Haiti - Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-3395-HA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT AND SPECIAL FUND CREDIT IN AMOUNTS EQUIVALENT TO US$21.0 MILLION TO THE REPUBLIC OF HAITI FOR AN URBAN DEVELOPMENT PROJECT March 3, 1983 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 lisclosed without World Bank authorization.  CURRENCY EQUIVALENTS Cturrency Unit = Gourde (G) G 1.00 = US$0.20 G 5.00 = US$1.00 G 1 million = US$200,000 The Gourde has been tied to the US Dollar at the ratio of five Gourdes to one Dollar since 1917. WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) = 3.281 feet (ft) 1 cubic meter (m3) = 35.32 cubic feet (ft3) 264.2 gallons (gal) 6.290 barrels (bbl) 1 kg = 2.206 pounds (lb) 1 ton (t; metric; 1,000 kg) = 1.100 short tons (sh. ton) FISCAL YEAR October 1 - September 30 GLOSSARY OF ABBREVIATIONS BDL - Housing Bank CAMEP - Metropolitan Water Company CDB - Croix-de-Bossales Market CIDA - Canadian International Development Agency DATPE - Land Use Management and Environmental Protection Agency DTPTC - Ministry of Public Works, Transport and Communications EPPLS - Public Social Housing Promotion Company (New name for ONL) GOH - Government of Haiti IDB - Inter-American Development Bank ILO - International Labour Organisation IMF - International Monetary Fund KfW - (German) Reconstruction Loan Corporation ONL - National Housing Office PAHO - Pan-American Health Organisation PPF - Project Preparation Facility SAGMAP - Metropolitan Market Agency SCUD - Special Commission for Urban development SNEP - National Water Service SPU - Urban Planning Service UNCDF - United Nations Capital Development Fund UNDP - United Nations Development Programme UNICEF - United Nations Children's Fund USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY HAITI URBAN DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Haiti Amount: SDR 7.4 million (US$8.0 equivalent) from IDA SDR 12.0 million (US$13.0 equivalent) from the IDA Special Fund. Terms: Standard Beneficiary: Entreprise Publique de Promotion de Logements Sociaux (EPPLS) Relending Terms: A part of the proceeds of the Credit would be relent by the Government to EPPLS for 25 years, with interest at 4 percernt per annum. Project Descraption: The project would initiate IDA involvement in urban development in Haiti and assist the Government in improving the living conditions of the urban poor in the capital and in two of the three next most important cities. It would include (i) the rehabilitation and upgrading of the Port-au-Prince central market area; (ii) a sites and services scheme for the relocation of 1,036 families displaced by the upgrading of the market; (iii) a pilot sites and services scheme for 1,093 low- income families in Cap-Haitien; (iv) a pilot sites and services scheme for 278 low-income families in Les Cayes; (v) institutional development of the metropolitan market agency; and (vi) institutional development of the Public Social Housing Promotion Company (EPPLS). Risks: Any new program involving important structural changes and the establishment and promotion of public agencies, is associated with certain risks. These would include the continuity of Government support (in particular the ability to meet counterpart fund requirements) and the capacity and efficiency as well as the financial sound- ness of the supported public agencies. Supervision missions would monitor these risks carefully in order to initiate corrective measures as soon as implementation delays, cost overruns or a deterioration of the financial status of the supported public agencies should become visible. This document has a restricted distribution and may be used by recipients only in the performance, of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Estimated Costs: a/ - - --US$'000---------- Local Foreign Total Market Upgrading Studies and engineering 122 488 610 Indemnization 800 - 800 Earthworks 760 1,008 1,768 Civil works 4,410 4,590 9,000 Implementation 665 285 950 Subtotal 6,757 6,371 134128 Sites and Services (a) Port-au-Prince Studies and engineering 18 72 90 Land 38 - 38 Earthworks 206 273 479 Civil works 630 403 1,033 Implementation 156 66 222 Subtotal 1,048 814 1,862 (b) Cap-Haitien Studies and engineering 16 64 80 Land 49 - 49 Earthworks 248 329 577 Civil works 757 484 1,241 Material loans 76 67 143 Implementation 338 145 483 Subtotal 1,484 1,089 2,573 (c) Les Cayes Studies and engineering 12 48 60 Land 13 - 13 Ear:thworks 56 74 130 Civil works 206 132 338 Material loans 18 16 34 Implementation 94 40 134 Subtotal 399 310 709 Institutional Development SAGMAP Studies and engineering 16 64 80 Initial working capital 250 - 250 Pre-operating expense 81 - 81 Vehicles and equipment 4 31 35 Technical assistance 29 66 95 Subtotal 380 161 541 Institutional Development EPPLS Studies and engineering 16 64 80 Technical assistance 240 560 800 Training - 100 100 Equipment 10 90 100 Subtotal 266 814 1,080 Base costs 10,334 9,559 19,893 Physical contingencies 692 599 1,291 Price contingencies 1,497 1,127 2,624 TOTAL PROJECT COST 12,523 11,285 23,808 a/ Cost estimates exclude taxes and duties, from which this project is exempt.  Financing Plan: ---------US$'000----------- Local Foreign Total IDA (including IDA 9,715 11,285 21,000 Special Fund) Government 2,808 - 2,808 Total 12,523 11,285 23,808 Estimated Disbursements: -----------------US$'000----------------- IDA FY 1983 1984 1985 1986 1987 1988 Annual 2,500 4,400 12,700 1,000 300 100 Cumulative 2,500 6,900 19,600 20,600 20,900 21,000 Appraisal Report: Report No. 4211-HA, dated March 2, 1983. Rate of Return: 15 percent for the market upgrading and sites and services components which account for 93 percent of total costs. Maps: IBRD Nos. 16756, 16758 and 16759 attached.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT AND SPECIAL FUND CREDIT TO THE REPUBLIC OF HAITI FOR AN URBAN DEVELOPMENT PROJECT K I submit the following report and recommendation on a proposed development credit of SDR 7.4 million (US$8.0 million equivalent), on standard IDA terms, and a proposed IDA Special Fund Credit of SDR 12.0 million (US$13.0 million equivalent), on terms adopted by the Executive Directors of IDA 1/, to the Republic of Haiti, to help finance an Urban Development Project. The Government would relend a part of the proceeds of the proposed credit to Entreprise Publique de Promotion des Logements Sociaux for 25 years, with interest at 4 percent per annum. PART I - THE ECONOMY 2. The last economic report on Haiti, distributed to the Executive Directors on May 25, 1982, was Report No. 3931-HA entitled "Economic Memoran- dum on Haiti". Its main findings, updated and complemented with findings of recent missions to Haiti, are summarized below. Relevant social and economic data are presented in Annex I. 3. Haiti's GNP per capita stood at US$270 in 1981, the lowest level in the Western Hemisphere. Its dire poverty is reflected in 1976 data showing that almost 75 percent of the population lived under conditions of absolute poverty; the rate of infant mortality was about 150 per thousand live births; average life expectancy was 51 years; there were low nutrition and sanitation standards (malnutrition and gastro-enteric diseases account for over half of the deaths in the country) and the adult illiteracy rate was about 80 percent. Extreme rural poverty and high pressure on agricultural land (350 inhabitants per sq km) and the lack of development of other sectors resulted, in recerit years, in an acceleration of migration within and out of the country. 4. High mortality and migration have so far slowed population growth (1.9 percent per annum during the 1975-80 period), but the natural desire on the part of the Government is to improve health conditions. Thus, health improvements and growing difficulties imposed on emigration to neighboring countries will aggravate the already unfavorable relation of resources to population. Efforts are currently under way to promote modern methods of contraception through community organizations and other groups in collabora- tion with various national and external public and private agencies. 5. Haiti's GDP expanded at an average annual rate of 4.4 percent or 2.7 percent per capita during the 1970-80 period. The pattern of growth, however, was subject to cyclical fluctuations, influenced by the performance 1/ Resolution No. IDA 82-6 of October 26, 1982.  -2- and weight of agriculture, subject to the vagaries of weather and external markets. Manufacturing and construction have shown a more even performance. 6. Between 1970 and 1980, agriculture provided employment for about 63 percent of the labor force, contributed on average 38 percent to GDP, and grew at an average annual rate of 1.7 percent. The sector--which provides most of Haiti's exports--is characterized by extremely low productivity. Furthermore, the rapid disappearance of Haiti's forests and the resulting soil erosion are reducing the availability of wood, the country's prime source of energy, and leading to a shrinkage of the area of productive land. In an effort to halt these trends, the Government has recently revived erosion control and forestry programs. It also has initiated programs to introduce improved grain varieties, rehabilitate coffee plantations, restore the major irrigated systems and develop agro-industries. 7. Since 1970, manufacturing industries, construction and public util- ities have emerged as the most consistently dynamic activities with average annual growth rates of 7 percent, 14 percent and 9 percent respectively. The manufacturing sector owes much of its expansionary drive to the export processing industries--which have a strong potential for further development-- and to a rapid increase in output of construction materials. Growth of locally manufactured products, other than construction materials, for the domestic market was necessarily limited by the thinness of this market. Construction, on the other hand, was fueled by public investment in infras tructure. 8. Gross investment reached 13 percent of GDP in 1981, compared to 10 percent in 1970. This progress was entirely attributable to the public sector, whose share of total investment has increased from one-fifth in 1970 to over 50 percent in 1981, as a result of an average expansion rate of 10 percent per year in real terms. The Government's investment strategy, as stated in its two Five-Year Development Plans (1972-76 and 1977-81), was geared to the decentralization of economic activity in favor of rural areas and provincial towns. 9. The mobilization of domestic resources for investment is hampered by a low average income level and institutional weaknesses in the capital market and in public finance. During the 1979-81 period, gross domestic savings amounted to only 2.6 percent of GNP. Foreign assistance, therefore, plays a major role in supplementing domestic savings; some two-thirds of public investment are financed by foreign aid, 10. As regards public sector savings, the Government of Haiti has undertaken during the period 1979-81 a major reorganization of fiscal manage- ment: all tax revenues have been integrated into the Government's budget; the Treasury now handles all Central Government expenditures; tax collection is being consolidated and parafiscal functions have been removed from the Regie du Tabac (State Trading Monopoly); sound accounting procedures are being established; customs duties have been consolidated and rates on luxury goods have been raised; new taxes have been imposed and the income tax law was amended to improve equity and elasticity of income taxation. While there were significant gains towards achieving the goals of the fiscal reform, large extra-budgetary expenditure authorizations in 1980 and 1981 raised public sector deficit from 7.9 percent of GDP in 1979 to around 8.4 percent in 1981 and increasing recourse was made to central bank financing.  -3- 11. Haiti did not avoid the negative effects of world recession. In addition, the 1981 coffee crop was particularly poor. This, coupled with a drop in its world price and a decline in bauxite export revenues, resulted in an overall decline of Haiti's merchandise exports of 28 percent as compared with the level achieved in 1980. These low export revenues and the demand pre 'sures generated by the domestic financing of the fiscal deficit generated a foreign exchange crisis. Furthermore, Haiti's drawing rights under an Extended Fund Facility (EFF) established with the International Monetary Fund (IMF) for the period 1979-81, were interrupted as ceilings on net domestic bank credit to the pUDliC sector and on net domestic assets of the monetary authorities were exceeded. 12. Economic activity would have remained almost stagnant during 1982, were it not for agriculture, where a good crop allowed overall GDP to grow by 1.5 percent. The assembly industry, the most dynamic sector in the recent past, was still hampered by world recession. Stringent monetary and fiscal policies restrained both public and private expenditures; public investment was particularly affected as counterpart funds were reduced. The foreign exchange constraint led to an accumulation of commercial arrears of US$20 million, and official foreign res,.erves dropped. As the forc2ign exchange situation became critical, the Haitian Authorities signed a Stand-by Arrange- ment with the IMF for the period June 1982 to September 1983. Under the conditions of this Arrangement, public expenditures and the arrears in the payment for vital imports are being reduced and a new general sales tax was approved. Also, measures are being taken to improve tax collection and an in-depth audit of the Central Bank is presently under way. Up to December 1982, the conditions of the Arrangement have been fully met, 13. The continuing high proportion of grants and concessionary loans extended to Haiti has helped the country maintain its debt-service ratio at an estimated 9.4 percent for 1981. The rising level of private foreign investment and of supplier's credits', however, will bring with it larger factor payments in the form of dividend repatriation and interest payments. 14. The ability of Haiti to maintain an acceptable growth rate in the future will depend on successful efforts to improve substantially the produc- tivity of the agricultural sector and to continue diversifying the economic structure, especially into export-oriented industry. Because of the limited capacity to generate adequate levels of savings, Haiti will have to continue relying heavily on foreign savings to finance a high proportion of the costs of carefully selected development and institution building projects. More- over, such external assistance should continue being extended on very concessionary terms in view of Haiti's low income level, modest prospects for overall export growth and increasing dependence on imported energy. But the terms, size and timing of the external assistance will depend very much on Haiti's own efforts in exercising fiscal and monetary prudence, in mobilizing domestic resources and putting them to good use. 15. The Association and the IMF are closely involved in Haiti's effort to improve fiscal performance and economic management in general. The Association, at the request of the Haitian Authorities, established a sub-  -4- group within the Caribbean Group for Cooperation in Economic Development. IDA is also extending assistance to the authori.ties in the preparation of longer term plans to mobilize the country's scarce resources for economic development, including the priorities of public investments, identification of bottlenecks in project execution and, more generally, institution building efforts. PART II - BANK GROUP OPERATIONS IN HAITI 2/ 16. The Bank Group began its operations in Haiti with a loan for a highway project in 1956. Since then, 17 !DA credits and one IFC investment (U1S$1.5 million) for an integrated poultry project have followed. As of September 30, 1982, the total of credits outstanding was US$175.2 million of which US$78.2 million were undisbursed. Annex II includes a summary state- ment of Bank Group operations and IFC investments in Haiti and notes on the execution of ongoing projects. Bank Group loans and credits have financed six highway/transport projects mainly serving the Northern region; three power projects helping to increase the country's electricity generation and distribution capacity; three education projects emphasizing primary school construction and qualitative improvements at the primary level; one water supply project for smaller locations outside the capital; one rural develop- ment project in the Northern region; one agricultural rehabilitation project designed to help compensate damages caused by a severe hurricane; one port development project predominantly improving small coastal port installations .11 around the country; one industrial credit facility, and one pilot forestry project. 17. Overall, project implementation and disbursement performance is satisfactory. However, on several occasions, lack of counterpart funds has delayed disbursements. The establishment of working funds in recent projects has brought improvement in this respect. Nevertheless, the Association is carefully monitoring the capacity of absorption of the country for exter- nally assisted development investments. The Government of Haiti (GOH) has requested the major external aid agencies to finance temporarily a larger share of local costs of projects. In case the major agencies should agree to the Haitian request, a larger number of high priority projects could be continued without delays or reductions, or started as planned, and the country would still be able to satisfy the conditions of the fiscal stabVlization program agreed with the International .',Monetary Fund in order to help overcome the present economic difficulties. 18. Many public and private aid agencies are active in Haiti. Among the most important are the Inter-American Development Bank (IDB), the United States Agency for International Developmert (USAID), the Canadian International Development Agency (CIDA) and the assistance agencies of the Federal Republic of Germany and France. IDB retains a diverse program in Haiti both regionally and sectorally. In addition to transportation, agri- culture and energy, projects in health, education, industry, urban improve- ment, water supply and port improvement are now being implemented or planned 2/ Reprinted substantially from PR No. P-3363-HA of November 5, 1982 for a Third Education Project in Haiti except for para. 16.  for implementation in the near future. The USAID program is implemented in collaboration with private volunteer groups and is concentrating on increas- ing agricultural production, improving rural infrastructure and employment generation, conservation and restoration of natural resources, health care and the strengthening of public and private development institutions. An important aspect of the USAID program is the sale of foodstuffs to the GOH, supported with long-term, low interest credits. 19. CIDA has been supporting\> rural development project in the Southern Peninsula and is now undertaking a review of its country's lending strategy. CIDA is participating in the second IDA power project and remains committed to supporting the institutional development of public and private organizations within Haiti. This objective is reflected in training and tech- nical assistance projects now underway with the Ministries of Educa"Lion and Agriculture and the National Institute of Administration. The Federal Republic of Germany is providing technical and financial assistance for a rural development project in the Gonaives Plain and for power sector develop- ment all over the country. Together with France, Germany is providing sub- stantial technical assistance for the IDA rural development project in the Northern region. Likewise, the co-financing of water supply and of the IDA port development projects is included in the German program. France has financed road construction and currently sponsors two integrated rural devel- opment projects, educational planning and research, a multitude of training programs and a maritime lighting project. Also, France is financing compo- nents of the third IDA power project and may become engaged in forestry development and further power projects. IDA Strategy 20. The lending strategy for Haiti is under review. It appears, how- ever, that the present strategy of supporting the improvement and expansion of basic infrastructure in power, rural development, reforestation, educa- tion, urban development and of creating employment in the directly productive sectors will keep its merits and efficiency in the near future. The present IDA lending program reflects the priorities of the national development plans and is sensitive to the current and future programs of other public assist- ance agencies operating in Haiti, and all IDA projects always would include substantial institution-building components. 21. Under the current IDA program, the ongoing Rural Development Project provides for the preparation of a second project which would extend the scope of the Regional Development Agency's program to additional crops and areas of the Northern regicn. A further power project will help in expanding hydroelectric generation capacity and substantially reduce silta- tion in the Peligre reservoir, the country's largest existing power scheme. A petroleum exploration promotion project will speed up the reassessment of the petroleum potential, and a large scale erosion control/reforestation project will improve the supply situation for firewood, the most important source of domestic energy. Sector reviews are being undertaken or will start soon in agriculture, industry, education and population, and are expected to lead to the identification of projects in these fields.  -6- 22. The Bank Group's share in Haiti's external debt disbursed and out- standing came to 25.6 percent as of October 1, 1981. The Bank Group's share of excernal public debt service was about 2.8 percent and will decrease during the coming years. PART III - THE URBAN SECTOR Background 23. While Haiti is one of the least urbanized countries (26 percent) in the Western hemisphere, its urban growth is rapid, unbalanced and heavily concentrated in the capital, Port-au-Prince, where 900,000 of the approxi- mately 1.4 million urban inhabitants are living. The next largest city, Cap-Haitien, is twelve times smaller with about 65,000 inhabitants, followed by Gonaives and Las Cayes with 44,000 and 30,000 inhabitants, respectively. Another 350,000 inhabitants live in the remaining four departmental capitals and eighteen other small towns. Over the past decade, urban centers have grown at an average rate of 4.1 percent p.a. (rural growth 1.1 percent p.a.; total growth 1.8 percent p.a.) - up from 1.6 percent p.a. for the 1950-1971 period. However, Port-au-Prince is growing at about 6 percent p.a. compared to 3 percent for the other cities. As the center of Government and manufac- turing, the metropolitan area of Port-au-Prince generates some 40 percent of GDP and about half of all Government development and recurrent expenditures are spent in the metropolitan region where the provision of social services is highly centralized, particularly in health and education. Urban Poverty and Living Conditions 24. Income distribution in Haiti is uneven and 74 percent of the total population live in absolute poverty. Higher incomes are concentrated in Port-au-Prince and the secondary cities where per capita income is 6.7 and 3.9 times that in rural areas, respectively. Nevertheless, even, in Port-au-Prince, 60 percent of the population have incomes below the absolute poverty threshold - against 78 percent in the rural areas. 25. More than 60 percent of the Haitian population in 1976 lived in relative poverty, i.e. at or below an income level equal to one-third of average per-capita income. In terms of actual income, the United Nations Children's Fund (UNICEF) estimated in 1980 that 70 percent of the households of Port-au-Prince disposed on an average of US$70 equivalent per month or less. Of this amount, nonfood expenditures were nearly as high as those for food (53 percent), with rent alone accounting for 30 percent of total expenditures (14 percent in secondary cities). In surveyed areas of Cap-Haitien and Les Cayes, median monthly household income was US$39 and US$28 equivalent, respectively, of which, on average, about 70 percent was devoted, to food purchases.  -7- Nutrition and Health 26. Nutritional status and health are inextricably linked. Most Haitiai.s, particularly those living in urban areas cannot afford a nutri- tionally adequate diet and for many years, malnutrition has been cited as one of Haiti's most serious health problems. Protein-caloric malnutrition is severe, although other nutritional deficiencies are widespread. Using data from several nutrition surveys conducted between 1959 and 1976, it was esti- mated that between 24 and 57 percent of children up to age 6 could be classi- fied as having second or third degree malnutrition. More recent data frcm the National Nutrition Survey (1978) indicate that only one-quarter of children under 5 years old are in the normal range of weight for their age. Undernourishment is more frequent among the elder children of the surveyed age group and one-quarter of these children were stunted (height for age), indicating that their growth had been impaired by prolonged periods of inade- quate nutrition. Malnutrition was a primary cause of 31 percent of deaths recorded during 1979-80 at the Albert Schweitzer Hospital, for children up to the age of 14. Haitian statistics on communicable diseases also reflect the toll of undernourishment; the two leading causes are gastroenteritis and bronchopneumonia, which are strongly associated with poor nutritional status and lowered resistance to infection. Shelter and Urban Services 27. Housing conditions in Port-au-Prince are poor and some two-thirds of the population live in sordid overcrowded slums. About 13 percent of all dwellings are made of scrap materials, 19 percent of wattle and straw and another 32 percent of wood. More than three-quarters of the homes in the city are not connected to the water supply system and erosion run-off obstructs up to 75 percent of the flow capacity of the drainage system in downtown Port-au-Prince and 50 percent in the outlying areas. There is no waterborne sewerage system, and most of the population uses pit latrines. 28. Residential densities are very high. In 1976, an estimated 132,000 dwelling units in the city housed 640,000 people. The number of independent structures, however, is very much smaller, because many buildings have anywhere between two and eight rooms, each occupied by separate low- and middle-income households, and many rooms are shared bg more than one family. About 61 percent of dwelling units offer less than 3m per resident and 44 percent of the urban population occupy about 12 percent of the residential land at gross densities in excess of 800 persons per ha. Although there has been considerable growth of low-income residential areas on the periphery of the city, the built-up areas con'tinue to grow denser. For the St. Martin neighborhood, a survey in 1978 indicated that density had increased to over 1,600 persons per ha. 29. In the context of the urban system of Port-au-Prince, the Croix-de-Bossales (CDB) market is the single most important element affecting the lives of the largest concentration of urban poor in the country. It extends over a 3.3 ha mud plain between the modern port and the old downtown area, spilling over into adjacent streets and a neighbouring ex-transport  -8- terminal, occupying another 1.3 and 0.2 ha respectively. The market area includes a retail market with some 14,000 merchants and 80,000 purchasers, storage facilities, a major inter-urban truck and bus terminal, and a wholesale market through which more than two-thirds of the food and manufactured goods for domestic use in Port-au-Prince are commercialized (also through redistribution in a dozen secondary markets in the metropolitan area). Although it caters to all the economic groups of the population, directly or through the hotels and restaurants, the market is of particular importance to the poorest segment of the metropolitan population, 72 percent of which (300,000) lives within walking distance. Besides providing for food, fuel, clothing and building materials that the urban poor consume, the market is the single largest source of employment and place of commercial and social interaction - and also the most serious source of disease and contamination for the 1,036 families living within it, and indeed in the whole metropolitan area. Following the IDA strategy of urban development (as outlined in para. 41 below), the rehabilitation of the CDB market has been chosen as the core component of the proposed project. 30. In Cap-Haitien, 39 percent of dwellings in the slum areas are of wattle and straw construction, 42 percent of wood and scrap material, and 19 percent of cement. Density is about 1,500 persons per ha and more recent dwellings have been built up the sides of the surrounding foothills, aggravating an already severe erosion and drainage problem. 72 percent of all dwellings have no running water, 58 percent have no electricity, and 43 percent have no sanitary facilities. Pit latrines are shared by many families and are poorly maintained. Families devote about one-fourth of their income to shelter expenditures (rent, water, electricity and maintenance). In the low-income neighbourhoods of Les Cayes, 31 percent of all dwellings are of wattle and straw, while 67 percent are made of more durable materials. Densities, however, are much lower: about 305 persons per ha. About 16 percent of household income is used for shelter, 54 per- cent of all low-income residents of Les Cayes use polluted well or river water; another 35 percent buy water from vendors. One-third have no latrines, and 87 percent have no electricity. Stagnant water poses a major sanitation problem. Urban Employment and Income 31i In 1979, the International Labour Organisation (ILO) estimated that 54 percent of the total population participated in the labour force. This high participation rate reflects the large proportion of women engaged in marketing activities, family farm employment and child labour. The total labour force is expected to grow in line with population growth by more than one percent annually until the end of the decade, while in urban areas this growth will equal at least four percent. Few of the new entrants to the urban labour market will be able to find employment in the formal sector, which accounts for only about 30 percent of total employment in Port-au-Prince. 32. Employment in the formal sector is concentrated in manufacturing industry, of which the assembly industries (clothing, sports goods, electronics) are the most dynamic part, and in the construction industry. Other major components of formal sector employment are commerce and public  -9- administration. Manufacturing firms employ 80 percent of the capital's formal industrial workers (36,000). After manufacturing, construction is the major modern and growth sector of the economy. Value added is created predominantly in housing (70 percent) and in industrial and commercial structures (25 percent). Much of construction employment is sporadic, occupying on a full-time basis (300 days per year) only 4 percent of the metropolitan area workers. In addition to the construction workers, some 7,000 workers are estimated to be engaged in the production, transport and marketing of building materials. 33. About 65 percent of the labor force is estimated to be engaged in the informal sector. However, linkages between the formal and informal sectors are complex and the dividing line unclear. Much manufacturing work is done at home on consignment; subcontracting is common in the construction industry, especially for housing construction. A sample survey (1976) in an important low-income neighborhood of Port-au-Prince (St. Martin) adjacent to the Croix-de-Bossales central market found that 35 percent of all workers were involved in small-scale manufacturing, 34 percent in trade (mostly retail trade), 6 percent in construction and the remainder largely in services. Almost half (47 percent) of all women were involved in trading activities as were 6 percent of the men; they made use of the CDB market facilities for purchasing, selling and storing. 34. For secondary cities less detailed information is available. How- ever, socio-economic surveys of low-income neighborhoods of Cap-Haitien and Les Cayes in 1980 showed that 85 percent of all workers were considered to belong to the informal sector (the formal sector comprising only fishermen and those employed full-time by the public administration). Most of the workers were unskilled and an average household at Cap-Haitien had 1.5 gain- fully employed members supporting 4.8 persons. For Les Cayes no estimates are available. Urban Policy and Institutions Urban Strategy 35. During the past three years, the Government has undertaken consid- erable efforts to define an urban strategy and to create the institutiocnal framework for its implementation. Apart from restructuring the National Housing Office (ONL), in August 1982, a comprehensive law was adopted, estab- lishing the basis for administrative decentralization and creation of regional commissions and institutions for planning and development. The Government is committed to supporting the growth of secondary cities, while increasing the share of agriculture in development expenditures at the same time. This strategy faces serious resource constraints. Efficient decen- tralization of non-agricultural employment, particularly in manufacturing, would require levels of investment in infrastructure and social services not attainable at this time. Also, deficits in employment, housing and urban services capacity in Port-au-Prince will continue to require prompt attention and compete with decentralization measures.  - 10 - Urban Planning 36. Primary responsibility for urban planning functions rests with the Urban Planning Service (SPU) of the Ministry of Public Works, Transport and Communications (DTPTC), while the Land Use Management and Environmental Protection Agency (DATPE) of the Ministry of Planning retains general urban development advisory functions. SPU is entrusted with all matters concerning the physical and economic planning of urban and rural settlement. In close collaboration with DATPE, the SPU is formulating the objectives and strategies for their development but project implementation is currently assigned to the Urban Works Department of the DTPTC. A Special Committee for Urban Development was established to monitor the preparation of the proposed project. Housing 37. In 1966, the National Housing Office (ONL) was created as a semi- autonomous agency attached to the Ministry of Social Affairs. ONL's mandate was to build, maintain and manage housing projects for all income groups, but in practice, the Office has maintained and managed housing projects planned, built and financed by other agencies. Through the years it was a weak insti- tution but recent IDA-sponsored restructuring has resulted in improvements. In November 1982, ONL was renamed the Public Social Housing Promotion Company (EPPLS) in the context of this restructuring exercise. A Housing Bank (BDL) has been recently established but is not yet operational. It is under- capitalized and its tasks have not yet been well defined, particularly regarding low-income housing. USAID is presently evaluating the possibility of providing financial assistance to building new home3 for middle-income families (about US$150 per month equivalent) in Port-au-Prince. Environmental Management and Water Supply 38. The interrelated issues of erosion, drainage, and solid and liquid waste removal are the responsibilities of a number of public agencies. Erosion control is the mandate of the Soil Conservation Office of the Ministry of Agriculture in both rural and urban areas; construction -Ld maintenance of urban drainage systems, streets and bridges, is assign:-d to the municipal engineering office of the DTPTC, which, to the extent that a significant amount of waste accumulates in the drainage system, is also involved in solid waste removal. The efficiency of the environmental services provided by these agencies is hampered by the lack of apP