The second of three articles
Why is
Haiti “attractive”
Last
September, President Michel “Sweet Micky” Martelly told
foreign investors that Haiti is ready for “new ideas and new
businesses.” The country, he said, is “creating the
conditions necessary for Haiti to become a natural and
attractive destination for foreign investment.”
But the ideas are not that new.
Over 30 years ago, the Haitian and U.S. advisors of dictator
Jean-Claude Duvalier had almost the same plan for Haiti’s
economy. The impoverished country would become the “Taiwan of
the Caribbean” – a vast factory complex offering low
sweatshop wages where U.S. industries could assemble textiles,
electronics and baseballs.
How has it worked out? Three
decades and billions of dollars in investments later, workers in
Haiti earn less than they did under “Baby Doc,” as
outlined in the first installment of this article. And studies
like Yasmine Shamsie’s Time for a “High-Road” Approach to EPZ
Development in Haiti note that “[w]hile the [Free Trade
Zone] model did create jobs, it also had important negative
effects on Haiti’s poor.”
Among the “negative effects”
the Canadian researcher noted:
● Increase in income concentration and
regional inequality
● A rise in food and housing prices
● Slums in marginal areas sprang up, in
part because of the rural exodus spurred by the factories, but
also because “wages were too low to provide workers with
decent or safe accommodations.”
Those results haven’t stopped
Haitian politicians and “development experts” from doing
“déjà vu all over again” planning. This time, however,
plans call for “decentralizing” the factories.
In 2002, President
Jean-Bertrand Aristide kicked off the new round when he and
Parliament passed sweeping “Investment Code” and “Free
Trade Zone” legislation. The new laws offer 15-year tax
holidays, duty-free import and export, and tax-free repatriation
of profits. Only one Free Trade Zone (FTZ) opened last decade –
CODEVI on the Haitian-Dominican border – but others were in the
works prior to the Jan. 12, 2010 earthquake, thanks to the
incentives offered by duty-free textile trade agreements with
the U.S..
In fact, the changes in the
international garment industry during the last decade – due to
the 2005 expiration of the Multi-Fibre Arrangement (MFA) and the
Agreement on Textiles and Clothing which gave developing
countries low-duty or duty-free export quotas for the U.S.,
Europe and other “developed” countries – have created havoc.
When those agreements ended,
thousands of factories in low-wage countries around the world
shut their doors or laid off workers as international
contractors sought out more advantageous locations to have their
clothes stitched. Perhaps not coincidentally, the very next
year, in 2006, the U.S. Congress passed the Haitian Hemispheric
Opportunity through Partnership Encouragement (HOPE) Act that
gave preferential access to Haitian-sewn clothing. Two years
later, HOPE II expanded the preferences and locked them in place
for ten years.
Then, in the wake of the
earthquake, Congress approved the Haiti Economic Lift Program
(HELP) Act, which nearly triples duty-free quotas for clothing
exports from Haiti to the U.S. and stretches the access up
through 2020.
But the names “HOPE” and
“HELP” shouldn’t mislead readers into thinking the
legislation is meant to be “hopeful” or “helpful”
to Haitian factory owners or workers only.
Writing for the United Nations
in 2009, economist Paul Collier noted that “[u]niquely in the
world, Haiti has duty-free, quota-free access to the American
market guaranteed.”
“Haiti has a massive
economic opportunity in the form of HOPE II,” Collier wrote
in his Haiti: From Natural Catastrophe to Economic Security
report for UN General Secretary Ban Ki-moon. “The global
recession and the failure of the [World Trade Organization] Doha
Round accentuate this remarkable advantage because manufacturers
based in other locations will undoubtedly be fearful that rising
protectionist pressures may threaten whatever market access they
enjoy currently. From the important perspective of market
access, Haiti is now the world’s safest production location for
garments.” [author’s emphasis]
Collier and the other
cheerleaders say Haiti won’t be able to sell its “unique”
advantage unless it carefully assures a few sine qua nons.
Low wages
Wages must be kept low. A World
Bank/Inter-American Development Bank report prepared for the
2011 Davos World Economic Forum noted that, at the moment,
Haiti’s labor costs were “fully competitive with China’s,”
while wages in the Dominican Republic are “high,” which
has led to a “decline” in the assembly industry there.
What are the wages across the
border in the DR? In 2009, the minimum wage for Free Trade Zone
workers was US$35 a week, which, according to the US State
Department – cited in a study by Georgetown Professor John M.
Kline – “did not provide a decent standard of living in any
industry for a worker and family.”
The implication? Haitian
sweatshop wages won’t be going up any time soon. They currently
stand at about $35 a week.
24/7 production
The clothing industry “operates
multi-shift production,” Collier noted in his report, where
he called for Haitian factories to include night shifts. The
Haitian private sector agrees. In its post-earthquake Vision
and Roadmap for Haiti report, Haiti’s industrialists and
business owners called for “flexible labor laws, including
immediately legalizing the 3x8 work shift to allow increased
competitiveness in the garment industry.”
Public investment
Not surprisingly, Haiti’s would-be
sweatshop investors are also looking for subsidies and handouts.
“Given the risk and timing associated with garment tenants,
public funding is necessary to catalyze investment in the new
economic development zones,” the Vision and Roadmap
noted.
The factory owners got their
wish – the U.S. and other donors are donating almost $200
million to the new Regional Industrial Park of the North (Parc
Industriel du Region Nord - PIRN) project in Caracol (see
below).
Land for
FTZs
“Ensure that
land is rapidly available for acquisition in Export Zones,”
Collier recommended.
All of these
elements will make sure that Haiti is, as Martelly called it, “a
natural and attractive destination.”
What’s planned
for Haiti?
“Free Trade
Zones should be one of the spearhead’s to launch reconstruction,”
recently said Jean-Alix Hecdivert, director of the Haitian
government’s Free Trade Zone Office (FTZO).
Beginning 40 years ago, Haitian authorities and their backers
pinned their hopes – in part – on Free Trade Zones (FTZs) and
assembly jobs.
More
recently, the Haitian government and its backers have nuanced
their approach. The 2010 Presidential Commission on
Competitiveness: Shared Vision for an Inclusive and Prosperous
Haiti report named textiles as one of five “priority”
sectors. (The other four are: animal husbandry, tourism, fruits
and tubers, and construction.)
But
in the wake of the earthquake, and with the advent of the HELP
law which extends the HOPE II benefits, the main focus appears
to be on FTZs and the assembly industry sector. The FTZO has
received many requests for new authorizations, Hecdivert told
Haiti Grassroots Watch (HGW).
“We
are working on all of these projects because the focus is:
create the most jobs possible in the shortest amount of time,”
he added.
Echoing Hecdiovert, a key figure in the Martelly administration
said the government is basically banking on “a massive influx
of foreign capital.” In a Sep. 12 article in Le
Nouvelliste, Laurent Lamothe, head of Martelly’s new Council
on Economic Development and Investments, said “the biggest
need for the Haitian population is job creation.”
According to HGW’s interviews with the FTZO, and the evidence
culled from dozens of documents and reports, there are over a
half-dozen new FTZs and other assembly industry-related projects
in the works. These include FTZs, Free Trade Industries
(essentially an FTZ that the size of the building) and “Special
Economic Zones” which are like expanded FTZs but with some
non-FTZ businesses allowed in the region. One of the biggest
projects is the PIRN. Another large project – although not much
is known about it – is a giant combination of FTZs and other
initiatives some journalists are calling the “North Pole
Initiative.”
Despite numerous requests to FTZO officials, HGW was not able to
obtain definitive paperwork on all of the projects, nor a map of
approved FTZs. Below is an incomplete list of existing or
potential FTZs and related projects.
Name |
Where |
Who |
Who is
investing & what kind of investment |
Number of new
jobs project aims to create |
SONAPI
industrial park (expansion) |
Port-au-Prince |
(government
industrial park) |
Government -
$3.5M loan
Government -
$400K grant |
1,200 - 2,000 |
CODEVI
(expansion) |
Ouanaminthe |
Grupo M |
World Bank &
Soros Economic Development Fund (SEDF) - $6M loan
Citi - $250K
grant |
1,400 |
West Indies
Free Trade Zone |
north of
Port-au-Prince (part of “North Pole”) |
WIN Group (Mevs
family) |
Soros
Economic Development Fund (SEDF) - $45M loan |
25,000 |
Industrial
Revolution II |
Croix des
Bouquets |
Richard Coles
of Multiwear S.A. |
$7.5M total,
with a $3M loan possibly coming from IDB |
? |
RHEA |
Croix des
Bouquets |
Signa S.A. |
? |
? |
? |
Corail-Cesselesse
(part of
“North Pole”) |
NABATEC -
Gérald-Emile Brun, director |
Unnamed
Korean firm? |
? |
HINSA |
Drouillard
(Port-au-Prince) |
Hispaniola
Investment S.A. (D’Adesky) |
|
? |
PIRN |
Caracol |
US
government, Haitian government, Sae-A |
US - $120M
grant
Inter-american
Development Bank (IDB) - $55M grant
Sae-A - $78M |
20,000 (more
promised) |
Quisqueya |
Sartre |
? |
? |
|
? |
Les Cayes |
? |
? |
|
Nouveau
Quisqueya |
Port à l'Ecu |
Société Générale de Développement S.A.
(SOGEDEV) |
(tourism
installation as well as FTZ planned, according to FZO) |
|
? |
Fort Liberté |
? |
? |
|
? |
Ganthier
(part of “North Pole”?) |
? |
? |
|
Charity or
profit?
The language in
the press releases and on the websites announcing the millions
in loans and grants for the expansion of the textile assembly
industry constantly reinforces the idea that relocation of
factories to Haiti is practically a charitable enterprise.
The
Interim Haiti Recovery Commission says the project is in the “job
creation” sector, making it sound almost like a social
service. Billionaire George Soros’ investment group hyped that
their participating in the West Indies Free Trade Zone would “improve
the standard of living for 300,000 residents.” A Citi news
release on its $250,000 grant to CODEVI congratulated itself for
helping “create 1,400 new full time jobs for Haitians over
the next 12 months.”
But a
look at what the buying power of a Haitian textile worker’s
salary dispels the myth that assembly jobs contribute to a
significantly improved “standard of living.” And in any
case, an investment is an investment – the objective is to make
a profit. That is why financiers like Soros and Korean textile
giants like Sae-A Trading are in Haiti, not in Alabama or
France.
The
jobs “created” in Haiti most likely already existed as
jobs in another country before moving to the home of the
hemisphere’s lowest wage. Haitian laborers are likely replacing
more expensive laborers, and are basically making it possible
for clothing labels like GAP, Banana Republic, Gildan, Levis and
others to make even more profits by shutting down factories
based in countries with better salaries and better worker
protections.
A
look across the border is instructive. Between 2004 and 2008, as
wages rose a tiny bit, and a preferential trade agreement came
to an end, the Dominican Republic lost 82,000 assembly jobs.
In
the US, during about the same period (between 2004 and 2009),
over 260,000 textile workers lost their jobs, according to the
US Bureau of Labor Statistics. U.S. sewing machine operators –
the least trained textile workers – earned about $9.50 an
hour in 2008 (the most recent figures available). In Haiti
they earn about $5.90 a day.
Manufacturers do not take their jobs offshore in order to “jumpstart”
industry or “improve the standard of living.” They do it
to make a profit. As Canadian company Gildan Activewear said in
a recent newspaper article, the savings offered are “too good
to pass up.”
According to a 2009 study commissioned by the Haitian government
and paid for by the World Bank, Haitian assembly plants seem to
be making a good profit, also. At that time were netting between
8 and 67 cents profit per piece, with factories stitching
up to 1.7 million items per month.
Not all bad
Industrialization
brings some benefits. Haitian workers get training, industrial
parks are built, and there is likely some transfer of
technology. Electricity, water and other infrastructure is
usually improved in the FTZ areas. But the industry is volatile,
and at any moment a textile company can pick up and leave.
For these and other reasons, Haitian
economist Camille Charmers thinks the current approach –
marketing Haiti’s sweatshop-wage salaries – is “a big error.”
“Basing
the country’s development on assembly industries is a big error,
it will lead us into a hole, into dependency,” he told HGW.
“We’ve already experienced it, we know what it does.”
While
Chalmers admitted that the areas with FTZs have slightly better
infrastructure than the rest of the country, and that workers
use their meager wages to buy food, the overall effects are
minimal and do not help the economy’s productive forces grow.
“The
sector is practically cut off from the rest of the country,”
he said. “You get some factories and some salaries, and
everything else is imported.”
“It’s
completely wrong-headed and it won’t help the country get out
from under its economic crisis,” the economist concluded. “People
need to know what FTZs are, what has happened in Mexico, or
Honduras, so they don’t think these things will ‘save’ us.”
So
how have other countries fared?
Stepping Stone
or Dead End?
Haitian factory
owner Charles H. Baker admits that by trying to attract
manufacturers to Haiti with the lowest salary in the Americas,
the country is engaged in a “race to the bottom,” but he
insists that low-wage, low-skilled assembly industries are a “stepping
stone” to more complex industrial development.
“It
will last ten to 15 years,” Baker told HGW. “I count on
it only as a stepping stone... It’s a step. We’re going up the
stairs, and it’s one of the steps.”
Dozens of countries – and indeed, Haiti, on and off for the past
30 years – have already walked the walk, climbing onto the
bottom of the “race to the bottom” steps.
HGW
reviewed reports on the Dominican Republic, Mexico and Central
America to see how those countries, economies and workers have
done.
Resoundingly, the evidence on Free Trade Zone (FTZ) and low-wage
assembly industries shows: Economy - Little evidence of “linkages”
with the rest of the economy; Environment and Health -
Assembly industry-led industrialization can have direct and
indirect negative effects on the environment, and lax
regulations or lax enforcement can mean that workers are exposed
to hazardous materials; Society - While the employment of
women does yield some positive effects (economic autonomy,
etc.), assembly industries can also have negative effects on
families and society.
“The
literature on [Export Processing Zones] is voluminous but there
are a few findings that stand out when considering Haiti,”
notes Canadian researcher Yasmine Shamsie. “First, countries
that applied the EPZ model relatively successfully (such as
Mauritius and Costa Rica for instance) employed it as one pillar
of a broader plan to diversify their economies. This means that
the model on its own will yield hardly any beneficial results.”
What does the
data say?
HGW cannot claim
to have perused all of the literature, but a glance at some
studies of countries similar to Haiti might shed some light…
Economy
In 2003, José G.
Vargas Hernández of the University of Guadelajara looked at
literature related to Central America where, during the 1990s at
least, “most of the maquiladoras are owned by Asian capital,
mainly Korean capital investors.”
The
researcher concluded that “[t]here is no evidence that
maquiladora industry’s technological complexity has a direct
impact both in economic development and generation of well
remunerated employment.”
Vargas Hernández went on to discuss universal “non-observances
of labor rights,” the fact that foreign investors can leave
a host country on a moment’s notice, and the frequent failure of
the sector to develop beyond simple low-skilled, and low-wage
jobs.
“There
is not a clear understanding about the role that this type of
industry is playing in economic growth and national development,”
the researcher wrote.
In an
exhaustive 2008 literature review, two US-based professors
concluded that even Foreign Direct Investment (FDI) and the
creation of high-tech assembly industry don’t necessarily
produce “spillover” into the local economy. In
Comparative Studies in Comparative International Development,
Eva A. Paus and Kevin P. Gallagher looked FDI in Mexico and
Costa Rica. For the latter, they found “some positive
spillovers from FDI through the training, education… [but]
spillovers via backward linkages [to the rest of the economy]
have been small.”
Hopes
were very high for Mexico, which had an indigenous electronics
and computer industries prior to the FDI boom. Rather than
source parts in Mexico, however, the foreign companies got
inputs wherever they were cheaper – usually from Asia.
“Under
the Washington Consensus, governments in both countries had
great faith in the power of liberalized markets to render
economic stability and growth, and for FDI to generate
technological and managerial spillovers,” the authors wrote.
“Our article contributes to the growing body of evidence that
the Washington Consensus does not constitute a viable
development strategy.”
Along
the Mexican-U.S. border, home to the maquiladora boom,
especially following the implementation of the North American
Free Trade Agreement (NAFTA), income disparity is higher than at
any other commercial border in the world, a 2007 article in the
Golden Gate University Environmental Law Journal reports.
Minimum wage in Tijuana buys one-fifth what it did in the early
1980s, and “67% of homes have dirt floors, and 52% of streets
are unpaved,” researcher Amelia Simpson wrote.
Environment
and Health
There are
generally two types of environmental concerns associated with
assembly industry plants – direct environmental damage due to
waste, and indirect damage or effects, due to increased pressure
on the water supply from both the industry and the typical
population influx inspired by the hope of jobs.
Damage or benefits to the environment appear to be highly
dependent on the ability of the host country to enforce laws and
standards. Some studies claim that assembly industry factories
are more careful about the environment because they know foreign
consumers might boycott a polluting industry.
A
2002 UN report on Mexico found that “the maquiladora industry
performs better than the non- maquiladora industry with respect
to direct environmental externalities.”
The
case of the blue jeans water run-off in the Mexican state of
Puebla is by now well-known. In order to “fade” jeans,
they are usually beaten or chemically treated. Tehuacán means “Valley
of the Gods,” but reporters call it “Valley of the Jeans.”
A 2008 study from Ciencia y el Hombre journal in Veracruz
reported blue dye run-off polluting rivers and irrigation
ditches. Of equal or greater concern is the increased demand on
water supply, Blanca Estela García y Julio A. Solís Fuentes
wrote.
“Due
to the intensive use of water, the water table is diminishing
between 1 and 1.5 meters every year, at the same time the
population is growing between 10,000 and 13,000 people per year,”
they noted.
In
some parts of Mexico, factories now buy “water rights”
from local farmers in order to cover their needs, harming
agriculture and driving up the cost of water. The 2002 study
noted that: “The shortage of water, both in quantitative and
qualitative terms, has already forced the industry to start to
purchase water rights, temporarily or permanently, from
surrounding agricultural water shareholders. These water rights
are traded with high market prices. One example is Nissan’s
automotive plant in Aguascalientes that purchased water rights
required for its painting processes.”
The
NAFTA has an environmental “side agreement” that calls
for companies to clean up after themselves, but the 2007 Golden
Gate article noted that the agreement is neither “enforceable”
nor has it “brought adequate protections for workers or the
environment.”
Surveys of Haitian factories attest to the lack of protections
for workers from environmental hazards. Better Work Haiti found
that almost all factories violated national and international
laws and standards. “Average non-compliance rates are high
also for Worker Protection (93%), Chemicals and Hazardous
Substances (89%) and Emergency Preparedness (82%).”
According to the April, 2011, report, “factories initiated
remediation efforts to improve the situation,” but as noted
earlier, Better Work does not have enforcement powers.
Society
As the record in
Haiti shows, the installation of assembly industries and FTZs
can have dramatic effects on population movement. According to
Simpson, in Mexico, the maquiladora industry “triggered the
largest migration since the 1960s.”
“Tijuana’s
population increased more than sevenfold from 1960 to 2000,”
she wrote.
Society is also
impacted in another way. More than any other industry in poor
countries, assembly plants employ women. In some countries, the
workforce is up to 80% female, often young. Women are preferred
because, according to Canadian researcher Yasmine Shamsie,
quoting another researcher, “they are cheaper to employ, less
likely to unionize and have greater patience for the tedious,
monotonous work employed in assembly operations.” (In Haiti,
the balance between women and men is more even. Women make up
about 65% of the workforce.)
The
impact on women can be both negative and positive. On the
negative side, women are exposed to the toxic chemicals, develop
injuries due to movement repetition, and can contract
respiratory illnesses. On the other hand, having an independent
income – albeit insufficient – can be empowering.
Still, women are usually the primary care givers for children. “Family
life, the foundation of every community, has deteriorated under
the influence of the maquiladoras,” wrote Richard Vogel
about Mexico’s Ciudad Juarez in 2004 for the Houston Institute
of Culture. “About half of the families that reside in the
two and three room adobe houses in the working-class
neighborhoods of Juárez are headed by single mothers, many of
whom toil long hours in the maquiladoras for subsistence wages.
The resulting stress on families has lead to chronic problems of
poor health, family violence, and child labor exploitation.
Children suffer the most. Because of the lack of child-care
programs, kids are often left home alone all day and fall prey
to the worst aspects of street culture, such as substance abuse
and gang violence. Ciudad Juárez, by any measure of social
progress, is moving backward rather than forward under the
influence of the maquiladora industry.”
(Next week:
Industrial Park in Caracol: A “win-win” situation?)
Haiti
Grassroots Watch is a partnership of AlterPresse, the Society of
the Animation of Social Communication (SAKS), the Network of
Women Community Radio Broadcasters (REFRAKA) and community radio
stations from the Association of Haitian Community Media. To see
images, video and to access links to primary sources -
http://www.haitigrassrootswatch.org
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