5 Total Expenditures 6.8 1.3 4.0 2.9 -1.0 Exports GNFS -18.3 22.4 3.5 18.4 -16.2 Imports GNFS 9.7 -0.4 5.4 2.7 -7.0 Gross Domestic Product 1.9 4.7 3.6 5.4 -2.1 National Income 6.5 1.8 2.3 4.8 0.0 Sources: Tables A-2 and A-3. 10. During 1981, economic activity in Haiti was also significantly affected by a reduction in domestic expenditures and exports which affected particularly, the industrial sector, construction, and several services (Table A-1). A sharp reduction in the terms of trade, in spite of a slowing in the oil price upward trend, the slowdown in the US economic activity reducing the growth potential of the light manufacturing industry, the increase of domestic prices over the international inflation rate because of food shortages, all concurred in depressing national income and domestic demand (Table 2). An expansionary fiscal policy through an increase in the Central Government's deficit was attenuated by imports, by a significant reduction in public investment due to, among other factors, the limited availability of counterpart funds to activate multilateral and bilateral project financing, and by a reduction in private investment due to loss of confidence of the business community and lack of foreign exchange. All this led to a reduction in financial services of 9.1 percent in real terms relative to 1980.  C. Public Finance 11. The most striking development--because it represents a major departure from previous years experience--in the fiscal sector over the last two years has been the heavy reliance on central bank financing by the public sector. This development has been responsible, in part, for the serious economic and balance of payments difficulties that the country confronts at present. Table 3: PUBLIC SECTOR, 1976-81 1976 1977 1978 1979 1980 1981 I. As Percentage of GDP Current Revenues 14.3 14.8 15.3 14.6 15.0 14.7 Central Government 9.9 10.1 10.7 9.7 9.5 8.2 Public Enterprises 4.4 4.8 4.6 4.9 5.5 6.5 Current Expenditures 12.4 11.7 10.7 10.9 14.2 15.3 Central Government 8.5 7.8 7.3 6.9 9.7 10.2 Public Enterprises 3.9 4.0 3.3 4.0 4.6 5.2 Current Account Surplus (+) 1.9 3.1 4.6 3.7 0.8 -0.6 or Deficit (-) Capital Expenditures 10.0 10.1 12.2 10.4 8.8 7.8 Central Government 7.6 7.2 9.7 8.5 7.4 6.6 Public Enterprises 2.4 3.0 2.5 1.9 1.4 1.3 overall Deficit 1/ (-) -7.6 -6.7 -8.5 -7.9 -8.3 -8.9 Domestic Financing 0.6 -1.1 0.8 1.0 2.9 3.1 Foreign Financing 7.0 7.8 8.7 6.9 5.4 5.8 II. Annual Percentage Change Current Revenues - 21.1 3.7 9.2 26.8 7.5 Central Government - 18.8 6.4 3.9 21.2 -5.1 Public Enterprises - 26.4 -2.0 21.5 37.7 29.5 Current Expenditures - 10.3 -8.4 17.3 60.5 18.2 Central Government - 6.6 -4.6 7.8 72.4 14.9 Public Enterprises - 18.1 -15.7 36.8 39.9 25.1 Capital Expenditures - 17.8 21.7 -3.1 4.2 -2.0 Central Government - 9.0 54.3 -0.1 6.6 -1.8 Public Enterprises - 46.4 -14.8 -14.6 -6.7 -3.0 Overall Deficit - 3.1 27.8 -5.6 30.0 16.6 1/ Includes a residual item which represents the overall surplus or deficit of the non-consolidated public sector. Sources: Tables A-6 and A-8.  12. The overall deficit of the public sector had been high and slightly on the rise throughout the mid-1970s, reaching the equivalent of 8.3 percent of GDP in 1980 and 8.9 percent in 1981 from 6.8 percent of GDP in 1976 (Table 3). But, if before 1980, more than 80 percent of the deficit had been financed by foreign grants and soft loans, in the past two years this ratio fell to 65 percent, the difference being almost entirely financed by the Central Bank. The severe deterioration of public finances during these last two years was also reflected in the public savings sharp reduction from 3.7 percent of GDP in 1979 to 0.8 percent in 1980 and dissavings of about 0.6 percent in GDP in 1981. Central Government finances are entirely respon- sible for this performance as both savings and the overall performance of the public enterprises improved. Central Government 13. Large deficits were accumulated by the Central Government during both 1980 and 1981, despite significantly different economic and fiscal prospects for each of those years. In 1980, a bumper coffee crop augured well for coffee exports proceeds, economic activity in general and Govern- ment's revenues. The favorable economic prospects on top of the institu- tional changes tied to the fiscal reform, were expected to be instrumental in improving the Central Government's financial situation. The actual fiscal results were sharply at variance with these expectations. Though revenues rose by about 21 percent, their increase did not keep pace with the growth in nominal GDP (24.7 percent). Inadequate tax administration and tax system inelasticity are to be blamed for this slackening. Total expenditure, meanwhile, grew much faster than expected -- about 26 percent -- as the budgetary process was often bypassed and expenditure control procedures were ignored. Current expenditures increased by 72.4 percent while capital expenditures rose, in nominal terms, by only 6.6 percent. Public savings became negative for the first time in a decade, and Government deficit rose by about 32 percent in 1981 with respect to the previous year, to reach G 554.0 million. Table 4: CENTRAL GOVERNMENT REVENUES AND EXPENDITURES, 1976-81 1976 1977 1978 1979 1980 1981 I. As Percentage of GDP Current Revenues 9.9 10.1 10.7 9.7 9.5 8.2 Current Expenditures 8.5 7.8 7.3 6.9 9.7 10.2 Current Account Surplus (+) or Deficit (-) 1.4 2.3 3.3 2.8 -0.2 -1.9 Capital Expenditures 7.6 7.5 11.5 9.9 7.5 6.8 Deficit Financing 6.2 5.2 8.2 7.1 7.6 8.7 Domestic (net) - -1.0 0.3 0.5 2.8 3.7 Foreign (net) 6.2 6.2 9.9 6.6 4.9 5.0 II. Annual Percentage Change Current Revenues - 18.8 6.4 3.9 21.2 -5.1 Total Expenditures Current Expenditures - 6.6 -4.6 7.8 72.4 14.9 Capital Expenditures - 9.0 54.3 -0.1 6.6 -1.8  14. In contrast with 1980, 1981 was expected to be a difficult period due to a drastic reduction in coffee exports value and its resulting impact on the country's economic activity. However, although coffee revenues fell by 60 percent, total revenues were reduced by only 4.8 percent as taxes indexed on the previous year's activity (e.g. income) and administrative controls on tax collection improved markedly (Table A-7). Tax measures introduced towards the middle of the fiscal year had only a marginal impact on the revenue performance. In contrast, total expenditures increased by 8.5 percent with respect to 1980 fueled by current expenditures which rose by 18 percent during the fiscal year and by 60 percent during the first quarter of 1981 with respect to the same quarter of the previous year. Again, as during 1980, budgetary controls were bypassed by extra-budgetary expenditures which increased the deficit in the Central Government's current account. While current revenues had been sufficient to cover current expenditures in the absence of extra-budgetary expenditures in 1980, the situation was reversed during 1981, since current revenues fell short of G 91.7 million to finance budgetary current expenditures which had increased in line with nominal GDP in relation to the previous year. Consequently, extra-budgetary expenditures worsened the budgeted deficit in current account and competed strongly with capital expenditures for any economically justifiable credit from the Central Bank. (i) Revenues: Tax revenues in Haiti have followed a declining trend with respect to nominal GDP due to the preponderance of customs revenues and other indirect taxes where specific rather than ad-valorem taxes tend to predominate (Tables 4 and A-7). Also, heavy emphasis has been placed on taxing at relatively high rates basic necessities such as flour, sugar and vegetable oil which makes it more regressive than otherwise. Since, theo- retically tax rates tend to be on the high side compared to other countries, the low tax collection and the falling trend in revenues may be explained by lax tax administration in addition to the previously noted characteristics of the tax system.  Table 5: CENTRAL GOVERNMENT REVENUES, 1976-81 (Annual percentage changes of some revenues) Average Annual Growth Rate 1977 1978 1979 1980 1981 1976-81 Current Revenues 18.8 6.4 3.9 21.2 -5.1 8.6 Internal Revenues 12.6 8.3 5.2 4.6 29.2 11.6 Income Tax (8.9) (13.7) (6.4) (12.2) (31.6) (14.2) Excise Tax (7.0) (4.0) (20.2) (17.0) (11.1) (11.7) Customs Revenues 24.8 4.6 2.8 36.7 -29.5 5.3 Export Taxes (25.5) (3.6) (-15.2) (65.3) (-70.7) (-11.8) Coffee 43.6 6.1 -38.2 131.2 -63.5 -4.5 Bauxite -0.8 -1.7 34.4 -7.3 -92.6 -38.2 Import Duties (24.2) (5.3) (15.2) (22.2) (-1.3) (12.7) Memo Items (rate of growth) National Income (current prices) 15.8 -0.4 15.6 24.7 9.7 12.8 Imports of Goods 21.7 3.8 18.1 23.3 -1.3 12.7 Source: Table A-7. 15. The performance of Government revenues changed significantly from 1980 to 1981. For the first time in at least a decade, internal revenues collected during 1981 represented a greater share of current revenues than customs collections, but this was due to a significant reduction in customs revenues. While tax collections rose by 21.2 percent in 1980 almost in line with nominal GDP, they fell by 5.1 percent during 1981. Economic conditions, new tax packages and changes in the tax administration explain these ups and downs of fiscal current revenues. 16. Deterioration in tax administration and widespread tax evasion are behind the modest internal revenue collection increase during 1980 of 4.6 percent against a surge in nominal GDP of 23.2 percent with respect to the previous year. Export tax proceeds rose to a record level (65.3 percent) on the strength of a bumper coffee crop and high international coffee prices while import duties barely rose in proportion to goods imports in spite of the introduction of an emergency revenue package around the middle of 1980. This package was mainly a consolidation of existing ad-valorem and specific custom charges and fees into a single duty on a limited number of tariff categories and the increase of the equivalent resulting tariff over the previous level. But the package was applied late in the year and some earlier tariff increases were rolled back soon after their inception.  - 9 - 17. The performance of Government revenues was different in 1981. Internal revenues were buoyant -- 29.2 percent -- even in comparison to the nominal GDP growth of 9.7 percent in relation to the previous year, while custom revenues fell by 30 percent as a result of a 70 percent drop in export tax receipts (Table 5). Marked improvement in tax administration and controls and the high level of economic activity of the previous year go a long way in justifying such successful performance. But drastically curtailed coffee exports, low world prices, and no collection on bauxite production 3/ explain the significant reduction in export taxes, while import tax revenues followed the trend of merchandise imports at current prices, which were slightly lower when compared to the previous year. The sluggishness of the economy and predominance of specific indirect taxes caused other internal revenue collections to be almost unchanged from the previous year. This performance would have been worse in the absence of the new package of revenue measures announced in February, March and August 1981. These measures included: (i) modification of taxes on private and luxury cars; (ii) a 20 percent increase in custom duties on luxury goods (including food) and on alcoholic beverages; (iii) an annual inspection fee on automobiles of G 100 per year; (iv) an increase in the excise tax on cigarettes from G 0.30 to G 0.50 per pack; (v) an upward adjustment of the ad valorem custom duties on petroleum products from 33.3 percent to 57.8 per- cent; (vi) an additional 20 percent tax on personal and corporate income tax; and (vii) the incorporation of the Regie's commissions into the budget -- in exchange of a monthly transfer by the Treasury back to the Regie of about two thirds of these commissions. 4/ Some of these measures were implemented immediately but most of them were either deleted or implemented too late to have a relevant impact during 1981. (ii) Expenditures. Total expenditures grew faster than revenues in both 1980 and 1981 despite a fall of capital expenditures in relation to 1979. In both years, current outlays outpaced national income growth, as public admin- istration was expanded, new departments were created, and efforts were made to retain and attract qualified managerial personnel. As a result of the ongoing fiscal reform, previously uncontrolled non-budgeted expenditures became budgeted -- implying a significant rise in budgetary expenditures in both 1980 and 1981 (Table 4) -- but also suggesting the basic difficulties in 3/ The bauxite company had agreed during 1980 to make an advanced tax payment against tax liabilities to be incurred in the following year. 4/ These changes came on top of a new income tax law which was first published in September 1980, and then suffered several modifications that weakened the original version. The law establishes a uniform rate for most taxpayers engaged in industry and trade (1 percent) and elimin- ates some deductions previously allowed. A progressive rate schedule (from 5-50 percent) applied on corporate profits was re-established and a tax on net undistributed profits of 10 percent was legalized. The new law also prohibits tax deferrals and subject net profits to a flat 15 percent tax. The new law does not provide for ex ante reserves against losses. Comments on this law are presented in paragraphs 94-95.  - 10 - making comparisons as doubts arise on the validity of the arbitrary distribu- tion of extra-budgetary expenditures between current and capital expenditures made in the past. Nevertheless, lags in the application of the new control mechanism included in the reform and sudden and arbitrary decisions taken by higher authorities, permitted very significant extra-budgetary expenditures whose raison d'etre has not been accounted for and consequently have been considered as being, at least in part, current expenditures. Furthermore, they occurred at one particular moment when current revenues were falling short of current budgeted expenditures, and were financed with Central Bank credit. 18. Capital expenditures fell in real terms during both years 1980 and 1981 partly due to the unavailability of counterpart funds. Savings of Central Government were negative in both years, and as the Central Bank credit was financing non-budgeted investment expenditures without foreign counterpart (sugar mill) (Table 4). But the falling trend observed in capital expenditures since 1978 may also be due to a change in investment composition, as discussed more fully in the next chapter of this report. Heavy infrastructure programs ended by 1978 were replaced by less costly projects and by more emphasis in soft sectors investment. The situation of budgeted capital expenditures is nevertheless worrisome since the figures provided in Table A-6 hide the fact that 15 percent of capital expenditures in both years are related to Government participation in three major unbudgeted and low economic return investment projects: fishing fleet (SPIDHA), vegetable oil plant (SODEXOL) and a sugar mill in the area of Leogane. The last one, which is the largest of the projects, has become a public sector project instead of a mixed enterprise as originally envisaged because the Authorities have been unable to find partners in the private sector -- domestic or foreign . The first two projects are operational while the third one is in the process of construction. In spite of a down-payment made early in 1980 for the sugar mill's equipment, construction did not start until 1981 and the equipment began to arrive only in late 1981. In the meanwhile, the cost of the project had increased by almost 100 percent, while the price of sugar kept falling in the world market. 19. As the foreign exchange situation was becoming more acute, and the Government became aware of the direct effect of the deficit on both the foreign reserves and the counterpart funds, measures were taken to constrain expenditures. These mesures involved a targeted average 20 percent reduction in budgeted expenditures other than salaries and a 25 percent curtailment of development expenditures. These efforts were partially successful in limit- ing the growth of expenditures after February 1981. In fact, total expendi- tures in the last three quarters of 1981 were kept at about the same level of the similar period in the previous year. Additional decisions taken in 1981 are expected to help improve the fiscal position in 1982 and the fiscal management in general. The 1982 budget was to be kept at the same level of 1981; all expenditures would be budgeted and strict procedures would be applied for the selection of investment projects to which the Government would give its guarantee and other support. To improve the revenue collec- tion, several commissions and groups of inspectors would be created to over- see customs and internal revenues; and several studies were recommended on property taxation and the possibility of a registre unique de contribuables.  - 11 - Public Enterprises 20. The overall financial situation of public enterprises has improved over the period 1980-81. The deficit of G 57.4 million of 1979 was trans- formed into an overall surplus of G 2.6 million in 1981 (Table 6), due to the considerable strengthening of the Telecommunications Company and the Power Company. Improvements in the rate system and enlarged services compensated fully for the expansion in current costs which came about through increased employment and through higher oil price for EDH (Table A-8). Profits of Port Authority stagnated as port fees were maintained at the 1977 level. They are scheduled to rise by 40 percent in 1982. Rising fuel costs, wheat prices and interest rates combined to produce losses in the flour mill operations in 1980 and 1981. Internal adjustment of flour prices during 1981 could have help improve its financial situation, but the mill had to borrow short-term at very high interest rates to pay for imported wheat. The Telecommunica- tions, Water Supply and Power companies are involved in significant expansion programs -- discussed in the next chapter -- which explains capital expendi- tures for the period 1980-81. It is interesting to note the growing weight of these enterprises in the public sector as their revenues represented 44 percent of revenues of the public sector in 1981 against 31 percent in 1976, while they generated an operating surplus of over G 100 million in 1981 against a Central Government's deficit of about G 150 million. Table 6: OVERALL SITUATION OF PUBLIC ENTERPRISES, 1976-81 (G million) 1976 1977 1978 1979 1980 1981 1/ Current Revenues 192.1 242.8 238.0 289.1 398.2 515.6 Current Expenditures 171.7 202.8 170.9 236.1 330.2 413.1 Operating Surplus (+) or Deficit (-) 20.4 40.0 67.1 53.0 68.0 102.5 Capital Expenditures 103.6 151.7 129.2 110.4 103.0 99.9 Overall Deficit (-) -83.1 -111.7 -62.1 -57.4 35.0 2.6 Financing -83.1 111.7 62.1 57.4 35.0 -2.6 Domestic (net) 48.4 23.0 9.3 14.2 10.9 -68.1 Foreign (net) 34.6 88.7 52.8 43.3 24.1 65.5 1/ Preliminary. Source: Table A-8  - 12 - D. Balance of Payments 21. Because of the already mentioned effects on production of adverse weather conditions, and the two-year coffee cycle, the widely fluctuating world prices for coffee and cocoa, rising oil prices and the volatility of capital transactions in the private sector, the balance of payments is fragile and difficult to manage. This fragility is further enhanced by the tight relationship between the fiscal position and the current account of the balance of payments. The demand for local counterpart funds to attract the high level of foreign assistance required to supplement domestic saving and Government expenditures capabilities illustrates this relationship: a fall in tax receipts may lead to a shortage of counterpart funds, hence to a lower level of foreign capital inflows and to additional pressures on the foreign exchange reserves to accommodate this shortfall. 5/ Moreover, the domestic financing of fiscal deficits originates demand for reserves through aggregate demand. Fluctuations can eventually be faced by using available foreign reserves as in the past. But since this procedure might become insufficient, these fluctuations may lead to controls on imports imposed to safeguard the Central Bank's reserve position. Table 7: NET INTERNATIONAL RESERVES, 1976-81 (US$ million; as of September 30) 1976 1977 1978 1979 1980 1981 Banking system -4.9 8.7 22.9 39.1 29.8 -2.0 Monetary Authorities 7.7 20.5 30.7 44.7 32.9 -0.2 Assets 22.7 31.0 41.9 54.7 39.9 19.4 Liabilities -15.0 -10.5 -11.2 -10.0 -7.0 19.6 Private Banks (net) -12.6 -11.8 -7.8 -5.7 -3.1 -1.8 Source: Table A-14 22. These destabilizing factors resulted in a deterioration of the balance of payments situation during 1980 and 1981, when official reserves were reduced by US$11.8 million and US$33.3 million respectively (Tables 7 and A-9). As most exogenous factors were extremely favorable during 1980 (export volumes , prices, lower food and oil imports; see Tables A-10 and A-ll), the failure to accumulate reserves was due to domestic financing of the fiscal deficit and to the loss of confidence by the private sector. The first factor contributed to the continued strong rise of imports while the 5/ To the extent that grants and loans are not fully tied to financing only the foreign component of public expenditures.  - 13 - second took the form of short-term capital outflows, reduction in capital inflows and repayments of liabilities abroad by domestic private banks or foreign bank branches (Table 8). Domestic financing of the fiscal deficit and further deterioration of the private sector's confidence (reflected into the errors and omissions account) during 1981, were further aggravated by a fall in coffee exports and its world price, and the fall in the demand for light industry exports and tourism services (Table A-9). The deficit was financed by drawing down on foreign assets and borrowing from the International Monetary Fund Extended Fund Facility (EFF). 6/ The level of gross foreign reserves declined to US$19 million, equivalent to little more than half a month of imports of goods and services as of September 30, 1981. At this date, the net foreign reserves were virtually nil. Table 8: BALANCE OF PAYMENTS, 1976-81 (US$ million) 1976 1977 1978 1979 1980 1981 Merchandise Trade, F.O.B. -52.3 -62.3 -52.9 -106.4 -89.7 -144.3 Exports 111.9 137.6 154.6 138.6 212.3 153.7 Imports -164.2 -199.9 -207.5 -245.0 -302.0 -298.0 Services (net) -33.1 -37.8 -50.4 -40.1 -50.5 -59.1 Transfers (net) 65.1 61.5 77.9 85.8 71.3 87.4 Current Account Balance -20.3 -38.6 -25.4 -60.7 -69.8 -116.0 Public Sector Capital (net) 24.8 50.2 42.2 33.1 36.6 42.6 Private Investment (net) 6.8 8.0 10.0 12.0 13.0 1527 Other 0.3 -6.8 -16.5 29.8 8.4 24.4 Capital Account Balance 1/ 31.7 51.4 35.7 74.9 58.0 82.7 Change in Foreign Reserves (increase: -) -11.6 -12.8 -10.3 -14.0 11.8 33.3 As Percentage of GDP Merchandise Trade, F.O.B. -5.9 -6.0 -5.1 -9.0 -6.2 -9.1 Exports 12.7 13.6 15.0 11.8 14.6 9.6 Imports -18.7 -19.6 -20.1 -20.8 -20.8 -18.7 Services (net) -3.8 -3.7 -4.9 -3.4 -3.5 -3.7 Transfers (net) 7.4 6.0 7.6 7.3 4.9 5.5 Current Account Balance -2.3 -3.8 -2.5 -5.2 -4.8 -7.3 1/ Includes SDR allocation and other unrequited earnings. Source: Table A-9. 6/ The financing of the fiscal deficit could have posed greater problems if it were not for the existing cushion of US currency circulating in the country, from which private sector and banks drew generously avoiding both greater pressure on the Central Bank and higher premium on the US currency for large transactions in the informal market.  - 14 - 23. Several steps were taken during 1981 to deal with the scarcity of foreign exchange. On July 21, 1981, the Central Bank instructed the exchange houses to negotiate all foreign transfers with the public commercial bank (BNC). On August 15, 1981, the Central Bank introduced restrictions on foreign exchange transactions by which proceeds of exports had to be fully * documented -- documentary drafts -- with the commercial banks in Haiti and the proceeds of traditional exports and foreign transfers (see above) were to be used only for import payments of priority commodities such as wheat, rice, petroleum products, oil seeds and sugar, or in accordance with any other priority established by the Central Bank. 24. Also, the Government established a two-year ban on imports of 20 consumption articles and import quotas on another 60, most of them produced locally, and decided to establish a strict programming of all its imports through the Ministry of Commerce and Industry starting in August, 1981. Other measures were taken as well, in consideration of the balance of pay- ments situation including a 30 percent reduction of automobile imports and additional taxes on specific imports described previously. A new unified system of import tariffs was passed in January 1981, and became fully oper- ational in June 1981. If applied to the letter, it will imply a significant increase in tariffs, as Table A-26 shows. Finally, all exemptions of custom duties except for those related to international agreements and to non- governmental charity organizations would be abolished. 25. Although most of the measures, if fully applied, might be instru- mental in redressing the balance of payments situation in the medium term, if a significant reduction in domestic financing of fiscal deficit occurs, they raise serious questions as to their desirability from the point of view of resource allocation, administration, foreign exchange proceeds and public reverues. Prohibitions and quotas may originate either unneccessary rents to domestic producers or importers, or may stimulate inefficiency not easily justified. Import quotas and generalized controls on imports will question- ably divert the administrative capabilities of the insitutions involved, and together with prohibitions, they may strongly stimulate unofficial procedures to bypass growing controls e.g. smuggling etc. Fiscal proceeds will be nega- tively affected by prohibitions and by the growth of such "parallel" imports which may arise from quotas and other import controls, while the new exchange controls in the financial market may stimulate undervaluation of traditional exports and a de facto dual exchange market of doubtful efficiency and justification. Prohibitions and quotas should not be renewed after their legal expiration. In the meantime, a thorough revision of the existing customs duties should be undertaken on the basis of realistic considerations of resource allocation and administrative efficiency (more details in Chapter III), and further efforts should be made on strengthening customs inspection, with eventual foreign technical assistance. All exemptions should be effectively suppressed starting from those applied to public institutions and domestic financing of fiscal deficit drastically reduced.  - 15 - E. Financial Intermediation 26. The volume of credit extended by the formal financial system did not suffer major changes during the 1980-81 period compared to previous years (Tables 9 and A-14), but both origins and destination were drastically altered by the public sector deficit financing. Monetary authorities became the main provider of credit while private banks reduced sharply their parti- cipation below the growth in nominal GDP. As expected, the destination of credit was concentrated on the public sector, and more precisely on the Central Government, since public enterprises and other decentralized official entities reduced their liabilities to the banking sector, at least during 1981. As usual, credit was financed mostly by liabilities to the private sector: currency into circulation, demand deposits and quasi-money. If net international reserves had been a negative factor in the financing of credit in the past, their net liability position during 1981 became a source, though extremely modest, of total credit financing (less than 1 percent). Table 9: CREDIT EXTENDED BY THE BANKING SYSTEM, 1977-1981 (Annual rate of change with respect to previous years's outstanding balance) 1977 1978 1979 1980 1981 Total Credit 11.7 20.7 18.9 22.1 21.4 Origin Monetary Authorities 0.2 22.5 16.1 41.9 30.2 Private Banks 24.0 19.4 21.0 3.6 9.0 Destination Public Sector -16.6 14.9 18.1 54.4 44.4 Private Sector 26.6 20.3 16.4 9.6 10.7 Source: Tables A-14 and A-15. 27. On the other hand, the aggregate supply of loanable funds -- mainly liabilities to the private sector -- did not undergo any relevant change during the 1980-81 period. Funds kept growing at about the same rate as nominal GDP, but their composition experienced significant alterations Table 10). While in 1980, quasi-money was expanding relatively faster than monetary liabilities, the reverse occurred during 1981. Also in 1980, as international interest rates were falling and monetary authorities were adjusting the domestic rates upwards, the resulting positive differential -- which lasted only three to four months -- reinforced the normal propensity of time deposits to expand when increasing proceeds from coffee are accruing. This trend was reversed in 1981, when interest rates differentials became negative for most of the time and coffee export proceeds were less than modest. In addition, demand deposits increased substantially during 1981 as commercial banks accepted gourde deposits for settlement of obligations  - 16 - abroad without being able to provide foreign currency in exchange, at least immediately. De facto arrears accumulated due to the inability of the Central Bank to provide foreign exchange to private banks and to the unwil- lingness of these institutions to use their accumulated reserves, or their access to them, for lack of confidence or a perception of generally high risks in financial operations. In fact, private banks did accumulate not only foreign reserves, but also excess domestic reserves: actual reserves over required reserves increased from 99.3 percent in September 1979 to 131.6 percent and 112.9 percent in September 1980 and June 1981, respectively receding afterwards. Previously, the banks had been usually in a deficiency position. Table 10: BANKING SYSTEM LIABILITIES TO THE PRIVATE SECTOR, 1977-1981 (percentage change with respect to the previous year's outstanding balance) 1977 1978 1979 1980 1981 Total 19.8 24.5 16.6 17.9 13.7 Monetary liabilities 8.5 25.0 22.0 8.8 22.7 Currency (13.5) (28.8) (27.8) (-4.5) (17.6) Demand deposits (3.4) (20.8) (15.2) (26.3) (27.8) Quasi-money 29.1 24.3 12.7 25.0 6.1 Savings deposits (25.0) (27.4) (16.5) (17.6) (3.3) Time deposits and other (35.1) (20.2) (7.2) (36.6) (10.2) Private capital and surplus 40.9 17.9 12.1 30.1 36.1 Source: Table A-14.  - 17 - II. PUBLIC SECTOR INVESTMENT PROGRAM A. Public Sector Investment Programs in Haiti 28. Unified budgeting of governmental revenues and expenditures and planning of public sector investments have very short histories in Haiti. A first five-year public development plan was prepared for the 1972-76 period and was subsequently followed by a second (1977-81) and a third (1982-86) five-year plan. During the seventies, with considerable external donor interest and initiative, public investment programs were implemented through the Haitian Government agencies, extending over many sectors of the economy. Significant organizational and institution-building actions were undertaken. Some highways connecting main population centers were built or rebuilt; a road maintenance organization was created. Coastal shipping harbors were rehabilitated and improved. With contributions by public and private aid agencies in the international community, schools, dispensaries, community development centers were built in rural areas. But in spite of some modest increases in the electricity, potable water, sewerage and telephone services, although the country still remains seriously deficient in these and other areas. 29. To increase public savings and to channel them towards efficient investment, efforts have been made by the Government and major donor agencies to improve public finance management and to strengthen Government departments and autonomous organizations in charge of planning and implementation of public investment projects. This proved to be a difficult and arduous task. Only recently a unified Public Treasury account has been established with the Central Bank of Haiti and definitive progress was made to include in the Government's public investment budget all planned publicly-financed develop- ment expenditure. While these were major achievements on their own, much remains to be done to establish an effective organization and uniform proced- ures for planning and execution of public sector investments. 30. Starting from a very low base, public investment expenditures in Haiti grew fast in the seventies. Also supported by increasing public sector savings until 1978 and a generous inflow of external aid, the Government was able to increase total public sector investment expenditure by 44.2 percent per year (29.6 percent in real terms) from 1972 to 1977. The main emphasis was on physical infrastructure, i.e., roads, telecommunications and power. Public sector investment in agriculture and other directly productive sectors remained low. 31. Total public investment expenditure (in current terms) of the Second Five-Year Plan (1977-81) was about three times larger than the level achieved in the First Five-Year Plan. The emphasis on physical infrastruc- ture investments, excepting electric power sector, declined in relative terms while investments for agriculture and industry increased (Tables 11, A-18 and A-19). There was also some increase in the relative shares of education and public health. Furthermore, the Second Five-Year Plan had aimed at an average annual growth of 5 percent in GDP, with an average 3.2 percent growth per year in the primary sector and 8.2 percent and 5.4 percent growth rates per year in the secondary and tertiary sectors, respectively. In face of a  - 18 - Table 11: SECTORAL ALLOCATION OF PUBLIC INVESTMENT EXPENDITURE, 1972-86 Plan I Plan II Plan III (Actual) (Actual) (Budget) Directly Productive Programs 1972/76 1977/81 1982/86 Agriculture 9.7 17.3 20.0 Mines and quarries 0.5 1.1 2.0 Industry and crafts 2.9 5.0 5.0 Tourism 0.5 0.3 1.0 Subtotal 13.6 23.7 28.0 Economic Infrastructure Power supply 8.6 15.3 18.1 Transportation 37.4 29.2 15.7 Communications 10.4 3.8 4.6 Subtotal 56.4 48.3 38.4 Social Infrastructure Water supply and sewerage 4.0 1.2 3.9 Urban development/housing 0.3 0.8 5.2 Education 5.2 7.6 7.7 Health 6.7 7.5 8.0 Community development 8.7 8.0 5.0 Subtotal 24.9 25.1 29.8 Other Administration 5.1 2.9 3.8 Total (%) 100.0 100.0 100.0 Total (G Million) 1,082.0 3,093.3 6,500.0 (at 1981 prices) Source: Ministry of Planning.  - 19 - rapid growth of assembly-type reexport industries in Haiti and of a contin- uing stagnation in agriculture, the process of change in the economic struc- ture, with relatively higher shares of secondary and tertiary economic activ- ities, gathered momentum. The overall growth in GDP during the 1977-81 plan period was less than what was originally expected. GDP grew only at an average annual rate of 2.6 percent heavily influenced by the decline of the primary sector production at an average yearly rate of 1.3 percent. To bridge gradually a great economic and social diversity between major urban centers and rural areas, the Second Five-Year Plan had also emphasized decen- tralized economic activity and social services in favor of rural areas and provincial towns. Actual expenditure under the Second Five-Year Plan reached its high point (G 720 million) in 1978 and thereafter has steadily declined (Tables A-18 and A-19). The reduction in counterpart's availability and in transportation were important factors behind the noted trend. Major road connections having been completed in previous years, the main thrust of the Government's capital expenditure has been on rehabilitation and maintenance work with relatively low costs. The decline in agriculture was due to several organizational and efficiency factors, as well as to the complexity of the problems to be tackled. While expenditure in industry, mining, power, drinking water, tourism, communications and public health increased from 1978 to 1981, the increase was not enough to compensate for the decline in the two major sectors. Investment in agriculture, other directly productive sectors and social infrastructure lagged and efforts to decentralize economic activ- ity has had little impact on the country. B. The Third Five-Year Public Investment Plan General Objectives 32. The Third Five-Year Plan is designed to raise GDP during the 1982-86 period at an average rate of 4 percent per year. The increase in the agricultural sector is expected to be 3 percent per year (as compared with 0.1 percent during the preceding plan period), while it is assumed that there will be annual increases of 7 percent and 6.1 percent in industry and infra- structure (transport, communications, energy, water supply and construction), respectively (as compared with 9 percent and 11.6 percent during the preced- ing plan period, respectively). The increase in other sectors (electric power, drinking water and sewerage) is anticipated to be 10 percent (as compared with an increase of 11.6 percent during the preceding plan period. The current plan gives particular attention to, and aims for a more balanced distribution of population and economic activity over the national terri- tory. This requires increased attention to the needs of provincial towns and rural areas in terms of economic and social infrastructure, productive investments and availability of governmental services. For the latter, a greater regionalization of governmental organization and services is envi- saged to achieve a better allocation of the resources and to promote local initiative and responsibility. The plan also attaches importance to the administrative reform, a continuing process to improve and adopt public administration to function as a developmental vehicle in a modern state. This will include a reform of certain activities of the Ministry of Planning, Department of Agriculture, information services and scientific and technolo- gical research. Finally, increased employment and preference of labor- intensive methods remain among the new plan's major objectives.  - 20 - The Composition of the Investment Plan Issue 33. In sectoral allocations, the Third Five-Year Plan places heavy emphasis on agriculture and power, as well as on water supply and sewer- age, 7/ urban development and housing, mining, public health and tourism, while the relative shares of the allocations for transportation (still the third largest item) and community development will decline. The expected allocation of funds can be used as a more precise indication of sectoral priorities under the Third Plan (Table 12). Table 12: SECTORAL ALLOCATION OF THE THIRD DEVELOPMENT PLAN, 1982-86 Total Allocation To be financed from (constant 1981 Domestic / External a/ Sector million Gourdes) (%) Resources (%) Resources (%) Agriculture 1,300 20.0 20.0 80.0 Electric power 1,180 18.1 26.3 73.7 Transportation 1,020 15.7 27.8 72.2 Health 520 8.0 12.3 87.7 Education 500 7.7 18.7 81.3 Urban development & housing 335 5.2 12.4 87.6 Industry and crafts 325 5.0 50.8 49.2 Community development 325 5.0 8.0 92.0 Communications 300 4.6 93.2 4.8 Drinking water/sewerage 250 3.9 17.8 82.2 General Government 250 3.8 71.4 28.6 Mines and quarries 130 2.0 30.7 69.3 Tourism 65 1.0 53.8 46.2 Total (%) 100.0 28.1 71.9 Total Expenditure (G Million) 6,500 a! These percentages are presented here only as indications of expected sources of sectoral financing as the resulting overall figures do not coincide with the financial projections of financing discussed in paras. 58-59. Source: Plan Quinquennal de Developpetnent Economique et Social, 1982-86, Vol. II. 7/ This is slightly at variance with the growth of value added for this sector over the period 1982-86 expected to be lower than during the preceding five-year period.  - 21 - 34. The contents of the proposed programs for each sector -- location, program period, executing agencies, objectives, cost and status -- are presented in a separate annex called "Program Summaries" attached to this report (see Annex I). These summaries (which are based essentially on data included in the Five-Year Plan (including cost estimates for these programs, in constant 1981 Gourdes), focus on broad programs, rather than well-defined projects. Most projects referred to are still to be prepared (and probably to be recast) before a decision for their implementation. Consequently, the analysis of the Third Five-Year Plan presented below will not refer to specific projects. It will concentrate on a review of sectoral objectives and priorities in the light of the main problems of each sector and, only to some extent, the consistency of suggested programs will be discussed. Procedural problems and information gaps are analyzed in Annex II. 35. It should be noted, as a general comment, that proposals for specific programs are in conformity with Haiti's highest-ranking develop- mental needs. However, their realism, desirability and the final choice of specific projects within their framework will have to depend on the absorp- tive capacity of each sector, the availability of financing and a stricter and more operational definition of priorities than the one available now. A tentative proposal is presented in Table A-20. 36. Sectoral Objectives and Priorities. The agricultural sector has been, in the recent past, and still is the Achilles' heel of the Haitian economy. Its lagging output has adversely affected growth in other sectors and caused serious imbalances in the economy and social life of the country. For areas of investment, the new Five-Year Plan singles out major deficiencies in infrastructure (inadequate irrigation, drainage, feeder roads), need for soil conservation, reforestation, agricultural research and services to farmers, increased production of food crops (maize, millet, sorghum, rice, beans, fruits), export crop (coffee, cocoa), industrial crops (oilseeds and sugar cane) and livestock. It also calls for the eradication of animal diseases and support for integrated regional development schemes. All these activities in the agricultural sector correspond to important needs of the economy. 37. The relevant questions are, in view of the diversity of the programs and the heavy costs involved, how much progress can be made to achieve the designated objectives and how these programs are going to be implemented to obtain best results. This calls for more thorough analysis of problems of social and institutional nature and, in particular, a critical review of donors performance and experience--failures and successes--in the field to be conveyed to the Authorities and for the donors' own benefit. Efficiency of on-going projects in pursuing pre-defined objectives, pragmatic and simple ways to improve existing and further stages in agricultural projects, should bring urgently the Authorities and donors' attention. This effort should lead to improved planning of Government's intervention in the sector which is missing at this stage. Though all activities to be under- taken in this sector under the Five-Year Plan are of high priority, it is doubtful that all of them can be carried out simultaneously because admin- istrative constraints and likely contradiction between objectives, among other obstacles. Priorities are required to be defined more precisely on the basis of achievable objectives. Some basic issues of paramount importance,  - 22 - such as production for export vs import substitution, irrigated vs non irri- gated production, national programs vs regional rural development efforts, subsistence vs cash crops, forestry vs food crops, etc., should be tackled explicitly in the medium term. Foreign technical assistance and experience can certainly be useful in this endeavor but cannot substitute fully for domestic decisions, a crucial condition for the definition of a framework for action required by all parties interested in agricultural development to improve the performance of this lagging sector. Greater coordination of this effort will also be required to enhance established priorities (or to be established) and to avoid waste and duplication. The "Commission Technique" created by the Planning Ministry can be a very useful step provided that it centers its task on technical discussions of the problems mentioned above. 38. Regional integrated development schemes providing a practical way of carrying developmental work to rural areas without time-consuming bureau- cratic procedures should be encouraged. All national programs will be impossible to be carried out simultaneously. Nevertheless, only a few selected national programs could also be justified after careful economic and technical scrutiny: e.g. forestry, research. For the successful implementa- tion of the various schemes, efficiency of existing support services has to be increased through better coordination and introduction of more appropriate organizational structures. The legal framework for land tenure and for the conservation of national resources has to be strengthened. 39. In the electric power sector, the development plan includes a time- phased program for construction of new thermal and hydrogeneration stations, transmission lines and distribution facilities, together with provision for relevant feasibility studies. More specifically, the investment plan calls for a further increase in generating and distribution networks capacity in Port-au-Prince between 1984 and 1986, completion of the la Chapelle hydro- plant, completion of the Guayamouc I hydroplant (to decrease siltation of the Pel'gre dam), expansion of electric power supply in the provinces, initiation of construction of the remaining hydroplants on the Artibonite river, and preparation for thermal power addition by the end of this decade or early in the next decade. These investments reflect the high priority needs of the economy in the sector, and should be supported, though timing may have to be reviewed in the light of financing availability for the overall investment plan. 40. For the lorg-term development of sources of energy other than electricity, Haiti has to assign project priorities on the following two crucial issues of the country's energy problem: (a) depletion of forest resources, and (b) increasing cost of oil imports. This leads to priority programs for increased wood production/reforestation, and to assigning prior- ities for the development of alternative sources of energy. The management of the energy sector is also of crucial importance. The 1982-86 plan makes provision for reforestation (the agriculture program), oil exploration and research on non-conventional sources of energy (the mining program), but it does not include provisions for the urgent need for strengthening of energy sector planning--virtually nonexistent so far as this sector has been conceived as being confined only to the electric power sub-sector. 41. A national transport study (1977), identified as priority invest- ments: (a) improved maintenance and selected upgrading and rehabilitation of existing roads; and (b) coastal shipping and improvements to achieve a more  - 23 - even distribution of economic activity between Port-au-Prince and provincial towns. The Government's Second Five-Year Plan reflected these priorities as secondary roads (IDA, USAID), construction works, as well as development of Port-au-Prince port facilities (IDB), coastal shipping harbors (IDA) and purchase of road equipment and technical assistance (USAID) were carried out. The proposed investments in the transport sector for the period 1982-86 provide for the continuation of transport improvement program which started earlier. 42. The 1982-86 plan provides, as priority investments, for the contin- uation of the maintenance build up, rehabilitation or upgrading of gravel roads to paved standards, and improvement of other secondary roads to all- weather gravel standards. A large part of external aid for feasibility studies and construction or rehabilitation of these roads has already been secured from IDA, IDB and USAID. IDA has also agreed to finance construction of important coastal shipping harbors, and purchase of some road maintenance equipment. The 1982-86 plan also includes provision for constructing new airport and port facilities for Cap Haitien and airport improvements for Port-au-Prince. While not included in the current Five-Year Plan, there is also an investment proposal for building of a container port facility at Port-au-Prince. The case for these investments has to be proven through exhaustive preinvestment work before being carried out even if financing is available. For the time being at least, road maintenance/rehabilitation/ construction work, with appropriate standards for each, and coastal shipping ports construction appear to have higher priority over the proposed sea transport and air transport items referred to above. 43. In the health sector, the Five-Year Plan gives high priority to the expansion of Government health services to the rural areas on a regional- ized basis, major campaigns against endemic diseases, improvement of nutri- tion and maternal and child health care, and family planning. Together with the expansion of health services, there will be need for a referral system and health manpower training at all levels. These are all high priority programs. Among them is reducing high fertility through widespread teaching of modern contraception deserves particular attention. 44. The proposed expansion of health services in the rural areas, while fully justifiable on grounds of acute need for such services, raises the difficult question of how to meet the mounting recurrent costs which such an expansion would entail. Considering the country's poverty, least cost alter- natives should be sought with a maximum element of self-help by the benefi- ciary communities. Various foreign and local charity organizations active in rural areas are making valuable contributions in this field and should be more fully used in the future to expand several basic programs. This endeavor may require a more flexible use of existing facilities in the rural sector. Adequate provision for distribution, increased production of food crops--included in the agriculture sector program--and education on better ways of conserving and consuming nutritional foods, will help promote the nutrition programs envisaged for the 1982-86 period. 45. In the past, education in Haiti generally reached only a small segment of the urban population, while the vast majority of the rest of the population (children as well as adults) was left out of the educational process. Since the mid-seventies, this attitude has changed considerably,  - 24 - however, and a new national educational development strategy has taken its shape. The new strategy which now addresses to the country's fundamental problems in the education sector aims at improving the education system at all levels (but particularly at the extended primary level) with increased empQasis on practical subjects, efficiency and utilization of education to improve productivity and life of both the urban and rural populations. The use of Cr6ole in the first cycle of primary education, decided recently by the Government, may be instrumental in improving the efficiency of education services. The new strategy is being carried out in stages since 1979, and will be completed by 1994-95. External aid agencies--IDA, CIDA and France-- have lent support to various parts of the Government's educational develop- ment program. As in the case of the health sector, public investment in education raises the difficult question of how to meet the annual recurrent costs. It calls for simplicity of design for schools, dormitories, etc. and community participation in meeting some of the recurrent costs. It calls also for tapping the private sector as much as possible. 46. One of the main constraints in both health and education sectors in Haiti is the quality of services, which to be improved requires substantial changes in incentives given to professionals involved in them. Since these incentives may be either monetary (e.g. regular salaries) and non-monetary (e.g. housing), the choice and design of projects in these fields will have to take fully into account the relative merits of both types of incentives, in particular in the light of the expected tight fiscal situation during the period 1982-86. 47. Other non-governmental organizations (ONG) have been active in both sectors. Authorities and donors could consider strengthening ONG's involve- ment to improve the efficiency of their own resource transfer. 48' In the urban development and housing sector, the Five-Year Plan provides for urban infrastructure (drainage), urban renovation, sites and services development and low income housing. The urban drainage component in Port-au-Prince is being implemented with support by IDB; other towns will also need drainage improvements. The housing situation is deplorable, and there is obvious need for low-cost, replicable programs to alleviate the situation. As a part of its strategy to support growth of alternative urban centers away from overcrowded Port-au-Prince, the Government envisages under the 1982-86 plan low-cost housing development in several provincial towns. Considering the acute needs, this sector can claim large sums of money for development purposes. However, in view of the country's very limited finan- cial resources and technical knowhow investment plans must be cut down to the bare minimum, and supported by soundly conceived and carefully-designed projects. The projects must be kept simple in their component and design and should be adapted to existing level of institutional and managerial competence within the country. The number of agencies involved should also be kept to a minimum. The project standards should not be allowed to be overeiaborated with efforts to make sites and services and slum upgrading concepts the basis for the Government's investment thrust. To supplement the Government's own resources, private sector investors may be attracted to develop more complex low-income housing projects as envisaged for Port-au- Prince and for several provincial towns. In addition to urban renovation and low-cost housing projects, there should also be room for investment by external aid agencies for urban sanitation improvement (both in Port-au- irince and provincial towns) and for support from the informal sector to increase employment.  - 25 - 49. In the industrial development and crafts sector, the Five-Year Plan includes measures to aid industrial development such as industrial parks, worker/craftsman training and orientation, and Government staff training, as well as provisions for direct investments in industries to process agricul- tural products or to substitute for imports. While the aid-to-industry part of the program may be sustainable, justification for certain direct public industrial investment components is not entirely convincing. This issue is discussed in more detail in the last chapter of this report. 50. The community development programs which are included in the Five- Year Plan are designed essentially to encourage development in the rural areas through a wide range of activities such as literacy programs, water supply, sanitation, support to increase production, as well as various non-governmental institution works. While no systematic evaluation has been undertaken to date, these programs seem to fulfill a useful role in promoting economic and social progress in rural communities largely based on technical (and some capital) assistance by national or international charity organizations and some external aid agencies. Their work complements projects such as integrated rural development schemes being carried out in several parts of the country. Emphasis will have to be given, nevertheless, to coordination of these rural development schemes with national projects in health, education and water supply. 51. In telecommunications, the Five-Year Plan objective is to reduce a heavy backlog in demand for telephone connections, to improve the quality of service and to expand the service area to include new towns in the pro- vinces. The program appears to be well-balanced and responsive to the country's priority needs in this sector, although its execution may need a 7 to 8 year period rather than the 5 years the 1982-86 Plan envisages. Unlike other autonomous organizations the program/project agency (TELECO) is plan- ning to finance from its current surplus more than 90 percent of the total estimated costs of the proposed investment. However, the Government will still require substantial external aid to secure the necessary foreign exchange. 52. Very limited access to a safe drinking water supply system makes polluted water a constant threat to the health of at least 80 percent of the population in Haiti, as evidenced by a heavy incidence of water-borne diseases and a high mortality rate. The 1982-86 plan provides for essential rehabilitation works and schemes to increase water supply in Port-au-Prince and several other urban centers. Barring serious financial constraints and limited project execution capability, both rural and urban areas require large amount of resources to increase their safe water supply, purify it and to provide sanitary sewerage facilities. External aid agencies, including IDA, USAID, CARE and UNICEF have been supporting water supply/sewerage devel- opment projects in various parts of the country, with emphasis on community orientation and self-help features. However, further strengthening of CAMEP and SNEP are needed to respond efficiently to additional responsibilities involved in the large programs considered by the Plan. 53. For the development of the mining sector, the Five-Year Plan gives priority to the development of mineral resources (prospecting for metallic and non-metallic minerals including copper, bauxite and gold and, for coal). It also provides for exploration and development of energy resources (hydrocarbons, lignite, new forms of energy). For both endeavors, closer  - 26 - collaboration with private investors is highly desirable taking into consid- eration the need for added knowhow and also to reduce financial risks. Further exploration is required to determine the true extent and quality of the lignite deposits at Maissade and Camp Perrin which are believed to be rather marginal. While the 11 drill holes so far sank in Haiti by foreign companies exploring for oil and gas have proved dry, this exploration effort has not been sufficient to establish Haiti's hydrocarbon potential. Given the country's scarcity of primary energy resources, evaluation of non- conventional energy development prospects (organic wastes, solar energy and wind energy) should be diligently pursued, and strengthening of the energy sector planning capability should be given high priority. For the success of most of these endeavors, the country has to set up the proper legal framework to promote prospecting and other developmental work in the mining sector; foreign assistance will be required to establish the framework and the required institutional strengthening. 54. Rather modest amounts are provided in the Five-Year Plan for the tourism sector, mainly for construction/rehabilitation of roads and restora- tion of sites of tourist attraction, and for training. This cautious approach is commendable in view of serious uncertainties as to the growth of Haitian tourism in the near future and the potential interest of the private sector in this activity. 55. Finally, under the other Government services heading, the Five-Year Plan include provision for construction of buildings for social security offices, courts and sports activities; for scientific and technology research; for improvement and modernization of statistical services and some other Government departments' activities and for the strengthening of various Ministry of Planning divisions. As it will be referred to in later sections of this report (paras. 68-73), the proposed strengthening of the Planning Ministry and other administrative reforms are of high priority and should be supported. 56. The main issue related to the sectoral allocation of the Haitian investment program is the choice of projects among sectors, on the basis of their relative merit and in the presence of a general constraint: the financing and specific constraints to each sector: the absorptive capacity. It is likely that projects of lower relative merits (among sectors) will be carried out in those sectors where absorptive capacity is not binding (e.g. transportation and power, sectors which could absorb most of the investment budget), while projects of higher relative merit in agriculture and social sectors will be postponed because of these sectors limited absorptive capacity. One implication of the above is that, to improve the efficiency of the overall program of investment, the choice of projects into transportation and power would have to be reviewed -- in spite of their "importance" -- in the light of the needs of other sectors. This endeavor requires an overall efficient system of project evaluation which would allow project comparison among sectors, nonexistent, as of today. Another implication of the above is that an increase in the public investment relevance and efficiency will require a strong and sustained effort to improve the absorptive capacity of the so-called "soft sectors" (see para. 68). This endeavor should be the main a priority objective of the Plan over the medium term.  - 27 - 57. An effort was made by the Bank mission to suggest an alternative allocation of resources by programs to the one devised by the Plan. The proposal as detailed in Table A-20 is based on a combination of criteria such as previous experience with specific programs, judgments on past and likely developments in sectoral absorptive capacity and priorities as viewed by the mission. This suggestion is very tentative. It should be taken only to indicate orders of magnitude of sectoral and program efforts. It is not an alternative "plan", as the latter should be completed after a detailed analysis of projects to be included in each program. The Size of the Investment Program Issue 58. As Table 14 shows, the Government envisages an investment program of G 6.5 billion, at 1981 prices, or G 7.4 billion--at current prices--over the period 1982-86. These figures are presented in two different ways in the Plan: one version assumes a growth rate in investment, at constant 1981 prices, of 71 percent over the previous five-year period; 8/ the other version assumes a 10 percent average annual rate of inflation 9/ with a volume of investment during the period 1982-86, 47 percent over public devel- opment expenditures of the previous five-year period, also expressed at 1981 prices. Neither combination of assumptions seems fully realistic. Expected real investment of G 6.5 million at 1981 prices is on the high side. It would imply an annual average increase in real investment of 25 percent per year. On the other hand, G 7.4 billion at current prices deflated by an average annual inflation of 10 percent would imply an annual average increase in real investment of 16 percent per year, still on the high side. Though public development expenditures were comparatively low during 1981--the base year--it is difficult to conceive such a high rate of growth that would certainly strain the absorptive capacity of the soft sectors, which are intended to take a greater sitare of public expenditures in the new five-year plan. A more modest approach is proposed in this report by taking 11 percent as the expected average annual growth rate of development expenditures with 1981 being the base year. An annual average rate of inflation of 12 percent was chosen which will then raise the volume of development expenditures from G 3.9 billion, in constant 1981 prices, to G 5.9 billion, at current prices (see below): 8/ Plan Quinquennal de Developpement Economique et Social, 1981-86, Tome II, p. II. 9/ Plan Quinquennal de Developpement Economique et Social, 1981-86, Tome I, p. 174 and Budget d'Execution de Programmes et Projets de Developpement 1981-82, vol. I, p. 8.  - 28 - PUBLIC INVESTMENT PROGRAM (C million) Average Annual Program Rate of 1982/86 Growth as x of (2) 1981 - Program 1977 /81 1982 1983 1984 1985 1986 1982-86 base year 1977181 As suggested by Plan current 3,093.3 1,049.8 1,252.6 1,453.6 1,687.3 1,957.8 7,401.3 28.1 239.3 constant 1981 prices 3.850.0 954.4 1,035.2 1,092.1 1,152.5 1,216.0 5,450.0 16.4 141.6 Aa suggested by miBsson current 3,093.3 705.6 912.8 1,140.3 1,407.7 1,689.3 5,855.7 24.4 189.3 constant 1981 prices 3,850.0 540.7 727.9 812.2 894.9 958.7 3,934.4 11.0 102.2 59. Both the sectoral allocation and the public investment's size are interrelated issues. For reasons of absorptive capacity among others, sectoral allocations as presented in the Plan are not likely to be attained and need to be revised downward over the period 1982-86. This re-examination affects both the annual allocations to specific sectors and the overall size of the public investment program. Tentative annual disbursement estimates are shown in Table A-20 based on past sectoral experience and qualitative judgments and is summarized above. This approach allowed to estimate and propose reduced public investment targets over the period 1982-86, as detailed in the preceding paragraph. The Financing Issue 60. Successful implementation of the 1982-86 investment program will require overcoming the financing constraint which has been hampering, along with a dearth of suitable projects, Haiti's development efforts in the past. The bare fact is that the country's very low income level does not allow the accumulation of an adequate level of public savings to build and maintain the necessary infrastructure and to support directly productive projects. In these circumstances, foreign aid and technical assistance have been filling the financial and planning gaps to a very large extent and the recent indications are that the country's dependence on such aid tends to grow (Table 13). The positive side of external aid is that it provides the Government with about two-thirds of its financial resources for public investment. Foreign technical assistance grants have been also playing a crucial role in launching and execution of numerous developmental schemes in all sectors. Several important developmental institutions which now operate in public investment field have been created or reorganized in recent past with active support and advice of various donor agencies. Because of their requirements for sector surveys, feasibility studies, etc., before their definitive financial support of a development scheme, foreign aid-givers have also been promoting sound project planning and execution techniques in Haiti. On the other hand, there are indications that, because of their dominant role in sharing of investment costs, foreign aid-givers may have been playing on occasion an unduly influential roles in the Government's determination of public investment priorities and project standards. In  - 29 - addition to major multilateral and bilateral aid agencies active in Haiti, there are many (over 130) ONG (mostly religious and charity groups) which are active in the field, providing mostly on-the-spot technical assistance. The Ministry of Planning is not equipped to keep abreast of these organizations, nor is in a position to evaluate their capital investment or technical assistance activity in the field. As a result, some directly involved Government departments and foreign aid-givers tend to bypass the Ministry of Planning. Table 13: SOURCE OF FINANCE OF PUBLIC INVESTMENT, 1977-81 PL480, Domestic Title I External Total Fiscal Year G Million % G Million % G Million % G Million 1977 86.8 16.8 26.7 5.1 404.4 78.1 517.9 1978 250.2 39.7 40.9 6.5 339.1 53.8 630.2 1979 221.7 36.3 55.7 9.1 333.0 54.6 610.4 1980 244.9 38.5 46.4 7.3 344.7 54.2 636.0 1981 166.2 26.7 57.4 9.2 399.6 64.1 623.2 61. Domestic savings, as forecasted, will be insufficient to finance the public investment program. To help finance public investment projects, many external agencies will normally require some contribution by the Government or the autonomous organizations concerned (Table 14). Although the expected external financing will be below the requirements to finance even the "reduced" development budget, the crucial point is the Government s ability to absorb aid. If public sector savings keep up with what the community of donors requires of savings as counterpart funds to foreign assistance, even a relatively low proportion of public savings would repre- sent a serious bottleneck for carrying.out the investment plan. On the assumption of a minimum of 20 percent counterpart funds represented by the public sector savings as forecasted, foreign assistance would not be the bottleneck, since the maximum foreign funds that could be used during the five-year period could be only about G 1.7 million 10/ against G 3.1 billion forecast. Shortage of domestic resources can seriously slow down project execution and increase costs in terms of higher prices and delayed benefits. It could also delay or cause loss of foreign aid funds which would otherwise be flowing into Haiti. 10/ Excluding PL 480 Title I.  - 30 - Table 14. FINANCING OF THE INVESTMENT PLAN, 1982-86 (G million) 1982 1983 1984 1985 1986 Total I. Government Forecast Public Investment 1,049.8 1,252.6 1,453.8 1,687.3 1,957.8 7,401.3 Current Central Government Surplus (+) or deficit (-) 184.1 222.6 248.0 287.8 333.9 1,276.4 Current Revenues 1,014.3 1,168.3 1,345.9 1,550.4 1,785.9 6,864.8 Current Expenditures 830.2 945.7 1,097.9 1,262.6 1,452.0 5,588.4 Public efnterprises Surplus (+) or Deficit (-) 150.7 183.2 221.9 265.4 307.9 1,129.1 Public Sector Saving 334.8 405.8 469.9 553.2 641.8 2,405.5 Foreign Financing Required 715.0 846.8 983.9 1,134.1 1,316.0 4,995.8 PL 480 Title I 74.2 77.9 81.1 86.3 100.2 419.7 Other 640.8 768.9 902.8 1,047.8 1,215.8 4,576.1 Foreign Financing Required 143.0 169.4 196.8 226.8 263.2 999.2 (in US$ m) II. Alternative Forecast Public Investment 705.6 912.8 1,140.3 1,407.7 1,689.3 5,855.7 Current Central Government Surplus (+) or Deficit (-) -76.0 -64.0 -33.0 -111.0 57.0 -227.0 Current Revenues 754.0 849.0 971.0 994.0 1,272.0 4,840.0 Current Expenditures 830.0 913.0 1,004.0 1,105.0 1,215.0 5,067.0 Public Enterprises Surplus (+) or Deficit (-) 93.0 114.0 129.0 145.0 170.0 651.0 Public Sector Saving 17.0 50.0 96.0 34.0 227.0 424.0 Deficit to be financed 688.5 862.8 1,044.3 1,373.7 1,462.3 5,431.7 Domestic Financing (net) 150.0 150.0 120.0 127.0 150.0 697.0 Foreign Financing (net) 557.8 703.4 733,0 725.0 711.5 3,411.7 PL 480 Title 1 45.0 55.0 53U 60.0 65.0 280.0 Expected Grants and Loans (net) 493.5 648.4 678.0 665.0 646,0 3,131.0 Unknown Sources - 9.4 191.3 521.7 600.8 1,323.0 memo item: Additional financing required (in US$ m) 1.9 38.3 104.3 137.1 264.6 Sources: Plan Quinguennal de Developpement Economique et Social, 1981-86. Budget d'Execution des Programmes et Projets de Developpement, 1981-86, Vol. I.  - 31 - 62. Recommendations. Efforts should be made to increase the current surplus of the public sector, and to improve the versatility of foreign aid. 63. (i) Current Surplus. Both economies in current expenditures and increased current revenues will be required. But the first one will not necessarily allow an improvement in public savings. Here, the real issue is not whether total expenditures should or could be reduced or not, as if the public services' efficiency could improve by sectoral reallocation of current expenditures. A very thorough review of them will require a stricter redefi- nition of priorities, more in accordance with those defined in the Five-Year Plan, e.g. agriculture vs. public works. Institutional efficiency will need also urgent administrative reforms which will entail, inter alia, salaries upward adjustments and personnel reduction. The size of public administra- tion may be excessive, as of today, given the quality of services it renders, but it is not excessive in terms of what it could and probably should deliver in this type of economy. 64. On the revenue side, taxes will have to increase in the medium term. Taxation revenues, in Haiti, are on the low side (about 9 percent of GDP in the two-year period 1980-81 against over 11 percent during the 1972-73 period). Furthermore, on the assumption that income distribution in 1981 was similar to that of 1976, and that only the richest one percent of population paid income tax (including the corporate tax), the burden to that class did not represent more than an average of 3.2 percent in the two-year period 1980-81. If export taxes, which to some extent are income taxes too -- though paid by all producers, independently of their income level -- are also added to income taxes of the richest one percent, the tax burden of this class would rise only to 6.2 percent of their estimated income. This effective burden is clearly on the low side and suggests that there is certainly some margin of maneuvers to improve Central Government revenues. MoreQver, pricing of public enterprises, goods and services is also a source of revenues which authorities may have to review carefully as tariffs of Port-au-Prince Port and the price of wheat meal from Minoterie have suffered lately lags in their adjustment. 65. All these considerations suggest that the Government could consider steps in the direction of improving the taxation system buoyancy and public revenues. Specific measures are suggested in this report (Chapter III) and have also been recommended by the IMF. 11/ The main lines of action should be (a) an improvement in income taxation (see para. 101), (ii) a thorough restructuration of import taxation (see para. 101), (iii) the creation of a broad sales tax to be applied also to imports, (iv) the simplification in export taxation, (v) revision of investment incentives (sed paras. 89-95), and (vi) strengthening of auditing and controlling programs. 66. Although all the referred measures are important on several grounds: equity, efficiency, balance of payments, etc., they will not prove to be as significative from the revenues point of view, as it could be expected. It is impossible to make a precise estimate of their likely impact, as the base on which they would be applied is, as of today, difficult to grasp, but their order of magnitude could amount to about G 80-100 million 11/ Taxation in Haiti, September 13, 1979.  - 32 - per year, or about G 400 to 500 million during the period 1982-86 if imple- mented immediately. 12/ To the extent that these eventual additional reve- nues would be fully converted into savings -- rather an optimistic assumption -- and added to the forecasted one, the maximum volume of external funds that the public sector could absorb -- coeteris paribus -- would be about G 3.5 billion, excluding PL 480, Title I, which would still fall short of the required G 4.5 billion for the period to carry out even the revised program though it would imply a significant increase of investment funds over the detailed alternative presented in Table 13. 67. (ii) Foreign Aid. Pending a reversal of current trends, external "budget-support type" assistance could be very beneficial to maintain the public investment level at an even keel. Donors could also consider adopting a more flexible view on the domestic counterpart requirements. Efforts required to the Haitian Government could be judged, on an annual basis, by performance on other criteria than the counterpart itself: e.g., auditing, cadaster, elimination of exemptions to the payment of custom duties, etc. In addition, the Government could husband its domestic financial resources in such a way as to maximize the flow of external grants and soft loans in support of high priority projects. The Public Investment Decision-making Process Issue 68. A most serious constraint for the successful implementation of the current development plan is the inadequacy of the decision-making process related to the investment projects cycle. As it stands on paper, not much can be proposed to improve it. The problem is that either it is often bypassed or, in a nutshell, the project pipeline is inadequate. Being bypassed, it loses the benefits of coordinated actions among ministries and does not respond necessarily to pre-established priorities. It imposes unexpected burden on public finances with the consequence of erratic cycles for many significant projects, delays, cost overruns, etc. In the lack of a full inventory of high priority projects, the Government's choice of projects each year is drastically narrowed. Government departments or autonomous organizations with ready projects or with better project implementation capabilities are in a position to use a larger part of scarce investment funds, to the detriment of more meritorious-but unidentified or unprepared projects elsewhere. Instead of proceeding systematically with preinvestment work for the projects at hand, the Government appears to be waiting for a donor's specific interest before proceeding with preinvestment studies in respect of a particular project. This usually causes delay in project execu- tion and sometimes unnecessarily ties up aid funds for construction until all the preinvestment work is satisfactorily completed. 69. If the Government is to have full control of its public investment sector, there is pressing need for strengthening of the Ministry of Planning, particularly its economic and social planning and project promotion divi- sions; specific proposals are discussed in the next section of this report. There is also an urgent need for administrative reform affecting, in addition 12/ These revenues are assumed to be obtained in addition to those incre- ments already considered in the alternative forecast presented in Table 14.  - 33 - to the Ministry of Planning, other key Ministries including agriculture, commerce and industry, public works and health. In 1974, the Government created an "Administrative Reform Commission" to be responsible for the total reform of Haitian civil service with particular attention to budgetary reform, uniform personnel practices and staff training, and decentralization of Government services. The proposed reform action, particularly in the Ministry of Planning and other key Ministries and the fiscal and budgetary reform, are of crucial significance for the successful implementation of the public investment programs and should be given priority consideration. 70. Recommendations. It should be noted that considerable progress has already been made in recent years to set up a comprehensive planning organi- zation and procedures for interdepartmental cooperation, considering in particular the short history of budgeting and planning work in Haiti. Agencies such as UNDP, CIDA, OAS and IDB have provided aid to the Ministry of Planning to improve certain activities undertaken by the Ministry. Neverthe- less, the process is still far from achieving its objectives in its entirety. The Government might usefully consider the following changes for the successful preparation and execution of public investment programs, in conformity with economic and social priorities and guidelines approved by the Government of Haiti: (i) The participation of the Economic and Social Programming Division of the Planning Ministry, in addition to setting out the economic and social framework, as a basis for the formulation of five-year plans, in the selection of new projects for inclusion in each year's public investment program and determination of sectoral and subsectoral allocations in the program. This responsibility should not be left unattended because of financial considerations or other arbitrary non-economic criteria. (ii) The expansion of activities of the Project Promotion Division of the Planning Ministry, in addition to setting up project prepara- tion norms and criteria--which has not been done yet--in the following areas: (i) monitoring of project identification and preparation efforts in various Ministries and autonomous organiza- tions; (ii) evaluating project proposals and preinvestment work underway, (iii) maintaining up to date project inventories, and (iv) submitting periodical reports to the Director-General on the adequacy of the current project pipeline in quality and quantity. (iii) The improvement of the planning units in the Ministries and autonomous organizations should be strengthened and of the coordin- ation and collaboration between them and the Ministry of Planning (through the Project Promotion Division). All Ministries, autono- mous organizations and public enterprises could be encouraged to prepare medium- and long-term plans for their sectors, taking into account the general development strategy and objectives of the Government's Five-Year Plan and directives of the Ministry of Planning. To stimulate this endeavor, all Ministries could be required to present such information for a period of two or three years as a pre-condition to discuss their annual operational and development budget. Since this endeavor may be considered as  - 34 - insurmountable, even in the medium term, by the breadth of the task, the approach will have to be gradual. To start with, a choice could be made based on the sector importance according to established priorities. A likely candidate would be the Ministry of Agriculture. Most resources accruing to this sector have been going lately to regional rural development. Although this approach has high merits and could be pursued, it has shifted the attention too radically out of the Ministry's centralized responsibilities. Strong coordinating efforts should be undertaken immediately to carry out, in a parallel fashion, the strengthening of specific regional institutions and of specific departments. The Ministries of Agriculture and of Planning should collaborate to adopt for this approach and be prepared to take rigorous administrative decisions to bring about the required changes with the support of external agencies. (iv) The starting of new projects should be done only after a careful review of on-going projects' requirements over a period of several years as counterpart funds availability and recurrent expenditures are expected to be important considerations in the choice and timing of new investment projects. Both Ministries of Finance and Planning will then have to coordinate their efforts in deciding to decide on new projects. Two to three years' forecasts on public revenues and savings prepared by the Ministry of Finance could be instrumental in improving medium-term planning. In addition, counterpart funds are very limited, the optimization of the public investment program may well require a reduction in the number of projects in execution and a concentration of governmental efforts on those which are predominantly externally financed. (v) As the Ministry of Finance controls the current expenditures of the Ministries, it would find beneficial to extend this responsibility over the development expenditures. This extension would add con- sistency to the pursuit of an integrated and efficient accounting for each governmental unit. It would further the cause of auditing, either internal or external. The Ministry of Planning would remain responsible for the conformity of development expendi- tures with established priorities. (vi) In participating in negotiations with external aid-givers for projects, the Ministry of Planning could find it useful to ensure that external aid agencies' priorities for investment is in harmony with the objectives of the Government's development plan. (vii) Early issuance of quarterly reports by the Control and Evaluation Division of the Planning Ministry on actual results of implementa- tion of development programs and projects, could facilitate Govern- ment's action to expedite project work and to resolve causes of delay in lagging sectors. 71. To achieve the full effectiveness of the measures listed in the preceding paragraph, the Ministry of Planning, in collaboration with the Ministry of Finance and Economic Affairs, will have to uphold forcefully the Government-approved plan objectives in all councils of the Haitian adminis- tration. In this endeavor, the Ministry should be granted governmental  - 35 - support at the highest level. At least for an initial period of several years, the Ministry will need technical and financial assistance from abroad to create within its organization (or converting one of its divisions into) an effective project preinvestment monitoring unit. Such a unit, which would include expatriate staff with broad experience in project preinvestment work, can be effective in setting within the Ministry of Planning, and vis-a-vis other Government departments and autonomous organizations, adequate standards and realistic programs for all project preinvestment work. It might be supported by an external grant or soft loan which would supplement other financial resources available to the Government for project preinvestment work. Modalities of this unit's work and its proper place within the Ministry have to be considered as a part and important complement of various technical, policy and administrative improvements as listed in the preceding paragraph. If successfully established, an effective preinvestment machinery can help to overcome one of the most serious shortcomings of Haiti's present economic planning process: inadequate and not fully harmonized project work to attain public investment plans' macro objectives. 72. The Government of Haiti is now meeting periodically with represen- tatives of potential aid-givers to discuss programs/projects in major sectors of the economy and to ascertain their interest in financing them through "wcommissions techniques". These meetings will be profitable only to the extent that in-depth developmental problems and priorities in each sector are discussed without undue attention to "aid pledging" aspects, so that the Government and potential aid-givers will agree at the outset on sectoral priorities and will plan jointly an appropriate preinvestment program to build an adequate project pipeline. For the latter purpose, there is considerable merit in the Government's use of separate funds, in particular, for agriculture and social sectors (such as a pre-investment fund) or a part of construction funds available for another similar project (the "piggyback" approach) for urgent preinvestment work in high priority sectors. 73. Until the suggested pre-investment facility is created, in absence of efficient planning units in the different ministries, and unless expe- rience indicates otherwise, these "commissions techniques" could play the role of umbrellas for small groups of Government and donors' representatives to identify projects. Periodically (once a year), technicians in a given sector with solid knowledge of the country could meet to exchange views on project ideas. Representatives of non-governmental organizations and of the private sector could also be invited. These groups or sub-groups should exist for each sector and its members kept at a minimum for efficiency purposes. Of course, the proposed approach would not substitute for the strengthening of the sectoral planning units in the medium term. 74. Final Considerations. The 1982/86 plan envisages a GDP growth in real terms at 4 percent per year during the plan period. Considering the fall in investment since 1978, the low expected economic return on some of the most important projects carried out recently, lags in the full impact of new projects on the economy, difficulties in launching during the first year of the Third Plan period new private investments of relative short period of maturity, it is doubtful that the Plan's growth target will be attained in full unless the private sector reacts vigorously in the subsequent months. Similarly, the plan is likely to make only limited contribution to the objective of decentralization of services within the country, considering the  - 36 - heavy costs and major organizational effort required. However, the plan's contribution to employment can be significant particularly if various agricultural and rural development programs and urban development schemes are accelerated. In view of the high population growth and serious unemployment situation, governmental action to expedite the plan implementation through improved planning and project work and more effective mobilization of domestic resources to finance projects becomes imperative at this time.  - 37 - III. PRIVATE SECTOR AND EXPORT GROWTH POTENTIAL 13/ A. The Domestic Framework Structural Changes 75. Haiti's economy is mainly governed by the private sector. The private sector, though composed by large numbers of subsistence farmers businessmen, tradesmen, professionals, is controlled by a few related or closely associated groups of individuals. These groups operate the export-import trade, tourism facilities, construction and the formal manufacturing sector. Only a small proportion of the work force is employed in formal agricultural and mineral processing, manufacturing, construction and service industries. On the whole, they are not unionized, except in bauxite mining, the sugar and cement mills, so organized labor is not a private sector force to be reckoned with. The Government has a generally supportive attitude towards the private sector elite, which has been allowed to trade and invest with considerable freedom. The private sector response was particularly positive during the 1970's when manufacturing and construction contributed about 40 percent of GDP growth. These sectors' share of output increased from 13 percent in 1970 to an estimated 22 percent in 1981. 76. The Government's attitude to private sector agriculture has been more equivocal and interventions have had generally unfavorable results. Because of the importance of cash crops in terms of tax revenues and foreign exchange earnings, the public sector was drawn into direct regulation in this area. Heavy taxation of coffee exports, the fixing of farmgate prices for sugar and cotton purchasing and ginning, and the commercialization of essen- tial oils ultimately depressed prices paid to growers and contributed to an erosion of already low rural incomes. Farmers responded by shifting produc- tion to more lucrative food crops and/or by reducing labor and other inputs to cash crops, with a resulting fall in total output and quality. 77. Government intervention in non-agricultural private sector activ- ities has taken the form of direct participation and policy measures. Direct participation in manufacturing and fishing industries concentrated in rela- tively large, capital intensive enterprises: a wholly state-owned flourmill, a cement plant (30 percent government-owned), an edible oil plant (SODEXOL, 34 percent state-owned), a sugar mill (private shareholding still undecided) 13/ This chapter complements a recent analysis prepared by a Task Force on Private Sector Activities of the Caribbean Group for Cooperation in Economic Development entitled "Opportunities and Obstacles to the Development of the Private Sector in Haiti" (August 1980). Though it is designed to give an overall picture of main incentives and obstacles to the private sector development, this chapter focuses on main changes occurred since 1980 which are likely to affect the private sector deci- sions in the future. Chiefly a new income tax law, a new custom duties schedule, and a list of import quotas and prohibitions. Moreover, it discusses domestic and foreign limitations to Haitian export growth--an extension of private sector potential--and recommends several actions to both Government and donors in both national and international fronts which would enhance Haitian economic growth through actual exports.  - 38 - and a fishing project (SPIDHA, 51 percent state-owned). The last three projects have been set up since 1979 in conjunction with, mainly foreign, private entrepreneurs. They would not have materialized in their present form had the Government not backed them with loan guarantees (SODEXOL, sugar mill and SPIDHA) and the granting of a domestic market monopoly in the case of edible oil. These projects' capital requirements probably exceeded total investment in the whole of the private manufacturing sector in the period 1980-81, and represent an important increase in the Government's share of what had been mainly a privately-owned sector. Through the Socifte d'Equipement National (SEN), itself part of the state development finance company Institut de Dgveloppement Agricole et Industrial (IDAI), the Govern- ment also participates in a number of small, mainly agro-industrial enter- prises, and financed the construction of an industrial park in Port-au- Prince. 78. Policy measures to encourage private investment consist mainly of fiscal incentives programs for tourism and manufacturing, while restrictive measures have affected the availability of credit (bank liquidity require- ments allow only short-term lending), have limited the free market (through price controls inter alia on cement and structural steel, in return for local manufacturing monopolies) and, lately, have narrowed the degree of openness of the economy (with import prohibitions and quotas, and controls over export earnings). The lax institutional framework, combined with bureaucratic interference in certain key areas, has caused these policies to be applied in an arbitrary and sometimes ineffective manner. 79. One significant change since 1980 is that Haiti's small business community, overcoming long-standing funds and rivalries, has become more organized. A Special Committee for Development was created in December 1981 out of the four existing commercial and industrial associations. This new- found unity is partly a response to what is seen as growing Government inter- vention in the economy and a failure to contain public spending. Private entrepreneurs resent the fact that instead of formulating and sticking to a coherent policy, the Government continues to resort to often highly indivi- dualized decisions made on an ad hoc basis. Since some of these decisions will result in a further widening of budget and balance of payments deficits, it is feared that they will also lead to more stringent measures than those introduced in 1981 to contain private sector spending. The appointment of a new ministerial team in February 1982 has raised hopes, but the feeling of uncertainty is still tangible. Many entrepreneurs are choosing to sit on the fence, postponing investment decisions, waiting to see which way Government winds will blow. This suspension of confidence is reflected in the economy through a decline in construction activity (falling sales of cement and structural steel) and rising liquidity of the banks. Only the assembly industries, which can expect relative immunity from local economic policy changes, have continued to expand at much the same rate as in the late 1970's. 80. Despite a growing state participation in industry and some poten- tially far-reaching new pol-icy measures, the beginning of the 1980's saw relatively little change in the structure of the private sector economy in terms of output, market orientation, location of enterprises, and employment patterns. In agriculture there has been some growth in food production, mainly for sale in the Port-au-Prince area, and in the industrial processing  - 39 - of agricultural raw materials. Irregular supplies, variable quality, defi- cient infrastructure as well as the narrowness of the local market are major problems for development of these two related sectors. Exports have been affected both by erratic supplies of raw materials, which make it difficult to establish new market positions, and by trade barriers: for example, mango exports to the US exceeded General System of Preferences (GSP) limits in 1981, then became subject to US import duties and consequently lost their competitive edge. Haiti's bauxite industry is gradually being phased out. Alumina content of the ore in the 20-year old mine exploited by Reynolds Haitian Mines has declined. A new contract was signed with the Government in 1980 reducing the annual production target from 600,000 to 400,000 m tons and ratifying a lower taxation. This has only temporarily delayed closure of the whole operation. 81. Import substitution industries, most of which also depend heavily on imported inputs, benefited from a number of tariff and trade measures introduced in 1981. In time, this may encourage the growth of overprotected, inefficient firms, an undesirable trend which, so far, had been kept to a minimum. Export-oriented firms, both in the assembly of imported inputs and those processing domestic raw materials, continued to grow rapidly. As in the past, new enterprises to which incentives were granted in 1980 and 1981 mostly proposed to locate in the Port-au-Prince area which already accounts for the bulk of manufacturing and service industries. Nevertheless 6 of the 107 investment approvals examined by the mission were to be located outside the capital; hardly an exodus, but a more encouraging performance than in the 1970's when some years saw no new enterprises setting up outside the metro- politan zone. Distance from Port-au-Prince-based Government institutions and private banks which deal with all foreign trade and exchange permits, the lack of social services and amenities and transport deficiencies (the road from Port-au-Prince to Cap Haitien is unsuitable for containers, while neither Cap Haitien nor Jacmel have adequate port facilities) are major obstacles to industrial decentralization. The success of a project to con- struct industrial parks in Cap Haitien and Jacmel hinges on the Government's ability to decentralize administrative dealings with the private sector and to make further social and infrastructural improvements. 82. The existing pattern of predominantly Haitian ownership in agricul- ture, manufacturing, construction and services sectors remains substantially unaltered--with the exception of the three previously mentioned projects. Most of the new enterprises to which incentives were granted in 1980 and 1981 were wholly or majority Haitian-owned. In the manufacturing sector they were also mainly labor rather than capital intensive. Total investment by 66 newly approved enterprises in 1981 was planned to reach US$14.4 million, or US$218,000 per enterprise. Each of the 10,160 proposed new jobs would have cost US$1,420 to create. 14/ Most of these new projects concern assembly operations which have continued to be the most buoyant growth sector. Investment per job in small and medium-sized import substitution enterprises, and in export-oriented ventures based partly or wholly on domestic inputs ranged between US$3,100 in food processing to US$12,880 in metal products in 14/ Ministry of Commerce and Industry.  - 40 - 1980. 15/ Capital outlay per job created in the tourism sector is generally low as most hotels in Haiti are small family enterprises. Human and Financial Resources 83. Human Resources. An abundant and relatively cheap supply of labor is one of Haiti's major attractions for foreign investors. Together with political stability and proximity it gives the country a strong comparative advantage in labor-intensive primary and assembly industries and in the provision of tourism services for North American markets. While there appears to be a general consensus among local and foreign entrepreneurs in Haiti about the dexterity, willingness and cheapness of the local workforce, there have been recurrent complaints concerning the shortage of skilled labor and of technical and managerial personnel. But in the last few years more emigrants returned to Haiti. This has improved the supply of technicians, to which must be added the number of workers who acquired skills from on-the-job training during a decade of rapid, if limited, industrialization. 84. Local vocational training still makes only a minimal contribution to the development of skills, and reflects the overall weaknesses of the educational system. The prevalence of owner-managers in Haitian enterprises suggests that the market for professional managers is relatively small. It is true that foreign investors setting up local operations have had difficul- ties in finding managerial staff, partly because of a real shortage and partly because such people are often tempted to set up their own enterprises as soon as the right opportunity presents itself. Here, too, the shortage has been eased by returning emigrants with experience of work in a corporate context, and by young Haitians who have completed business-studies abroad. Nevertheless, there is scope for a private sector assistance program to improve technical and administrative skills through advanced traineeships abroad (in the US, Canada and France, particularly) and to help set up accounting systems and improve the organization of export marketing and promotion both in Haiti and abroad. 85. Financial Resources. Although the entrepreneurial drive exists at all levels of society, the entrepreneurial class in the strict sense of the word, consists of only a few dozen families. Venture capital is raised from within family groups. This has limited both the size and type of activities undertaken. Moreover, the demonstration effect is very strong so that rapid expansion took place in a few areas while others still await pioneering investment. This uneven development is partly attributed to the shortage of institutional medium- and long-term capital which compelled the existing investor group to rely on its own capital and know-how resources, and kept out new investors, except from abroad. 15/ Data for 1980 from PNUD/BIT HAI/74-014, Resultats de L'Enquete sur l'Emploi Industriel a Port-au-Prince, January/February 1981.  - 41 - 86. Generally, it is the availability of credit, not its cost, that may have had an effect on investment trends. Interest rates are not considered to be an issue mainly because of the high profitability of many private sector enterprises (returns on capital of 30 to 50 percent are quite common. The commercial banks rarely make loans for more than three years, both as a matter of policy and because of regulatory constraints. There are no open market operations. The Government-owned IDAI is the only finance company with branch operations outside Port-au-Prince. It has made a minimal con- tribution in the financing of private sector investment, despite recent efforts to improve performance. In 1981, its new lending totalled US$3.6 million, raising total outstanding loans and advances to US$6.5 million. The World Bank has provided US$7 million of IDA funds to set up the Fonds de Developement Industriel (FDI) which will provide credit insurance and redis- count commercial bank loans to majority Haitian-owned development projects worth up to $250,000, for a maximum period of 15 years at current interest rates. So far, 4 commercial banks have agreed to participate in the FDI operation. FDI has also worked on identification of bankable projects; 42 such projects were listed in January 1982, requiring total investments of US$15 million. A further 54 projects costing US$17 million were retained from an earlier study. 16/ 87. USAID, in 1978, financed a feasibility study for a new development finance company which would make medium- and long-term loans at market rates. This project is now in abeyance but could be revived quickly since the necessary legislation has been passed and a number of agencies would be prepared to renew pledges of funds, in addition to capital committed to the project by local investors. Meanwhile USAID sponsors an innovative program of project lending to very small entrepreneurs (loans of between $100 and $7,500) through the Haitian Development Foundation (HDF). HDF raised private local and foreign finance for its first two years of operation and expects to operate on a self-sustaining basis by 1984. In October 1981, it had an out- standing portfolio of $375,000 for 302 clients with a default rate of barely 5 percent. The average cost of creating a job through these very small-scale projects amounted to $850. AID supports two other private sector business development programs: that of the Witherspoon Development Corporation currently involved in a pilot project in Haiti to invest some $0.8 million in five small enterprises. The second program involves cofinancing of small and medium-sized agricultural enterprises with the Latin American Agribusiness Development Corporation (LAAD) 17/ which has so far invested $3 million in 9 different projects in Haiti. Finally, a feasibility study is under way, at the request of the Government, to set up a national mortgage finance insti- tution. 88. Apart from FDI, whose operations are still at an initial stage, the various private sector financing programs, as well as IDAI, are in need of additional funds in the medium term. It would seem preferable to channel new funds through these existing channels, however tentative or cumbersome their project management practices might be, rather than to divert funds to a new 16/ ADELATEC, Private Development Finance Company for Haiti, Feasibility Study, May 1978. 17/ Private US investment company.  - 42 - DFC. However, the various sources of investment credit now operating in Haiti are oriented towards small and medium-sized enterprises; there is no credit line for investments of over $250,000. 18/ There appears to be a need either for a heavily endowed new DFC or for closer cooperation between the private sector and external agencies like the International Finance Corporation (IFC) to proceed with project identification, feasibility studies and the organization of co-financing. Since there are unlikely to be sufficient large projects to justify the setting up of a new agency, the latter alternative seems preferable for the time being. Since IFC finance is only suitable for the largest projects, the financing gap could be covered by raising FDI's rediscounting limit from $0.25 million to $1 million as its resources grow. Incentives and tax reforms 19/ 89. Tax holidays and customs duty exemptions are the main incentives granted under Haiti's existing laws, of which the most important for manufac- turing and agro-industrial enterprises are embodied in decrees dated 1963, 1969 and 1977. Quota and tariff protection were introduced as additional incentives to import substitution industries in 1963 and 1977, respectively, but were not used to any great extent until 1981. Tourism investment is covered by the Hotel Investment Incentives decree of 1972. 90. On paper, at least, incentives appear to be granted more easily to wholly export-oriented industries assembling imported inputs than to indus- tries producing for both local and export markets using entirely, or partly, local inputs. Linkages industries therefore could be at a disadvantage compared with assembly industries although development of the former is more important to the economy as a whole. In reality, incentives have been granted without much regard for precise criteria laid down in the laws (lack of data on total consumption of individual products makes it impossible in practice to apply market share criteria theoretically applied to new pro- ducers). In those few cases where incentives have been refused, the refusal was usually a response to objections from existing producers (whatever their market share) who had better access to decision-making than the new appli- cant. There are no employment criteria in the incentives laws (apart from a general reference to "labor employing" assembly industries 20/), nor are they considered necessary in an open economy with a comparative advantage in labor costs. In any case, incentives to labor-intensive industries granted elsewhere have only been effective in a regional policy context by attracting to a particular location investments that would have taken place anyway (but possibly with a different labor/capital mix in industries where labor and capital are substitutes); there is no evidence to show that they can boost the total level of investment. 18/ Of the 42 projects identified by FDI, 8 are in excess of this amount: one has a $7 million price tag, two are in the $1 million range, and the remaining five require between $0.3 and $0.5 million each. 19/ Details of current incentives are given in Annex III. 20/ Decree of October 8, 1969, Article 7(b).  - 43 - 91. The most positive aspect of Haiti's incentives system until now has been the lack of distortions attributable to it. Unlike many neighboring countries, notably Jamaica, Haiti offers incentives that appear to have been neutral (in the industrial sector) as to the use of resources (labor vs. capital; national vs. foreign capital) and as to market orientation (domestic vs. exports). 21/ This apparent neutrality may be a reflection of their ineffectiveness or irrelevance. One fact in support of this theory is that incentives existed throughout the 1960's but were unable then to compensate for the generally unfavorable investment climate. Equally, decentralization incentives have been unsuccessful in persuading manufacturing industries to locate outside the Port-au-Prince area. 92. It is likely that the Government's de facto attitude of laissez- faire, its liberal tax and duty exemptions granted without much adherence to criteria theoretically imposed by incentives laws, provided a favorable environment for profitable investment in the 1970's. At the same time, non- adherence to procedures laid down in the investment laws, the need for personal relationships to circumvent red tape and the arbitrary nature of some administrative dealings with private investors have probably acted as deterrents to two particular groups of entrepreneurs. Firstly, the mission was told that Haiti will remain unattractive to some foreign investors while the demarcation line between private influence and public authority remains blurred. Large US corporations which sponsor offshore assembly operations prefer not to invest directly in Haiti (but may subcontract to a Haitian firm instead) because the rules of the game are so ill-defined. The second group of investors who may be deterred by the lack of guidelines are those Haitian entrepreneurs who do not belong to the traditional political or economic power structure. The absence of a recognizable administrative framework is not due to a lack of legislation. On the contrary, if all existing investment laws and tax regulations were applied to the letter, enterprises in Haiti would be subjected to an intolerable amount of bureaucratic interference and paperwork--and a discouragingly heavy tax burden. Difficulties arise when regulatory or fiscal procedures are tightened (for example, customs valuations or profits tax collections) without correcting the built-in overkill of the legal system--an overkill designed to guarantee at least a minimum of compliance or a token tax payment. 93. The incentives system has probably cost the Government more in lost revenues than was necessary to achieve realized levels of investment. This was particularly true for import duty exemptions. In 1978, when the old, relatively low, tariff system was in force, as much as 50 percent of dutiable imports were exempted. As for profits tax holidays, since entrepreneurs in Haiti generally expect to recover their investment in 3 to 5 years, the granting of incentives for periods as long as 10 years (in Port-au-Prince), 13 years (in the industrial park) or 20 years (outside Port-au-Prince) is clearly unnecessary. The incentives, after all, are designed to help enter- prises over difficult initial years, not as a semi-permanent or permanent boost to profits. Moreover, where tax paying US-based investors are concerned, the incentives are of little or no value (except as a means of reducing red tape) because Haitian profits will eventually be subject to US tax. The US Internal Revenue Service (IRS) does not allow "tax-sparing" 21/ Again, with the exception of the three "large" projects.  - 44 - (which in some countries permits companies to deduct taxes paid abroad even if the tax was not actually paid because the foreign subsidiary benefited from exempted status) (para. 113). In the case of such taxpayers Haiti is making an unnecessary revenue sacrifice that ultimately benefits only the US IRS. 94. In the course of 1981, steps were taken to increase revenue collections which affect entrepreneurs and their attitudes to fiscal incentives. Firstly, tariffs were raised and a program to tighten up customs valuation procedures was initiated. The immediate result of these measures is that import duty exemptions become more valuable incentives to investors. They will be seen less as an aid to investment, more as compensation for the rising cost of imported inputs. Wherever possible, entrepreneurs will ask for import duty exemptions as a precondition to new investment. Under the present system of incentives administration, the exemptions will be granted. Secondly, a 20 percent corporate profits surtax was introduced 22/ which raises the tax payable on profits of $100,000 and over to an average of almost 60 percent, one of the highest in the Caribbean. In theory, the additional surtax will apply until September 1982 only, but even the normal rate of tax, at 50 percent on profits of $100,000, is above the 40 to 45 percent charged in most other Caribbean locations with which Haiti competes for foreign investment, in addition to which there is a 15 percent withholding tax on profits distributed abroad. 95. Haitian entrepreneurs are relatively unmoved by this tax increase; most of them run small, independent companies with rudimentary accounting procedures. Even when they do not benefit from exemptions, they pay minimal profits tax, often no more than the forfeit tax (which was introduced partly to secure at least that minimum contribution). Subsidiaries of foreign corporations are generally bound by stricter audit rules and cannot arrange the kind of the tax evasion practiced by Haitian-owned or managed enter- prises. So potential foreign investors who want to stay in Haiti for more than the 5-year full tax exemption period may consider the tax rate as a dis- incentive. Alternatively they will arrange their affairs so as to minimize Haitian source profits, as in the case of US investors, who are liable to US tax in any case. It may be that the comparatively low value added in base- ball assembly (Table 15) which is dominated by US subsidiaries, is due to such arrangements: the Haitian subsidiary is paid practically at cost for its assembly work with nil or minimal profit allowance. The bulk of profits that could have been attributed to the Haitian operation are most probably transferred to the US principal since there is no profits tax advantage in acting otherwise, and there is an import duty advantage in minimizing the dutiable Haitian value added to goods imported under tariff items 806.3 and 807 (which cover most of Haiti's assembly operations). 23/ 22/ For tax rates, see Annex III. 23/ There is no minimum value added requirement for US tariff item 806.3 and 807 imports. The GSP system requires at least 35 percent foreign value added.  - 45 - Table 15: ASSEMBLY INDUSTRY: VALUE ADDED PER DOLLAR OF US COMPONENTS FOR MAJOR EXPORT GROUPS, 1976 AND 1980 Value Added per Dollar As % of All 806/807 of US Input Value Trade with the US 1976 1980 1976 1980 Garters, suspenders, brassieres $0.43 $0.39 6.5 7.7 Underwear 0.40 0.42 0.8 2.1 Other wearing apparel 0.29 0.46 23.7 25.2 Office machines 0.12 1.28 3.2 4.8 Capacitors 0.31 0.93 6.9 6.0 Footwear 2.52 2.54 4.1 3.4 Gloves 0.80 0.89 2.9 2.2 Games and sporting goods 0.60 0.37 31.4 18.0 All exports 0.38 0.47 100.0 100.0 Source: TSUSA Tariff Items 807.00 and 806.30, Imports for Consumption. The New Tariff Schedule and Protection Measures 96. Possibly because so many manufacturers benefit from customs duty exemptions, sector representatives did not mention the new tariff as a constraint imposed by the Government. The tariff is embodied in a decree of December 30, 1980, and was put into effect on June 1, 1981. It replaces the 1961 tariff (partly updated in 1969), but instead of introducing simple ad valorem rates, it provides both specific and ad valorem duties. Customs officers are required to apply the rate which yields the most revenue. To comply with this regulation it is necessary to make two calculations for each customs duty assessment. The resulting system is both time-consuming and susceptible to arbitrary decision making. 97. A comparison of tariff levels before and after the 1981 reform, based on a sample of 50 commodities subject to ad valorem rates under both systems, shows that tariffs have gone up by 28 to 67 percent for major product groups if an average rate of duty is used (Tables 16 and A-26). In reality, the increase will be even larger since ad valorem or revalued specific duties are supposed to replace the predominant use of specific duties whose value had long been eroded by inflation, in addition to which the new system is expected to improve (increase) the valuation of imports. The resulting tariff levels on non-luxury consumer goods and producer goods are excessive, unless no one is really expected to pay. Lowering duty rates to about 15 percent, if effectively charged, would not create an incentive to replace labor resources with imported machinery, nor would it amount to an investment disincentive if there were no exemptions, and would certainly improve custom revenues.  - 46 - Table 16: TARIFF REFORM, 1981 (percentage) Average Rate Effective of Duty Protection a/ old New under Commodities System System Increase New System Non-durable consumer goods 32 41 +28 130 Durable consumer goods 37 47 +27 150 Intermediate producer goods b/ 29 47 +62 150 Machinery and equipment 15 25 +67 80 Total 28 37 +32 a/ Assuming 30 percent value added. Excludes considerations of prohibi- tions and quotas. b/ The sample of raw materials on which ad valorem duties were levied under both systems was considered too small to be significant. 98. The new customs tariff provides considerable protection to import substitution industries. Under the old customs tariff, the import duty exemptions granted to such industries (usually heavily reliant on imported inputs) provided a way to neutralize the low or even negative effective protection resulting from a relatively low and sparingly implemented tariff structure. Since 1981, this situation appears to have been reversed and the combined incentives/tariff structure could now provide an effective protec- tion rate of 150 percent and more for import-substitution industries, most of which have a low proportion of local value added. By the same token it reduces the incentive to export. 99. Before implementing the new customs tariff, the Government had introduced other protective measures for local industries. They consist of outright import prohibitions on 20 products or groups of products, and import quotas on 58 others. 24/ Import prohibitions are to remain in force for two years, the quota system indefinitely. The restrictions affect most wage goods and relatively few others. This choice of products reflects the exist- ing structure of import substitution industries which the Government was seeking to encourage; nevertheless, if the system is efficiently implemented, the new protection will be given largely at the expense of low income groups. Such products as soap, detergents, shoes, simple housewares, kero- sene stoves, matches, beer and vinegar are now wholly protected from foreign competition. Meanwhile, quota systems (plus high tariffs) could encourage 24/ Decree of February 26, 1981 as modified by a decree published on September 17, 1981 and a communique dated September 24, 1981, see Annex V.  - 47 - inefficient production and/or higher prices, among others, for shoes, under- wear and clothing (average tariffs of 70 percent). 25/ Until 1981, the Government had limited protective trade measures to three specific import substitution industries: flour, cement and steel, 26/ and to sugar, by restricting exports. But, these industries were limited in their monopoly powers by price controls. It would be impossible to introduce such safe- guards for all the other existing and potential industries that now find themselves in a similarly protected situation. 100. In conclusion, the tariff and trade measures introduced during the last twelve months have, or may have, if systematically applied, the follow- ing unfavorable results: (a) the dual system of specific and ad valorem duties, and the choice left to customs officers as to which to apply, intro- duces uncertainty and arbitrary elements which tariff reform initially had intended to avoid; (b) the new tariff, on the whole, represents a sharp increase over the old system with two immediate consequences for the local manufacturing sector: firstly, import substitution industries are given more protection which may result in production and market distortions, and may inhibit the otherwise vital development of export industries; secondly, all manufacturers will consider customs duty exemptions granted under the invest- ment incentives system as compensation for high tariffs, not as an encourage- ment to production; (c) import prohibitions and quotas reinforce the tariff protection now given to import substitution industries. Since trade restric- tions cover mainly wage goods, the cost of protecting these industries will be borne mostly by lower income groups. This will work directly against the broader socio-economic policies aimed at widening the home market and increasing purchasing power; (d) for legal and illegal reasons, Government revenue from the new import tariff may end up by declining, rather than rising, even if the customs authorities' law enforcement capacity is improved, firstly, because more enterprises will press for more import duty exemptions, secondly, because smuggling will become more profitable. Tax and Tariff Reform Recommendations 101. The above analysis of recent tax and tariff reforms suggests a number of recommendations: (i) It would be in Haiti's interest to consider the possibility of introducing a relatively low rate of profits tax on manufacturing enterprises, possibly 10 percent, 27/ while phasing out tax holi- days, subject to existing commitments. New grants of incentives would be limited by an overall expiry date of, say, September 30, 25/ Edible oils feature on both import prohibition and quota lists. This basic food item is the monopoly of partly Government-owned SODEXOL. The company is the sole local producer of unrefined oil (based mainly on imported oilseeds) and was granted sole import rights for refined edible oils early in 1982. 26/ The Government owns the flour mill and has a 17 percent holding in the cement plant. 27/ This rate was adopted in Ireland during a successful change in the incentives system.  - 48 - 1993. All tax exemptions granted under existing or new incentives laws would automatically cease on that day when the new, low profits tax would become applicable. Such a system would broaden the tax base, and most likely increase revenue, while avoiding the disincentive effect of present high tax rates. (ii) The Government should initiate discussions on treaties for the avoidance of double taxation with the US in a further effort to improve the operational environment for US investors. (iii) If effective use is to be made of the tariff system, duty rates need to be lowered across the board. For revenue and social reasons, reduced tariffs on luxury consumer goods could be comple- mented by indirect taxes. As a protection incentive to agricul- ture, there would be a good case for tariffs on agricultural products which compete or might compete with local crops, but duties on intermediate and capital goods should come down sharply. (iv) Quantitative restrictions on imports need to be phased out as soon as possible to avoid creating regressive rents and market and production distortions in an economy where, so far, they have been kept to a minimum. The Outlook for Assembly Industries 102. In the short term, the best opportunities for urban employment creation and increasing export earnings lie in the continued growth of assembly industries. In September 1981, there were 139 such enterprises operating in Port-au-Prince. 28/ They had 35,600 employees, 80 percent of the labor force working in the capital's formal industrial sector (Table A-27). During the preceding twelve-month period they had taken on 3,760 more workers, over three times as many as other formal enterprises. They supported about one-fifth of the metropolitan population (assuming a dependency ratio of 4 to 1). In terms of numbers, about two-thirds of assembly firms are wholly or majority (at least 51 percent) Haitian owned. Foreign ownership is concentrated in the largest plants (over 300 workers) including the two that have more than 1,000 workers (electronics and baseballs). Even foreign-owned enterprises- usually have Haitian management. 103. The most important assembly production lines, both in terms of employment and of net export earnings are clothing and baseballs. During the 1970's subcontracting deals made between mainly US-based principals and Haitian producers grew to cover a more varied range of goods. The proportion of value added through assembly of imported inputs for re-export fell from a high of 40 percent in 1969 to a low of 24 percent in 1974 and rose again steadily to reach 32 percent in 1980. 29/ This trend reflects the changing nature of local operations: at the beginning of decade enterprises were engaged in simple assembly of low value US components. As confidence in local manufacturing capacity grew, the range of products became more sophis- ticated and the unit value of imported inputs higher, with a consequent 28/ Only one assembly plant is known to have located outside the capital. 29/ Journal of the Flagstaff Institute, August 1981.  - 49 - decline in the proportion of local value added. However, since the mid- 1970's quality standards and the input of skills to assembly of such products as office machines, capacitors, clothing and footwear has risen and so has the proportion of local value added (of which 80 percentage profits and wages). 30/ There has been no overall increase in linkages with the domestic economy. The few existing linkages affect value added differentials between products, as in the case of gloves which have an above-average local value added because of the use of local leather. Value added in the baseball industry declined between 1976 and 1980. This may have been due to major firms being taken over by US principals, and a consequent shift of profits to the US. The lack of backward linkages is due to poor supplies of local raw materials and intermediate goods. Even the inputs to locally made packaging materials are mostly imported. Sisal and glue from local sources used in some baseball assembly, is only suitable for low standard goods. With the present structure of Haitian assembly production, the lack of forward linkages is not an issue. 104. Two criticisms often leveled at assembly industries in general-- that they are foot-loose and isolated from the rest of the economy--are not relevant in Haiti. There has been no retrenchment in the face of a US reces- sion; on the contrary, increasing cost-consciousness in the US has probably accelerated the production sharing process with Haiti. The sector is versa- tile: local enterprises have moved from one principal to another, or operate with several principals, they have changed their production lines (from clothing to electronics, or both simultaneously, rolling over their tax incentives in the process). Nor is the assembly industry isolated in the same way as enclave industries on the Mexican-US border, for example. Off- shore Haitian assembly plants do not operate in bond, they import their inputs, duty-free like most other industries, and have to go through the same bureaucratic hassles as other industries in their import-export trade. Their goods can be sold on the local market provided that relevant import duties are paid. 31/ In fact, it is likely that more assembly plants would be attracted if the industry could operate as an enclave. 105. At present, Haiti has no free zone or other area set aside specif- ically for offshore assembly industry. Some plants are located in the indus- trial park, which offers longer tax holidays than the rest of the metro- politan area. Most of the rest are located in owned or rented factories in and around Port-au-Prince. The port authority has plans for a free zone close to the port. A feasibility study has been completed which envisages developing an initial area of 21 hectares as a transit zone and an industrial and commercial free zone. The first phase of the project, for which finance is still being sought, will develop an area of 21 hectares at a cost of US$15 million of which $3.4 million for infrastructure and $10.7 million for the construction of 26 in-bond factory and warehouse modules. The total project, including development of a further 90 ha and 272 modules is estimated at $165 million. As such, it looks much too large for Haiti's foreseeable needs. Even in the first stage, it will be difficult to make the project self- financing while charging competitive rents, yet it is essential that there 30/ Institut Haitien de Statistique et Informatique. 31/ The draft new investment law contains an express permission for assembly industries to sell locally. Under existing laws the permission is only implied (see Annex IV).  - 50 - be no further subsidization of free zone enterprises already operating free of customs duties and income tax. 32/ The appeal of the free zone to potential investors will depend largely on their perception of real operating freedom in the zone, on rental levels compared with other sites and on the standard of infrastructure (including a convenient internal road to the port). 106. While agricultural exports are likely to stagnate in the next few years, and shipments of bauxite will cease altogether, the outlook for assembly industries is that their sales abroad can continue to grow rapidly. In the five years previous to 1981, net exports (exports less imports of materials for assembly) rose 27 percent a year at current prices, from $12.2 to $40.0 million, and the industries' share of total exports grew from 11 to 26 percent. Assembly industry employment and the value added, content of exports are expected to increase, so that by 1985 the sector should be able to generate around $60 million in export earnings at 1981 prices. 33/ This figure could be further improved if Haiti were promoted more effectively among potential foreign investors, not only in the US, but also in the Far East and in Europe. At the same time efforts should be made to reduce institutional constraints (negotiations for franchises and factory space, delays in clearing imports) while incentives are strengthened (guaranteed low rate of profits tax, effective institutional support, free zone facilities). B. International Environment for Private Sector Growth Haiti's Potential: Best-Kept Secret in the Caribbean 107. Disparate foreign investor interest in Haiti during the 1970s was largely due to the lack of promotion. Nor does Haiti attract the kind of tourism which has brought investment in its wake for such otherwise unpro- moted countries as the small Commonwealth Caribbean states (e.g., St. Kitts, St. Lucia, Antigua). Foreign, mainly US, investors came to the island because of personal links with Haitians. It was left to US interests to put together the first organized investment promotion drive. In November- December 1981, two important US investment missions visited Haiti. One was sponsored by the Overseas Private Investment Corporation (OPIC). It brought to Haiti senior executives of some 20 US companies which had expressed an interest in Haiti and possessed the technical expertise to invest in the country. The second mission was organized by the Governor of Florida and included representatives of both public and private sector organizations in that state. The mission's main purpose was to examine technical assistance and investment possibilities to improve economic conditions in Haiti, thus stemming the outflow of Haitian emigrants to Florida. Private sector mission 32/ Factory building rents, at 1982 prices, were expected to be about 15 percent higher than in the industrial park where rents are still being subsidized. 33/ Based on employment rising to 48,000, and a 15 percent increase in value added content over the four-year period.  - 51 - members initiated contacts with Haitians that may lead to joint projects in the field of fruit and vegetable processing and horticulture. The mission's industrial committee reported that Haiti's poor image abroad and lack of positive promotion had made it the best kept secret in the Caribbean and proposed to identify 50 US corporations which Haiti should target for future industrial development. With USAID assistance, a Florida Program for Haiti (FPH) has been set up and a liaison officer appointed to develop Haiti's marketing strategy. 108. The major attraction offered to US, and other foreign, investors apart from proximity to the US and political stability, is the low cost of labor. Compared with other regional locations, Haiti has probably the lowest minimum wage. Table 17: MINIMUM WAGES IN CARIBBEAN ASSEMBLY INDUSTRIES IN DECEMBER 1981 Minimum Daily Wage 1/ US$ Mexico (Sonora province) 13.20 Dominican Republic 6.80 Jamaica 5.00 El Salvador 4.40 Barbados 3.80 Haiti 2.64 1/ In garment assembly plants. Source: National development corporations. 109. Haiti's success in developing export-oriented industries is demonstrated in its growing share of US imports under tariff items 806.30 and 807.00 concessions, which cover most offshore assembly operations. In 1980, Haiti was the ninth most important LDC 806/807 exporter, only just behind Korea and Brazil. Compared with other LDCs, however, Haiti's value-added component is still less than half the average for all LDCs (see Table 18). Exports of goods made from domestic materials have not fared so well. Most are destined for the US and suffered from the recessions in 1975, and again in 1981 (assembly industries were not affected). In this sector, which includes agro-industries supply problems, poor knowledge of markets and the lack of marketing experience are major obstacles to growth.  - 52 - Table 18: HAITI'S SHARE OF LESS DEVELOPED COUNTRIES' OFFSHORE ASSEMBLY AND GSP EXPORTS IN 1980 Value Added per Value of US Value Added by Dollar of US GSP Exports Inputs LDC Industries Input Value to the US US$ Million US$ Million US$ US$ Million Mexico 1,190 1,156 0.97 511 Taiwan 108 371 3.44 1,837 Singapore 409 365 0.89 300 Malaysia 480 339 0.71 65 Hong Kong 114 300 2.61 805 Philippines 253 160 0.63 136 Korea 168 146 0.87 777 Brazil 16 95 5.94 452 Haiti 105 49 0.47 35 El Salvador 51 37 0.73 19 Dominican Republic 66 31 0.47 51 Indonesia 18 31 1.72 16 Barbados 24 24 1.00 42 Costa Rica 30 15 0.50 57 Total All LDCs 3,169 3,184 1.00 7,297 Haiti as % of Total 3.3 1.5 0.47 0.5 Source: Journal of the Flagstaff Institute. 110. Foreign exchange earnings from tourism more than doubled from $24.7 million in 1976 to $57 million in 1981. Haiti is far from realizing its full potential in this sector. Lack of promotion is an important factor in keep- ing down the number of visitors, while relatively modest facilities (compared to Dominican Republic tourism centers, for example), have also limited expen- diture per visitor. Yet Haiti has an undoubted comparative advantage for independent travellers and small groups in its relatively low costs, the amiability of local people, its historic sites as well as the usual Caribbean seaside potential attractions. Even during the present downturn in North American source travel Haiti's tourism should be able to grow by increasing its share of total Caribbean tourism (diversion of travellers from politic- ally turbulent areas like Central America and Grenada or the socially unwel- coming Bahamas and Jamaica). In the medium to long term, larger scale tourism could be developed if more foreign capital and know-how can be involved. Currently there is practically no direct foreign investment in Haitian tourism (apart from the new French Club Mediterranee holiday center) and consequently no direct links with organizations in the major tourism- generating areas. Here again there is a need to counter ignorance and mis- conceptions with positive information and carefully aimed promotion abroad, as well as institutional improvements at home (land tenure laws in partic- ular).  - 53 - Foreign Incentives and Constraints to Haiti's Export Growth and to Investment in Haiti 111. The most important concessionary openings for Haitian exports to the US market, its chief trading partner, are through the General System of Preferences (GSP) and special US Tariff Items 806.30 and 807.00. 34/ Tariff item 807.00 covers Haiti's assembly industries which may re-export goods assembled from US components paying duty only on the Haitian value added. The latter system is easier to use than GSP concessions, which have two particular disadvantages: firstly, since there is no monitoring system in Haiti for GSP sales to the US, certain export products have inadvertently hit their ceilings, and duty-free concessions were withdrawn; secondly, smaller exporters, in particular, have not been aware of the concessions and/or were not able to satisfy the 35 percent value added requirement (there is no minimum value added requirement for 806/807 imports to the US). Textiles and clothing are among Haiti's major manufactured export commodities. They are not eligible for GSP treatment but are closely controlled by the US-Haiti textile agreement. This imposes quantitative restrictions on shipments to the US of specific groups of textile products. 112. Haiti's second most important trading partner is the European Economic Community (EEC). The Community makes trade concessions in specific bilateral or multilateral agreements and through the GSP. Haiti is not included in the major EEC multilateral agreement with developing countries, the Lome Convention. However, the country qualifies for almost identical concessions to those available under the Lome Convention as a result of being classified a "least developed country" entitled to maximum benefits under the Community's current GSP system. This means that Haiti is not subject to quantitative restrictions on imports into the EEC. But, rules governing the application of the EEC GSP are of byzantine intricacy. Criteria for eligibility vary from product to product, and from one period of the year to another (for products covered by the EEC Common Agricultural Policy). There is no equivalent to the 806/807 concessions for assembly industries. As is the case for the US, imports of textiles and clothing are severely restricted and subject to high foreign value-added criteria. 35/ 113. None of the major capital exporting countries--the US, Canada, the EEC, Japan--extend their domestic fiscal investment incentives to investment abroad. In the two most commonly used systems for taxing foreign source income, the exemption method exempts foreign income from domestic tax, the credit method taxes foreign source income like domestic income but a tax credit for foreign tax paid can be set against the final tax liability. The exemption method is more favorable than the credit method if the foreign tax rate is nil or lower than the domestic rate; if the foreign tax rate is 34/ See Annex VI. 35/ The "substantial transformation" requirement demands that the trade classificatioi of a product exported by Haiti to the EEC be different from that of E ' of the foreign inputs used in its manufacture: thus Haitian brassi 1;es would only qualify for GSP treatment if the third country input consisted of yarn. If the Haitian manufacturer imported cloth, cut or uncut, the tariff jump would have been insufficient.  - 54 - higher, the result is the same under both systems. The tax credit method does not allow investors to benefit from foreign tax holidays unless tax- sparing or matching relief concessions are available. These consist of tax- deductible credits given by the investor's home country which match the tax that would have been payable abroad but for the foreign tax incentives prbgram. The US and Japan apply tax credit methods, without tax-sparing pro- visions. Canada and most of the EEC countries apply the exemption method, except for West Germany which allows tax-sparing for manufacturing invest- ments in developing countries and also allows investors to build up temporary tax-free reserves on investments in developing countries. 114. One important non-fiscal incentive to investment in less developed countries generally is the provision of investment insurance and guarantee facilities. These usually provide Government underwriting for certain loss risks resulting from exchange restrictions, expropriation or insurrection. Such agreements are usually made on a bilateral basis, although Japan, for example, grants these facilities unilaterally. The US program operates through the Overseas Private Investment Corporation (OPIC). It cannot be applied to "run-away" plants, which replace existing US plants by exporting a substantial portion of their products to the US. 115. Although none of the major capital-exporting countries provide positive incentives to invest in a less developed countries, at best they aim to put investments at home and abroad on an equal tax footing. Assistance to Haiti in Grasping the Opportunities Available 116. The development of Haiti's private sector will continue to depend on the outside for the provision of markets and for inflows of capital and technology. Access to foreign markets, particularly those of the US and the EEC could be improved without threatening the developed countries' home industries. 36/ In the case of the US, a more sympathetic handling of the textiles agreement would be one way to implement good intentions expressed by the Caribbean Basin Initiative (CBI). A further trade aid would involve set- ting up an early warning system for Haitian exports to the US under the GSP system. The figures are monitored by US trade authorities and it would be relatively simple to warn Haitian authorities when monthly exports appear to run in excess of annual allowances on any particular product group. 117. The key factor in developing Haiti's trading links is more of the right kind of investment. Given Haiti's institutional weaknesses promotion of investment in Haiti could probably be organized most effectively through business associations in the capital exporting countries. The US OPIC and State of Florida initiatives provide an example of how such promotion can be handled. Similar initiatives should be encouraged as part of the economic assistance programs of EEC countries, specifically France and West Germany which have long standing links with Haiti. In the case of Japan there are opportunities for publicizing Haiti's potential as an export platform, both for North America and the EEC. Japanese producers, particularly in fast- 36/ Even Haitian textile imports into the US, which were deemed to require a special controlling agreement, represent less than 1 percent of total US imports of textiles.  - 55 - moving high-technology industries have subcontracted much labor-intensive work to other Far East countries like Thailand and Singapore. 37/ Wages there have risen rapidly and the time is ripe to stage a promotion of Haiti based on its comparative advantage in labor costs, easy labor adaptation to new skills and proximity to the US. In order to attract the right kind of investment the Haitian Government will need to define priorities with partic- ular emphasis on export orientation and the maximization of domestic value added. These would provide an essential input to the selection of foreign firms invited to consider the opportunities for investment in Haiti. Finally, the developed countries could strengthen investment incentives in favor of Haiti and other LDCs. In particular, the US, in the context of the CBI, might consider the introduction of "tax-sparing" to allow US companies to benefit from tax holidays offered in Haiti, possibly in the context of specific tax treaty provisions, and/or introduce tax-free investment allow- ances. 37/ Some Japanese and Korean companies are withdrawing from these countries because labor cost advantages have become so small.  - 56 - ANNEX 1 SUMMARIES OF PROGRAMS INCLUDED IN THE 1982-86 DEVELOPMENT PLAN Agriculture I. NAME OF PROGRAM: Increased production of basic fooderops, industrial crops, and export crops II. LOCATION: Various agricultural districts III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: A. Department of Agriculture, Natural Resources and Rural Development (DARNDR) B. Societe Nationale des Amis de l'Arbre (Reforestation) (SONAMAR) V. TOTAL ESTIMATED COST: G 350 million, consisting of the following components: A. Coffee/cacao development G 75 million B. Basic food-crops development G 200 million C. Sugarcane, oilseeds development G 45 million D. Fruit crops protection (SONAMAR) G 30 million VI. EXTERNAL FINANCING REQUIRED: About 80 percent of the total estimated cost (UNDP, IDB, FAC and Inter American Agricultural Institute (IICA) are expected to contribute to the 1982 program). VII. YEAR OF COMMITMENT: Execution of the specific programs will be phased according to the availability of funds. VIII. PROGRAM OBJECTIVES: Production of basic food and export crops, which accounts for roughly four fifths of agricultural output in Haiti, has not caught up with demand in recent years, adversely affecting both the nutrition levels at home and export earnings from abroad. The program is designed to add each year up to 62,000 metric tons to food products (maize, millet, sorghum, rice, beans), as well as coffee, cocoa, oil seeds, sugarcane and fruits to improve nutrition and self-sufficiency in food supplies and, also to provide up to 500,000 tons of crops each year for industrial processing in Haiti (sugarcane, oilseeds) or for exports (coffee and cacao). IX. PROGRAM DESCRIPTION: Development of suitable farm inputs (seedlings, seeds), provisions for fertilizers and credit; increased extension services for farmers. Irrigated lands in plains and hill slopes with adequate rainfall will be selected for the basic food crops develop- ment program. X. STATUS: The program components are yet to be prepared. The Government attaches high priority to this program. External aid agencies are being contacted for their financial support of it.  - 57 - ANNEX 1 Agriculture I. NAME OF PROGRAM: Preservation and development of natural resources II. LOCATION: Countrywide (12-20 districts) III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCY: Department of Agriculture, Natural Resources and Rural Development (DARNDR) V. TOTAL ESTIMATED COST: G 169 million, consisting of the following components: A. Rehabilitation of national forests (reforestation). B. Taking an inventory of underground water resources and determination of suitable techniques for their utilization. C. To increase fishermen's incomes and to provide fish culture. D. Soil conservation and erosion control on hill slopes for increased agricultural output. E. Maintenance, rehabilitation and extension of existing irrigation systems (Maribacoux, Riviere, Lastie, Nippes). F. Development of firewood and timber forests. G. Maintenance of village roads in rural areas. VI. EXTERNAL FINANCING REQUIRED: About 80 percent of the total estimated costs. Contributions to the 1981-82 program is expected from the World Food Program (G 10.2 million), UNDP (G 3.1 million) and FAO (G 0.1 million) VII. YEAR OF COMMITMENT: Smaller sections of the waterworks are in progress. Future rate of investment on the program as a whole will depend on availability of external and domestic finance. VIII. PROGRAM OBJECTIVES: A serious problem which Haiti faces is a contin- uing loss of good soil, due to erosion or to conversions to non- agricultural uses. There has also been a continuing deterioration of water sources as a result of a reduction of forest areas and loss of watersheds. Demand for firewood has been causing a net loss of the country's forest reserves which are also being depleted due to conver- sion of forest lands to other uses. Erosion and deforestation have reduced the water absorption capacity of major watersheds. Watershed protection and soil conservation measures are needed. The program will, by better irrigation and drainage, increase the areas under intensive cultivation and thereby reduce pressures on forestry lands and pastures.  - 58 - ANNEX I IX. PROGRAM DESCRIPTION: The program will provide for coordinated action concerning introduction of legal norms to control the use of natural resources, development of better techniques of land and water utiliza- tion, public education on resource utilization, staff training and supporting services to farmers. For rehabilitation of irrigation systems, distribution basins, small dams, passage routes and canals will be constructed. To expand the system, a dam will be built on L'Estere a' Taboule; pumping stations and water derivation canals will be provided. Hydraulic and topographic surveys will be undertaken. National forests will be rehabilitated through controlled exploita- tion, reforestation and development of firewood forests. To control erosion, barriers, diversion routes and water penetration sheds will be built on hill slopes; provision will be made for field staff train- ing. X. STATUS: The major part of projects under the program has still to be prepared prior to execution. The Government attaches high priority to this program. External finance is being sought.  - 59 - ANNEX 1 Agriculture I. NAME OF PROGRAM: Regional Integrated Development Schemes II. LOCATION: Varies (see below) III. PROGRAM PERIOD: 1982-86; varying periods for each scheme IV. EXECUTING AGENCY: Department of Agriculture, Natural Resources and Rural Development (DARNDR) and autonomous project implementing organizations V. TOTAL ESTIMATED COST: G 339 million, made up by costs of the following schemes: Estimated Name/Location Cost __ Status A. Vallee de l'Artibonite (ODVA)* G 48.5 Scheduled for completion in 1982/83; (IDB-interest) B. Plaine du Nord (ODN) G 58.5 Scheduled for completion by 1984; (IDA/FAC/German interest) C. Plaine de Gonaives (ODPG) G 18.5 In progress, (German- interest) D. Plaine Cul de Sac G 48.5 Scheduled for completion by 1984; (IDB interest) E. Plaine de l'Arbre G 5.0 Scheduled for completion by 1983; (FAC-interest) F. PDAI/Cayes G 23.5 Planned for start in 1982/83; (USAID-interest) G. Petit Goave and Petit Trou de Nippes (DRIPP) G 35.1 In progress; (CIDA financing suspended in November 1981) H. Jacmel extension G 38.5 In preparation; (FAC interest I. Peninsule du Sud (Asile) G 45.5 In preparation; (IDB interest) J. Grande Anse G 3.5 To be prepared (1982-86) K. Plateau Central G 10.0 To be prepared (1982-86); (IDB interest) L. Anses a Pitres G 3.5 To be prepared (1982-86 * A related scheme is rice development by the Republic of China.  - 60 - ANNEX 1 VI. EXTERNAL FINANCING REQUIRED: The estimated expenditure in 1982 is G 115.7 million, of which G 27.4 million will come from domestic sources (and PL 480 counterpart funds) and the remainder from external sources. As a whole, the 1982-86 development plan assumes an average of 80 percent financial contribution by external aid agencies to the total estimated costs of all schemes. The CIDA support for the scheme under (g) above has been suspended in November 1981; the prospects for continuation with a second phase of this scheme are now uncertain. VII. YEAR OF COMMITMENT: Varies (see above) VIII. PROGRAM OBJECTIVES: The program components, while differing in scope and in terms of economic and social benefits to be attained, are designed to lead to a more profitable use of the country's natural resources (soil and water) and to improve standards of living in rural areas through increased output of crops, livestock and better transport for access to markets. Social progress through improved public health, education and community development is also envisaged. IX. PROGRAM DESCRIPTION: Regulation of water supply through river flow controls and drainage canals; rehabilitation and expansion of irrigation systems; feeder roads; erosion control; development of crops (including rice cultivation); agricultural credit and extension services (mostly for benefit of small farmers); construction of schools, health centers, drinking water supply. X. STATUS: Several of these schemes are already in execution, assisted by foreign lending/grant agencies. Some others are yet to be financed or prepared for execution. Among the schemes which are not yet selected for financing, the Government has singled out the Grande Anse scheme (item J above) for early external support. Future pace of program execution will depend on availability of domestic and external financing resources.  - 61 - ANNEX 1 Agriculture I. NAME OF PROGRAM: Livestock Development II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCY: Department of Agriculture, Natural Resources and Rural Development (DARNDR) V. TOTAL ESTIMATED COST: G 177 million, consisting of the following components: A. Small head livestock; poultry; rabbit G 15 million B. Large head livestock (milk and beef cattle) G 18 million C. Apiculture G 5 million D. Animal health (charbon control) G 9 million E. Eradication of swine fever G 130 million VI. EXTERNAL FINANCING REQUIRED: About 80 percent of the total estimated cost, excepting the swine fever component for which the Government will meet the eradication costs with contributions by the US, Canada and Mexico. Relatively small contributions are also anticipated from WHO and FAO/IDB in 1982 for the animal health and the pig replacement (repopulation) programs, respectively. VII. YEAR OF COMMITMENT: December 1981 (swine fever eradication); milk cattle project, in execution. Execution of the program as a whole will be phased in conformity with the availability of external and domestic finance. VIII. PROGRAM OBJECTIVES: Livestock raising in Haiti depends largely on small family holdings. The prevailing swine fever adversely affects small farmers' incomes and the national protein supply. The program as a whole is intended to meet the local demand for animal products, thereby reducing imports, and to provide some surplus for exports. IX. PROGRAM DESCRIPTION: Under the swine fever eradication part, which is scheduled to start execution in March 1982, the existing pig population will be eradicated and, under strict control, disease free breeds will be imported to repopulate the country. For the other parts of the program, provision has been made under the plan for development of pastures and other necessary infrastructure, acquisition of livestock, and increased extension services to farmers. X. STATUS: Some program components have yet to be prepared. External aid agencies are being contacted for their support in financing.  - 62 - ANNEX I Agriculture I. NAME OF PROGRAM: Agricultural Research; strenghtening of agricultural services in rural areas II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCY: Department of Agriculture, Natural Resources and Rural Development (DARNDR) V. TOTAL ESTIMATED COST: G 265 million, consisting of the following components: A. Practical agricultural research G 30 million B. Study of rural economy; promotion of rural development through improved services, farmer organizations (cooperatives) and marketing facilities G 55 million C. Institutional development (improved and increased governmental services to farmers) G 180 million VI. EXTERNAL FINANCING REQUIRED: The major cost component is increased staff salaries. For 1982, the Government will pay the bulk of the costs involved (from the budget or out of the PL 480 counterpart funds) with some contribution by the USAID and FAO. In average, 80 percent of external financing is envisaged for the 1982-86 period. VII. YEAR OF COMMITMENT: 1982-86, subject to availability of financial resources. VIII. PROGRAM OBJECTIVES: In support of the Government extension services, provision will be made for district-oriented research to improve production techniques and parasite control, as well as for staff training and orientation. Promotion of rural development through improved production methods, farmer organizations (cooperatives), marketing and improved quality and quantity of the Ministry of Agriculture services to the farming community are also envisaged. IX. PROGRAM DESCRIPTION: Recruitment of additional staff; training and orientation programs for staff; salary improvements for research and field staff; field service centers and equipment. The program will strengthen the Department of Agriculture, central and district-level organizations, planning and information services. X. STATUS: Staff training and orientation part of the program is being implemented on a limited scale. Future pace of implementation will depend on availability of external aid and domestic funds. The research program has yet to be prepared.  - 63 - ANNEX 1 Mining I. NAME OF PROGRAM: Mining Development II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; varying periods IV. EXECUTING AGENCY: Department of Mineral Resources and Energy (MRE) V. TOTAL ESTIMATED COST: G 130 million, broken down to: A. Exploration and geological surveys G 7.1 million B. Development of mineral resources G 45.8 million C. Institutional development G 5.2 million D. Development of energy resources G 71.9 million VI. EXTERNAL FINANCING REQUIRED: G 90.1 million. (For the 1982 program, relatively small amounts are expected to come from UNDP, Germany and IDB.) VII. YEAR OF COMMITMENT: 1982-86; varying dates VIII. PROGRAM OBJECTIVES: While Haiti has some metallic and non-metallic mineral resources (bauxite, copper, sands, gypsium, etc.), economic- ally exploitable copper deposits have declined; present bauxite reserves are likely to be depleted by 1983. The country lacks known hydrocarbon resources. In view of growing demand for imported oil, on-shore and off-shore prospecting, exploration and development of alternative energy resources have become imperative. This program is designed to provide for development of mineral and energy resources of the country, as well as for institutional development to strengthen the Department of Mineral Resources and Energy to play an active role in this field. IX. PROJECT DESCRIPTION: The program provides for exploration work and geological surveys. In addition to Government funds, substantial amounts of foreign aid (58 percent to 81.2 percent) will be required for the development of mineral and energy resources by means of on-shore and off-shore prospecting, and research. X. STATUS: Some survey work has been in progress on a limited scale. The Government has had contacts with private investors for their collaboration in this effort. External aid by governments and aid agencies is also required for certain parts of the program.  - 64 - ANNEX 1 Industry and Crafts I. NAME OF PROGRAM: Industrial Development and Crafts II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: A. Department of Commerce and Industry (DCI) B. Institute for Development of Agriculture and Industry (IDAI) C. National Office for Promotion of Investments (ONAPI) D. Industrial Development Fund (FDI) V. TOTAL ESTIMATED COST: G 325 million, consisting of the following components: A. Industrial parks - expansion or new parks G 110 million B. Agro industries (import substitution) G 100 million C. Processing of local agricultural produce G 80 million D. Training/orientation for craftsmen G 17 million E. Institutional development (industry) G 10 million F. Institutional development (crafts) G 8 million VI. EXTERNAL FINANCING REQUIRED: G 160 million (50 percent for the industry program, 40 percent for the crafts program). External aid agencies active in the sector are IDB (industrial parks), Germany/KFW (industrial promotion and surveys), USAID (small industry credit), OAS and UNDP. Counterparts of Venezuelan aid funds are being used in support of Government participation in new industrial ventures. VII. YEAR OF COMMITMENT.: Various dates during the 1982-86 period. Some of the schemes started in earlier years. VIII. PROGRAM OBJECTIVES: Haiti has experienced a remarkable industrial growth (14-15 percent p.a.) in the course of the last decade. Indus- trial output, consisting mainly of products of agro industries, import substitution plants and re-export industries, now accounts for about 18 percent of the country's GDP. Industrial plants, largely concen- trated in the Port au Prince area, provide employment and purchasing power and contribute to the country's export earnings. The Govern- ment, in an effort to encourage private investments in industry, has been offering incentives such as customs exemptions, industrial parks, easy transfer of profits, labor training and promotions. In doing so, it has also been pursuing policy objectives such as decentralization of industry locations away from Port au Prince, emphasis on labor- intensive industries and low energy consumption. Crafts are being encouraged as a means of increased employment and earnings. Starting in 1979, however, the Government has also attempted to have direct investments in industry through participations.* * A World Bank mission which visited Haiti in 1981 has had reservations on the proposed industries; see economic report dated February, 1981.  - 65 - ANNEX I IX. PROGRAM DESCRIPTION: Under the industrial parks component, the existing parks in the Port au Prince area would be expanded and new parks would be created in the north (Cap-Haitien) and south (Cayes) of the country. The new parks are intended to develop new industrial centers outside the Port au Prince area. The "agro-industries" component is designed to promote primary industries within the country in order to reduce dependence on imports of food and other basic necessities and to enable processing of domestic raw materials for sale in domestic market. The industrial plants envisaged under the processing of non-agricultural local materials are essentially to serve construction industry; they also include a plant to mix fertilizers. Finally, the proposed program includes provision for training and orientation of government staff responsible for assisting industry abd crafts and will offer training and orientation courses for craftsmen. X. STATUS: The industrial parks project components are being prepared. Some agro-industry proposals (sisal, vegetable oil, sugar) are fairly advanced. Some others are yet to be prepared or in preparation.  - 66 - ANNEX 1 Power I. NAME OF PROGRAM: Electric Power Generation, transmission and distribution; feasibility studies II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; varying periods for each scheme. IV. EXECUTING AGENCY: Electricite de Haiti (EDH) V. TOTAL ESTIMATED COST: G 1,303.5 million*, consisting of: A. Generation: G 951.9 million B. Transmission G 128.6 million C. Distribution G 84.9 million D. Feasibility studies C 65.3 million E. Consultants and training G 47.6 million F. Other G 25.2 million VI. EXTERNAL FINANCING REQUIRED: G 869.8 million*; equivalent to the program's foreign exchange cost component (80.1 percent). Details are given in the detailed list attached. VII. YEAR OF COMMITMENT: Varies (see below) VIII. PROGRAM OBJECTIVES: Haiti, lowest-ranking in the Caribbean in terms of per capita electricity consumption, relies on hydroelectric power stations (65 percent) and petroleum-based generators (35 percent) for its electricity supply. Per capita electricity generation, 60 KWH per capita in 1981, has been growing fast in recent years. Generation of electricity has grown at an average annual rate of 14.5 percent during the last decade. With an assumption that the demand for power will continue to grow at an average rate of 12 percent per year during the 1982-86 period (the bulk of it in the Port-au-Prince area), the Electricite de Haiti has prepared the present program to meet the increased demand. * Revised data prepared by the EDH after publication of the 1982-86 plan (without contingency provisions). Original amount in the plan: G 1,180 million (external financing: G 870 million).  - 67 - ANNEX 1 IX. PROGRAM DESCRIPTION: The main components of the program are as follows: A. Electricity generation stations - Extension of Varreux (thermal station in Port au Prince to raise - Construction its capacity to about 42 MW by completed, adding 3 x 7.5 MW (assisted by IDA) - Carrefour thermal; 14 MW - In preparation; 1982-85; (under active considera- tion by IDA). - Extension of Ste. Philomene (Cap-Haitien) thermal station by adding 850 KW - to raise to 5850 KW - 1982-83 - Port de Paix, thermal station - 1982-83 - La Chapelle, hydro station 28 MW - In preparation; 1983-87; (under consideration by IDB) - Guayamouc I hydro station 13.4 MW - In preparation; 1983-86 - Verettes hydro station 21 MW - In preparation; - Mirebalais (A-176) hydro station 17 MW - In preparation; 1985-89 - Mirebalais (A-166) hydro station 25 MW - In preparation; 1986-1990 - Caracol hydro station 0.3 MW - In preparation; 1982-84 - Saut-Mathurine hydro station 2 MW - 1981-84; (German aid: DM 10.0 million; in execution)  - 68 - ANNEX 1 B. Electricity Transmission (assisted by CIDA and IDA in part) The following transmission facilities will be provided for, largely of high tension (115 KV, 69 KV) type, to serve the new generation stations, and transmission substations: - Port-au-Prince extension (high tension) - 1981-86 - Varreux S-S (high.tension) - 1981-82 - Peligre - La Chapelle - 1984-86 - La Chapelle -- Port au Prince - 1984-86 - La Chapelle Verrettes - 1984-86 - Verrettes substation - 1985-86 C. Electricity Distribution This component will include medium tension (13 KV, 23 KV) lines, to extend electricity to consumers within Port au Prince and to small communities in provinces, as follows: - Port-au-Prince, renovation - 1981-86 - Port de Paix, renovation - 1981-83 - Jacmel, renovation - 1981-83 - Saut Mathurine, connection - 1982-84 - Caracol connection - 1982-84 - Peligre, Guayamouc - 1981-83 - Cap-Haitien - 1986 - Drouet, Gonaives - 1986 Provision is made for maintenance of generation stations and distribution facilities, installation of transformers to connect new customers, as well as for construction of distribution centers to extend service to small communities in provinces. The foreign exchange costs will will be low and the Electricite de Haiti will assume the bulk of the costs. D. Feasibility Studies Studies will be necessary mainly for the erection of new hydroelectric generation stations, as listed under (A) above: - Guayamouc - 1981-82 (assisted by IDA) - La Chapelle - 1981-83 (assisted by IDB) - Verettes - 1982-84 - Mirebalais (A-166) - 1984-86 - Mirebalais (A-176) - 1983-85 - Centrale a vapeur - 1986 - Small hydro stations - 1986  - 69 - ANNEX 1 E. Consultants, Staff Development and Other - Foreign consultants (such as Hydro-Quebec, Price Waterhouse, Hydro Plan) to undertake major feasibility studies) - Staff development at the EDH (FAC-supported) - Construction and equipment for a new EDH headquarters building Port-au-Prince (assisted by IDA) - Rehabilitation of Peligre dam (assisted by IDA) X. PRESENT STATUS: A number of schemes (as indicated) are proceeding with foreign assistance which has already been secured. For others, foreign aid agencies are being contacted for their financial and technical support. The Government has singled out the Chapelle hydro station for early financing by external aid agencies.  - 70 - ANNEX 1 Electric Power, Generation, Transmission and Distribution Program (in G million) Estimated Cost Program/Project Items Domestic External TOTAL A. Generation 1) In Port-au-Prince Area Varreux 4.35 43.67 48.02 Carrefour 17.05 98.05 115.10 La Chapelle 55.60 236.10 291.70 Guayamouc - I 17.65 87.95 105.60 Centrale de Carrefour 7.35 54.70 62.05 Verrettes ou A-108-8 30.90 158.85 189.75 Mirebalais ou A-176 11.15 54.75 65.90 Site A-166 1.90 6.45 8.35 Subtotal Port-au-Prince 145.95 740.52 886.47 2) In Provinces Cap-Haitien 0.50 6.18 6.68 Caracol 4.10 10.50 14.60 Port-de-Paix 0.45 2.50 2.95 Saut-Mathurine 15.20 26.00 41.20 Subtotal Provinces 20.25 45.18 65.43 Total Generation 166.20 785.70 951.90 B. Transmission Port-au-Prince 31.70 23.10 54.80 Port-au-Prince (future) 2.80 7.20 10.00 Extension S/S to Varreux 0.40 2.80 3.20 Peligre-La Chapelle - P-au-P 9.60 35.15 44.75 La Chapelle-Verrettes et sub-station 2.65 10.70 13.35 Communications - 2.45 2.45 Total Transmission 47.15 81.40 128.55  - 71 - ANNEX 1 C. Distribution Port-au-Prince (in progress) 2.95 13.10 16.05 Port-au-Prince (future) 5.25 23.95 29.20 Port-de-Paix 1.90 1.55 3.45 Jacmel 1.15 6.05 7.20 Saut-Mathurine 3.70 7.20 10.90 Caracol 1.10 2.50 3.60 Peligre - Guayamouc 0.95 5.15 6.10 Cap-Haitien (in progress) - 2.80 2.80 Cap-Haitien (rurale) - 3.75 3.75 Drouet - Gonaives - 1.82 1.82 Total Distribution 17.00 67.87 84.87 D. Feasibility Studies La Chapelle 6.25 4.66 10.91 Guayamouc - I 0.50 3.75 4.25 Verrettes - 10.50 10.50 Site A-166 - 12.15 12.15 Site-A-176 - 12.20 12.20 Centrale a Vapeur 0.75 3.65 4.40 Small hydro stations 1.75 9.10 10.85 Total Feasibility Studies 9.25 56.01 65.26 E. Consultants Second project 1.25 25.45 26.70 Third project 1.70 17.50 18.60 Total Consultants 2.35 42.95 45.30 F. Training Second project 0.05 1.30 1.35 Third project 0.10 1.00 1.10 Total Training 0.15 2.30 2.45 G. Miscellaneous Construction of EDH building 6.75 4.60 11.35 Repair of the Peligre dam 2.20 11.65 13.85 Total Miscellaneous 8.95 16.25 25.20 GENERAL TOTAL 251.05 1,052.48 1,303.53 Source: Electricite de Haiti  - 72 - ANNEX I Water and Sewerage I. NAME OF PROGRAM: Drinking Water and Sewerage II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; varying periods. IV. EXECUTING AGENCIES: A. Autonomous Central Drinking Water Administration for Metropolitan Area (CAMEP) - Port au Prince B. National Drinking Water Service (SNEP) - active outside the Port-au-Prince metropolitan area C. Department of Public Health and Population (DSPP) D. Department of Agriculture, Natural Resources and Rural Development (DARNDR) V. TOTAL ESTIMATED COST: G 250 million, consisting of the following components: A. Feasibility studies and research (CAMEP, SNEP, DARNDR) G 12.2 million B. Construction and rehabilitation of infrastructure (CAMEP, SNEP and DSPP) G 227.8 million C. Institutional development (CAMEP, SNEP) G 10.0 million VI. EXTERNAL FINANCING REQUIRED: G 205.6 million (82.2%); financial and technical assistance is already obtained from IDA (Cap Haitien, Port de Paix, Jeremie, Miragoane and Jacmel), Germany (Gonaives, St. Marc and Cayes), UNDP (Hinche and St. Marc and des Cayes). VII: YEAR OF COMMITMENT: 1982-86, varying dates VIII. PROGRAM OBJECTIVES: Water supply/sewerage services in Haiti, particu- larly outside the Port au Prince metropolitan area, are seriously deficient. As of 1980, drinking water house connections and access to public fountains were 21 percent and 20 percent, respectively, in urban areas; 59 percent of urban areas lacked sewerage facilities. 1/ In rural areas, these ratios were 0.1 percent, 0.6 percent, and 99.3 percent, respectively, giving a countrywide average of 6.1 percent, 6.3 percent and 87.6 percent, respectively. Available drinking water sources are, in general, inadequate and often polluted; water supply is frequently interrupted. The Government agencies in charge of drinking water supply and sewerage services are seriously handicapped by lack of qualified manpower. The existing installations of water purification and distribution are inadequate. The program is designed to improve the position somewhat during the 1982/86 period. 1/ These informations differ from those used in the introduction of the report due to differences in definition of services.  - 73 - ANNEX 1 IX. PROGRAM DESCRIPTION: The program will make provision to extract supplementary water sources to ameliorate growing deficit in drinking water supply for the Port au Prince area, as well as for necessary feasibility studies under a G 10 million allocation for CAMEP. For similar studies in areas outside the metropolitan area, a provision of G 1.2 million will be made for SNEP and DARNDR. The major components of the program will be construction or rehabilitation programs to be executed by CAMEP (G 70 million), SNEP (G 123.6 million) and DSPP (G 34.2 million). A list of water supply development works underway or planned for starting during the 1982/86 period is attached. The program will allocate G 5.0 million each for CAMEP and SNEP for insti- tutional development. In the past, their project implementation capa- cities have been seriously limited due to inadequate personnel and lack of financial resources. This program will help to overcome these difficulties. X. STATUS: Some of the projects supported by external aid agencies are at the preparation stage. Others external aid agencies are being approached for financial and technical assistance. The Government has singled out the Artibonite water supply scheme as a priority invest- ment.  - 74 - ANNEX 1 Annex DRINKING WATER DEVELOPMENTS, 1982-1986 Project Under Total Project Project in Execution/ Estimated Programs/Projects Idea Preparation Executed Cost A. Drinking Water Supplies for: (a) Nord (1) - 0.77 3.12 3.89 (b) Artibonite (1) - 4.88 0.13 5.01 (c) West (1) - 3.82 0.55 4.37 (d) Grande Anse (1) - 0.62 0.24 0.86 (e) South (1) - 2.01 0.10 2.11 (f) South East (1) - 1.77 - 1.77 (g) Center (1) - 3.38 1.19 4.57 Subtotal - 17.25 5.33 22.58 B. Drinking Water Distribution: (a) North West (1) - 0.16 2.79 2.95 (b) North East (1) - 0.11 0.82 0.93 (c) Other Sections (2) 50.00 - - 50.00 (d) Metropolitan Area (1) - 76.13 - 76.13 (e) Replacement of small sections of pipes (1) 25.00 - - 25.00 (f) Rebuilding of meters (2) 2.00 - - 2.00 Subtotal 77.00 76.40 3.61 157.01 C. Other: (a) Training (2) 0.30 - - 0.30 (b) Feasibility Studies, research (2) (c) Equipment and Materials (2) 1.05 - - 1.05 (d) Supplies (2) 5.00 0.80 0.16 5.96 Subtotal 6.35 0.80 0.16 7.31 Total 83.35 94.45 9.10 186.90 (1) Projects in preparation. (2) Projects to be prepared.  - 75 - ANNEX 1 Tourism I. NAME OF PROGRAM: Tourism Development II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: A. National Tourism and Public Relations Office (ONTRP) B. Department of Public Work, Transport and Communications (TPTC) C. (ISPAN) V. TOTAL ESTIMATED COST: G 65 million, consisting of the following items: A. Construction and rehabilitation of tourist roads, bridges, etc. G 25 million B. Restoration of historic and other tourist attractions G 34 million C. Training courses; orientation G 5 million D. Institutional development (staff) G 1 million VI. EXTERNAL FINANCING REQUIRED: G 30 million (46.1 percent). So far, involvement by foreign aid agencies in tourism sector has been quite limited. UNDP is assisting in restoration of some historic tourist attractions. The budget for tourism development in 1982 has been about G 2.3 million or 3.6 percent of the 5-year allocation in the current development plan. VII. YEAR OF COMMITMENT: Various dates, 1982-86, subject to availability of finance. VIII. PROGRAM OBJECTIVES: While the annual number of tourists visiting Haiti, starting from a very low point of 33,700 in 1970, increased in average 17 percent p.a. during the last decade, Haiti still attracts a very small part (less than 2 percent) of tourist flows to the Caribbean. Nearly two-thirds of tourists visiting Haiti come from North America and the remainder is roughly equally divided between countries of Europe and other countries in the Caribbean. During the 1982-86 period, the Government aims to raise the flow of tourists at an average rate of 5 percent per year (to reach 200,000 tourists by 1986), to extend their average stay in Haiti from 7 to 10 days, with an average tourist spending growth of 13 percent per year. To achieve these objectives, emphasis will be on effective planning, improved coordination and promotion (including measures to stimulate domestic tourism).  - 76 - ANNEX I IX. PROGRAM DESCRIPTION: The program envisages activities in north, west and south/south east sections of the country. Under the construction/rehabilitation component, a list of roads, bridges and beach development schemes has been prepared for construction or rehab- ilitation, to provide easy access for tourists to the country's tourist attractions. Under the restorations component, historic citadels, forts, cathedrals, old houses, etc. will be restored; beach improvements will be undertaken; tourist attractions inventories will be completed. To strenghten tourist services, schools, training courses or seminars for tourist guides and hotel workers and Governmentstaff will be offered. Finally, technical staff of the Government tourist offices in Cap-Haitien, Jacmel and Cayes will be strenghtened. X. STATUS: Most of the undertakings under this program are relatively simple and do not require elaborate preparation. A lack of financial resources is the major limiting factor.  - 77 - ANNEX 1 Transportation I. NAME OF PROGRAM: Construction public works/rehabilitation of roads, harbours and airports II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; varying periods for each scheme. IV. EXECUTING AGENCIES: A. Department of Public Works, Transport and Communications (TPTC) B. National Ports Authority (APN) C. National Airports Authority (AAN) V. TOTAL ESTIMATED COST: G 755.0 million, of which: A. G 548.3 million by TPTC; G 141.7 million by APN; and G 65.0 million by AAN. B. Foreign exchange component: G 605.0 million VI. EXTERNAL FINANCING REQUIRED: About 80 percent of the total estimated cost. The IDA, IDB, FAC have been assisting the Government in construction of roads in various parts of the country. USAID (feeder roads and highway maintenance) and Germany (urban roads) have also been active in this sector. VII. YEAR OF COMMITMENT: Varies (see below) VIII. PROGRAM OBJECTIVES: The program is designed essentially to develop a transport network responsive to the country's essential economic, social and administrative needs. It will rehabilitate or reconstruct some of the existing roads and other transport facilities in order to ensure their continued optimum use. The program will also provide for construction of new roads (largely in rural areas), harbours and an air field. IX. PROGRAM DESCRIPTION: Provision for: A. Land Transport a) Construction of 98 Kms of main roads (asphalt), (feasibility studies underway; IDA may consider for its financing). b) Construction/rehabilitation of 1,520 Kms of secondary roads (gravel) (USAID may support a part of the program). c) Rehabilitation of 115 Kms of main roads. d) Repaving of some roads in Port-au-Prince and other cities.  - 78 - ANNEX I e) Rehabilitation of bridges with increased heavy traffic; (IDA is supporting). f) Construction of 12 Kms of major urban arteries; (Germany is supporting) An up to date list of new roads proposed for construction or reconstruction during the 1982-86 period, together with data on length of each, is attached. In selecting these roads, the Government has given consideration to objectives such as: (a) to provide better access by farmers to rural markets, (b) to support economic and social development in the regions concerned, (c) to stimulate production, and (d) to reduce poverty in uncertain regions of the country. B. Sea Transport a) Construction of ten coastal shipping harbors (Anse a Galets, Gonaives, Baraderes, Corail, Anse d' Hainault, Port a Piment, Les Cayes, Ile a Vache, Pointe a Raquette and Isle de la Tortue); b) Construction of a new port at Cap Haitien to allow calls by major tourist ships, as well as for use by merchant navy; c) Installation of additional maritime signals and lighthouses to serve sea routes. Under a 1981 project, IDA will finance construction of the harbours listed under (a) above. West Germany (KFW) supports the the item (b) above, together with IDA; studies are now underway. C. Air Transport a) Construction of a new international airport at Cap Haitien (mainly for tourist traffic); and b) Modernization of international airport of Port au Prince. FAC has assisted in the conduct of feasibility studies regarding the Cap Haitien airport construction; the Port-au-Prince airport scheme has not yet been prepared. X. STATUS: A large part of program components have already been selected by external aid agencies for their financial support. The Government is attempting to attract further external aid for its feeder roads program, Cap Haitien airport and Port-au-Prince airport improvement schemes.  - 79 - ANNEX 1 Road Construction Program,. 1981-86 Road Total Length Estimated (Km) Cost Remarks (G Million) A. Main Roads - Construction Pont-Sonde - La Chapelle - 79.8 39.9 Scheduled for Mirebalais execution in 1983 (G 12.9 million, 1983/84 (G 12.5 million) and 1984/85 (G 14.4 million) Mirebalais - Hinche 54.6 95.5 Scheduled for execution in 1984 (G 67.2 million) and 1985 (G 28.3 million) Sub-Total 134.4 135.4 B. Gravel Roads - Construction Limbe - Petit Bourg du Limbe 12 n.a. 1/ Belle Hotesse - Camp Louise 5 n.a. Camp Louise - St Michel 2.5 n.a. Corail - Bayeux 6 n.a. Port-Margot - Corail - Bassin Cape 4 n.a. Trou du Nord - Ste Suzanne 11.5 n.a. Trou du Nord - Caracol 8.5 n.a. Bois de Lance - Amont 4.5 n.a. Moustique - Mayo 4 n.a. Le Borgne - Petit Bourg du Borgne 10 n.a. St Michel - Lorman 4 n.a. Petit Bourg de Port Margot - Corail 6 n.a. Legras - Potier 5 n.a. Limbe - Bois d'Eau 8 n.a. Bois d'Eau - Mathurin 2 n.a. Bois d'Eau - Blain 3 n.a. Roger - Macary 3.5 n.a. Soufriere - Riviere Blanche 15.5 n.a. Grison Garde - Amont 4 n.a. Pignate - Bord de Mer Cagnette 1 n.a. 1/ The Government has not provided cost estimates for these feeder roads. A very rough working assumption could be $10,000 per km. of road to be constructed. Labor intensive technologies are assumed to be used.  - 80 - ANNEX 1 Road Total Length Estimated (Km) Cost Remarks (G Million) Pignon - Fontaine - Valliere 33 n.a. Bahon - Lanquite - Fontaine 24 n.a. St Michel - St Raphael 19 n.a. Dessalines - Nan Paul - Coupe a l'Inde 18 n.a. Coupe a l'Inde - St Michel 23.4 n.a. St Michel - Marmelade 16.9 n.a. Marmelade - Vieux Depot 15 n.a. Petite Riviere de l'Artibonite - Pont Canneau 8.4 n.a. Deschapelle - Dodard 1 n.a. Deschapelle - Pont Canneau 4 n.a. Petite Riviere de l'Artibonite - Passe Bac 1 n.a. Passe Bac - Coupon 1.5 n.a. Petite Riviere - Grande Hatte 4.7 n.a. Gros Chaudiere - Petite Riviere 3.9 n.a. Ville Bonheur - Carrefour St D'Eau 5 n.a. Ville Bonheur - Trou Chouchou 11.6 n.a. Chatelain - Desarmes 4.7 n.a. Villard - Grande Saline 18.1 n.a. Pont-Sonde - Poirier 13 n.a. N 100 - Desdunes - Duclos 8 n.a. Duclos - Drouin 6 n.a. Pont L'Estere - Ti Desdunes 5 n.a. Carrefour Peye - Gros Chaudiere 10 n.a. Gros Chaudiere - Dessalines 14 n.a. Carrefour Cadeau - Bois Jour 12 n.a. St Marc - Moreau 6.9 n.a. Savane Figuier - Ti Saline 12.3 n.a. Terre Neuve - Bois Marchand 28.9 n.a. Savane Figuier - Terre Neuve 14 n.a. Petit Port-a-Piment - Savane Figuier 18.5 n.a. Jean Rabel - Anse Rouge 37 n.a. Jean Rabel - Mole St Nicolas 27.3 n.a. Mole St Nicolas - Bombardopolis 15.6 n.a. Bombardopolis - Anse Rouge 44.4 n.a. Port-de-Paix - Jean Rabel 35.6 n.a. Port-de-Paix - St Louis du Nord- Anse-a-Foleur 29.1 n.a. Mirebalais - Lascahobas - Belladere - Frontieres 61 n.a. Belladere - Baptiste 21 n.a. Dini - Savanette 18 n.a. St Marc - Goyavier 20 n.a.  - 81 - ANNEX 1 Road Total Length Estimated (Km) Cost Remarks (G Million) Grande Hatte - Cahos 15 n.a. Anse a Galets - Ti Palmiste - Pte a Raquettes 45 n.a. Thomazeau - Cornillon 29.2 n.a. Fonds Verrettes - Thiotte - Belle Anse 60 n.a. Marigot - Seguin - Belle Anse 52.1 n.a. Cayes Jacmel - Cap Rouge 12 n.a. Jacmel - Marbial 20 n.a. Trouin - Carrefour Fauche 15 n.a. Bainet - Cotes de Fer 28.5 n.a. Vialet - Durese - Charrier 30 n.a. Asile - Virgile 18 n.a. Asile - Carrefour Bonne Fin 26 n.a. Moisson - Morisseau 10 n.a. Vieux Bourg d'Aquin - L'Asile 15 n.a. LtAsile - Carrefour Bogat 10 n.a. Baraderes - Petit Trou de Nippes 18 n.a. Routes de la Plaine des Cayes 47.4 n.a. Carrefour Joute - St Jean du Sud 7 n.a. Carrefour Avocat - Carrefour Charles 27.2 n.a. Carrefour Avocat - Pestel 23.6 n.a. Jeremie - Abricot 24.8 n.a. Jeremie - Dame Marie - Anse d'Hainault 65 n.a. Anse d'Hainault - Tiburon 30 n.a. Tiburon - Les Anglais - Port Salut 75 n.a. Les Anglais - Jambon 8 n.a. Port-a-Piment - Duplantin 17 n.a. Sub-Total 1,520.6 Source: Department of Public Works, Transport and Communication  - 82 - ANNEX 1 Transportation I. NAME OF PROGRAM: Feasibility Studies in Transport II. LOCATION: Countrywide III. PROJECT PERIOD: 1982-86; varying periods IV. EXECUTING AGENCIES: A. Ministry of Public Works, Transport and Communications (TPTC) B. National Ports Authority (APN) C. National Airports Authority (AAN) V. TOTAL ESTIMATED COST: G 45 million, of which: A. G 44.4 million by TPTC; G 0.5 million by APN; and G 0.1 million by AAN B. Foreign exchange component: G 36 million VI. EXTERNAL FINANCING REQUIRED: About 80% of the estimated cost. VII. YEAR OF COMMITMENT: Varies (see below). VIII. PROGRAM OBJECTIVES: The program is designed to complete feasibility studies for selected roads, bridges, coastal shipping harbors and an airfield (either for construction or rehabilitation purposes). Some 90% of the studies concern roads in rural areas and the remainder are for transport facilities in urban areas. IX. PROGRAM DESCRIPTION: Feasibility studies regarding: A. 350 Km. of main roads (asphalt), including: - Port Sonde-Mirabalais-Hinche (studies underway with IDB assistance - Jeremie-Baraderes (done as a part of IDA project) B. 1,520 Km. of secondary roads (gravel), including agricultural agricultural roads to provide market outlets (coffee and other crops) (see the list under the construction or rehabilitation program. C. 115 Km. of paved roads for rehabilitation, including: - Gonaives-Cap Haitien (part of an IDA project) D. Studies of bridges (rehabilitation, study of foundations of steel bridges) (studies underway with assistance by IDA) E. Transport/traffic flows studies.  - 83 - ANNEX 1 X. STATUS: Most of these studies are underway with financial support by IDA and IDB. With adoption of appropriate construction standards for gravel roads, the need for elaborate feasibility studies may not arise.  - 84 - ANNEX 1 Transportation I. NAME OF PROGRAM: Road Maintenance; Institutional Development II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; varying periods IV. EXECUTING AGENCIES: A. National Road Network for each scheme; Permanent Maintenance Service (SEPRRN) B. Ministry of Public Works, Transport and Communications; National Ports Authority; National Airports Authority V. TOTAL ESTIMATED COST: G 220 million, of which main components are: A. Road maintenance (SEPRRN) G 150 million B. Institutional development (TPTC) G 70 million VI. EXTERNAL FINANCING REQUIRED: G 95 million (C 75 million for road maintenance and G 20 million for institutional development.) VII. YEAR OF COMMITMENT: 1982-86; varying dates VIII. PROGRAM OBJECTIVES: A. In order to secure maximum benefits from newly-constructed or rehabilitated roads, the Government (SEPRRN) has to engage in periodic and systematic maintenance work. The SEPRRN has been seriously handicapped in this effort due to a lack of adequate road maintenance equipment (the existing equipment is worn out), limited high-caliber manpower, and financial constraints (both domestic and external). B. Ministry of Public Works, Transport and Communications and other major transport services (i.e., Ports Authority and Airports Authority) require improved office space, equipment and strenghtening of their technical services. The program will respond to these requirements. IX. PROGRAM DESCRIPTION: For the road maintenance part, the proposed program includes provision for purchase of road machinery and equipment for various district road maintenance centers, as well as for staff training and community support services. For the institutional development part, provision is made for some office construction, restructuring and strengthening of the Ministry of Public Works and other agency organizations, and for acquisition of vehicles and communications equipment. X. STATUS: The Sixth IDA highway project includes provision for road and bridges repair work and for purchase of road maintenance equipment. The Government has approached other aid agencies for their support of the remaining parts of this program.  - 85 - ANNEX 1 Telecommunications I. NAME OF PROGRAM: Telecommunications; posts II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86, varying periods IV. EXECUTING AGENCIES: A. Telecommunications d'Haiti, S.A. (TELECO) B. National Telecommunications Council (CONATEL) C. Administration of Posts V. TOTAL ESTIMATED COST: G 300.0 million, consisting of the following: A. Construction of commutation centers G 62.3 million B. Extension of transmission network G 189.0 million C. Construction of administrative buildings G 9.9 million D. Equipment for services G 13.1 million E. Institutional development G 19.4 million F. Construction and equipment for the Administration of Posts G 6.3 million Excepting the G 1.9 million building construction and institutional development items (CONATEL) and the G 6.3 million for the Administration of Posts, the whole program will be executed by TELECO. VI. EXTERNAL FINANCING REQUIRED: Foreign exchange costs of the program are estimated at G 217.0 million. TELECO requires only G 26.3 million (8.8 percent) in foreign financial assistance, although the Government will require from external sources the necessary foreign exchange. Some contributions by UNDP and ITT are envisaged. VII. YEAR OF COMMITMENT: 1982-86, varying dates  - 86 - ANNEX 1 VIII. PROGRAM OBJECTIVES: Telephone services in Haiti is poor in quality and seriously inadequate. Unfilled demands for services are expected to grow at an average annual rate of 15 percent during the 1982-86 period. In addition to improving and expanding its services in the Port-au-Prince area, TELECO intends to expand its services in other cities and townships as well as to include new urban centers in its service area. The program, which is a continuation of TELECO's investments in previous years, is essentially designed for these purposes. IX. PROGRAM DESCRIPTION: A. The capacity of telephone centers in Port-au-Prince, Gonaives, Cayes, Jacmel and Port de Paix will be expanded; new centers will be erected at Leogane, Petit Goave, Santo, St. Marc and Miragoane. Together with replacement of some lines, 28,000 new lines will be installed during the 1982-86 period, raising the country total to 60,800 lines; B. By 1986, capacity of the distribution network will reach 91,200 pairs, to serve Port-au-Prince, Jeremie, Leogane, Petit Goave, Santo, St. Marc and Miragoane. For interurban transmissions, TELECO will rely on physical lines. The transit center in Port-au-Prince will be expanded to serve five neighbouring townships. Transit centers at Cap Haitien, Gonaives, Jacmel, Cayes, Jeremie, and transmission center at Hinche will also be expanded. Thus, connections between 9 transit centers and 39 secondary towns will be improved; C. Under the construction and equipment items, a laboratory and three control centers will be built for CONATEL. An administrative building for the Administration of Posts will also be constructed and various equipment will be acquired. TELECO will acquire equipment for its headquarters office and for various installations elsewhere; D. TELECO has made provision for services of various foreign experts to assist in the implementation of this program. Some technical assistance for CONATEL is also envisaged. X. STATUS: Most of the project items are yet to be prepared.  - 87 - ANNEX 1 Urban Development and Housing I. NAME OF PROGRAM: Urban Development and Housing II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: A. National Housing Office (ONL) B. Department of Public Works, Transport and Communications (TPTC) V. TOTAL ESTIMATED COST: G 335.0 million, consisting of the following major components: A. Urban renovation G 108.3 million B. Drainage and urban development G 225.0 million C. Preinvestment G 1.7 million VI. EXTERNAL FINANCING REQUIRED: G 293 million for all items listed below excepting the provisions for disaster relief and preinvestment which will be met by the Government from its own sources. VII. YEAR OF COMMITMENT: 1982-86; parts of the Program are being assisted, or under active consideration for financial assistance, by IDB (urban drainage in Port au Prince), UNDP (urban rehabilitation), IDA (upgrading of produce market in Port au Prince and sites and services development in one or two provincial towns), Germany (cadastral survey of Port-au-Prince). VIII. PROGRAM OBJECTIVES: In previous years, efforts have been made to strengthen public institutions active in the urban fields to secure financial and other resources abroad in support of an expanded 1982-86 urban development and housing program. Domestic financial institu- tions (the Housing Bank) and the legal framework regarding urban land ownership are being strenghtened. The housing industry is now consid- ered capable of producing up to 650 houses a year, or a total number of up to 3,250 houses during the 1982-86 period. The Government's main objectives now are to proceed with projects to alleviate serious housing shortages in major urban areas, to install sanitary drainage facilities and treatment centers in designated areas of Port au Prince and of some major provincial capitals, to proceed with urban clearance and improvements in Port au Prince and major provincial capitals, institutional development (ONL) and surveys. The Program is designed to achieve these objectives.  - 88 - ANNEX 1 IX. PROGRAM DESCRIPTION: The main components of the program are the following: G Million I A. Low-income housing 58.4 B. Urban rehabilitation; sites and services 17.7 C. Disaster relief 0.2 D. Cadastre national, surveys, studies and construction re. market place 32.0 Subtotal - urban renovation (ONL) 108.3 II A. Port-au-Prince drainage B. Urban development - Port Au Prince C. Urban development - Gonaives, Cap. Cayes, St. Marc D. Rainwater drainage studies (Cap. Cayes, Gonaives, St. Marc, Jacmel) Subtotal - drainage (TPTC) 225.0 III A. Institutional development, research and program unit for ONL 0.3 B. Identification and delimitation of land for sites and services projects 0.2 C. Socio-economic surveys and research 1.2 Subtotal - preinvestment (ONL/TPTC) 1.7 Total 335.0 X. STATUS: Parts of the program are being implemented with external aid funds (some at feasibility survey stage); other parts are being prepared for execution, pending availability of domestic and external financial resources. Subject to availability of external finance, the Government intends to proceed with projects for construction of 1,250 housing units in Gonaives/St. Marc, Cap-Haitien and Cayes areas (G 42.5 million), 980 housing units in the Port-au-Prince area (G 25.0 million) and provision of finance (G 50.0 million) in support of real estate loan (Credit Foncier et Immobilier d'Haiti) operations. The last project is in preparation; the others are yet to be prepared.  - 89 - ANNEX 1 Education I. NAME OF PROGRAM: Education II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCY: Department of National Education (DEN) V. TOTAL ESTIMATED COST: G 500 million, consisting of: A. Construction of new schools G 376.2 million B. Improvements to existing schools G 30.0 million C. Equipment G 42.0 million D. Teacher training and reorientation G 20.0 million E. Teaching materials, curricula development, etc. G 24.7 million F. Institutional development G 7.1 million VI. EXTERNAL FINANCING REQUIRED: G 406.5 million. Certain project components are being financed by external aid agencies including IDA (school constructin and software development, fundamental education), and IDB (integrated rural education centers). VII. YEAR OF COMMITMENT: 1982-86, subject to availability of domestic and external finance. VIII. PROGRAM OBJECTIVES: Following an experimental period started in 1979, the Government has been implementing a major reform of the education system, which will embrace all levels. The objective is to make the education system better responsive to the country's economic and social needs by increased emphasis on practical subjects, promoting efficiency and productivity and by providing improved and expanded schools and equipment. For the 1982-86 period, the reform drive will concentrate on "fundamental education" which consists of 4 years of primary and 3 years of junior secondary levels. Quantitatively, the objective is to raise the present 42.3 percent (net) primary schooling rate and to improve the rate of student progression through the cycle which at present does not exceed 46 percent. There is need for addi- tional classrooms and student dormitories, equipment, and teacher training and orientation. The proposed program will also respond to related needs at the secondary and higher levels, as well as to insti- tutional development requirements in the education sector. Notably, rural integrated education centers will be increased.  - 90 - ANNEX 1 IX. PROGRAM DESCRIPTION: The main components of the 1982-86 program are the following: C Million A. Construction New 2,500 classrooms 164.3 student dormitories 62.5 New 5 lycees 37.5 New regional curriculum centers 11.4 Technical and Professional Education 19 E.P. 76.5 Higher level education 24.0 Total construction 376.2 B. Reconstruction Reconstruction and maintenance of 4 lycees 30.0 C. Equipment Laboratory equipment for 4 lycees 25.0 Educational radio 4.5 Equipment for primary and fundamental schools 7.5 Audio-visual 5.0 Total equipment 42.0 D. Software Teacher training (13,500; 5 years) 20.0 Curricula development, teaching aids, etc. 24.7 Institutional development 7.1 Total 500.0 Of these costs, G 288.5 million will be for primary and fundamental education, G 92.5 million for secondary level, G 76.5 million for technical and professional education, G 24.0 million for higher level education, and G 7.1 million for institutional development. 57.7 percent of these costs would be directly related to implementing the educational reform program. X. STATUS: IDA and IDB-financed sections of the program are being prepared or at execution stage. Construction of 2 lycees, additional classrooms for primary schools and technical schools are yet to be prepared. The Government is contacting external aid agencies for their support of the program components for which financing has not yet been secured (such as technical schools).  - 91 - ANNEX-1 Public Health I. NAME OF PROGRAM: Public Health, Nutrition, Family Planning II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86; continuing program IV. EXECUTING AGENCIES: A. Department of Public Health and Population (DSPP) B. Division of Family Hygiene (DHF) C. National Service for Eradication of Major Endemic Diseases (SNEM) D. Division of Nutrition (BDN) V. TOTAL ESTIMATED COST: G 520 million, with the following major components: A. Expansion and improvement of public health services, regionalization (DSPP) G 385.0 million B. Endemic diseases control (SNEM) G 35.5 million C. Nutrition improvement (BDN) G 35.5 million D. Maternal/child health care; family planning (DHF) G 64.0 million VI. EXTERNAL FINANCING REQUIRED: G 456.0 million (87.7% in average; higher for items (c) and (d)). Some of the program components are being assisted by the USAID (malaria eradication, maternal-child health care and family planning), IDB (public health installations in rural areas), UNDP and World Food Program (maternal-child health care and family planning), and WHO. VII. YEAR OF COMMITMENT: Continuing program. Rate of progress in future will depend on availability of external assistance. VIII. PROGRAM OBJECTIVES: Haiti, among countries of the Western Hemisphere, is a country most seriously affected by inadequate level of public health and sanitation services. Transmissible diseases, malnutrition and a high level of infant mortality are prevalent. Public and private health and disease prevention services are seriously private health and disease prevention services are seriously deficient, particularly in rural areas. This is due mainly to serious financial and manpower constraints, the latter being aggravated by a concentra- tion of health personnel in major urban areas and emigration. Some 85 percent in average of all public health investments come from external sources. Assistance, on a voluntary basis, for family planning has made a modest beginning so far, although much scope exists for future growth. The proposed program is designed to extend sanitation services to over 70 percent of the population, to halve the death rate from major prevalent diseases and to improve child nutrition so that a half (rather than 20 percent in 1980) of all children up to 5 years old will be considered "normal".  - 92 - ANNEX 1 IX. PROGRAM DESCRIPTION: In improvement and expansion of public health services, emphasis will be on disease prevention (particularly in rural areas). Maternal-child health care and family planning services will be integrated with other public health services, to be accessible for all. Efforts will be made to change consumption patterns through nutrition education for families. Under the regionalization program, six public health regions will be created within the country for better functioning of the public health system. As a part of efforts to control endemic diseases, particular attention will be given to malaria, tuberculosis and dengue fever. X. STATUS: External aid agencies being contacted for their continuing financial support of the program.  - 93 - ANNEX 1 Community Development I. NAME OF PROGRAM: Community Development II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: A. National Office for Literacy and Community Action (ONAAC) B. Department of Agriculture, Natural Resources and Rural Development (DARNDR) - field services. C. Various Government agencies responsible for implementation of integrated rural development schemes (ODVA, DDPG, ODN); various external aid and international charity organizations (CARE, Church World Services) and charity organizations established in Haiti (Community Action Council-CAC, Haitian American Community Help Organization-HACHO, Haiti Christian Service-SCH). V. TOTAL ESTIMATED COST: G 325 million, consisting of the following activities: A. Organization and staffing to implement programs (ONAAC and DARNDR) G 28.3 million B. Literacy programs (ONAAC) G 20.1 million C. Various "Community Action" schemes (ONAAC and various charity organizations) G 276.6 million VI. EXTERNAL FINANCING REQUIRED: G254.5 million. USAID (drinking water, nutrition/education centers), the World Food Organization (adult literacy and education), CARE, Church World Services, Catholic Relief Service, and UNICEF have been active in support of various activities under this program. VII. YEAR OF COMMITMENT: 1982-86; continuing programs.  - 94 - ANNEX 1 VIII. PROGRAM OBJECTIVES: Telephone services in Haiti is poor in quality and seriously inadequate. Unfilled demands for services, 52.8% in average, are expected to grow at an average annual rate of 15% during the 1982-86 period. In addition to improving and expanding its services in the Port-au-Prince area, TELECO intends to expand its services in other cities and townships as well as to include new urban centers in its service area. The program, which is a continuation of the TELECO investments in previous years, is essentially designed for these purposes. IX. PROGRAM DESCRIPTION: A. The capacity of telephone centers in Port au Prince, Gonaives, Cayes, Jacmel and Port de Paix will be expanded; new centers will be erected at Leogane, Petit Goave, Santo, St. Marc and Miragoane. Together with replacement of some lines, 28,000 new lines will be installed during the 1982-86 period, raising the country total to 60,800 lines; B. By 1986, capacity of the distribution network will reach 91,200 pairs, to serve Port au Prince, Jeremie, Leogane, Petit Goave, Santo, St. Marc and Miragoane. For interurban transmissions, TELECO will rely on physical lines. The transit center in Port au Prince will be expanded to serve five neighbouring townships. Transit centers at Cap Haitien, Gonaives, Jacmel, Cayes, Jeremie, and transmission center at Hinche will also be expanded. Thus, connections between 9 transit centers and 39 secondary towns will be improved; C. Under the construction and equipment items, a laboratory and three control centers will be built for CONATEL. An administrative building for the Administration of Posts will also be constructed and various equipment will be acquired. TELECO will acquire equipment for its headquarters office and for various installations elsewhere; D. TELECO has made provision for services of various foreign experts to assist in the implementation of this program. Some technical assistance for CONATEL is also envisaged. X. STATUS: Most of the project items are yet to be prepared.  - 95 - ANNEX 1 Other Government Services I. NAME OF PROGRAM: Other Government Services II. LOCATION: Countrywide III. PROGRAM PERIOD: 1982-86 IV. EXECUTING AGENCIES: Various government departments in charge of programs to be implemented. V. TOTAL ESTIMATED COST: G 249.1 million, the main components being: A. Social security; worker training G 15 million B. Sports and youth activities G 50 million C. Statistical services/research G 44 million D. Strenghtening of Planning Ministry G 58.5 million E. Special program for poor communes G 30 million F. Other government departments G 51.5 million VI. EXTERNAL FINANCING REQUIRED: G 100.5 million. A number of external aid agencies, including CIDA, USAID, FAC, IDB, UNDP, WHO, OAS, UNICEF have been contributing relatively modest sums for improvement/reorientation of various Government services listed above. VII. YEAR OF COMMITMENT: 1982-86, continuing programs VIII. PROGRAM OBJECTIVES: Public administration in Haiti is in great need for improvement and modernization. The program is intended to contribute to this end on a selective basis.  - 96 - ANNEX 1 IX. PROGRAM DESCRIPTION: The following are some of the programs to be undertaken during the 5-year period: G Million A. Strenghtening of social security services 2.6 B. Worker training for increased productivity 1.7 C. Strenghtening of social security funds 10.7 D. Infrastructure for sporting activities 33.1 E. Social/educational programs for youth 16.9 F. Strenghtening of statistical services 7.5 G. Systematic research on significant economic and social developments in the country 36.6 H. Construction and rehabilitation of court houses, school for magistrates 15.0 I. Administrative reforms and modernization 14.8 J. Science and technology research 8.8 K. Creation of a Nutrition Planning Unit at the Ministry of Planning 8.6 L. Strenghtening of the economic and social planning, regional development, evaluations, project promotion and coordination 58.5 M. Special aid for least developed communes (to reduce disparity between them and relatively well to do communes) 30.0 N. Other projects 4.3 TOTAL 249.1 X. STATUS: Some of these schemes are being implemented on a limited scale. For others, preparatory work and additional financial resources are required.  - 97 - ANNEX II PROCEDURAL FACTORS AND INFORMATION GAPS FOR THE EVALUATION OF PLANS IN HAITI 1. Analysis and evaluation of the Government's Third Five-Year Public Investment Plan (1982-86), attempted in this report, is made difficult by several procedural factors and information gaps. The Ministry of Planning (Project Promotion Division) did not have (in February 1982) an inventory 1/ of investment projects included in the current development plan nor those being prepared for future implementation. The Ministry did not maintain a complete record of projects financial data, which would indicate the amounts disbursed on each project in previous years and what remained to be spent in future years. Recurrent costs of projects already selected for implementa- tion or planned for future implementation are not routinely prepared prior to their approval. While the current Five-Year Plan sets investment policy and global sectoral targets for the 1982-86 period as a whole, a sectoral break- down of annual budgetary allocations planned for years beyond 1982 has not yet been prepared. 2/ This reflects shortcomings of sectoral planning work. Disbursement data for public investment expenditure have been slow to come (as of February 1982, the 1981 results were available only in global sectoral totals). Until "codification" of public expenditure categories in 1982, presentation of development expenditures in the budgets, including the contents of each expenditure category, differed from one development budget to the other. Project descriptions were frequently vague. This made analysis and comparison of expenditure items in several years quite diffi- cult. To neutralize the above shortcomings and to present a meaningful analysis, the presentation and evaluations in Chapter II have been made with- in the framework of programs, rather than a large number of small projects or sub-projects. This approach has an added advantage of being less vulnerable to frequent shifts occurring within a sector of project contents or points of emphasis from year to year. 2. While the term "public investment expenditure" is used throughout Chapter II, it should be noted that the Government's concept of public investment expenditure has been subject to change in the course of the last two years. Under the Government's definition, some borderline expenditures 1/ At the time of a previous Bank mission's visit to Haiti in 1981, a start was made in collating such a project through preparation of individual project summaries (Fiche de projet). This exercise was not carried through in subsequent months. New and elaborate forms were devised, but (as of February 1982), the inventory was not yet made. The Ministry of Planning is now working on a simplified project summary. Discussions between donors and the Government taking place within the framework of "Commissions Techniques" recently created by the Planning Ministry, should eventually lead to a more precise definition of specific projects to be included in the annual development budgets. 2/ The 1982 development budget memorandum, for purposes of indicating resource allocations for the plan, states only total investment figures for years 1983 to 1986.  - 98 - ANNEX II such as salary increases for governmental staff engaged in developmental work or expenditure for maintenance of roads, buildings, etc., starting with 1982, are now included in the development budget, while previous development budgets left such items in the recurrent budgets. There has also been in progress a continuing process of making public investment budgets more comprehensive than in previous years by including in them so-called "extra budgetary" schemes. Thus, some "developmental" expenditure previously handled through extrabudgetary channels have been now amalgamated in the regular development budget. For information on projects, the Ministry of Planning relies not only on the departments or autonomous organizations concerned, but also on information received from the Central Bank (for certain project accounts) and from various donor agencies in Port-au-Prince (for information regarding projects they finance). This dispersal of sources of project data raises questions of consistency and timeliness of the infor- mation compiled. 3/ All these practices, while confusing and casting some doubt on precise comparability, are not likely to change the overall picture, however. If the new procedures and nomenclature are maintained in the future, the consistency and comparability of public investment budgets will steadily improve. 3/ This is particularly true of the consistency between public investment figures and external aid information prepared by two different depart- ments of the Planning Ministry.  FISCAL INCENTIVES TO AGRICULTURAL, INDUSTRIAL AND TOURISM ENTERPRISES Ilucencive Laws Criteria Income Tax Exemptions / / Custom Duty Exemptions Other Bomefirs Decree of October 8, 1969. Priority to be given to enterprises which: No change. Imports duty exeeptions on semi- (a) Process local or imported raw. finished or finished articles limited A copy of the Advisory materials into finished or semi-finished to 10 years. Committee's report to articles to supply existing local be submitted to the enterprises. Planning Council (b) Are labor employing and use local (CONADEP) raw materials in producing for export. (c) Are located outside the Port-au- Prince region. Decree of July 18, 1974. Enterprises located in an industrial park. Eight years. Decree of April 4, 1977. (a) Enterprises located outside the Fifteen years. Advisory Committee Port-au-Prince area (from Petit Coave reorganized into Comnittee southward, from Montrouis northward, for National Industrial from Mirebalais towards the Plateau @ Promotion with Central and from Jacmel eastward). representatives from the (b) Enterprises which satisfy 75% (b) Enterprises satisfying at Departments of Commerce of the local market for a particular least 75% of the local market and Industry, Finance, product at a competitive price. may be granted a protective Agriculture and tariff, or a quota on similar CONADEP. imported goods, or both. Tourism Enterprises Hotel Investment New hotels and existing hotels Ten years. All hotel enterprises exempt from 10% withholding tax exemption. Incentives Decree which expand their facilities. import duties on installations, April 1, 1972. materials, furniture and other imports needed to complete facilities. /1 Upon expiry of the five, eight, ten or fifteen year tax holiday granted, enterprises are taxed progressively over the next five years as follows: in the first year 15% of privileged income is taxable, second year 30%, third year 45%. fourth year 60%, fifth year 80%. /2 Tax payable by companies on their profits is graduated from 10% on the first $2,000 of profits after deductions, to 50% of taxable income in excess of $100,000. A tax forfeit of 1% (0.75% in some enterprises) of turnover is payable by all enterprises; this is deductible from total profits tax payable but non-returnable if there is no profits tax liability. A surtax of 20% of tax payable on profits exceeding $40,000 was introduced for FY81/82 only. There is a 15% withholding tax on income paid abroad. Sources: Le Moniteur, various; ONAPI; mission data.  FISCAL INCENTIVES TO AGRICULTURAL, INDUSTRIAL AND TOURISM ENTERPRISES Incentives Laws Criteria Income Tax Exemptions/-/2 Customs Duty Exemptions Other Benefits Agricultural and Industrial Enterprises Decree of March 13, 1963. Privileges granted to enterprises which: All enterprises indefinitely exempted All enterprises a,nd entrepreneurs Incentives applications (a) Make use of domestic raw materials Five years. from import duties (but not consular exempted from municipal taxes and need to be approved by as to at least 50% of the total cost fees, storage taxes and handling alien taxes. Technicians and the Advisory Committee of raw materials. fees) for specialized workers exempted from composed of five represen- (b) Use more than 50% imported raw Five years; (a) Building materials not available municipal and alien taxes for tatives, one each from the materials for which no domestic locally. one year. State Secretariats for substitute is available and produce (b) Machinery and equipment, including Commerce and Industry; import substitution goods or goods generators. Agriculture; Public that help conserve national (c) Raw materials and intermediate goods Works and Transportation; resources. as well as packaging if not produced Labor and Social Welfare; (c) Prepare, modify, assemble or Five years. locally., a Finance and Economic finish imported items that will (d) Trucks locomotives and other necessary Affairs. substitute for imported finished transport equipment including buses for items. personnel transporation. (d) Manufacture, modify, assemble Five years. All enterprises indefinitely exempted or finish imported items destined from customs duties on exports. for exports. (e) Start import substitution production Five years. in a market which is less than 25% satisfied by existing local producers. (f) Start import substitutsct ion Two years plus whatever exemption (f)(g)(h) Where existing te where existing producers satisfy period is still enjoyed by the enterprises can show that they between 25 and 50% of the local market. last enterprise established to satisfy competitively at least produce the same product. 50% of the market for certain (g) Start import substitution production Whatever period is still products they may request the w where existing producers satisfy over available to the last enterprise benefit of import restrictions 50 but less than 75% of the local established to produce the same under the Law on Quotas. market. product. (h) If 75% or more of the home market All enterprises may reinvest in is supplied by existing producers no their business up to 25% of profits exemptions are granted. (or US$20,000, whichever is larger), this amount to be exempt from tax.  - 101 - ANNEX IV THE DRAFT NEW INVESTMENT CODE 1. Work has progressed on the preparation of a new investment code. The draft was almost ready for approval at the time of the mission's visit. The new code would gather together the various incentives and investment regulations currently scattered among at least five different decrees. It recognizes investors' rights such as the freedom to hire and fire and the protection of patents and trademarks, and guarantees fair compensation in case of nationalization. Foreign-financed investments are also guaranteed access to foreign exchange for transfers of interest and dividends, expa- triates' salaries, and for the repatriation of capital, or of compensation payments. The draft law proposes to classify privileged enterprises into three groups, with incentives decreasing over periods of 10 or 15 years. The first two of these groups, Groups A and B, are subject to similar criteria and given similar incentives to those provided under existing laws. 1/ The third group of enterprises are not covered under existing legislation, but have become an increasingly important, and controversial, part of industrial development. These are the joint companies set up by state agencies in con- junction with private local or foreign investors. Four such projects are currently in operation or at an advanced stage of planning: an edible oil refinery (SODEXOL), a fishing project (SPIDHA), a sugar mill, and a textile plant. However broad, the draft code provides the first Government policy statement on such projects. As proposed, the code says: "any particularly important enterprise in what the economic and social Development Plan considers to be a priority area can benefit from a Contract of Establishment which will grant certain guarantees and require certain obligations." Each Contract is signed for the Government by the Secretaries of State for Finance and for the related sector and would have to be approved by specific decree. The code thus proposes some opening up of the process by which joint sector companies have been created. If the new system can lead to a more thorough examination and discussion of the costs and benefits attached to proposed joint ventures, this by itself would represent an important step forward. Meanwhile the generality of the eligibility clause will do nothing to allay private investors' uncertainty as to which sectors the Government might be drawn into in the future. 2. Applications for incentives by Group A and B enterprises would have to be vetted by an interministerial Consultative Commission for Privileged Investments, much as they are now. In practice this system has now proved to be very effective since members of the investigative committee do not have the technical staff required to examine individual projects, while the data provided by prospective investors is usually insufficient for a professional project assessment. The composition of the Commission is slightly different 1/ Group A Enterprises in the Port-au-Prince region are completely exempted from income tax for 5 years, partially taxed at progressive rates during the next 5 years and fully taxed in the 11th year. Group B Enterprises located outside the Port-au-Prince region are tax exempt for 10 years, progressively taxed for the next 5 years and fully taxed in the 16th year.  - 102 - ANNEX IV from that of the present Advisory Committee in that it would also include ONAPI and the Central Bank. However, the Planning Department remains unrepresented, although conformity with the current Plan's objectives is one of the criteria to be considered in granting incentives. 3. The new investment code, if accepted in its present form, will consolidate and to some extent simplify the system of incentives. However, it runs the risk of being launched into the same vacuum as that in which its predecessors operated unless its administration can be strengthened. This would involve more thorough project appraisals before incentives are granted and monitoring of the progress of approved investments in terms of capital expenditure, employment and incentives status (possibly by means of an annual questionnaire). It is particularly important where improvements in project appraisal practices are concerned that there should be thorough cost-benefit analysis for any new Contract of Establishment joint ventures. For this, one of the multilateral or bilateral aid organizations or a recommended project pre-investment monitoring unit (see No. 69) should be able to supply ad hoc technical assistance. Paradoxically, if the law is to be applied more rigidly, certain of its provisions need to be weakened or scrapped. One such provision, which should be eliminated, is the theoretical monthly reporting requirement imposed on privileged enterprises. This also exists under current legislation, but is not complied with at all, nor could the Department of Commerce and Industry cope with the flood of paperwork that would ensue. Even the relatively simple documentation involved in franchise applications at present is too much for the Department's limited human and spatial resources. For the enterprises concerned such reports would involve unnecessary, and therefore resented, expenditure of time and effort. If the investment code is adhered to more strictly, the practice of rolling over tax exemption periods will become more difficult. High prevailing tariff and tax levels will then have a disincentive effect which could be diminished or eliminated by reducing tariffs on producer goods and switching to a low rate of tax on net income of all manufacturing enterprises. Such coordination between incentives and fiscal measures would be an important step towards a coherent policy framework for growh in local and foreign private investment.  - 103 - ANNEX V List of Restricted Imports 1. List of Imports Banned for Two Years 1/ Green or toasted coffee Candies Food paste Soap Detergents Shoes Mattresses Aluminium, enamelware, or plastic housewares Refined or unrefined oil Kerosene stoves Wastepaper Matches Fabric for hosiery (100 percent polyester) Rum, beer, alcohol Pastries Bread Jute bags Fruit juices Tubes Vinegar 2. Products Subject to Import Quotas 2/ Ham, bacon, hot dogs, bologna, sausages Fish and shellfish, fresh and frozen Meat (beef, mutton, kid, pork, and chicken) Yogurt Butter Fresh milk Corn, rice Wheat flour Corn flour and cassava flour Roasted peanuts Peanut butter Roasted cashew nuts Soybean oil and animal fats Sugar and honey 1/ According to Decree of February 26, 1981, as modified by a decree published on September 17, 1981, and a communique dated September 24, 1981. 2/ According to Presidential Order of February 26, 1981.  - 104 - ANNEX V Cigarettes Toothpaste Disinfectants, deodorants, detergents Shampoos Waxes and shoe polish Shoes and leather articles Ceramic products Varnishes Paints (powder-, water-, and oil-based, enamel and for swimming pools) Industrial paint and other special paints Anticorrosive paint, lead-based and ferrous oxide-based Water proofing liquids Paint thinners Wood preservatives, insecticides and fungicides Woodstain Glues Sanitary napkins Paper table napkins Paper and cloth handkerchiefs Metal zippers Steelwood Paper and plastic bags Frozen fruit and vegetables Furniture made of wood and glass fiber Wrapping material made of paper, cardboard and plastic Toilet paper Toothbrushes Irons Batteries Jams Jellies Metal containers Nails Sheet metal and bottle caps for carbonated drinks Charcoal fired irons Portland cement (grey) Mosaics Cotton yarn, untreated, for retail sales Blue denim Burlap, carabella Socks, regular and sport Underwear Clothing Marble  - 105 - ANNEX VI QUALIFICATION CRITERIA FOR ACCESS TO THE US GENERAL SYSTEM OF PREFERENCES AND TARIFF ITEMS 806.30 AND 807.00 CONCESSIONS I. General System of Preferences For an Haitian export product to qualify for duty-free entry to the US market, the following criteria must be met: 1. The product must be included in the US GSP list (most clothing and textiles other than handloom fabrics are excluded); 2. The import must be from a designated beneficiary country (Haiti); 3. The sum of the cost or value of materials produced in Haiti (the beneficiary country) plus the direct cost of processing must equal at least 35% of the appraised value of the article at the time of entry into the US (the minimum value-added requirement); 4. The product must be imported directly into the US from Haiti; 5. A certificate of origin must be provided (the Certificate of Origin Form A, approved by UNCTAD, issued by Haitian authorities); 6. The importer must request GSP treatment; 7. US imports of the article from Haiti must not have exceeded $50.9 million in 1982 (the threshold is raised each year as a proportion of the US GNP), and must not have accounted for over 50% of total US imports of the articles in 1982. If either of these figures is reached, GSP eligibility on such products from Haiti would continue for the rest of the year, but would not be available the following year. II. US Imports Under Tariff Items 806.30 and_807.00 These items provide that the value of US components made by US labor are not dutiable when further processed (806.30) or assembled (807.00) abroad and returned to the US. US tariffs are payable only on the value added abroad. There is no minimum value added requirement.  Table A-1: GROSS DOMESTIC PRODUCT BY SECTOR, 1976-81 1/ (million 1976 Gourdes) Average Annual Growth Sector 1976 1977 1978 1979 1980 1981 1976-81, (%) Agriculture 1,675 1,588 1,604 1,594 1,675 1,597 -0.9 Mining and Quarrying 83 78 74 69 65 49 -10.0 Manufacturing 664 730 791 821 854 892 6.1 Construction 226 250 246 230 239 227 0.0 Public Utilities 10 11 14 16 18 19 13.7 Transport and Communication 88 110 104 135 152 160 12.7 Commerce 763 776 809 890 970 921 3.8 Banking and Insurance 9 10 10 11 11 10 2.1 Housing 233 237 241 245 249 237 0.3 Government 327 345 390 414 426 435 5.9 Personal Services 317 342 403 429 457 460 7.7 GDP at market prices 4,395 4,477 4,6862 4,854 5,116 5,007 2.6 1/ Preliminary estimates. IHS is preparing a serie of National Accounts with a new base 1976. Source: Haitian Institute of Statistics, International Monetary Fund and mission estimates.  Table A-2: GROSS DOMESTIC PRODUCT BY EXPENDITURES, 1976-81 (million 1976 Gourdes) Average Annual Growth 1976 1977 1978 1979 1980 1981 1976-81 (%) Consumption 4,108.2 4,363.7 4,475.0 4,712.5 4,823.4 4.852.4 3.4 Investment 677.8 749.0 706.3 677.1 723.8 639.2 -1.2 Public 376.8 418.5 496.2 428.6 393.8 347.4 -1.6 Private 306.0 330.5 210.1 248.5 330.0 291.8 -0.9 Total Expenditures 4,786.0 5,112.7 5,181.3 5,389.6 5,547.2 5,491.6 2.8 Balance of Goods and Non Factor Services 2/ - 391.0 - 635.7 - 495.3 - 535.6 - 431.2 - 484.6 4.4 Exports 736.5 601.7 736.6 762.6 902.6 756.2 0.5 Imports 1,127.5 1,237.4 1,231.9 1,298.2 1,333.8 1,240.8 1.9 Gross Domestic Product at Market Prices 4,395.0 4,477.0 4,686.0 4,854.0 5,116.0 5,007.0 2.6 Net Factor Payments Abroad - 36.0 - 57.6 - 67.3 - 59.9 - 61.4 - 72.1 -14.9 Gross National Product at Market Prices 4,359.0 4,419.4 4,618.7 4,794.1 5,054.6 4,934.9 2.5 Indirect Taxes minus Subsidies 279.9 307.5 302.7 307.3 326.0 331.1 3.4 _ Gross National Product at Factor Cost 4,079.1 4,111.9 4,316.0 4,486.8 4,728.6 4,603.8 2.4 Depreciation 108.0 115.6 134.3 114.8 138.1 151.0 6.9 Terms of Trade Effect -- 230.8 121.7 30.5 25.3 - 74.9 - National Income 3,971.1 4,227.1 4,303.4 4,402.5 4,615.8 4,377.9 2.0 1/ Preliminary. 2/ Exports and imports are net of inputs imported by the assembly industry. Sources: Haitian Institute of Statistics, International Monetary Fund and mission estimates.  Table A-3: GROSS DOMESTIC PRODUCT BY EXPENDITURES, 1976-81 (G million) Average Annual Growth 1976 1977 1978 1979 1980 1981 1976-81 (%) Consumption 4,108.2 4,736.4 4,749.3 5,666.2 6,787.4 7,854.0 13.8 Investment 677.8 813.4 842.6 881.6 1,091.5 1,026.6 8.7 Public 371.8 454.5 592.0 558.0 593.9 558.0 8.5 Private 306.0 358.5 250.6 323.6 497.6 468.6 8.9 Total Expenditures 4,786.0 5,549.8 5,591.9 6,547.8 7,878.9 8,880.6 13.2 Balance of Goods and Non-Factor Services 1/ - 391.0 - 440.0 - 443.0 - 665.5 - 629.5 - 928.0 -18.9 Exports 736.5 905.0 1,018.0 1,045.5 1,440.5 1,130.5 8.9 Imports 1,127.5 1,345.0 1,461.0 1,711.0 2,070.0 2,058.5 12.8 Gross Domestic Product at Market Prices 4,395.0 5,109.8 5,148.9 5,882.3 7,249.4 7,952.6 12.6 Net Factor Payments Abroad - 36.0 - 60.5 - 73.5 - 67.0 - 71.5 - 89.0 -19.8 Gross National Product at Market Prices 4,359.0 5,049.3 5,075.4 5,815.3 7,177.9 7,863.6 12.5 Indirect Taxes minus Subsidies 279.9 327.2 342.7 377.4 403.6 425.5 8.7 Gross National Product at Factor Cost 4,079.1 4,722.1 4,732.7 5,437.9 6,774.3 7,438.1 12.8 Depreciation 108.0 123.0 152.0 141.0 171.0 194.0 12.4 National Income 3,971.1 4,599.1 4,580.7 5,296.9 6,603.3 7,244.1 12.8 1/ Exports and imports are net of inputs imported by the assembly industry. Sources: Haitian Institute of Statistics, International Monetary Fund and mission estimates.  - 109 - Table A-4: SAVINGS AND INVESTMENT, 1976-81 (G million) 1976 1977 1978 1979 1980 1981 Gross Domestic Investment 677.8 813.4 842.6 881.6 1,091.5 1,026.6 Public Sector 371.8 454.5 592.0 558.0 593.9 558.0 Private Sector 306.0 358.5 250.6 323.6 497.6 468.6 Gross National Saving 250.8 312.9 326.1 149.1 390.5 9.6 Public Sector 83.2 159.7 237.8 215,6 56.4 -48.9 Private Sector 1/ 167.6 153,2 88,3 -66.5 334.1 58.5 Foreign Saving = resource gap 427.0 500.5 516.5 732.5 701.0 1,017.0 Transfers from abroad (net) 325.5 307.5 389.5 429,0 356.5 437.0 Change in international reserves; increase (-) - 58.0 - 64.0 - 51.5 - 70.0 59.0 166.5 Other 2/ 159.5 257.0 178.5 373,5 285.5 413.5 Gross National Saving as % of Domestic Investment 37.0 38.5 38.7 16.9 35.6 0.9 Sources: Tables A-3, A-5 and A-9. 1/ Residual Z/ Includes errors and omissions.  - 110 - Table A-5: SUMMARY PUBLIC SECTOR OPERATIONS, 1976-81 (G million) Rate of 2/ growth 1976 1977 1978 1979 1980 1981- p.a. Current Revenues 626.4 758.6 786.6 859.2 1,089.3 1,171.5 13.3 Central Government 434.3 515.8 548.6 570.1 691.1 655.9 8.6 Public Enterprises 192.1 242.8 238.0 289.1 398.2 515.6 21.8 Current Expenditures 543.2 598.9 548.8 643.6 1.032.9 1.220.4 17.6 Central Government 371.5 396.1 377.9 407.5 702.7 807.3 16.8 Public Enterprises 171.7 202.8 170.9 236.1 330.2 413.1 19.2 Current Account Sur- plus (+) of Deficit (-) 383.2 159.7 237.8 215.6 56.4 -48.9 - Capital Expenditures 439.5 517.9 630.2 610.4 636.0 623.2 7.2 Central Government 335.9 366.2 501.0 500.0 533.0 523.3 9.3 Public Enterprises 103.6 151.7 129.2 110.4 103.0 99.9 -0.7 Overall Deficit-/ 334.0 344.5 440.2 464.8 604.4 704.8 16.1 Domestic Financing (net) 26.4 -57.8 42.8 60.2 213.4 243.1 55.9 Foreign Financing (net) 307.6 402.3 397.4 404.6 391.0 461.7 8.5 Grants (184,5) (153.0) (246.0) (269.0) ((192.5) (214.0) (3.) Loais (123.1) (251.0) (211.0) (165.5) (183.0) (213.0) (11.6) Other - _ - _ (37.5) 1/ Includes a residual item which represents the overall surplus or deficit of the non-consolidated public sector. 2/ Preliminary 3/ Downpayment made in 1980. Source: Tables A-6 and A-8.  Table A-6: CENTRAL GOVERNMENT REVENUES AND EXPENDITURES, 1976-81 (G million) 1976 1977 1978 i19. 1980 1981 Current Revenues 434.3 515.8 548.6 570.1 691.1 655.9 Internal Revenue 148.3 200.1 212.3 274.8 287.4 371.4 Customs Revenue 142.6 157.8 175.7 295.3 403.7 284.5 Extra-Budgetary Revenue 146.4 157.9 160.6 Current Expenditures 371.5 396.1 377.9 407.5 702.7 807.3 Budgetary Expenditures 290.8 273.4 324.6 407.2 683.2 747.6 Wages and Salaries (130.1) (146.8) (179.5) (207.9) (293.2) (324.1) Transfers and Subsidies ( 23.2) ( 26.9) ( 36.6) ( 56.3) ( 64.1) ( 65.4) Interest Payments ( 5.5) ( 12.4) ( 17.4) ( 15.2) ( 27.3) ( 36.0) Expenditures of Customs and Internal Revenue Services ( 24.8) ( 27.6) ( 33.0) ( 42.4) ( 49.2) ( 48.0) Other (107.3) ( 59.7) ( 58.1) ( 85.4) (249.4) (274.2) Extra-budgetary Expenditures 80.7 122.7 53.3 - 19.5 59.7 Current Account Surplus (+) or Deficit (-) 62.8 119.7 170.7 162.6 -11.6 -151.4 Capital Expenditures 335.9 383.0 591.0 581.4 542.4 543.3 Financed with foreign grants 184.5 153.0 246.0 237.0 200.0 247.0 Financed with foreign loans 1/ 89.4 136.4 158.6 136.1 204.2 160.6 Other budgetary expenditures - - - 110.7 135.3 Extra-budgetary expenditures 62.0 93.6 186.4 208.3 27.5 - Overall Deficit (-) -273.1 -263.3 -420.3 -418.8 -554.0 -694.7 Domestic Financing (net) 0.1 -52.0 16.1 27.6 202.6 295.7 Foreign Financing 273.0 315.3 404.2 391.2 351.4 399.0 Grants (184.5) (153.0) (246.0) (269.0) 192.5 214.0 Development loans (net) 2/ (88.5) (162.3) (158.2) (122.2) 158.9 93.0 Other loans - - - - 92.0 Foreign loans for general budget support and down payment ($7.5) made in 1980 for the sugar mill. 2/ Includes PL480 Title I. Source: Ministry of Finance and Economic Affairs, Ministry of Planning and International Monetary Fund.  - 112 - Table A-7: CENTRAL GOVERNMENT REVENUES, 1976-81 (G million) 1976 1977 1978 1979 1980 1981 Current Revenues 434.3 515.8 548.6 570.1 691.1 655.9 Internal Revenues 214.2 241.2 261.3 274.8 287.4 371.4 Income Tax 59.5 64.8 73.7 78.4 88.0 115.8 Corporate (49.4) (52.5) (60.4) (64.2) (71.7) (91.1) Personal (10.1) (12.3) (13.3) (14.2) (16.3) (24.7) Property Taxes 7.8 8.3 10.2 10.1 10.4 10.7 Real Estate (2.2) (2.3) (2.5) (2.7) (2.9) (3-1) Mortgage Registration (5.6) (6.0) (7.7) (7.4) (7.5) (7.6) Excise Taxes 44.5 47.6 49.5 59.5 69.6 77.3 Flour (7.1) (9.7) (7.2) (8.3) (11.5) (12.5) Sugar (7.7) (4.9) (3.9) (7.4) (9.3) (8.5) Petroleum Products (11.9) (13.2) (15.1) (16.6) (15.7) (15.3) Cigarettes (8.1) (8.9) (10.5) (14.5) (16.6) (21.3) Other (9.7) (10.9) (12.8) (12.7) (16.5) (19.7) Other Internal Taxes 1/ 33.7 38.0 41.7 48.4 58.5 65.7 Non-Tax Revenues 2/ 60.8 73.8 76.7 68.4 49.6 90.4 Municipal Taxes 7.9 8.7 9.5 10.0 11.3 11.5 Custom Revenues 220.1 274.6 287.3 295.3 403.7 284.5 Export Taxes 90.1 113.1 117.2 99.4 164.3 48.1 Coffee (53.4) (76.7) (81.4) (50.3) (116.3) (42.4) Bauxite 3/ (35.5) (35.2) (34.6) (46.5) (43.1) (3.2) Other (1.2) (1.2) (1.2) (2.6) (4.9) (2.5) Import Duties 130.0 161.5 170.1 195.9 239.4 236.4 Regular (105.0) (128.5) (135.1) (145.3) (185.6) (204.3) Other 4/ (25.0) (33.0) (35.0) (50.6) (53.8) (32.1) 1/ Includes taxes on motor vehicles, consular services, identity card tax, stamp duties and solidarity tax. 2/ a) consists on tax revenues, which effective November 3, 1978, ceased to be earmarked to special checking accounts maintained by government agencies with the Bank of the Republic; b) includes also taxes and commissions formerly collected by the Regie du Tabac and previous transfers made by Regie du Tabac to the Treasury. 3/ Includes several taxes on bauxite extraction and exports, collected by Internal Revenue. 4/ Same as 2(a). Source: Ministry of Finance and Economic Affairs and International Monetary Fund.  - 113 - Table A-8: SUMMARY ACCOUNTS OF PRINCIPAL PUBLIC ENTERPRISES, 1976-81 (G million ) 1976 1977 1918 1979 1980 1981 3 I. Telecommunications Company Operating deficit (-) or surplus 1/ -9.1 -2.5 9.8 17.0 37.7 49.0 Current revenue 10.0 29.3 35.0 49.5 64.5 80.5 Current expenditure 19.1 31.8 25.2 32.5 26.8 31.5 Overall deficit (-) or surplus -36.5 -64.0 -15.8 -7.5 13.5 10.0 Capital expenditure 27.5 61.5 25.6 24.5 24.2 39.0 Gross fixed capital formation (29.5) (61.0) (25.6) (24.2) (23.8) 38.5 Inventory changes (-2.0) (0.5) (--) (0.3) (0.4) (0.5) Financing (net) 36.5 64.0 15.8 7.5 -13.5 -10.0 Domestic 38.5 66.0 17.8 8.1 -11.4 -10.0 External -2.0 -2.0 -2.0 -0.6 -2.1 - II. Water Supply Company Operating deficit (-) or surplus 1/ -0.5 -1.8 -2.4 -0.8 -0.8 -1.5 Current revenue 3.5 3.6 4.1 6.6 7.1 8.0 Current expenditure 4.0 5.4 6.5 7.4 7.9 9.5 Overall deficit (-) or surplus -23.8 -8.9 -4.2 -2.5 -2.0 -21.5 Capital expenditure 23.3 7.1 1.8 1.7 1.2 .20.0 Gross fixed capital formation (23.3) (7.1) (1.8) (1.7) (0.9) (19.7) Inventory changes (-) (-) (-) (--) (0.3) (0.3) Financing (net) 23.8 8.9 4.2 2.5 2.0 21.5 Domestic 8.1 2/ 3.0 3.5 3.7 3.9 -- External 15.7 5.9 0.7 -1.2 -1.9 21.5 III. Port Administration Operating deficit (-) or surplus 1/ 5.4 10.2 6.7 3.6 5.7 4.0 Current revenue 14.5 22.2 21.0 28.9 30.9 34.0 Current expenditure 9.1 12.0 14.3 25.3 25.2 30.0 Overall deficit (-) or surplus -31.1 -29.4 -11.7 -7.1 -8.7 -2.8 Capital expenditure 36.5 39.6 18.4 10.7 14.4 6.8 Gross fixed capital formation (36.5) (39.6) (18.4) (10.7) (14.4) (6.8) Inventory changes (--) (--) (--) (--) (--) (-) Financing (net) 31.1 29.4 11.7 7.1 8.7 2.8 Domestic 15.3 -5.4 -3.6 4.1 0.2 0.8 External 15.8 34.8 15.3 3.0 8.5 2.0  - 114 - Table A-8: SUMMARY ACCOUNTS OF PRINCIPAL PUBLIC ENTERPRISES (CONCLUDED), 1976-81 (G million) 1976 1977 1978 1979 1980 1981 IV. Electricity Company Operating deficit (-) or surplus l/ 10.9 15.4 26.0 23.7 32.4 55.0 Current revenue 33.4 45.2 56.9 69.9 98.1 137.6 Current expenditure 22.5 29.8 30.9 46.2 65.7 82.6 Overall deficit (-) or surplus -3.3 -31.6 -52.9 -16.8 -31.3 14.2 Capital expenditure 14.2 47.0 78.9 40.5 63.7 40.8 Gross fixed capital formation (12.1) (42.4) (75.7) (38.5) (61-2) (37.8) Inventory :hanges (2.1) (4.6) (3.2) (2.0) (2.5) (3.0) Financing (net) 3.3 31.6 52.9 16.8 31.3 -14.2 Domestic 3. -20.3 14.1 -4.8 4.2 -26.2 External -- 51.9 38.8 21.6 27.1 12.0 V. Flour Mill Operating deficit (-) or surplus 1/ 13.7 18.7 27.0 9.5 -7.0 -4.0 Current revenue 130.7 142.5 121.0 134.2 1976 255.5 Current expenditure 117.0 123.8 94.0 124.7 204.6 259.5 Overall deficit (-) or surplus 11.6 22.2 22.5 -23.5 -6.5 2.7 Capital expenditure 2.1 -3.5 4.5 33.0 -0.5 -6.7 Gross fixed capital formation (--) (--) (5.5) (25.8) (1.0) Inventory changes (2.1) (-3.5) (-1.0) (7.2) (-1.5) (-6.7) Financing (net) -11.6 -22.2 -22.5 23.5 6.5 -2.7 Domestic -16.8 -20.3 -22.5 3.0 14.0 -32.7 External 5.2 -1.9 -- 20.5 -7.5 30.0 1/ Before depreciation. 2/ Includes Government participation of G 6.8 million. 3/ Preliminary. Sources: Telecommunications d'Haiti S.A. (TELECO); Centrale Autonome Metropolitaine d'Eau Potable (CAMEP); Administration Portuaire de Port-au-Prince; Electricite d'Haiti; Bank of the Republic of Haiti and International Monetary Fund.  Table A-9: BALANCE OF PAYMENTS, 1976-81 (US$ million) 1976 1977 1978 Credit Debit Balance Credit Debit Balance Credit Debit Balance Goods and services 148.3 233.7 -85.4 182.3 282.4 -100.1 205.6 308.9 -103.3 Merchandise trade, f.o.b. 111.9 164.2 -52.3 137.6 199.9 -62.3 154.6 207.5 -52.9 Freight and merchandise insurance -- 31.6 -31.6 0.2 32.4 -32.2 0.4 34.3 .33.9 Other transportation 0.6 6.0 - 5.4 1.3 7.6 -6.3 1.8 14.5 42.7 Travel 31.4 11.5 19.9 36.7 12.0 -24.7 42.0 11.6 30.4 Investment income 1.0 8.2 - 7.2 1.3 13.4 -12.1 2.0 16.7 -14.7 Direct (1.0) (6.2) (-5.2) (1.3) (9.0) (-7.7) (1.7) (10.8) (-9.1) Other C --) (2.0) (-2.0) ( --) (4.4) (-4.4) (0.3) (5.9) (-5.6) Government, n.i.e. 2.7 8.8 -6.1 4.0 12.3 -8.3 3.2 17.3 -14.1 Other services 0.7 3.4 -2.7 1.2 4.8 -3.6 1.6 7.0 -5.4 Nonmerchandise insurance (0.2) (0.2) ( --) (0.4) (0.6) (-0.2) (0.6) (1.0) (-0.4) Other (0.5) (3.2) (-2.7) (0.8) (4.2) (-3.4) (1.0) (6.0) (-5.0) Unrequited transfers 111.9 46.8 65.1 105.6 44.1 61.5 125.2 47.3 Private transfers 75.0 46.8 28.2 75.0 44.1 30.9 76.0 47.3 28.7 Public transfers 36.9 -_ 36.9 30.6 -- 30.6 49.2 -- 49.2 Goods, services and transfers 260.2 280.5 -20.3 287. 326.5 -38 330. 356.2 25.4 Capital 47.4 15.7 31.7 70.9 19.5 1 69.0 3..3 35. Private direct investment 6.8 -- 6.8 8.0 -- 8.0 10.0 -- 10.0 Private sector capital -- -- -- -- -- -- -- -- -- Public sector capital 33.3 8.5 24.8 60.5 10.3 50.2 51.3 9.2 42.2 Central Government Public Enterprises Trust Fund -- -- -- 2.4 __ 2.4 7.7 -- 7.7 Short-term private capital -- 7.2 -7.2 __ 0.0. 8 .8 -- 4.0 - 4.0 Short-term official capital -- -- -- -- -- -- -- -- Errors and omissions 7.3 -- 7.3 -- 8.4 8.4 __ 20.1 20.1 SDR allocation _ -- -- -- -- -- -- -- __ Other unrequited earnings _ -- 0.2 = = = -- = _ Change in net international reserves (increase-) -11.6 -12.8 - 10.3  Table A-9: BALANCE OF PAYMENTS (CONCLUDED) , 1976-81 (US$ million) 1979 1980 1981 Credit Debit Balance Credit Debit Balance Credit Debit Balance Goods and services 211.7 358.2 -146.5 291.2 431.4 -140.2 229.4 432.8 -203.4 Merchandise trade, f.o.b. 138.6 245.0 -106.4 212.3 302.0 -89.7 153.7 298.0 -144.3 Freight and merchandise insurance 1.5 37.0 35.5 3.3 44.0 -40.7 3.9 43.0 -39.1 Other transportation 2.0 17.7 15.7 2.4 21.0 -18.6 2.6 21.4 -18.8 Travel 60.6 13.0 47.6 63.6 13.0 -50.6 57.2 12.0 45.2 Investment income 2.6 16.0 -13.4 3.1 17.4 -14.3 3.3 21.1 -17.8 Direct (2.2) (9.2) (-7.0) (2.6) (11.0) (_8.4) (2.8) (12.0) (-9.2) Other (0.4) (6.8) (-6.4) (0.5) ( 6.4) (-5.9) (0.5) ( 9.1) (-8.6) Government, n.i.e. 4.4 22.7 18.3 4.3 25.6 -21.3 6.3 27.3 -21.0 Other services 2.0 6.8 4.8 2.2 8.4 -6.2 2.4 10.0 -7.6 Nonmerchandise insurance (0.7) (1.2) (-0.5) (0.8) (1.4) (-0.6) (0.7) (_1.4) (-0.7) Other (1.3) (5.6) (-4.3) (1.4) (7.0) (-5.6) (1.7) (-8.6) (-6.9) Unrequited transfers 130.6 44.8 85.8 126.5 56.7 69.8 147.4 60.0 87.4 Private transfers 76. 44.8 32.0 88.0 56.7 31.3 98.0 60.0 38.0 a Public transfers 53.8 -_ 53.8 38.5 __ 38.5 49.4 __ 49.4 Goods, services and transfers 342.3 403,0 -60.7 417.7 488.1 .70.4 376.8 492.8 -116.0 Capital - 73.5 6.2 67.3 83.7 31.9 51.8 94.7 18.6 76.1 Private direct investment 12.0 -- 12.0 13.0 -- 13.0 15.7 -- 15.7 Private sector capital -- -- -- 11.1 0.6 10.5 8.0 1.7 6.3 Public sector capital 2/ 39.3 6.2 33.1 46.5 9.9 36.6 55.8 13.2 42.6 Central Government Public Enterprises Trust Fund 5.8 -- 5.8 8.1 -- 8.1 0.1 -- 0.1 Short-term private capital 9.3 -- 9.3 -- 13.9 - 13.9 -- 3.7 - 3.7 Short-term official capital -- -- __ __ 7.5 - 7.5 7.5 -- 77.5 Errors and omissions 7.1 7.1 5.0 -- 5.0 .6 _- SDR allocation 3.1 -- 3.1 3.2 -- 3.2 3.0 Other unrequited earnings 1/ 4.5 -- 4.5 3.6 __ 3.6 3.6 Change in net international reserves (increase -) - 14.0 11.8 33.3 l/ Includes gold revaluation. I Differ from World Bank debt tables which are in the process of being revised by Government. 3/ Preliminary. Sources: Bank of the Republic of Haiti, World Bank and International Monetary Fund.  - 117 - Table.A-10: EXPORTS, F.0.B., 1976-81 (US$ million) 1976 1977 1978 1979 1980 1981 Total 111.9 137.6 154.6 138.6 212.3 153.7 Agricultural exports 66.3 88.3 94.5 68.3 129.4 71.3 Coffee 44.0 63.6 62.3 39.3 90.9 33.1 Sisal 1.5 2.8 3.3 2.7 9.5 7.3 Sugar 1.8 - 2.3 - 6.4 - Cocoa 2.1 4.1 6.0 6.8 4.5 3.4 Essential oils 8.2 6.5 9.7 7.5 5.4 4.9 Meat 1.1 1.5 1.7 3.1 1.8 4.2 Other 7.7 9.8 9.2 8.9 10.9 18.4 Light manufactures 24.9 28.8 39.9 51.6 62.6 65.8 From domestic materials 12.7 14.1 18.7 25.0 29.0 25.8 From imported materials (net) 12.2 14.7 21.2 26.6 33.6 40.0 Minerals 20.7 20.5 20.2 18.7 20.3 16.6 Bauxite 18.2 17.3 17.2 18.0 19.6 16.6 Cement 2.5 3.2 3.0 0.7 0.7 - Sources: Bank of the Republic of Haiti; US Department of Commerce and International Monetary Fund.  - 118 - Table A-1l: VOLUME, UNIT PRICE AND VALUE OF PRINCIPAL EXPORT PRODUCTS, 1976-82 (Volume in thousands of metric tons; unit price in US dollar per metric ton unless otherwise indicated; value in millions of US dollars) 1/ 1976 1977 1978 1979 1980 1981 Coffee Volume 2/ 447 261 319 226 416 225 Unit price 3/ 98.4 243.3 195.3 174.0 218.3 145.2 Value 44.0 63.6 62.3 39.3 90.9 33.1 Sisal Volume 3.0 3.4 4.2 2.3 3.3 0.8 Unit price 484 309 391 326 437 500 Value 1.5 1.0 1.6 0.7 1.4 0.5 Sisal string Volume - 4.0 3.3 3.9 10.6 8.3 Unit price - - - 520 760 780 Value - 1.8 1.7 2.0 8.1 6.8 Sugar Volume 7.1 - 5.3 - 19.2 - Unit price 254 - 441 - 334 - Value 1.8 - 2.3 - 6.4 - Cocoa Volume 2.5 1.6 2.7 2.9 2.3 2.6 Unit price 836 2,555 2,555 2,358 1,935 1,270 Value 2.1 4.1 6.0 6.8 4.5 3.3 Essential oils Volume 0.3 0.3 0.3 0.3 0.2 0.2 Unit price 24,507 24,725 31,140 25,104 22,387 24,120 Value 8.2 6.5 9.7 7.5 5.4 4.9 Bauxite Volume 739 701 630 613 579 Unit price 24.7 24.8 27.4 30.0 33.8 32.0 Value 18.2 17.3 17.2 18.1 19.6 15.5 Meat Volume 0.8 0.6 0.8 1.5 0.8 1.5 Unit price 1,353 2,637 2,128 2,065 2,700 Value 1.1 1.5 1.7 3.1 1.8 4.0 1! Calculated from the full value and volume figures: thus unit price multiplied by the rounded volume figure in this table may not equal the rounded value figure. 2/ In thousands of 60-kilogram bags. 3/ US dollars per kilogram-bag. Sources: Bank of the Republic of Haiti and International Monetary Fund.  - 119 - Table A-12: EXPORTS OF LIGHT MANUFACTURES TO THE UNITED STATES, F.0.B. 1/ (US$ thousand) 1976 1977 1978 1979 1980 1981 31 Total 95,206 104,389 119,913 152,836 170,067 199,687 Products from domestic materials 10,644 13,302 16,255 25,752 31,421 25,829 Leather manufactures 1,403 2,013 4,587 4,730 8,666 9,607 Wood manufactures 328 308 416 568 782 786 Cotton fabric -- -- -- 11 8 -- Coated and impregnated textiles 1,855 2,030 2,024 3,116 6,081 3,719 Textile products 1,983 2,441 3,461 5,010 6,608 7,203 Carpets, carpeting, rugs, and mats 929 786 374 575 655 457 Glass articles, n.e.s. -- -- -- 172 144 -- Wood furniture 573 1,198 1,365 2,040 2,057 2,379 Works of art 274 401 930 1,991 426 325 Brooms, brushes, buttons, and candles 2,780 3,683 2,555 6,992 5,745 5,720 Informal entries 519 442 543 547 249 599 Products from imported materials 2/ 84,562 91,087 103,658 127,084 138,646 173,858 Tulle, lace, ribbons, etc. 190 198 220 232 321 393 Articles of iron and steel, n.e.s. -- -- -- -- -- -- Power-generated machinery -- -- -- -- -- -- Of fice machines and parts 6,181 5,592 -- -- -- -- Machinery and appliance parts 993 1,696 2,721 4,126 4,760 7,719 Transformers switch gear, etc. 5,751 6,610 5,051 5,675 6,779 19,916 Equipment for distributing I electricity 427 443 5,124 1,568 3,316 4,927 4adio receivers and parts 78 1,642 702 5,581 -- 5,397 Electrical apparatus and parts, n.e.s. 10,671 9,669 8,171 19,629 14,137 13,667 Travel goods and handbags 723 634 1,711 3,938 5,317 8,137 Clothing 32,880 36,270 43,215 37,519 52,894 59,604 Footwear 1,562 1,830 1,797 679 2,904 5,853 Tape recorders 568 500 238 -- 200 -- Rubbers and plastic manufactures 465 403 682 6,560 5,985 5,722 Toys and sporting goods 24,073 25,600 33,576 41,511 41,961 42,294 Other -- -- -- 66 72 228 1/ Data are for calendar years. 2/ Only domestic value added is included in the export figures of Tables. 3/ Fiscal year. Source: US Department of Commerce.  - 120 - Table A-13: COMPOSITION OF IMPORTS, C.I.F., 1976-80 1976 1977 1978 1979 1980 (In millions of U.S. dollars) Total 1/ 215.8 232.3 241.8 282.0 346.0 Food products 43.5 38.0 39.0 40.0 50.0 Beverages and tobacco 3.6 3.3 4.1 3.9 4.2 Raw materials 7.5 6.9 9.8 7.8 9.1 Fuels and lubricants 17.1 23.6 24.5 34.5 63.0 Of which: petroleum and derivatives (16.7) (21.6) (22.5) (31.6) (61.4) Fats and oils 15.1 16.6 13.4 18.8 19.7 Chemical products 14.8 16.0 20.1 23.8 27.5 Manufactured products 40.6 41.1 42.7 61.2 64.6 Machines and transport 35.0 40.2 42.9 54.3 64.0 Other manufactures 16.6 21.2 23.0 20.1 22.8 Other 7.3 1.3 1.1 1.5 1.6 Balance of payments adjustment 14.7 24.1 21.2 16.0 19.5 (In percent of total) Food and beverages 21.8 17.8 17.8 15.6 15.7 Raw materials 3.5 3.0 4.1 2.8 2.6 Fuels and lubricants 7.9 10.2 10.1 12.2 18.2 Of which: petroleum and derivatives (7.7) (9.3) (9.3) (11.2) (17.7) Fats, oils, and chemical products 13.9 14.0 13.9 15.1 13.6 Machines and manufactured products 42.7 44.1 44.9 48.1 43.8 Other 10.2 10.9 9.2 6.2 6.1 1/ SITC classification as reported by Customs, plus balance of payments adjustment. Sources: Customs Administration, Foreign Trade Yearbook; Bank of the Republic of Haiti, and International Monetary Fund.  - 121 - Table A-14: ACCOUNTS OF THE BANKING SYSTEM, 1976-81 (G million) 1976 1977 1978 1979 1980 1981 I. Monetary authorities' accounts 1/ Net international reserves 38.5 -102.3 153.6 223.4 164.4 -1.2 Assets 113.6 155.0 209.3 273.4 201.6 96.9 Liabilities -75.1 -52.7 -55.7 -50.0 -37.2 -98.1 Use of IMF credit (-72.5) (-49.5) (-51.2) (-41.4) (-28.8) (-90.5) Other (-2.6) (-3.2) (-4.5) (-8.6) (-8.4) (-7.5) Net domestic assets 622.7 752.8 952.7 1,117.1 1,405.1 1,769.9 Net claims on public sector 466.5 523.1 658.5 778.7 1,031.6 1,329.5 General Govern- ment (net) (313.0) (330.4) (419.4) (508.3) (753.6) (1,101.5) Overdraft and loans /444.4/ /553.2/ /649.0/ /759.4/ /999.3/ /1,368.6/ Deposit (-) /-131.4/ /-222.8/ /-229.6/ /-251.1/ /-245.7/ /-267.1/: IDAI (6.4) (1.9) (5.1) (5.5) (13.4) (17.0 ) Loans /12.5/ /12.4/ /11.9/ /13.9/ /14.2/ /29.5 / Deposits and cash /-6.1/ /-10.5/ /-6.8/ 1-8.4/ /-0.8/ /-12.1*/ Other official entities (net) (147.1) (190.8) (234.0) (264.9) (264.6) (211, 0) Loans /227.7/ /328.4/ /402.1/ /416.4/ /411.71 /439 .2/ Deposits and cash /-80.6/ /-137.6/ /-168.1/ /-151.5/ /-153.1/ /-228 .2/ Of ficial capital and surplus -46.0 -58.9 -72.7 -89.5 -155.3 -16').2 Credit to commercial banks 13.7 29.9 31.8 42.4 22.7 '34.4 Credit to private sector 155.1 206.6 251.9 269.2 316.2 1653.5 Net unclassified assets 33.4 52.1 83.2 116.3 189.9 221.7 Counterpart unrequited foreign exchange 2/ 42.7 42.5 41.6 57.0 73.5 82.1 IMP Trust Fund -- 11.8 50.4 81.6 120.3 105.9 Medium- and long-term foreign liabilities 136.2 249.1 340.6 400.6 440.1 490.5 General Government 50.4 118.4 187.1 253.7 296.4 332.5 Rest of public sector 85.8 130.7 153.5 146.9 143. 7 158.0 Liabilities to com- mercial banks 159.5 174.8 207.3 209.3 322.8 368.8 Currency holdings 7.9 10.5 19.3 18.3 32.1 33.7 Deposits 151.6 164.3 188.0 191.0 290. 7 335.1 Liabilities to private sector 322.8 376.9 466.4 592.0 612.8 720.4 Monetary liabilities 239.3 273.6 337.2 430.7 429.9 527.8 Currency in cir- culation (186.6) (211.8) (272.7) (348.4) (332.7', (391.3) Demand deposits (52.7) (61.8) (64.5) (82.3) (97.2') (136.5) Quasi-money 83.5 103.3 129.2 161.3 182.8 192.6 Savings deposits (60.8) (74.3) (88.0) (99.5) (116.9) (118.5) Other (22.7) (29.0) (41.2) (61.8) ( 65.5J) ( 74.1)  - 122 - Table A-14: ACCOUNTS OF THE BANKING SYSTEM (Continued), 1976-81 (G million) 1976 1977 1978 1979 1980 1981 II. Private banks 3/ Net foreign assets -63.2 -59.1 -39.2 -28.3 -15.3 -8.9 Assets 27.8 24.4 39.6 22.0 59.4 76.5 Liabilities -91.0 -83.5 -78.8 -50.3 -74.7 -85.4 11onetary reserves and currency holdns 165.7 188.2 217.7 226.7 335.2 383.3 Cl irrency holdlings 8.0 10.5 19.3 18.3 32.1 33.7 De- posits with monetary E tuthorities 157.7 177.7 198.4 208.4 303.1 349.6 Net domestic assets 382.1 473.9 565.7 684.3 708.6 772.2 Net claims on public sek tor 16.0 14.9 14.1 14.1 14.1 - 1.1 Get teral Govern- m eit (net;' (13.6) (13.6) (13.6) (13.6) (13.6) (-1.6) Othtir offici.al en tities (net) ( 2.4) ( 1.3) ( 0.5) ( 0.5) ( 0.5) ( 0.5) Credit to priv.ate sectc'r 364.6 451.4 539.6 652.6 694.2 764.8 Net unc lassified asset:3 1.5 7.6 12.0 17.6 0.3 8.5 Medium- and lort g- term foreigii liabilities 57.5 Liabiliti es to mone- tary aut:1orities 11.6 26.9 24.5 34.1 10.2 12.8 Liabilitie-3 to private sector 473.0 576.1 719.7 791.1 1,018.3 1,133.8 Monetary liabilities 131.1 128.3 165.1 182.2 236.8 290.3 Demand deposits (131.1) (128.3) (165.1) (182.2) (236.8) (290.3) Quasi-money 326.0 425.4 528.2 579.3 743.0 791.1 Savings deposits (181.9) (229.1) (298.5) (350.6) (412.2) (428.2) Other (144.1) (196.3) (229.7) (228.7) (330.8) (362.9) Private capital and surplus 4/ 15.9 22.4 26.4 29.6 38.5 52.4  _ 123 - Table A-14: ACCOUNTS OF THE BANKING SYSTEM (CONCLUDED), 1976-81 (G million) 1976 1977 1978 1979 1980 1981 III. Consolidated banking system Net international reserves -24.7 43.2 114.4 195.1 149.1 -10.1 Assets 141.4 179.4 248.9 295.4 261.0 173.3 Liabilities -166.1 -136.2 -134.5 -100.3 -111.9 -183.4 Use of DMF credit (-72.5) (-49.5) (-51.2) (-41.4) (-28.8) -90.5 Other (-93.6) (-86.7) (-83.3) (-58.9) (-83.1) -7.5 Net domestic assets 999.4 1,213.2 1,504.3 1,784.7 2,130.2 2,542. Net claims on public sector 482.5 538.0 672.6 792.8 1,045.7 1,328.4 General Government (net) (326.6) (344.0) (433.0) (516.7) (768.1) (1,099.9) IDAI (net) (6.4) (1.9) (5.1) (5.5) (13.4) (17.0) Other official entities (net) (156.0) (192.1) (239.6) (276.1) (278.5) (211.5) Official capital and surplus -46.0 -58.9 -72.7 -89.5 -155.3 -169.2 Credit to private sector 519.7 657.8 791.5 921.8 1,010.4 1,118.3 Net unclassified assets 34.9 61.7 95.2 133.9 190.2 230.2 Interbank float 8.3 16.4 17.7 25.7 24.8 34.8 Counterpart unrequited foreign exchange 42.7 42.5 41.6 57.0 73.5 82.1 IMF Trust Fund -- 11.8 50.4 81.6 120.3 105.9 Medium- and long-term foreign liabilities 136.2 249.1 340.6 458.1 440.1 490.5 Liabilities to private sector 795.8 953.0 1.186.1 1.383. 1,631.1 1,854.2 Monetary liabilities 370.4 401.9 502.3 612.9 666.7 818.1 Currency outside banks (186.6) (211.8) (272.7) (348.4) (332.7) (391.3) Demand deposits (183.8) (190.1) (229.6) (264.5) (334.0) (426.8) Quasi-money 409.5 528.7 657.4 740.6 926.8 983.7 Savings deposits (242.7) (303.4) (386.5) (450.1) (529.1) (546.7) Other (166.8) (225.3) (270.9) (290.5) (396.7) (437.0) Private capital and surplus 4/ 15.9 22.4 26.4 29.6 38.5 52.4 1/ Includes all operations of the Bank of the Republic and the National Credit Bank, and the coin issue of the Treasury Department of the Ministry of Finance. 2/ Cumulative allocation of SDRs and exchange profits or losses. 3/ Includes the local branches of the Royal Bank of Canada, the First National City Bank of New York, the Bank of Nova Scotia, the Bank of Boston, the Bank of Chicago, and the Banque Nationale de Paris; and the following domestic banks: Banque de l'Union Haitienne, Banque Populaire Haitienne, Banque Commerciale d'Haiti, and Banque Industrielle et Commerciale. 4/ Includes capital and surplus of the Banque Populaire Haitienne, which was taken over by the Government in 1973. Source: Bank of the Republic of Haiti, and International Monetary Fund.  - 124 Table A-15:ORIGIN, DESTINATION, AND FINANCING OF BANK CREDIT, 1976-81 (G million) 1976 1977 1978 1979 1980 1981 Total credit 863.2 964.1 1,163.7 1,384.0 1,690.0 2,052.3 Origin Monetary authorities 472.8 473.8 580.3 674.0 956.6 1,245.3 Private banks 382.1 473.9 565.7 684.3 708.6 772.2 Interbank float 8.3 16.4 17.7 25.7 24.8 34.8 Destination Public sector 1/ 346.3 288.9 332.0 392.2 605.6 837.9 National Government (276.2) (225.6) (245.9) (268.2) (470.8) (767.4) Other official entities and IDAI (70.1) (63.3) (86.1) (124.0) (134.8) (70.5) Private sector 519.7 658.0 791.5 921.8 1,010.4 1,118.3 Other 2/ -2.8 17.2 40.2 70.0 74.0 95.8 Financing Liabilities to private sector 795.8 953.0 1,186.1 1,383.1 1,631.1 1,854.2 Monetary authorities (322.8) (376.9) (466.4) (592.0) (616.8) (720.4) Private banks (473.0) (576.1) (719.7) (791.1) (1,018.3) (1,133.8) Net international reserves (positive asset -) 24.7 -43.2 -114.4 -195.1 -149.1 10.1 Monetary authorities (-38.5) (-102.3) ( -153.6) (-223.4) (-164.4) (1.2) Private banks (63.2) (59.1) (39.2) (28.3) (15.3) (8.9) Unrequited foreign exchange 42.7 42.5 41.6 57.0 73.5 82.1 Trust Fund -- 11.8 50.4 81.6 120.3 105.9 Medium- and long-term foreign liabilities of private com- mercial banks -- -- -- 57.5 __ __ l|1 Net of medium- and long-term foreign liabilities of the Bank of the Republic of Haiti. "/ Comprises official capital and surplus of the Bank of the Republic, interbank float and net unclassified assets. Sources: Bank of the Republic of Haiti and International'Monetary Fund.  Table A-16: CHANGES IN CONSIUFTR PRICF INDEX FOR PORT-AU-PRINCE, 1976-81 General Index Food Clothing Housing (100.0) (68.6) (19.5) (11.9) Fiscal Year Average 1976 10.2 12.2 2.0 8.1 1977 6.9 7.8 -1.6 13.3 1978 -2.6 -6.9 2.1 9.4 1979 13.0 15.6 1.9 12.8 1980 18.1 26.8 0.3 3.0 End of Year X 1976 3.8 -0.2 0.2 19.6 1977 5.1 8.1 -1.9 2.9 1978 2.3 -2.0 3.8 16.9 1979 18.8 26.4 0.1 8.2 1980 6.3 9.2 - - 1981 21.0 - n.a. n.a. n.a. 1/ Preliminary. Source: Haitian Institute of Statistics. 1/ Preliminary.  Table A-17: PETROLEUM CONSUMPTION, 1976-81 (thousand barrels) Average Annual Growth Rate, 1976-81 1976 1977 1978 1979 1980 1981 % LPG 16 18 22 24 30 36 17.6 Aviation Gasoline 27 30 34 37 23 15 11.9 Aviation Turbine - Fuel 75 89 96 140 126 101 6.1 Motor Gasoline - Premium 300 333 383 395 391 384 5.1 Kerosene 34 42 60 46 46 48 7.1 Diesel 502 556 579 625 620 666 5.8 Fuel Oil 456 425 469 424 412 435 -0.9 Lubricants 22 23 23 25 35 22 - Asphalt 63 35 29 47 12 11 -29.5 Others - - - - - 9 - Total 1,495 1,553 1,697 1,763 1,695 1,727 2.9 Source: Shell Oil of the West Indies.  Table A-18: SECTORAL ALLOCATION OF PUBLIC INVESTMENT EXPENDITURE BY YEARS, 1972-82 (in Z of Total) Sectors Actual Data Budget Estimates 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981/1 1981 1982 Agriculture 9.3 12.1 12.9 9.0 8.6 10.8 15.7 27.0 16.1 15.0 15.6 23.4 Mines and Quarries 0.8 - 0.6 0.2 0.7 0.8 1.1 1.5 1.1 0.9 1.1 1.4 Industry and crafts 5.7 1.5 2.7 3.5 2.3 1.1 2.0 7.9 6.7 7.0 9.1 6.7 Power 19.2 16.7 10.3 5.5 6.0 21.9 13.8 11.1 7.9 23.7 15.4 5.6 Drinking water 2.3 1.1 1.0 1.9 7.7 1.8 0.5 0.7 1.0 2.7 5.6 2.6 Tourism 0.7 0.9 0.7 0.6 0.2 0.1 0.3 0.4 0.5 0.3 0.3 0.2 Transport 15.7 8.0 24.2 47.6 46.6 36.7 38.5 25.2 26.7 18.1 15.7 20.9 Communications 8.0 13.2 18.2 10.1 7.4 3.3 1.9 3.5 8.6 2.3 3.0 3.7 Urban development,housing - - - 0.7 0.2 0.1 0.1 0.4 1.0 3.0 7.7 6.0 Education 2.7 9.1 4.1 7.3 3.7 4.2 4.2 9.3 10.4 10.0 8.7 8.1 w Health 15.3 17.1 7.5 5.8 3.1 5.7 6.3 6.4 9.7 8.3 6.6 7.9 Social affairs - - - - - - 0.1 0.1 0.4 0.1 0.2 0.2 Community development 11.3 9.1 12.1 3.5 10.4 9.9 11.7 4.2 7.3 7.2 7.5 8.9 Administration 9.0 11.3 5.7 4.3 3.1 3.6 3.8 2.3 2.6 1.4 3.5 4.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Realization 80.6 69.1 87.7 101.3 84.2 79.3 80.3 80.3 57.8 51.9 /1 Preliminary Source: IBRD, Current Economic Position and Prospects of Haiti, Dec. 22, 1978 Budget 1980 and information from Planning Ministry, Department of Evaluation and Control.  Table A-19: DISBURSEMENTS BY SECTOR, SECOND FIVE-YEAR DEVELOPMENT PLAN, 1977-81 (G Million) 1977 1978 1979 1980 1981 Total % Agriculture 57.8 112.9 187.0 93.2 85.2 536.1 17.3 Mines and Quarries 4.2 7.6 10.6 6.5 5.0 33.9 1.1 Industry and Crafts 5.7 14.7 54.7 38.4 40.0 153.5 5.0 Power 117.3 99.1 76.8 45.5 135.0 473.7 15.3 Drinking Water 9.7 3.4 4.8 6.1 15.2 39.2 1.2 Tourism 0.4 2.5 2.5 2.8 1.9 10.1 0.3 Transportation 196.8 277.7 174.1 154.0 102.7 905.3 29.2 Communications 17.8 13.9 24.2 49.1 12.9 117.9 3.8 1 Urban Development/Housing 0.4 0.6 2.5 5.7 16.8 26.0 0.8 4 Education 22.3 30.2 64.7 60.2 57.3 234.7 7.6 Health 30.5 45.7 44.0 56.0 47.1 223.3 7.5 Social Affairs - 0.7 0.4 3.7 0.4 5.2 0.1 Community Development 52.8 84.0 29.3 42.2 41.0 249.3 8.0 Administration 19.0 27.2 16.2 15.0 7.7 85.1 2.8 Total Disbursed 534.7 720.2 691.8 578.4 568.2 3,093.3 100.0 Budget Estimates 674.7 896.6 861.0 1,001.2 1,094.4 4,527.9 Achievement Rate (%) (79.3) (80.3) (80.3) (57.8) (51.9) (68.3) 1/ Preliminary. Source: IBRD, Current Economic Position and Prospects of Haiti, Dec. 22, 1978 Budget 1980 and Information from Planning Ministry, Department of Evaluation and Control.  - 129 - Table A-20: TENTirIVE DISBURSEMENT TARGETS FOR MAJOR PROGRAMS/PROJECTS UNDER THE FIVE-YEAR PLAN, 1982 86 (G Million) Estimated Disbursement Tentative Disbursement Targets 1981 1982 1983 1984 1985 1986 Total 5-Year Agriculture T.Ba-sic food stuffs production 4.7 4.5 10.0 12.0 15.0 20.0 61.5 2. Coffee, industrial and export crops production 4.7 4.6 8.0 10.0 13.0 16.0 51.6 3. Livestock development 6.3 1.8 3.0 4.0 4.0 4.0 16.8 4. Eradication of swine fever 1.8 35.5 3.5 3.5 4.0 4.0 50.5 5. Preservation and development of natural resources 9.1 10.0 15.0 20.0 30.0 40.0 115.0 6. Research, extension, rural develop. services, credit 7.9 8.1 12.0 15.0 15.0 15.0 65.1 7. Institutional (DARNDR) 0.4 7.4 10.0 10.0 10.0 10.0 47.4 8. Regional integrated rural development schemes 33.3 63.6 97.1 109.6 122.7 138.9 531.9 Total 68.2 135.5 158.6 184.1 213.7 247.9 939.8 Mining 1. Develop. of non-metallic mines 0.8 0.9 4.0 5.0 7.0 9.0 25.9 2. Develop. of metallic mines 0.7 2.7 5.0 7.0 8.0 10.0 32.7 3. Develop. of energy resources 3.8 3.0 6.4 5.9 5.9 5.3 26.5 4. Institutional development 0.1 ... 0.5 0.5 0.5 0.5 2.0 Total 5.4 6.6 15.9 18.4 21.4 24.8 87.1 Industry and Crafts 1. Industrial parks 2.7 6.9 10.0 12.0 15.0 18.0 61.9 2. Agro-industries;promotion of other industries; participa- tions; technical services. 37.5 25.2 29.5 34.0 38.0 44.0 170.7 Total 40.2 32.1 39.5 46.0 53.0 62.0 232.6 Electric Power 1. Construction and rehabilitation of generation facilities 70.4 13.7 80.5 92.6 93.3 114.3 394.4 2. Construction and rehabilitation of transmission and distribu- tion system 37.8 31.3 50.0 60.0 80.0 90.0 311.3 3. Feasibility studies - 5.9 10.0 10.0 15.0 15.0 55.9 4. Training - 1.3 3.0 4.0 5.0 5.0 18.3 Total 108.2 52.2 143.5 166.6 193.3 224.3 779.9  - 130 - Table A-20: DIS8URSEMENT TARGETS FOR MAJOR PROGRAMS/PROJECTS UNDER THE FIVE-YEAR PLAN, 1982-86 (G Million) Estimated Disbursement Tentative Disbursement Targets 1981 1982 1983 1984 1985 1986 Total 5-Year Drinking Water/Sewerage 1. Construction and equipment - Port-au-Prince 0.6 0.6 5.0 8.0 10.0 15.0 38.6 2. Construction and equipment - Provinces 13.2 6.7 22.9 23.0 25.7 27.3 105.6 3. Feasibility studies and research 0.2 .. 2.0 3.0 3.0 3.0 11.0 4. Institutional development 1.1 0.2 1.0 2.0 3.0 3.0 9.2 Total 15.1 7.5 30.9 36.0 41.7 48.3 164.4 Tourism F.-Construction and rehabilitation of roads, bridges, etc. 0.4 0.1 5.3 5.3 6.7 7.4 24.8 2. Restoration, improvements 0.2 0.7 2.0 3.0 3.0 4.0 12.7 3. Feasibility studies 0.3 0.2 0.5 0.8 1.0 1.0 3.5 Total 0.9 1.0 7.8 9.1 10.7 12.4 41.0 Transportation 1. Construction, rehabilitation, surveys-sea transport 25.6 18.9 20.0 20.0 22.0 25.0 105.9 2. Construction, rehabilitation, surveys-air transport 4.5 19.8 15.0 15.0 15.0 15.0 79.8 3. Construction, maintenance, surveys-Roads 68.4 105.8 82.5 102.5 123.7 147.6 562.1 4. Institutional Development 3.7 6.6 7.0 7.0 7.0 7.0 34.6 Total 102.2 151.1 124.5 144.5 167.7 194.6 782.4 Communications 1. Construction and extension of telecommunications network 10.5 15.4 33.0 37.7 44.1 51.0 181.2 2. Construction and equipment for postal services 0.4 0.6 1.0 1.5 2.0 3.0 8.1 3. Institutional development 1.9 1.1 2.5 3.0 3.0 3.0 12.6 Total 12.8 17.1 36.5 42.2 49.1 57.0 201.9  - 131 - Table A-20: TENTATIVE DISBURSEMENT TARGETS FOR MAJOR PROGRAMS/PROJECTS UNDER THE FIVE-YEAR PLAN, 1982-86 (G Million) Estimated Disbursement Tentative Disbursement Targets 1981 1982 1983 1q84 1985 1986 Total 5-Year Urban Development and Housing 1. Housing construction 7.0 0.6 5.0 10.0 15.0 20.0 50.6 2. Urban renovation 8.6 21.9 36.0 36.9 38.5 41.4 174.7 3. Institutional development 0.1 0.1 0.5 1.0 2.0 3.0 6.6 Total 15.7 22.6 41.5 47.9 55.5 64.4 231.9 Education 1. School construction and Develop. 32.9 30.5 30.8 35.7 42.4 51.2 190.6 2. School rehabilitation/maintenance 0.8 2.0 2.0 4.0 5.0 6.0 19.0 3. Teacher training 1.6 2.0 2.3 3.0 3.5 4.0 14.8 4. Teaching materials, curricula develop. educational radio - 2.2 3.0 3.2 3.8 4.2 16.4 5. Institutional developments/ strengthening of organiza- tion at all levels 21.1 21.7 22.0 24.0 26.0 28.0 121.7 6. Cultural development 0.8 0.6 1.0 1.0 1.5 2.0 6.1 Total 57.2 59.0 61.1 70.9 82.2 95.4 368.6 Public Health 1. Regionalization of health services 8.' 12.9 15.0 17.0 19.0 21.0 84.9 2. Infant/maternal healthy and family planning 14.1 17.3 18.0 19.0 20.0 22.0 96.3 3. Endemic diseases control 1.3 2.7 3.0 4.0 5.0 6.0 20.7 4. Fight against malnutrition 0.8 1.4 2.0 2.5 3.0 3.5 12.4 5. Expansion and improvement of services 22.6 25.2 25.4 31.1 38.4 46.6 166.7 Total 47.5 59.5 63.4 73.6 85.4 99.1 381.0 Community Development 1. The "HACHO" Program 3.6 1.5 2.0 2.5 3.0 4.0 13.0 2. "SCH" Program 6.8 .. 0.1 0.3 0.5 1.0 1.9 3. "CARE" Program 19.5 29.2 28.4 31.7 33.9 34.5 157.7 4. "ONAAC" Program 3.0 2.7 3.0 3.5 4.5 5.5 19.2 5. "AFE NEG COMEITE" Program 1.1 0.5 1.0 1.0 1.5 2.0 6.0 6. Community action 3.4 17.0 5.0 7.0 10.0 15.0 54.0 Total 37.4 50.9 39.5 46.0 53.4 62.0 251.8  - 132 - Table A-20: TENTATIVE DISBURSEMENT TARGETS FOR MAJOR PROGRAMS/PROJECTS UNDER THE FIVE-YEAR PLAN, 1982-86 (C Million) Estimated Disbursement Tentative Disbursement Targets 1981 1982 1983 1984 1985 1986 Total 5-Year General Administration 1. Social services 0.3 0.4 1.0 2.0 2.5 3.0 8.9 2. Statistical services 1.8 3.5 5.0 7.0 10.0 15.0 40.5 3. Surveys and Development Planning 3.9 5.4 10.0 12.0 15.0 18.0 60.4 4. External aid coordination/ other - 1.2 14.1 14.0 13.1 11.1 53.5 Total 6.0 10.5 30.1 35.0 40.6 47.1 163.3 TOTAL 516.8 605.6 792.8 920.3 1,067.7 1,239.3 4,625.7 Errors/omissions 51.4 - - - - - - TOTAL 568.2 605.6 792.8 920.3 1,067.7 1,239.3 4,625.7 Rate of increase over preceding year (%) (-1.8) (6.6) (30.9) (16.1) (16.0) (16.1) Assumptions/basis for calculation of tentativ- disbursement targets 1. For 1980/81 fiscal year, disbursement data (preliminary) are available in sectoral totals. The sectoral disbursement ratios (Table 6, last column of the Statistical Annex) have been uniformly applied to each program in each sector. 2. For 1981/82, the 1980/81 disbursement ratios have been applied to corresponding programs with a 10 percent increase in the ratios. 3. For 1982/83 and subsequent years, the gross investment targets as listed in Table 3 (of the text) are reduced on the basis of the three-year average disbursement ratios (1978-79 to 1980-81) in Table 6 (the last three columns) of the statistical annex; total sectoral allocations have been determined on the basis of percentage of funds allocated to each sector under the 1982/86 plan (as per Table 1 of the text). Disbursement targets for specific programs are suggested in consideration of factors such as past disbursement record, priority accorded to each program in this report, administrative capacity to execute programs, etc. 4. These are tentative targets estimated by the World Bank.  Table A-21: GOVERNMENT FORECAST OF EXTERNAL AID FOR FINANCING OF THE FIVE-YEAR PLAN-, 1982/86 (G Million) Source of Finance Total 1982 1983 1984 1985 1986 A. Multilateral IDB 2,366.6 310.0 410.0 497.5 547.2 601.9 IDA 149.0 63.0 18.5 20.4 22.4 24.7 FAO 27.2 4.5 4.9 5.4 5.9 6.5 Interamerican Agricultural Sciences Institute (IICA) 20.6 3.4 3.7 4.1 4.5 4.9 IMF 2.0 0.4 0.4 0.4 0.4 0.4 OAS 14.6 2.4 2.6 2.9 3.2 3.5 WHO 40.4 6.6 7.3 8.0 8.8 9.7 UNDP 137.9 24.7 27.4 28.5 28.0 29.3 World Food Program 113.5 19.9 20.2 22.2 24.4 26.8 UNICEF 26.2 4.3 4.7 5.2 5.7 6.3 EEC 167.5 27.0 30.3 33.3 36.6 40.3 Total Multilateral 3,065.5 466.2 530.0 627.9 686.8 754.3 B. Bilateral CIDA 298.2 58.7 52.1 56.9 62.6 68.9 FAC /1 109.8 37.4 20.1 15.8 17.4 19.1 USAID /2 1,075.3 186.9 177.6 205.4 235.9 269.5 Germany 307.9 58.2 53.8 59.2 65.1 71.6 China 57.4 9.4 10.3 11.4 12.5 13.8 Israel 5.0 0.8 0.9 1.0 1.1 1.2 Total Bilateral 1,854.6 351.4 314.8 349.7 394.6 444.1 Total 4,920.1 817.6 844.8 977.6 1,081.4 1,198.4 Total (in US$ million) 984.0 163.5 169.0 195.5 216.3 239.7 /1 Includes SCCT /2 Includes Titles I and II Source: Plan Quinquenal de Developpement Economique et Social, 1981-86, P.150  Table A-22: MAJOR ONGOING INVESTMENT PROGRAMS/PROJECTS AND SOURCES OF FINANCE, 1977-82 (C million) Public Investment Expenditure Budgeted Sources of Finance Public Investment Programs/Projects 1977 1978 1979 1980 1981 1982 1981 1982 Actual Actual Actual Revised Budget Budget Domestic/ External Domestic Counterpart External Estimated Counterpart Agriculture 1. Basic food stuffs production 0.2 8.6 1.4 4.6 9.5 8.2 9.5 - 2.0 2.5 3.7 2. Coffee, industrial and export crops production 9.3 8.3 7.0 15.3 9.3 8.4 8.2 0.2 5.5 2.5 0.4 3. Livestock development 0.2 0.6 0.q 10.8 12.7 3.3 7 6 5.1 1.5 - 1.8 4. Eradication of swine fever - - 0.1 0.1 3.6 64.5 3.5 1.0 3.0 0.8 60.7 5. Preservation and development of natural resources 1.1 4.3 10.7 12.1 18.2 18.1 5.0 13.2 4.6 - 13.5 6. Research, extension, rural development services, credit 1.0 10.6 11.6 44.0 15.7 14.8 9.0 6.7 1.7 3.9 9.2 7. Institutional (DARNDR) 0.5 1.5 1.6 5.0 0.9 13.4 0.6 0.3 2.5 8.0 2.9 8. Regional integrated rural development schemes 12.0 44.9 42.3 77.9 66.6 115.7 9.8 56.8 11.8 15.5 88.4 Total 24.3 78.8 75.6 170.6 136.5 246.4 53.2 83.3 32.6 33.2 180.6 (39%) (61%) (13.2%) (13.5%). (73.3%) 4 Mining 1. Development of non-metalic mines - 0.2 0.8 0.9 2.1 2.1 1.9 0.2 0.8 - 1.3 2. Development of metalic mines - 3.8 4.9 5.8 1.8 6.2 0.5 1.3 0.7 - 5.5 3. Development of energy resources - - 0.1 5.8 9.5 6.7 1.8 7.7 0.9 - 5.8 4. Institutional development - - 0.2 0.2 0.1 0.1 - 0.1 - 0.1 Total - 4.0 6.0 12.7 13.5 15.1 4.2 9.3 2.4 _ 12.7 (31.1%). (68.9%) (15.9%). (00%) (84.1%) Industry and Crafts 1. Industrial parks 0.2 - - - 6.7 15.7 3.8 2.9 2.9 1.6 11.2 2. Agro-industries; promotion of other industries; participations, teclnical services 1.6 3.2 8.6 4.4 93.8'! 57.2/- 77.3 16.5 1.4 45.9 9.9 Total 1.8 3.2 8.6 4.4 100.5 72.9 81.1 19.4 4.3 47.5 21.1 (80.7%) (19.3%) (5.9%) (65.2%) (28.9%) /1 Including credits to private sector (G 19 million), Sodexol (G 40 million), Leogane Sugar (G 17.9 million) /2 Including Leogane Sugar (G 40 million)  Table A-22 MAJOR ONGOING INVESTMENT PROGRAMS/PROJECTS AND SOURCES OF FINANCE, 1977-82 (G Million) Public Investment E Budgeted Sources of Finance 1977 1978 1979 1980 1981 1982 1981 1982 Actual Actual Actual Revised Budget Budget Domestic/ External Domestic Counterpart External Estimated Counterpart Electric Power 1. Construction and rehabilitation of generation facilities - - 32.4 46.1 88.1 15.6 36.3 51.8 2.9 - 12.7 2. Construction and rehabilitation of transmission and distribution systems - - - 11.8 47.3 35.6 12.3 35.0 8.6 - 27.0 3. Feasibility studies - - - - - 6.7 - - 3.1 - 3.6 4. Training - _ - _ - 1.5 - - 0.5 - 1.0 Total - - 32.4 57.9 135.4 59.4 48.6 86.8 15.1 - 44.3 (35.9%) 64.1%) (25.4%) (74.6%) Drinking Water/Sewerage 1. Construction and equipment - Port-au-Prince - 0.1 1.5 2.5 2.5 2.3 2.5 - 2.3 - - 2. Construction and equipment - Provinces - - 0.1 7.2 52.9 24.4 20.3 32.6 5.3 - 19.1 3. Feasibility Studies and Researcb - - - 4.2 0.7 n.a. 0.7 - n.a. - n.a. 4. Institutional development - 1.4 0.9 0.9 4.5 0.7 - 4.5 0.7 _ Total - 1.5 2.5 14.8 60.6 27.4 23.5 37.1 8.3 - 19.1 (38.8%) (61.2%) (30.3%) (69.7%) Tourism 1. Construction and rehabilitation of roads, bridges, etc. - 0.5 1.9 1.2 1.0 0.2 1.0 - - 0.2 - 2. Restoration, improvements - - 0.3 0.7 0.4 1.7 0.4 - 1.2 - 0.5 3. Feasibility studies 0.2 0.3 1.8 1.1 0.8 0.4 0.4 0.4 0.4 -- Total 0.2 0.8 4.0 3.0 2.2 2.3 1.8 0.4 1.6 0.2 0.5 (81.8%) (18.2%) (69.6%) (8.7%) (21.7%) Transportation 1. Construction, rehabilitation, surveys - sea transport 0.1 0.3 16.5 17.7 42.7 28.7 42.7 - 8.2 0.5 20.0 2. Construction, rehabilitation, surveys - air transport - - - - 7.5 29.9 4.7 2.8 3.1 - 26.8 3. Construction, maintenance, /I surveys - roads 10.1 35.5 118.4 105.8 113.9 160.3 42.4 71.5 8.1 87.9 - 64.3 4. Institutional development 2.9 10.0 5.4 3.7 6.2 10.0 4.9 1.3 2.5 3.8 3.7 Total 13.1 45.8 140.3 127.2 170.3 228.9 94.7 75.6 21.9 92.2 114.8 (55.6%) (44.4%) (9.6%) (40.3%) (50.1%)  Table A-22: MAJOR ONGOING INVESTMENT PROGRAMS/PROJECTS AND SOURCES OF FINANCE, 1977-82 (G million) Public Investment Expenditure Budgeted Sources of Finance Public Investment Programs/Projects 1977 1978 1979 1980 1981 1982 1981 1982 Actual Actual Actual Revised Budget Budget Domestic/ External Domestic Counterpart External Estimated Counterpart Communications 1. Construction and externsion of telecommunications network - - 1.3 1.3 26.3 35.0 26.3 - 33.0 - 2.0 2. Construction and equipment for postal services - - - 1.2 1.1 1.3 1.1 - 1.3 - - 3. Institutional development - 2.2 4.8 2.7 1.9 2.9 0.5 - 2.2 Total - - 1.3 4./ 32.2 39.0 29.3 2.9 34.8 - 4.2 (91.0%) (9.0%) (69.0%) - (10.8%) Urban Development ard Housing 1. Housing construction - - 1.6 8.0 35.2 2.9 34.2 1.0 0.4 2.5 - 2. Urban renovation - - 6.6 52.7 42.7 99.7 8.4 34.3 1.8 28.7 69.2 t 3. Institutional development - 0.2 - 0.5 0.7 0.3 0.7 - 0.3 -- Total _ 0.2 8.2 61.2 78.6 102.9 43.3 35.3 2.5 31.2 69.2 (55.15) (44.9%) (2.4%) (30.3%) (67.3%) Education 1. School construction and development 3.4 6.8 28.5 54.3 54.7 46.1 12.5 42.2 8.2 9.5 28.4 2. School rehabilitation/maintenance 0.2 0.2 0.9 0.6 1.4 3.5 1.4 - 3.5 - - 3. Teacher training - - 1.6 3.3 2.7 3.1 2.7 - 0.7 0.4 2.0 4. Teaching materials, curricula development, educational ratio - - - - - 3.3 - - 1.0 2.3 5. Institutional developments/strengthening of organization at all levels 15.7 21.1 34.0 34.8 35.2 32.8 3.7 31.5 2.2 1.1 29.5 6. Cultural development - - - 0.4 1.4 0.9 0.2 1.2 0.4 - 0.5 Total 19.3 28.1 65.0 93.4 95.4 89.7 20.5 74.9 15.0 12.0 62.7 (21.5%) (78.5%) (16.7%) (13.4%) (69.9%) Public Health 1. Regionalization of health services 3.4 7.3 11.5 17.0 13.4 18.1 3.0 10.4 2.1 1.0 15.0 2. Infant/maternal protection and family planning 8.0 4.8 11.9 13.3 21.7 24.1 0.8 20.9 - 1.2 22.9 3. Endemic diseases control - 13.2 13.7 15.7 2.0 3.8 2.0 - - 2.0 1.8 4. Fight against malnutrition 2.2 1.9 2.2 1.6 1.2 2.0 1.1 0.1 0.5 0.8 0.7 5. Expansion and improvement of services - - 2.8 34.0 34.8 35.2 31.5 3.3 0.8 16.0 18.4 Total 13.6 27.2 42.1 81.6 73.1 83.2 38.4 34.7 3.4 21.0 58.8 (52.5%) (47.5%) (4.1%) (25.2%) (70.7%)  Table A-22 MAJOR ONGOING INVESTMENT PROGRAMS/PROJECTS AND SOURCES OF FINANCE, 1977-82 (G million) Public Investment Expenditure Budgeted Sources of Finance Public Investment Programs/Projects 1977 1978 1979 1980 1981 1982 1981 1982 Actual Actual Actual Revised Budget Budget Domestic/ External Domestic Counterpart External Estimated Counterpart Community Development 1. The "HACHO" Program - - 5.5 7.2 7.2 2.6 2.6 4.6 2.1 0.5 2. "SCG" Program - - 1.1 0.1 13.6 n.a. - 13.6 n.a. n.a. n.a. 3. "CARE" Program - - 4.0 40.2 38.9 53.1 0.2 38.7 _ 0.8 52.3 4. "ONAAC" Program - - 7.9 4.1 6.1 4.9 0.5 5.6 0.4 - 4.5 5. "AFE NEC COMBITE" Program - - - - 2.2 0.9 2.2 - 0.9 -- 6. Community Development - - 1.2 5.8 6.7 31.0 2.4 4.3 1.8 - 29.2 Total - - 19.7 57.4 74.7 92.5 7.9 66.8 5.2 1.3 86.0 (10.6%) (89.4%) (5.6%) (1.42) (93%) General Administration 1. Social services - 0.3 0.3 1.5 1.7 2.0 1.6 0.1 1.8 - 0.2 2. Statistical services 2.0 1.7 1.8 2.9 9.2 15.7 6.3 2.9 7.1 3.0 5.6 3. Surveys and development planning 1.2 1.5 7.5 17.9 19.1 24.6 10.1 9.0 11.9 3.9 8.8 4. External aid coordination - - - - - 5.4 - - 0.8 0.5 4.1 Total 3.2 3.5 9.6 22.3 30.0 47.7 18.0 12.0 21.6 7.4 18.7 (60%) (40%) (45.3%) (15.5%) (39.2%) Total on-going projects 75.5 193.1 415.3 648.2 1.003.0 1.107.4'4 464.5 538.5 168.7 246.0 692.7 /1 This amount exceeds by C 57.6 million the total budgeted amount for 1982. The discrepancy is due to a similar discrepancy between the sum total of various budgetary categories and the total budgeted amount as stated in the budget document, "Budget d'Execution des Programmes and Projects de Development, 1981-82". Sources: "Plan Financier, exercice fiscal 1980-81" "Budget d'Execution des Programmes at Projets de Developpement, 1981-82", Vol. I, Ministry of Planning.  Table A-23: RATES OF DISBURSEMENT BY SECTOR AGAINST BUDGETED PUBLIC INVESTMENT EXPENDITURE, - 1972-81 (in percentages) Sectors 1972 1973 1974 1975 1976 1977 1978 1980 1981 1982 Agriculture 24.6 40.6 83.6 61.6 85.3 47.2 57.1 82.0 36.4 50.0 Mines and Quarries 116.7 - 62.5 125.0 100.0 - 6.8 100.9 30.8 40.0 Industry and Crafts 61.3 26.8 41.1 60.2 67.1 15.6 39.6 205.7 72.2 40.0 Power 108.6 103.7 112.5 135.6 59.0 116.9 114.3 188.2 61.2 79.9 Drinking Water 99.9 10.8 8.9 28.5 87.0 88.1 13.3 35.6 18.4 25.0 Tourism 54.5 30.0 32.4 163.6 100.0 46.8 36.0 45.4 43.1 39.0 Transportation 92.5 40.5 94.8 120.4 85.8 88.5 104.9 79.5 81.8 60.0 Communications - 72.0 211.9 189.0 47.7 48.4 30.5 38.4 120.3 39.9 Urban Development/Housing - - - - - - 1.7 11.1 34.3 20.0 m Education 88.5 131.4 100.0 189.3 175.3 77.4 48.3 86.9 63.3 60.0 Health 94.2 86.9 67.4 62.2 58.5 74.2 79.2 61.1 65.4 65.0 Special Affairs - - - - - - 14.2 18.1 115.0 20.3 Community Development 109.0 112.2 116.9 76.5 197.0 130.5 233.9 55.8 50.1 50.0 Administration 110.0 147.4 65.1 114.1 118.8 92.6 97.1 46.3 33.9 20.0 Average (%) 80.6 69.1 87.7 101.3 84.2 79.3 80.3 80.3 57.8 51.9 /1 Actual expenditure as a percentage of budgeted expenditure Source: IBRD, Current Economic Position and Prospects of Haiti, Dec. 22, 1978 Budget 1980 and information from Planning Ministry, Department of Evaluation and Control.  Table A-24: EXTERNAL AID TO HAITI, 1977-81 (G Million) Aid Agency 1977 1978 1979 1980 1981 1982 Disbursements Disbursements Disbursements Disbursements Budget /3 Budget /3 A. Multilateral IDB 101.1 106.8 60.6 69.8 108.6 106.5 IDA 87.9 47.8 38.5 73.6 168.5 98.1 UNDP 16.9 17.0 36.4 42.9 59.0 48.7 World Food Program 8.0 4.1 13.3 - 19.7 19.3 FAO - - - 0.2 1.7 4.5 WHO 5.5 3.3 3.5 10.4 1.7 4.4 Unicef 9.9 6.9 n.a. 2.0 2.7 3.0 OAS 2.4 1.5 2.5 - 3.6 3.6 IICA 0.5 1.2 5.7 3.9 1.0 58.5 International Coffee Organization 0.5 0.3 - - - EEC - - - 2.4 1.0 Latin America Energy Agency - - - - 0.6 - Subtotal 232.7 188.9 160.5 205.2 368.1 346.6 B. Bilateral USAID/- 34.3 45.5 34.8 47.7 60.6/-- 65.7 Kreditanstalt 13.2 34.9 32.8 30.5 66.6 53.4 CIDA 21.6 23.8 61.9 28.6 47.3 52.8 FAC (France) 9.7 17.4 4.2 10.3 16.1 44.9 SCCT (France) 10.4 12.2 13.3 12.9 8.8 12.6 China 2.6 2.9 2.8 - 2.9 9.4 Subtotal 91.8 136.7 149.8 130.0 202.3 238.8 C. Private Aid CARE 17.8 10.3 4.5 3.8 35.0 47.9 Haiti Christian Service 9.3 17.6 9.8 3.2 10.9 15.0 Catholic Relief Services 9.5 32.2 5.0 7.4 8.2 1.4 Subtotal 36.6 60.1 19.3 14.4 54.1 64.3 D. Other External -- - 2.2 32.2 2.0 Total 361.1 385.7 329.6 351.8 656.7 651.7 ii Excluding PL480 Title 1 /2 Excluding PL480 Title 1 /3 1ludget fivsuree Are not strictly comparable with disbursements Sources: (1) Haiti Ministry of Planning- OAS Seventh "Commission Mixte" meeting document No. CEPCIES/632; 29 April, 1981. (2) "Resultats d' Execution, 1976/77-1979/80". (3) "Budget: d' Execution, 1981/82"  Table A-25: ErCERNAL AID TO HAITI, 1980 (G Million) Drinkiag Urban Development Community Other Agency Total Agriculture Mining Industry Power Nater Tourism Transport Communications Housing Education Health Development Administration CIDA 28.6 16.5 - - 1.5 - - - - - 9.6 - _ 1.0 USAID 47.7 7.0 - - - 0.8 - 22.1 - - - 14.4 _ 1.9 FAC - France 10.3 6.9 - -- - - 1.6 - - - 1.3 Kreditanrstalt 30.5 6.8 1.3 - 9.9 _ - 6.8 - - - 0.1 5.6 - IDB 69.8 24.3 - 0.1 - 0.1 - 29.7 - - 1.6 11.1 - 2.9 IDA 73.6 0.6 - 0.B 22.6 0.6 - 36.4 - 1.3 11.3 - - - EEC 2.4 0.4 0.4 - - - - - - - 0.5 - 0.1 0.9 W'HO 10.4 - - - - - - - - - - 10.4 - - World Food Program - - - - - - - - - - UNDP 42.9 7.1 4.5 1.5 1.0 2.0 1.5 0.6 2.6 3.0 7.8 3.7 1.6 1.6 Catholic Relief 7.4 - - - - - - - - - - Society 7.5 CARE 3.8 - - - - - - - - - - - 3.8 - Church World 3.2 - - - - - - - - - - - 3.2 - Society Inter-American 3.9 2.8 - - - - - - - - 1.1 - - - Agricultural Society SCCT - France 12.9 0.6 0.1 - - - - 0.3 - - 11.3 - - 0.6 FAO 0.2 0.2 - - - - - - - - - - - - UNICEF 2.0 - - - - - - - - - - - 1.7 0.3 other 2.2 - 0.5 - - 1.7 - - - Total 351.8 73.2 7.1 2.8 35.0 2.8 1.5 97.5 2.6 6.0 43.4 40.0 25.0 14.9 Source. 14i;.istry of Planninig ("RZlsultats d' Zxecution, 1976/77 - 1979/80") Note: Small discrepancies in totals are due to rounding.  - 141 - Table A-26: SELECTED TARIFF CHANGES INTRODUCED IN 1981 2 ~~~~3/ Old Tariff-/ New Tariff-/ Commodity- 1Ad Valorem Ad Valorem Raw Materials and Intermediate Goods 13.02.31 Arabic gum 29.00 40.00 25.20.19 Plaster, inc. plaster of Paris 29.00 40.00 27.10.21 Gas, oil, fuel oil exempt exempt 27.10.31 Lubricants 28.50 32.00 28.08 Sulphuric acid 28.50 32.00 29.06 Phenolaphenol alcohol 29.00 40.00 32.01 Tanning extracts of vegetable origin 29.00 40.00 44.11.01 Wooden heels for shoes 29.00 40.00 51.04 Woven fabrics from manmade fibers 55.00 64.00 55.09 Cotton yarn, dyed or colored 28.50 40.00 70.08 Security glass 30.00 40.00 74.13 Copper chain 30.00 40.00 76.07 Aluminum piping and accessories 29.00 40.00 82.12.09 Scissor blades 30.00 40.00 83.13 Metal caps for pots and bottles 29.00 30.00 Machinery and Equipment 39.01.51 Plastic pipes and tubes 30.00 43.00 84.01.09 Steamraising boilers; other boilers 10.00 18.00 84.12.01 Airconditioners 17.00 25.00 84.20.01 Scales and weighing machinery 29.00 40.00 84.26.01 Dairy machinery exempt 18.00 85.04.01 Electrical accumulators 10.56 25.00 85.13.01 Telephone equipment 10.56 25.00 87.01 Tractors and trailers exempt exempt 87.02.02 Diesel trucks 10.80 25.00 89.02 Tugboats 16.50 25.00 90.28.01 Wattmeters, ampmeters, voltmeters 16.00 18.00. 91.05 Time recorders 30.00 42.00  - 142 - Table A-26: SELECTED TARIFF CHANGES INTRODUCED IN 1981 (continued) Old Tariff2/ New Tariff-/ Commodity- ad Valorem Ad Valorem Non-durable Consumer Goods 02.06 Ham, smoked 28.50 43.00 03.02.11 Cod, dried and salted 30.00 32.00 04.03 Butter 25.00 30.00 07.03.11 Canned tomatoes, peas, cabbage 28.50 40.00 09.02 Tea 28.50 40.00 11.05 Potato flour 29.00 40.00 15.07.01 Olive oil in cans 28.50 32.00 21.05.02 Canned stock and soups 22.72 40.00 22.05.11 Non-sparkling wines 42.00 25.00 30.01 Serotherapeutic vaccines of animal origin 10.00 11.00 30.20 Medicinal charcoal 28.50 32.00 32.10 Paints for artistic recreational use 41.50 51.00 33.12 Cosmetics 67.00 84.00 34.01.01 Laundry soap 15.36 18.00 34.05.01 Shoe polish 54.00 68.00 34.06 Candles 54.00 68.00 48.13 Carbon paper 29.00 40.00 49.02 Newspapers and periodicals exempt 8.00 61.31 Outwear, men's and boys', of synthetic fabrics 49.97 70.00 61.04 Underwear, women's and girls', of synthetic fabrics 49.97 70.00 62.02.41 Mosquito nets 17.00 24.00 Durable Consumer Goods 73.38 Enamelled metal 80.00 92.00 85.06.01 Vacuum cleaners 28.50 40.00 85.15.02 Radio receivers 20.00 28.00 87.10.01 Bicycles 30.00 42.00 90.07.07 Cameras 28.50 33.00 I/ Tariff numers as given in the new Haiti customs tariff. Representative tariff items were selected subject to there being an ad valorem duty under the old tariff. The majority of items under the old tariff were subject to specific, not ad valorem duties, hence there are no comparisons, for example, in the basic metals and metal products categories. 21 Law of September 8, 1961 as modified in September 1969. 3/ Decree of December 30, 1980 put into effect on June 1, 1981.  - 143 - Table A-26: SELECTED TARIFF CHANGES INTRODUCED IN 1981 (Concluded) Footnotes 1/ Tariff numbers as given in the new Haiti customs tariff. Representative tariff items were selected subject to there being an ad valorem duty under the old tariff. The majority of items under the old tariff were subject to specific, not ad valorem duties, hence there are no comparisons for example, in the basic metals and metal products categories. 2/ Law of September 8, as modified in September 1969. 3/ Decree of December 30, 1980 put into effect on June 1, 1981.  Table A-27: EMPLOYMENT IN ASSEMBLY AND NON-ASSEMBLY PLANTS IN PORT-AU-PRINCE 1981 Tota] Assemblv Indtustries No_ -Assembly Lndustries Assembly Assembly Number of/ Industries Number of Industries Nuimber of Number of Nuimber of Number of Sector Pl.nts - as 2 of total Employees as X ot total Plants Employees Plants Employees Agriculture Fisbing and 3 - 32 - - 3 32 Forestry Mining and Quarrying I - 358 - - 1 358 Manufacturing 440 31.6 42.469 83.9 139 3,5647 287 6,822 of which: Food, Neverages and Tobacco 99 5.1 5,957 20.6 5 1,229 89 4,728 Textiles, Clothing and Leather 126 46.8 15,334 99.8 59 15,312 61 22 Wood Products and Furniture 40 37.5 1,517 90.8 15 1,378 25 139 Paper and Printing 20 30.0 1,030 84.0 6 865 14 165 Cbemicals, Rubber and Plactic Products 23 21.7 832 75.4 5 627 18 205 Cement, Concrete and Tiles 37 5.4 1,735 88.4 2 1,534 33 201 Metal Products 58 37.9 8,990 84.8 22 7,628 36 1,362 Otbers 37 - 7,074 100.0 37 7,074 - - Public Utilities 5 - 1,504 - - - 4 1,504 Total 449 30.9 44,363 80.4 139 35,647 295 8,716 a/ Totals may nIot add as some enterprises did not provide data Source: PNUD/BIT HAI/74-014 Resultats de l'Enquete sur l'Emploi Industriel Realisee A Port-au-Prince et l'Aire Metropolitaine, Janvier-f6vrier 1981.  - 145 - Table A-28: MINIMUM DAILY WAGE BY INDUSTRIAL BRANCH, 1982a/ Branch US Dollars/Day Furs and Fur Garments 3.12 Electronic Components 3.12 Components and Accessories for Mechanical Industries 3.12 Footwear 2.88 Leather Products 2.88 Cassettes and Cartridges 2.88 Baseballs and Softballs 2.88 Embroidery 2.88 Electronic Components 2.76 Soft Toys, Dolls and Other 2.64 Plastic Products 2.64 Clothing 2.64 Export Industries n.s.e. 2.76 All Other Enterprises, Including Agricultural and Commercial 2.64 a/ The law stipulates a normal working week of 48 hours, 8 hours per day Source: ONAPI  7777 0 c 5 A /V A T Z A N:
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