Haiti - Industrial Restructuring and Development Project

Document of The World Bank FOR OFFICIAL USE ONLY C^iZ .Zo7 1- H A Report No. 8013-HA STArF APPRAISAL REPORT HAITI INDUSTRIAL RESTRUCTURING AND DEVELOPMENT PROJECT NOVEMBER 2, 1989 Trade, Finance and Industry Operations Country Department III Regional Office for Latin America and the Caribbean Thi doument has a restdcted ditribto and may be used by recipknts only in the perfonmance of their officil duti Its contens may not otherwi be dicosed wthot World Ebnk authorizaion.  CURRRNRCY EQUIVALENT UNITS Currency Unit - Gourde (G) G 5.00 = US$1.00 (The Gourde has, since 1919, been pegged to the U.S. dollar, at the rate of G 5 = US$1.00 UNITS AND MEASURES 1 hectare (ha) 1=0000 square meters (m2) - 2.47 acres (a) 1 kilometer {km) = 0.62 mile (mi) 1 square kilometer (kmZ) = 0.39 square miles - 100 ha ABBREVIATIONS AID - U.S. Agency for International Development BCA - Banque de Credit Agricole [Agricultural Credit Bank) BCI - Banque de Credit Immobilier [Mortgage Credit Bank] BNDAI - Banque Nationale de Developpement Agricole et Industriel (National Agricultural and Industrial Development Bank] BRH - Banque de la Republique dl'Haiti (Bank of the Republic of Haiti (Central Bank)] BUH - Banque de l'Union Haitien (Haitian Union Bank] CBI - Caribbean Basin Initiative CMCID - Consultative Mixed Committee for Industrial Development EEC - European Economic Community ERR - Economic Rate of Return FDI - Fonds de Developpement Industriel [The Industrial Development Fund] FHD - Fondation Haitienne de Developpement (Haitian Development Foundation] FIs - Financial Intermediaries FIRR - Financial Internal Rate of Return GPT - General Preferential Tariff GSP - General System of Preferences IDA - International Development Association OFATMA - Public Medical Insurance Program SHODECOSA - Public Industrial Park SONAPI - Private Industrial Park SOFIHDES - Societe Financiere Haitienne de D6veloppement (Haitian Financial Corporation for Development] TA - Technical Assistance UNDP - United Nations Development Programme FISCAL YEAR October 1 - September 31  FOR OFFICIAL USE ONLY STAFFY APPRAISA RIPOR T DiSTRiL - DIVDORIT PROJECT Table of Contents Pase No. CREDIT AND PROJECT S UOM RR Y . ......... iv 1. TUE INDUSTRIAL S E C TOR ................................... 1 Macroeconomic Framework ................................. 1 Industrial Structure ................................... 2 Growth Trends ........................................... 2 Manufacturing Expot Trends t .................... 2 Employment in the Formal Manufacturing Sector ........... 3 Industrial Policy Framework . . 3 Industrial Sector Adjustment Process .................... 4 1'sort-Substitutlon Industry .. S Export Assembly Sector ...... Performance of Export Assembly Sector . . 6 Principal Constraints to Industrial Growth . . 6 Environmental Impact ................. a 2. THE FINANCIAL SECTOR .................................... 9 Structure ... ............................... g The Central Bank (IRE) and Banking Regulations . . 10 Interest Rate Structure .. 10 Tgrm Lending ............................................ 11 Development Banks . . . 11 3. INDUSTRIAL RESTRUCTuRiG ................................ 12 4. CREDIT DEMAND ........................................... 13 5. IDA ASSISTANCE AND STRATEGY . ............................ 14 6. THE PROJ8CT ............................................. 14 Project Objectives and Description ...................... 14 PDI and Experience under the First Industrial Credit (Credit 1131-hA) ...... 16 PDI Lending and Financial Status . ...................... 17 This report was prepared by Mrs. Kanella C. Vasiliades, LAST? (Mission Leader); Messrs. Robert Simsolo, James Beresin, Roman Semkow, Consultants, LA3TFt and Mr. Hassan Fazel, LASC2, and Ms. Constance Bernard. LA31T, following preparation missions to Haiti In May 1988. Appraisal was concluded in May 1989. This document has a striced dtibuonand may be ud by eipsnt oily in the performane of thir official dutis Its contents may not otherwi be diced wthout World Bank authodin.  iiL - Page No. Portfolio Quality .... . . ............... ......... 18 Guarantees 18.... ...... . .......... is Eligible Financial Intermediaries...... 19 Project Costs, Financing, and Implementation 19 Replenishment of FDI Resources .. 20 Onlending Terms ......... 20 Types and Sizes of Subloans ........ 21 Financial Instruments .. .. ...... . . .22 Haturities and Grace Perer i. 22 Subproject Appraisal and Supervision ................., 22 Project Advisory Committee (PAC) . . 23 Procurement..... .... ......... 23 Disbursements. . 24 Accounts, Auditing, and eporting . . 24 7. BENEFITS. ....... ....... . ........ 24 8. RISYS ............ ...... 24 9. AGREEMENTS REACHED .................................... .. 25 ANNEXES 1 Ponds de Developpeme'.t Industriel (FDI)... 27 2 Tecbnical Assistanc Components. ..... 35 3 Industrial Restrucr.uring Plan... 39 4 Data on Exnorts Table 1 - Gross Domestic Product by Sector: Constant 1976 Pricess.... .. .... 43 Table 2 - Performance of Local Import-Substitution Industries . ...... ........ 44 Table 3 - Industrial Exports to U.S.A. based on Local Materials ...... * ... .. .......... 45 Table 4 - Exports of the Assembly Sector Based on Imported Materials.... ....... 46 Table 5 - Trends of Industrial Exports to U.S.A 47 Table 6 - Sunmary of Industrial Exports of the Assembly Sector to U.S.A. 48 Table 7 - Basic Indicators of Assembly Sector .49 5 Data on Haiti's Financial Sector Table 1 - Pinancial System - Summary of Operations 51 Table 2 - Money Supply.............. 52 Table 3 - Distribution of Credit by Economic Activity 53 Table 4 - Interest Rates.. ........ 54 Table S - Reserve Requirements by Category of Deposits 55 Table 6 - The Commercial Banking System in Haiti, Statement of Condition, as of September 30, 1988 56 Table 7 - Distribution of Credit by Banking Institution and Economic Activity, as of June 30, 1988 57 6 Data on FDI Table 1 - Distribution of Operations through FIs, by Size of Subloans, as of September 30, 1987 59  - iii - Pase No. ANNEXES (continued) 6 Data on FDI (continuation) Table 2 - Distribution of Operations through Fla, by Maturity ................................... . .......... 60 Table 3 - Distribution of Operations, by Sector and Maturity, as of September 30, 1987 ... ..... 61 Table 4 - Distribution of the Number of Operations, by Region, as of September 30, 1987 ........... 62 7 Proiect Data Table 1 - FDI, Projected and Actual Balance Sheets PYs1982-88 .................................... . ......... 63 Table 2 - FDI, Balance Sheet, Projections under New Project ....................... . 64 Table 3 - FDI, Audited Results of Operations 1985-88 .... 65 Table 4 - PDI, Cash Flow Projections, FY1988189-94195 ... 66 Table 5 - Integrated Cash Flow and Debt Service Projectior . . ...... *.. ............ . 67 Table 6 - Estimated Credit Demand ....... ................ 68 Talble 7 - Profile of Enterprises to be Restructured ..... 69 Table 8 - PDI, Lending Program ................... ....... 70 Table 9 - Project Cost Table and Proposed Financing..... 71 8 Estimated IDA Disbursement Schedule, 1990-95 ............ 73 9 Project Implementation Timetable................... 75 10 List of Documents Available in Project File............. 77 FDI ORGANIZATIONAL CHART .......................... 79 IBRD Map No. 21143  - iv - HIATI INDUSTRIAL USTUC UR' AND DEVELOMPT PROJECT Credit and Proiect Summary Borrowers Government of Haiti Executina Amencys Bank of the Republic of Haiti (BRH)/ Industrial Development Fund (FDI) Beneficiariest Private Manufacturing Enterprises Armount SDRs 9.1 million (US$11.4 million equivalent) Termss Standard, with 40 years maturity Relendina Terms The Borrower would pass on to fRH for FDI's use US$10.0 million equivalent, of which US$5.0 million would be in the form of a grant and US$5.0 million at 81 for 20 years, including 5 years of grace. FDI would pass on the funds to the financial intermediaries (FIs) at 8SZ for onlending to the final beneficiaries. For loans financing small-scale enterprises (below US$100,000 equivalent), FI would be charged 71, to allow a larger spread, as an incentive to support small-scale industry. FIs would determine the lending rate to the final beneficiary within the broad interest range authorized by the Central Bank. The FIs would retain an adequate spread in both cases, to cover administrative costs and credit risks and provide them with a reasonable return. The nominal foreign exchange risk would be borne by the Government. However, given that interest rates are determined within a broad range and as the Haitian capital market is open, a foreign exchange risk premium reflected in the interest rates, would be borne by the final borrower. Prol:ct The proposed project would support the private industrial Descriptions sector in undertaking the necessary adjustments for the transition from a highly-protected and inwardly-oriented sector, to an outwardly competitive one, by improving its efficiency, competitiveness, and export potential. Moreover, it would assist the Government in maintaining the newly reformed trade regime. To achieve the above objectives, the proposed project would provide: (i) financial and technical assistance to a number of private industrial enterprises being restructured, including financial restruc*uring, improving marketing strategies, and upgrading product quality and production facilities; (ii) credit assistance to export-oriented or efficient import-substitution industrial enterprises that need financing but no restructuring; and (iII) technical assistance to strengthen the institutional capacity of the  IDI, FIs, and the Central Bank, strengthen customs administration, and support ongoing Government efforts to improve the industrial regulatory framework. Project Risks If recent political instability were to persist, project implementation could be adversely affected. Investment credit demand is highly sensitive to the current political situation. Restructuring, as well as neo investments, may be slow to materialize. Influential, long-protected industrialists might put pressure on the Government to reverse the trade liberalization reforms. The above risks would be mitigated by the strong pipeline of industrial restructuring proposals and by the Government's efforts tot (i) broaden the basis for an internal dialogue, through the revival of a public/private consultative committee; and (ii) provide adequate financial resources to PDI to support the restructuring efforts. In addition, the Government has committed itself, in a policy letter submitted to IDA, to continue implementation of trade policy reforms. Another risk is that the banking system may be reluctant to increase its financial exposure to the industrial sector-- perceived more risky for the provision of term financing-- which in turn might slow down disbursements. The project, however, is designed in such a way as to encourage its utilization by the banks, including, for instance, an adequate spread and, in the case of the restructuring component, participation by the commercial banks in the drawing up of the restructuring plans for some important clients. In addition, the banks have gained experience in the second-tier-type lending under the first operation. FDI's rediscounting was reduced in the first credit operation when its foreign exchazge resources were depleted, at a time when the banking system was experiencing excess liquidity. This could be repeated in the future. However, a commitment by the Government to exchange accumulated Gourdes for foreign exchange would reduce this risk. Proiect Cost Local Foreimn Total (US$ Millions) Credit 10.5 12.7 23.2 Technical Assistance 0.4 1.0 1.4 Total Proiect Cost 10.9 13.7 24.6  - Wi - Financing Plans Local Forein Total (US$ MlIons) FDI/Government 5.3 - 5.3 Intermediaries/ Final Beneficiaries 5.2 2.7 7.9 IDA 0.4 11.0 11.4 Total Proiect Cost 12_ 13.7 24.6 Estimated IDA Disbursements: (Based on Average Profile for IDF Bank Loans in Region) -----------------*------US$ million *-------------------- FYss 1990 1991 1992 1993 1994 1995 Annual 0.4 1.0 3.1 2.9 2.6 1.4 Cumulative 0.4 1.4 4.5 7.4 10.0 11.4 Rate of Return: Subprojects must have FRRs and Enos of at least 122 in real terms.  u&rn STAFF APPRAISAL REPORT INDUSTRIAL RESTRUCTURING AND DEVELOPHEWT PROJECT 1. TME INDUSTRIAL SECTOR 11.1 Macroeconomic Framework. Macroeconomi policies and performance have improved substantially in Haiti from early 1986, following a change in the country's political regime. The primary focus from March 1986 to November 1987 was on macroeconomic stabilization and improvement of resource allocation and growth prospects. This was accomplished through reforms of taxes, public expenditures, public enterprises, industrial and trade policies, and agricultural pricing. The reforms were extensive and swift, and began to stabilize and restructure the economy. During the Haitian FYs1986-87, the public sector deficit averaged an equivalent of 62 of GDP, compared to 92 in FYs1980-85; the external current account deficit averaged 5? of GDP, compared to 82 per year in FYsl980-85; inflation was brought down to 2Z per year, compared to 82 per year in FYsl98O-85; and the effective exchange rate depreciated by 142 in real terms, compared to 402 appreciation between PYs1980-85. Economic growth averaged slightly under 12 per year, compared to the decline of about 1S per year in 1980-85. 1.2 ziaiti's economic policies during 1986 and most of 1987 drew significant international support. The pace of economic reforms suffered, however, when, beginning in the last quarter of FY1987, a series of constitutional crises compounded the country's economic and financial difficulties. In response to the changing domestic and external circumstances, strong efforts were made to limit the size of the budget and external deficits. However, the shortfalls in budget support grants and in gross aid disbursements proved too big for the country to deal with. At the end of FYs1988 and 1989, there were fiscal gaps of over G150 million (nearly 22 of GDP), financed by monetary expansion, and the nation incurred external payments arrears of about US$20 million. In the same period, the overall public sector deficit remained at around 62 of GDP. 1.3 The Gourde has been linked to the U.S. dollar at a rate of US$1.00-G5 since 1919. Historically, Haiti's desire to keep the Gourde stable vis-a-vis the U.S. dollar has disciplined successive Governments to pursue prudent fiscal and monetary policies. By law, all foreign exchange transactions must be channelled through the banking system. The banks in turn must sell 50 of these proceeds to the Central Bank, so that it can service public external debt and cover petroleum and other essential imports. A parallel market began to operate in the early 1980s, with a premium ranging between 52 in periods of fiscal and political stability and 252 in 1987-88 when external budget aupport was withdrawn. Given the current scarcity of foreign exchange at the official rate, most importers must rely partially or entirely on the parallel market, which is currently roughly estimated to account for over 602 of all foreign exchange transactions.  1.4 Notwithstanding the political, economic, and financial difficulties of FYs88-89, thus far Haiti has kept in place the basic fiscal and trade reforms that were implementod in 1986-87. In FY90, moreover, Haiti has undertaken to implement a financial stabilization program, to be supported vith an IMF Stand- by arrangement. The key elements of the program in FY90 are to be fiscal discipline and associated monetary, wage, exchange, and trade policies. It is expected that provision of IN? resources would relieve budget pressures, as well as pressures on the parallel market premium. 1.5 Industrial Structure. Haiti's industrial sector is characterized by two separate industrial structures that have emerged under two different trade regimess (i) the import-substitution industries, serving the local market and, until recently, highly protected from external competition; and (ii) the export assembly sector, operating under a free trade regime. The overall industrial structure, including the assembly sector, is dominated by three industrial subsectors, accounting for over 70? of the industrial value addeds food products (352); electrical and electronic equipment (22S); and textiles, leather, and clothing (13X). Thne local industry--dominated by foodstuffs, beverages, household goods, and building materials--comprises around 500 family- owned enterprises and a small number of public enterprises partially or wholly- owned by the State, which are currently being restructured. Small ente:prises employiug between 5-50 workers make up 57Z of the total and account for 11 of the industrial labor force; medium enterprises, employing between 51-300 employees, make up 35? of the total and 47? of the industrial labor force; and the large enterprises, employing over 300 employees, make up 82 of the total and 42? of the industrial labor force. 1.6 Growth Trends. Haiti's industrial sector experienced its most dynamic growth in the 19709--at a rapid rate of 10 per annum in real terms--due primarily to the establishment and expansion of the export assembly sector. However, this growth has not been sustained, and, with the exception of a brief surge of activity in 1982183, industry has been in overall decline since 1981 (see Annex 4, Table 1). While GDP at factor cost grew by 1.8? between FYs1982-83 and FYs1987-88, the manufacturing sector's output declined by 12.5? and its contribution to GDP went down from 18.5? to 15.9?. In FYsl986-87, the sector's contribution to GDP went down by 0.5? and its output by 3.8?. In FYs1987-88, the sector's contribution to GDP remained constant, while its output declined by 0.8?. This may indicate a slowdown in the downtrend of industrial growth. 1.7 Manufacturins ExDort Trends. Annex 4, Table 5, presents a five-year export trend of four comiodity groups, classified by their relative performance. The most erratic performance concerns articles in the first group (transformers, switches, toys, jewelry, optical, and sporting goods). This group experienced en index growth of 31.6 points in FY1983-84, followed the next year by a marginal growth of 1.1 points, followed by a drop by 29.1, an upsurge of 54 points, and, finally, another drop of 24.1 points in the last fiscal year. During the period, the group's share of total exports progressed from 39.2? to 40.2?. The second group, comprising textiles and garments, progressed by 81.3 points, with the only drop of 6.3 points registered in PY1985-86. This group increased its share of total exports from 31.8? to 44.7Z. The third group, comprising other articles assembled from imported components, declined steadily by 79.8 points, while dropping its share of total exports from 18.47 to 11.4?. Finally, the fourth group, comprising articles assembled from local raw  - 3 - materials, declined by 44.5 points, while dropping its share of total exports from 10.61 to 3.72. The last two grcups, however, registered modest increases in tb.e last fiscal year, ending September 1988. 1.8 Employment in the Formal Manufgcturing Sector. Unemployment (including underemployment) estimates in Haiti range from 50S to 602. The main source of industrial employment is the export assemply sector, currently at a total of 39,000 jobs. This compares with a figure of some 20,000 workers in import- substitution industries. Employment in the informal, or artesanal, sector has been placed at as many as 80,000 workers. The industrial sector, including the assembly sector, employs 72 of the labor force. The assembly sector alone employs 31 of the labor force in Port-au-Prince. 1.9 Unemployment rose sharply in the aftermath of Duvalier's departure in February 1986, with an estimated loss of 10,000 to 12,000 jobs in the assembly sector as a result of 10 factory closings. There is also evidence of a progressive decline in the level of activity of those industries producing for the local market, with the result that total industrial employment in the formal sector is thought to have contracted by more than 20S overall, to only some 55,000 by the end of 1986/87. Employme..t figures by OFATMA, the Government-run employees' medical insurance scheme, indicate a decrease of 6.52 in the number of registered employees in FY87. Although there is no way of accurately assessing its magnitude, employment in the informal economy appears to have increased. 1.10 Industrial Policy Framework. Up to mid-1986, industrial activities operated in a highly protected environment, which allowed industries to survive ifn spite of low productivity levels and non-competitive prices. Tariffs as high as 200Z, combined with quantitative restrictions on imports, resulted in effective protection levels averaging about 1002, with more than 10X of industrial production enjoying effective protection of over 300S. Excessive protection led to the manufacturing of over-priced low-quality products and the extreme variance in effective protection resulted in a bias against technologies based on labor-intensive processes, thus discouraging job creation. 1.11 In July 1986, the Government of Haiti, with IDA support (Credit 1760-HA), undertook a major trade reform that changed the operating environment significantly. Import tariffs were simplified, with ad valorem tariffs substituting for the previous system of specific tariffs and for quantitative restrictions on imports. Ad valorem tariffs were lowered to an average of 202, with a maximum rate of 40?. Exemptions allowed by the Investment Code ended in January 1988. The level of effective protection for existing firms has been drastically reduced by these measures, from an average of over 100X, to below 40?. The number of products subject to quota or other license restrictions was reduced from 111 to 35, followed in December 1986 by the effective abrogation of the Import Licensing and Quota Law. Imports require licenses mainly for maintaining trade records, and these are granted automatically, except for a short list of agricultural items still subject to restrictive import licensing. A new import licensing law, without formal ceilings, has been introduced for rice, maize, millet, beans, sugar, chicken parts, and pork meat. Exports require prior authorization from the Ministry of Commerce; this is usually granted freely, unless there is a shortage of domestic supplies. Commercial banks maintain records of exports, and exporters must obtain a Central Bank visa to ensure subsequent repatriation of the proceeds. Price controls in Haiti traditionally have been applied only to a handful of agricultural items,  -4- petroleum products, and goods and services sold by the public sector. However, in the context of rising inflation, legislation was approved in Harch 1989 which allows the GoverAment to regulate prices of goods falling under the category of basic necessities. Thus far, the authorities have not announced the iaplementation regulations. With the exception of public utilities, Haiti does not have any legal barriers to business investments. Entrylexit into businesses is quite fluid, and no elaborate licensing Is in force. 1.12 Given the implications of these changes, in terms of the ability of industry to continue operating in a more open and competitive environment, the new tariff structure has been subject to extensive consultations between industrialists and the Ministries of Finance, Industry, and Commerce. la this consultative process, some anomalies in the tariff etructure have been noted, regarding treatment of certain products that constitute finishad goods for some and inputs for others. For example, colored fabric is exempted, while colors for textiles are subject to a 301 duty. The Government also recognizes the few anomalies in the New Tariff Code introduced iz 1987, and intends, through the consultative private/public committee already in place, to resolve them. The guiding priciple in applying trade tariffs will be transparency and uniform treatment of cases. The Government provided the appraisal mission with a policy letter committing itself to maintain the wide-ranging industrial and trade policy reforms undertaken in Haiti during FYs1986-87. IDA will closely sapervise adherence to these reforms. During negotiations, agreement was reached with the Government to maintain the reforms. 1.1 Although the industrialists initially resisted trade liberalization measures, widespread contraband during the same period caused a shift to cautious acceptance. Several industrtalists have shifted their efforts to addressing the Government's lack of control of contraband, which has made the new lower levels of protection meaningless in many cases. !hile contraband continues to be a problem, its composition seems to have changed, reducing its impact on sugar, flour, and rice, where local prices have been reduced, but continuing in consumer items, such as clothing, cigarettes, and pharmaceuticals. 1.14 IndustriUl Sector AdJustment Process. Paras. 1.15 to 1.22 below describe the trends and adjustment of the various subsectors in local industry and the assembly sector during the last two years. In aggregate, contraband, and trade liberalization, together with the uncertain politico-economic climate, have had a negative impact on the overall growth of the industrial sector. Notwithstanding the above difficulties, some local industries exposed to competition have internalized market signals, have taken the necessary adjustments, and are showing signs of recovery. Others have reduced drastically their production levels. while still seeking alternative solutions. With the exception of public enterprises, there have been no major factory closings. Cross-subsidization between industry and trade by several family-owned import- substitution enterprises seems to have provided a cushion during this period of adjustment. Irregular supply of raw materials due to a disruption in local production has affected assembly industries based on local raw materials. Assembly industries based on imported raw materials have performed relatively better. In particular, textile exports to the U.S. were at a record high in 1987, while CBI exports to the U.S. ranked second in the Latin America/Caribbean region. With some Industries of the private sector sustaining reasonable production levels, Haiti is in a position to achieve ccnsiderable growth, if social and political stability can be maintained.  -5- 1.15 Imnort-Substitutiom Industry. According to Central Bank estimates, the contribution of this sector to GDP has declined, from 4.71 in the fiscal year ending September 1987 to 1.52 during the fiscal year 1988. In real terms, the value of manufacturing output dropped within a year from 231 million Gourdes to 71 million Gourdes. Perforr-nce has been uneven (see Annex 4, Table 2). The production decline of sugar, clinker, cotton textiles, and toilet soap appears to have been slowing down in the fiscal year 1988s the decline ranged between 0.22-14.3Z, against 16.11-75.O during the previous fiscal year. On the other hand, the production of matches, synthetic textiles, and detergents, which increased between 4.62-39.52 the previous fiscal year, declined between 23.0Y-32.82 in the last fiscal year. Among the products processed from local raw materials and experiencing increases between 2.32-233.92 over the previous fiscal year were: cement, edible oils, essential oils, laundry soap, and butter. The increase of 233.91 in edible oils production resulted largely from bottling of imported bulk, possibly through contraband. 1.16 Significantly enough, a group of local products considered low-cost and low-income, such as, certain pharmaceuticals, laundry soap, pasta, butter, etc., has been so far immune from contraband and, what is wore significant, their local production has been actually on the increase. These products, adapted to the lower income market segments, may have a very strong 'brand loyalty' and above all, the right 'product mix.' In sharp contrast, the second group of products, concerning essentially certain bulk commodities, such as sugar, rice, flour, cotton textiles, etc. of substandard quality, infiltrated by contraband into the physical distribution channels and retailed in bulk at a discount. However, a very significant slowdown of the local production decline registered in the last fiscal year could be a plausible indication that contraband may have reached the limits of its share of the local market of these commodities. Finally, the third category includes e6sentially 'brand name' products, such as matches, detergents, synthetic textiles, etc., recently targetted by both legal and illegal imports. For some of these products, the local production has been scaled down to 1984 production levels. 1.17 Ernort Assembly Sector. The assembly sector has been the most dynamic sector in the Ha