Une stratégie pour la prospérité haïtienne

ThispresentationdrawsonideasfromProfessorPorter’sbooksandarticles,inparticular,CompetitiveStrategy(TheFreePress,1980);Competitive Advantage(TheFreePress,1985);“WhatisStrategy?”(HarvardBusinessReview,Nov/Dec1996);OnCompetition(HarvardBusinessReview,2008); and“CreatingSharedValue”(HarvardBusinessReview,Jan2011).Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,or transmittedinanyformorbyanymeans—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofMichaelE.Porter.For furthermaterials,seethewebsiteoftheInstituteforStrategyandCompetitiveness,www.isc.hbs.edu,andFSGwebsite,www.fsg.org. A Strategy for Haitian Prosperity Presentation Professor Michael E. Porter Harvard Business School Port-au-Prince, Haiti September 22, 2017 v28 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter2 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter3 It is time for Haiti’s turnaround •Haiti has weathered severe natural disasters, and many donors and international agencies have contributed much needed resources •There have been manypast efforts to improve conditions in Haiti over the years, including numerous plans though few have been implemented •It is time for Haiti to take control of its future •An objective assessment of Haiti’s competitiveness is needed to create a foundation for an effective action •Haiti needs to put in place an overall strategythat will guide all stakeholders, and engage citizens •Haitian citizens need to come together, put politics aside, and build trust in each other to move the country forward •Haiti has the potential to be transformed if the country can work strategically and collaborativelyacross groups and with neighbors in the region This presentation is just the beginning, not the end 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter4 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter5 •Haiti can achieve higher rates of economic growth andrising prosperity,but only if it improves its competitiveness •Success will require a coherent strategythat leverages the country’s strengths •Haiti has numerous weaknesses to overcome, and careful prioritizationwill be required to successfully address them •International assistance can be a crucial asset, but must support Haiti’s strategyrather than reflect donor priorities •The Haitian people have been resilient and able to recover from very difficult circumstances. Building the capability and unleashing the initiative of citizens will be a condition for success Performance of Haitian Economy •Haiti is a low income country with challenging constraints and a challenging history 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Argentina Burundi Benin Burkina Faso Belize Bolivia Brazil Chile Congo (Democratic Republic) Colombia Costa Rica Dominican Republic Ecuador Guinea Gambia Guinea-Bissau Grenada Guatemala Guyana Honduras Haiti Jamaica Kenya Liberia Madagascar Mexico Mali Mozambique Malawi Niger Nicaragua Peru Paraguay Rwanda Senegal Sierra Leone El Salvador Suriname Chad Togo Tanzania Uganda Zimbabwe $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 -1% 0% 1% 2% 3% 4% 5% 6 Prosperity Performance Selected Low Income Countries Average Prosperity Growth: +1.86% Average Real GDP per Capita: $6,523 High but Declining Low and Declining High and Improving Low but Improving Note: Country set includes Latin America, Caribbean and low-income African countries. Source: World Bank PPP-Adjusted Real GDP per capita, 2016 Growth in Real GDP per capita (PPP US$ at 2011 prices), CAGR 2010-2016 (2.62%, $22,707) Panama (5.56%, $21,335) (-1.33%, $13,114) Central African Republic (-5.12%, $648) 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter7 Argentina Benin Burkina Faso Bolivia Brazil Central African Republic Chile Colombia Costa Rica Dominican Republic Ecuador Guinea Gambia Guinea-Bissau Grenada Guatemala Guyana Honduras Haiti Jamaica Kenya Liberia Madagascar Mexico Mali Mozambique Malawi Nicaragua Peru Paraguay Rwanda Senegal Sierra Leone El Salvador Suriname Chad Togo Tanzania Uganda Uruguay Zimbabwe 10% 15% 20% 25% 30% 35% 40% 45% 50% -15% -10% -5% 0% 5% 10% 15% Export Performance Selected Low Income Countries Exports of Goods and Services (% of GDP), 2016 Change in Exports of Goods and Services (% of GDP), 2010-2016 Average: 27.09% Average: -2.06% Congo (Democratic Republic) (-18.18%, 25.32%) (-16.60%, 24.59%) High but Declining Low and Declining High and Improving Low but Improving Note: Country set includes Latin America, Caribbean and low-income African countries. Source: World Bank Belize (-1.34%, 56.88%) 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter8 Extreme Poverty and Inequality Madagascar Congo (Democratic Republic) Malawi Guinea-Bissau Zambia Rwanda Lesotho TogoHaiti Nigeria Benin Sierra Leone Burkina Faso Mali Niger Tanzania South Sudan Swaziland Papua New Guinea Chad Uganda Senegal Congo Guinea Ethiopia 30% 40% 50% 60% 70% 80% 3035404550556065 Source: World Bank WDI, Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population); averageof available data 2010-2015 Percent of population below $1.90 per day GINI Coefficient Average GINI in 25 Countries with Highest Rates of Extreme Poverty Average Rate of Extreme Poverty in Low Income Countries Extreme poverty and inequality 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter9 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter The Dual Challenges of Development Social Development •There is a powerful connection between economicand socialdevelopment •Improving competitiveness requires improving the economic and social context simultaneously Economic Development 10 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Competitiveness depends on the long-run productivity of a location as a place to do business -Productivity of existingfirms and workers -Enabling high participation of citizens in the workforce •Competitiveness is not: -Low wages -A weak currency -Jobs per se •Successful economic development requires improving competitiveness A nation or region is competitive to the extent that firms operating there are able to compete successfullyin the national and global economy while maintaining or improvingwages and living standards for the average citizen What is Competitiveness? 11 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Macroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies •Productivity ultimately depends on improving the microeconomic capability of the economy •Many things matter; there is no silver bullet 12 What Determines Competitiveness? 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Endowments What Determines Competitiveness? •Endowments, including natural resources, geographical location, population, and land area, create a foundation for prosperity, but true prosperity arises from productivityintheuseofendowments 7 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Macroeconomic Competitiveness Sound Monetary and Fiscal Policies Endowments Human Development and Effective Public Institutions •Fiscal Policy: Public spending aligned with revenues over time •Monetary Policy: Interest rates, exchange rate, control of inflation •Economic Stabilization: Avoiding structural imbalances and cyclical overheating Sound Monetary and Fiscal Policies What Determines Competitiveness? 14 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Human Development: Basic education, health care, equal opportunity •Rule of Law: Property rights, absence of corruption, personal security, and due process •Government Institutions: Stable and effective governmental organizations and processes Human Development and Effective Public Institutions Macroeconomic Competitiveness Endowments Sound Monetary and Fiscal Policies Human Development and Effective Public Institutions What Determines Competitiveness? 15 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter The quality of the business environment that supports company productivity, innovation, and growth Macroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies What Determines Competitiveness? 16 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Context for Firm Strategy and Rivalry Related and Supporting Industries Factor (Input) Conditions Demand Conditions •Sophisticatedand demandinglocal needs –e.g., Sophisticated demand in the private sector and government –Strict quality, safety, and environmental standards •Many things in the business environment matterfor competitiveness •Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated ways of competing •Local rulesand incentivesthat encourage investment and productivity –e.g. incentives for capital investment, IP protection –Sound corporate governance practices •Open and vigorous local competition −Openness to competition −Strict competition laws •Improving access to high quality business inputs –Qualified human resources –Capital availability –Physical infrastructure –Scientific and technological infrastructure –Administrative and regulatory infrastructure •Availability and quality of suppliersand supporting industries Improving the Quality of the Business Environment The Diamond Model 17 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Geographic concentrations of firms, suppliers, and related institutions in particular fields (e.g. tourism, automotive) that enable productivity and innovation Macroeconomic Competitiveness Microeconomic Competitiveness Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies Sophistication of Company Operations and Strategy What Determines Competitiveness? 18 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter What is a Cluster? •End product industry or industries •Downstream or channel industries •Specialized suppliers •Related service providers •Related industries: those with important shared activities, skills, technologies, common channels, or common customers •Supporting Institutions: financial, training and standard setting organizations, research institutions, and trade associations A geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities (external economies) •Clusters vs. industries •Clusters vs. sectors 19 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Clusters in Developing Countries Cut Flower Cluster in Kenya Plantstock Greenhouse; Shading Structures Irrigation Technology Pre-Cooling Technology Fertilizers, Pesticides, Herbicides Agricultural Cluster Horticultural Cluster Post-Harvest Cooling Technology Grading / Packaging Sheds Packaging & Labeling Materials Refrigerated Trucks Freight Forwarders Clearing and Forwarding Agents Air Carriers (Scheduled and Charters) Tourism Cluster Flower Farming Post-Harvest Handling; Transport to Market Horticultural Agencies, NGOs & Industry Associations Horticultural Crops Development Authority (HCDA) Government Export Policies Targeting Horticulture Non-Government Organizations (e.g., The Rural Enterprise Agri-Business Promotion Project) Trade & Industry Associations (e.g., Kenya Flower Council) Education, Research & Quality Standards Organizations Research Institutions (e.g., Kenya Agricultural Research Institute) Public Universities with Post Graduate Degrees in Horticulture (e.g., University of Nairobi) Quality & Standards (e.g., EUREGAP Standard, Kenya Plant Health Inspectorate Services) Sources: MOC student team research by KusiHornberger, Nick Ndiritu, LaloPonce-Brito, MelesseTashu, TijanWatt, Harvard Business School, 2007 20 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Clusters Specialized Physical Infrastructure Natural Resource Protection Science and Technology Infrastructure (e.g., centers, university departments, technology transfer) Education and Workforce Training Business Attraction Export Promotion •Clusters provide a framework for organizing the implementationof many public policies and public investments directed at economic development to make them more effective Quality and Environmental standards Market Information and Disclosure Organize Public Policy around Clusters 21 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter The internal skills, capabilities, and management practices that enable companies to achieve high and improving productivity and innovationMacroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies What Determines Competitiveness? 22 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Geographic Influences on Competitiveness Neighboring Countries States, Regions and Cities Nation 23 •Policies and circumstances at multiple levels of geography affect competition 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Economic performance varies significantly across sub-national regions (e.g., provinces, states, metropolitan areas) •Many essential levers of competitiveness reside at the state, provincial or departmental level •States and provinces specializein different sets of clusters •A state or province cluster portfolio and strength directly impacts not only performance but the path of reginal development •Sub-national regions are a critical unit in competitiveness •Each state or province needs its own distinctive strategy and action agenda –Business environment improvement –Cluster upgrading –Improving institutional effectiveness •Economic development is enhanced if significant resources and policy responsibility are decentralizedto the state or provincial level The Role of Sub-National Regions in Economic Development 24 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Integration with Neighboring Countries Affects Competitiveness •Open trade and investment among neighbors –Expands the availablemarket for each country A nation’s neighborsare its most natural trading and investment partners The natural pathofinternationalizationfor local firms is the neighborhood –Makes eachcountrya more attractive location for investment •Achieve efficiencies through coordinationof policy (e.g. border crossing), infrastructure (e.g. power grids and major highways) and other parts of the business environment •Synergies through coordinating clusters that cross borders •Gain greater clout through joint efforts ininternational negotiations •Commitments to neighbors and regional groups (e.g. The Caribbean Basin Initiative (CBI), CARICOM) help overcome domestic political and economic barriers to reform 25 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •An overall agenda for creating a more competitive and distinctive positionfor the country or province/state, based on its particular circumstances •Implementing best practices in each policy area •There are a huge number of policy areas that matter •No region or country can (or should try to) make progress in all areassimultaneously Policy Improvement Economic Strategy The Need for an Economic Strategy 26 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Focus on competitiveness, not on job creation per se •Data drivenandfact based, not political or based on wishful thinking •Driven by an overall strategy rather than a list of actions •Builds on existing and potential strengths, not just focused on reducing weaknesses •Cluster-based, reflecting the powerful role of clusters in job creation, wages, and new business formation in today’s global economy •Bottom-up and provincial department based, not only top-down •Prioritizedand sequenced, not addressing all strengths and weaknesses equally •Harnesses collaborationacross a wide range of actors and institutions, including firms, educational institutions, and economic development organizations, not just government Towards a New Economic Development Model 27 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter National Value Proposition Developing an Economic Strategy •What is a distinctive competitive positionfor the nation given its location, legacy, existing strengths, and potential strengths? –What are its unique potential advantages as a business location? –For what types of business activities and clusters? –What roles can the nation play in the surrounding region? Developing Unique Strengths Achieving and Maintaining Parity with Peers •What elements of the business environmentcan be unique strengths relative to peers/neighbors? •What existingandemerging clusters can be upgraded? •What weaknessesmust be addressed to remove key constraints to competitiveness and achieve parity with peer locations? •Prioritiesand sequencingare fundamental to successful economic development 28 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter29 Old Model •Governmentdrives economic development through top down policy decisions, funding and incentives New Model •Economic development is a collaborative process involving government at multiple levels, local and foreign companies, industry associations, educational and research institutions, andlocal communitiesand citizens •Competitiveness depends on both top-downandbottom-up processes in which many companies and institutions take responsibility •Translating policy into actionis decisive in determining success The Process of Economic Development Shifting Roles and Responsibilities 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter30 •Competitiveness improvement requires consistent and sustained effortsacross successive governments –Mechanisms are needed to improvethe continuity of policy over time •Competitiveness is affected by numerous government entities and levelsof government –Multiple agencies and departments have an influence on competitiveness –“Economic” agencies and “social” agencies are both involved –Multiple levelsof government (nations, states, cities, etc.) affect the business environment –Intergovernmental relations with neighboringcountriesaffect productivity •Coordinatingstructuresareneeded to bring all the actors together around an integrated economic strategy and action agenda Government Structure and Economic Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter The Private Sector’s Role in Economic Development •Inform government on theneeds of business andthe key constraints holding backcompany and cluster development •Collaborate with other companies to improve competitiveness through trade associationsand other mechanisms •Work closely with local educational andresearch institutions to raise quality andcreate specialized programs that address actual company and cluster needs •Nurture localsuppliersand attract foreign suppliers •Participate activelyin national and provincial department level competitiveness initiatives •Compete as companies through shared value strategiesin which businessesaddress unmet social needs and challenges with a business model (e.g. low income housing, renewable energy) 31 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter32 •Created a Shared National Strategy: Vision 2020 –Rwanda Vision 2020 set ambitious goals to build a “knowledge-based economy” –The President personally drove implementation •Zero Tolerance for Corruption –Office of the Auditor General was created to audit government companies and payrolls –Public officials were required to declared wealth –The government actively investigating allegations of corruption •Diaspora –Recruited skilled Rwandans living abroad to return and take key leadership positions in public service and in the economy •Cluster Based Approach –Cluster development as a core approach, beginning with established clusters in coffee and tea •Rwandan Development Board as the Lead Development Institution –Combined 8 overlapping government agencies involved in investment promotion, exports, tourism, privatization, IT promotion, SME development, and human resource development Learnings from Rwanda’s Strategy 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter33 •Decentralized Responsibilities to the District Level –Authority was delegated to leaders at the district level and down to the village level, including “performance contracts” on results •Donor coordination –All donor aid was coordinated the appropriate government agenda and not accepted unless it was aligned with the objectives of the government –Donor performance was discussed explicitly at the annual Development Partners meeting •Numerous Community Based Initiatives –Established local community based initiatives to engage citizens and create community responsibility •Land Rights –An Organic Land Law was passed to clarify land rights –All land was registered in a digital land administration information system, and linked to the mortgage registry to facilitate access to finance Learnings from Rwanda’s Strategy •Haitian leaders will benefit from visiting Rwandato learn from these initiatives 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter34 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter35 Haiti’s Endowments •Location −Favorable location near the US −Situated in a peaceful, accessible region −Same time zone as Eastern US and French speaking Canada •Natural Resources −Favorable climate and sunshine −Sandy beaches −Long coastline (2nd longest in the Caribbean after Cuba) •Rich in Culture and History −Heritage from African and European countries −First black independent country −Many tourist sites to visit, such as numerous forts −Unique gastronomy −Well developed creative arts (Painting, music, craftsmanship) •Sustainability Challenges −Prone to natural disasters Endowments 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter 137 3.1 5 13 23427 1.7760 1.4 1.2 6 311 0.0566 1.5 0.5 11 2363 0.3370 1.6 0.6 9 3298 0.451 1.2 2.5 8 687 0.3482 1.9 0.8 5 1754 0.1258 1.3 1.1 12 72 0.0446 1 0.6 12 80 0.01 1 2 3 4 5 6 HaitiDominican RepublicNicaraguaHondurasEl SalvadorGuatemalaCosta RicaPanama 36 Natural Disasters Selected Caribbean Countries 1971-2014 Source: World Bank 2014 137 Number of natural disasters 3.1 Disasters per year 5 Disasters per land surface (`000 sq. km) 23427 Deaths per million inhabitants 1.77 Total damage/GDP 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter37 Stable Macroeconomic Environment •In the last decade Haiti has achieved a more stable macroeconomic environment –Monetary policy has improved since 2004 through the implementation of stabilization policies –However, inflation has risen above 10% in 2015 for the first time since 2008 •Fiscal policy is challenged –Tax revenue is low because of a narrow tax baseand inadequate tax administration •Few people and businesses pay taxes, collecting taxes is inefficient, and tax evasion is common –Haiti is experiencing lower donor assistance andfalling inflows from the PetroCaribeagreement –However, remittancesare substantial and growing Sound Monetary and Fiscal Policies 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter38 Health and Healthcare •Limited health system –Inadequate health infrastructure such as clinics, storage facilities, clean water, and sanitation –Poor coordination between the actors in healthcare •Insufficientgovernmenthealthspendingon healthcare –Only 6% of all government expenditure for the country –Heavy reliance on international aid •Limited health care professionals –Lack of healthcare workers such as physicians, nurses and administrators –Attracting and retaining qualified health professionals continues to be a challenge •Haitians lack accessto basic healthcare –Only 45% of children are vaccinated –Vulnerability of workforce to otherwise treatable disease •Continued malnutrition –20% of children are stunted Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter39 Uneven Education System •Only a small fraction of basic schools are licensed by the Ministry of Education •Over 80% of schools are private managed by international institutions, NGOs, religious groups –The qualityof private schools differs greatly •The majority of teachers have only a high school degree •Most schools have poor infrastructure •Low literacy rate (60%) compared to the Latin American and Caribbean average of 90% •School enrollment remains low, with only 35% students reaching 5 th grade •Technical schools and universities are present, but serve a limited number of citizens Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter40 Ineffective Public Service •Heavy involvement of NGOs and donors has weakened the capacity of government •Political patronage and corruption have a strong influence on government –Civil servants are frequently appointed based on political affiliation •NGOs have attracted many of the skilled Haitians through higher salaries •“Phantom government employees” drain the government budget and limit government capacity •Lack of technical skills and data have created a weak implementation capacity –Files, archives, office equipment, and computer data were lost in the Earthquake –Haiti’s government data strategy can be greatly improved Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter41 Corruption Perception Index Selected Countries Argentina Bolivia Brazil Burkina Faso Chile Colombia Costa Rica Cuba Dominican Republic Ecuador El Salvador Eritrea Gambia Guatemala Guyana Haiti Honduras Jamaica Liberia Madagascar Malawi Mali Mexico Mozambique Nicaragua Niger Panama Paraguay Peru Rwanda Senegal Sierra Leone 0 20 40 60 80 100 120 140 160 -80 -60 -40 -20 0 20 40 60 80 Rank in Global Corruption Index, 2016 Change in Rank, Global Corruption Report, 2016 versus 2006 High corruption and Worsening Low corruption but Worsening Low corruption and Improving High corruption but Improving Source: The Corruption Perception Index –Transparency International 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter42 Government Planning and Implementation •The majority of past economic plans have lacked clear prioritiesand action plans •Governmental organizations, decision-making, and resources are highly centralized and concentrated •Government institutions have limited implementation capacity •There has been inadequate coordination among ministries, public agencies and donors •There are more than 600 NGOs in Haiti, but many are not aligned and coordinated with government priorities •Past competitiveness initiatives have lacked continuity and a formal institutional structure Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter43 Context for Firm Strategy and Rivalry Related and Supporting Industries Factor (Input) Conditions Demand Conditions Assessing the Quality of the Business Environment Haiti 2016 ±Existing microclusters but missing actors in their value chain ±Industrial Parks with weak linkages to local suppliers –Limited local suppliers and supporting industries –Weak university-industry collaboration –Shallow clusters –Limited local purchasing power –Weak environmental standards and enforcement –Low sophistication in government procurement +Openness to FDI and trade ±Efforts to improve the cost of doing business –Difficulty in business formation –Cumbersome administrative procedures to create companies –Environment for competition –Concentrated local companies in many fields forcing limited competition –Weak administration of tax system –Fraud and evasion in the tax system –High informality limits taxes and compliance +Attractive location +Climate (sun days) +Agricultural, fishing, and cultural resources +Multilingual population +Creative and young talent ±Improving financial markets, but limited access to finance –Low quality electricity supply –Poor and vulnerable physical infrastructure –Low quality education –Absence of a well developed system determining land tenure and property rights –Low skill levels in the labor force –Few quality universities and research institutions –Poor data and analytical capacity of the government Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter44 Human Talent •Haiti has an abundant labor pool of French, English, Spanish and Creole speakers •Haitians are eager to learn new skills •More than half of the population is under 24 years old •Workforce participation is low in relative terms, but improving •Brain drain is occurring due to a 75% emigration rate of highly educated people –Many skilled professionals leave the country to work abroad Human resources are a potential strength Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter45 Diaspora •It is estimated 1.2 million Haitians live abroad in countries like the US, Dominican Republic, Canada and France •Members of the Haitian diaspora in the U.S. and Canada are the most prosperous •The diaspora is heavily in service related industries in the United States, specially in health and teaching positions •Haitian diaspora is partly organized abroad, from professional organizations to cultural and artistic groups, bur there is no clear agenda to engage the diaspora within Haiti Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter46 Inefficient Energy Supply •Only about a quarter of the population has access to electricity •The supply of electricity is unstableand erratic •The state-owned electricity company (Electricitéd’Haïti, EDH) has a monopoly on energy distribution –EDH has weak infrastructure and inadequate maintenance –The existing distribution system is inefficient and in need of upgrading •Much electricity generated is lost due to illegal connections and malfunctions •Low payment and collection rates translate into the need for large subsidies from the National Budget •Poor access to electricity contributes to deforestation and environmental challenges •Many businesses and households install costly, inefficient, and environmentally unfriendly diesel generators •Some microgridshave been developed to provide stable electricityin rural areas, a promising approach Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter47 An Open Economy •Haitian tariffs are among the lowest in the Caribbeanand Central America region •Haiti benefits from trade preference agreement –CARICOM with Caribbean countries –The Caribbean Basin Initiative (CBI) –The Caribbean Basin Trade Partnership Agreement –Hemispheric Opportunity through Partnership Encouragement Act II (HOPE II) and the HELP Acts •Haiti has preferential access to the U.S. market for manufactured goods, especially apparel •Tradeagreements create an opportunity, but enhancing competitiveness is needed to capitalize on them Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter48 A Weak Environment for Competition •Low intensity of competition (ranked 140 out of 148 countries) –One or a few companies dominate key markets –Concentrated markets deter the entry of new firms •Import licenses and quotas give exclusive rights to some families •Price controls and privileges benefit favored firms •Vested interests and discrimination disadvantage foreign firms and deter foreign investment Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter49 Weak Land Property Rights •Haiti lacks a functioning system for recording land ownership •Property titles are often non-existent •Informal land tenure discourageslong term investment •Uncertain land tenure deters investment by the diaspora in real estate •Creating a fair and transparent land tenure system is critical but requires significant investment –Opportunity to leap-frog through embracing digital technology Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter 0 20 40 60 80 100 120 140 160 180 200 220 A Difficult Place to Do Business World Bank Doing Business Rankings vs Latin America and the Caribbean) Ranking, 2017 (vs. 190 countries) LatAm& Caribbean avgrank: 107 More favorable 50 Less favorable Source: World Bank Report, Doing Business (2017) Haiti’s GDP per capita rank: 185 Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter51 Change in World Export Market Share, 2005-2015 World Export Market Share, 2015 = $25 million Clusters in the Haitian Economy Apparel (0.26%, +0.08) Hospitality and Tourism 0.051% Computer and Communications Services, 0.006% Food Processing and Manufacturing, 0.003% Downstream Chemical Products, 0.008% Upstream Metal Manufacturing, 0.002% Fishing and Fishing Products, 0.012% 0.00% 0.01% 0.02% 0.03% 0.04% 0.05% 0.06% 0.07% -0.01% 0.00% 0.01% 0.02% 0.03% 0.04% Haiti’s Overall Export Share in 2015: 0.0097% Change in Haiti’s Overall Export Share 2005-2015: +0.00405% Only clusters with an export value greater than USD 2 million are shown The Apparel and Hospitality and Tourism Clusters account for 91% of Haiti’s exports State of Cluster Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Haiti has numerous existing andemerging clusters, in sectors such as agriculture, tourism, apparel. Many are micro clusters •Most clusters have limited depth, with limited suppliers and few supporting institutions •There is insufficient institutional capacitytoday at the local level to develop clusters •Development plans recommending clusters have not been implemented 52 The State of Clusters in Haiti Clusters •The World Bank Business Development Services Program is an encouraging step towards implementing a cluster vision for the country State of Cluster Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter53 World Bank Business Development Services Program Coffee Vetiver Honey Mango Cocoa Avocado Apparel 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter54 Companies in Haiti •There are a small number of large companies with substantial market positions •Most local companies are small and informal •Some multinationals are present in sectors such as banking and telecommunications •There are a few state owned enterprises such as the electricity distribution company and vehicle insurance company, with mixed success •Most companies have limited sophistication in production and across the value chain Sophistication of Company Operations and Strategy 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter55 Economic Composition of Haitian Departments Established Agricultural Products West Center Nippes North North-West North- East South-EastSouth Artibonite Grand-Anse Grand Anse Vegetable Trees, Cocoa and Ginger Artibonite Rice, Lalo, Sea Salt and Mango North -West Banana, Shallot, Yam Nippes Sugar Cane and Pineapple South Vetiver North Coffee and Cocoa North-East Honey, Nuts and Peanuts Center Fowl and Livestock West Cherry and Broccoli South-East Tangerine and Coffee •Based on information from Ministry of Trade and Industry and UNDP 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter56 Economic Composition of Haitian Departments Processed and artisanal handicraft products West Center Nippes North North-West North- East South-EastSouth Artibonite Grand-Anse Grand Anse Chocolate Artibonite Furniture in Bamboo and Spirits North -West Chocolate Nippes Straw Hat, Carabella Dress and Laval Meads South Dried Mango, Straw handbag North Sweet Cassava, Roasted Nuts, Bricks and Mahogany North-East Guava Jelly, Mats Center PeanuttButter West DousMakos, (Haitian Fudge) Sugar and Paillette South-East Paper macheand Basketry •Based on information from Ministry of Trade and Industry and UNDP 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter57 •Government, economy and population are heavily concentrated in Port au Prince •There is significant regional variation in development and poverty. Highest poverty concentrated in the North East and North West Departments •Limited financial resources at local level •Low administrative and technical capacity in local governments •Lack of clear responsibilitiesand resourcesat the local level Limited Current Role of Haiti's Departments States, Regions and Cities 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Summary: Key Competitive Strengths to Build On Microeconomic competitiveness Macroeconomic competitivenessEndowments 58 •Attractive location •Land and climate •Cultural resources •Macroeconomic stability •The diaspora •Multilingual population •Creative and young talent •Open to FDI and trade with preferences •Existing clusters provide a foundation 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Summary: Key Competitive Weaknesses Microeconomic competitiveness Macroeconomic competitivenessEndowments 59 •Political instability •Corruption •Inefficient public service •Poor healthcare and nutrition •Weak overall education •Internal barriers to competition •Limited and low quality electricity supply •Inadequate land tenure and property rights •Low skilled labor force •Limited company capabilities and strategic thinking •Natural disasters 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter60 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter61 Increase Resilience To Natural Disasters •Increase the effectiveness and enforcement of zoningand land-use practices •Improve the quality of physical infrastructure –Strengthen standards and implementation of building codes, including inspection •Enhance the System of Risk and Disaster Management to strengthen coordinating planning, education,preparedness, and warning systems for potential disasters, with clear overall responsibility and accountability –Engage local communities at risk to be better prepared for a potential disaster –Coordination with neighboring countries and institutions for prevention and relief mechanisms –A protocol for working with the international donor community –Financing mechanisms for post-disaster actions Endowments 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter62 Improve and Maintain Macroeconomic Stability •Take steps to return to a single-digit rate of inflation •Reduce tax evasion and improve tax collection –More citizens and businesses need to pay taxes –Limit the use of tax and customs exemptions to those areas where there is clear benefit to the economy •Reduce excessive investment incentives •Mount a multi-pronged strategy to increase remittancesand encourage investment by the diaspora in the country Sound Monetary and Fiscal Policies 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter63 Aggressive Strategy to Reduce Corruption •Mount a media campaign to build public support for eliminating corruption •Digitize and make transparent all transactions between government and individuals –Invite a leading technology company to assist in this effort •Create transparency of all government contracts, including contract amounts and time of execution •Eliminate “phantom” employees through better information and contracting systems •Improve capabilities in the customs, the tax agency, and the judicial system •Enhance the salaries of skilled government officials •Regulate private sector financing of political campaigns Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter64 •Channel donor investment into strengthening government’s institutional capacity •Move to e-government practices whenever possible to improve efficiency andtransparency •Improve data, statisticsand analytical capacity in government –Strengthen the Haitian Institute of Statistics and Informatics •Create a disciplined structure and processes for policy implementation •Raise performance standards for public employees •Create incentives to attract professionals committed to public service (e.g. higher salaries, career development paths) •Publicly recognize capable public servants Upgrade Public Institutions and Services Human Development and Effective Public Institutions 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter65 Improve Education and Training •Improve the qualityof primary and secondary schools –Measure and create accountability for learning outcomes •Establish teacher training programs andopportunities for career advancement andsalary improvement •Monitor and certify private schools through standardsand guidelines •Improve educational infrastructure, including classrooms with access to water, energy, and connectivity •Continue investing in technical schools and universities Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter66 Upgrade the Skill Level of the Workforce •Create a national commitment and plan to upgrade the skill level of the workforce, especially younger citizens •Create a Workforce Development Agency to lead the process on developing an innovative, and effective workforce development system within Haiti –Increase standardsfor existing training institutes –Engage with employers to upgrade training providers and identify priority skill needs –Work with employers and potential investors to establish internaltraining programs supported by incentives •Raise a Training Fund to award matching grants to employersto train employees •Organize the training system around clusters –Customized training tocluster needs –Locate training facilities near clusters Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter67 Engage The Diaspora •The diaspora can be a major contributor to a new Haiti through its resources, international relationships, and commitment to the country •Build programs to encourage and simplify investments by the diaspora in Haiti (housing, retirement and job opportunities in Haiti, incentives for business investment) •Organize the diaspora as a network to facilitate trade and investment in Haiti, including foreign investment opportunities in the various clusters in the country Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Introduce pre-payment requirements and improve enforcement against electricity theft •Create tax and financial incentives as well as streamlined rules to invest in sustainable energy generation (sun and wind) •Strongly encourage and support the adoption of solar energy in rural communities, health facilities, and energy intensive industries •Open the solar and wind energy sector to FDI –Attract to Haiti leading international solar and wind energy companies •Promote and grant licenses for solar microgrid systems and community micro utility companiesto expand access to renewable energy across the country Improve the Quality of Energy Supply 68 Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter69 Land Rights •Initiate a modern, digital property registration process with international assistance, starting with current real estate transactions •Streamline theprocedures involved in registering property •Create a respected property dispute resolution mechanism •Encourage and establish rules for renting and leasing land to facilitate property utilization and encourage property investment Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter70 Open Up Competition •Activate a competition agency with statutory authority to enforce open and fair competition standards –Remove restrictions on competition (quotas, licenses and controls) without compelling offseting benefits •Eliminate subsidiesfavoring individual companies •Attract foreign companies to increase local competition •Reduce informalitythrough simplifying and making company registration simpler and more efficient government Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter71 Make Attracting Foreign Investment a Core Strategy •Attracting foreign investment accelerates improvement in the business environment in many ways •Foreign investment improves the competition landscape •Foreign companies bring new technology and contribute to workforce development and training •Foreign investment helps jumpstart cluster development •The diasporacan play an important role in attracting investment given its relationships and expertise Quality of the National Business Environment 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Initiate a sustained national cluster development strategy to upgrade both established and emerging clusters in the country •Begin with established existing clusters such as tourism, and apparel, as well as emerging clusters with some critical mass such as vetiver and organic coffee •Grow the World Bank Business Development Services Program to assist in cluster upgrading •Use cluster development to guide and set priorities for infrastructure and workforce development programs 72 Embrace a Cluster-Based Development Strategy State of Cluster Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Natural Attractions (e.g., Natural Parks, sunny beaches and hiking mountains) Haiti Tourism Association –Regional Council of ArcadinsCoat (Côte des Arcadins) École Hôtelière d’Haïti Ministry of Tourism National Council of Tourism (Mix advisory board) Local Government (CollectivitesTerritoriales) Local Excursion Operators International Tour Operators and Travel Agencies Restaurants Local retail and other services (Internet cafes, etc.) Maintenance Services Food Producers and Importers Hospitality equipment suppliers Haitian Tourism Cluster Côte des Arcadins Marina and Port Services Tourist Transportation Services Historical and Monument Sites (e.g., Habitation Dion ) Cultural Heritage and Arts (e.g.,Carnival) Toussaint LouvertureAirport Hotels & Resorts Receptive Operators Port & Marina Institutions for collaborationEducational InstitutionsGovernment Agencies 73 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter74 •Formalize a collaborative local public/private institution to develop the cluster –All actors should be invited to work together to design and implement a more competitive tourist experience •Use social media and popular celebrities to create a highly visible events in Haiti –Gastronomic experience –Entertainment for millennials •Improve airport infrastructure and servicesto enhance the tourist experience •Improve security along National Route #1 to avoid delays between Toussaint LouvertureAirport andthe cluster •Organize and support local artists as a unique part of the cluster •Promote localwater sportsand host worldwide competitions to attract younger tourists •Coordinate with local emergency teams to improve access to medical care, health infrastructure, ambulances, and other emergency services for visitors Upgrading The Tourism Cluster State of Cluster Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter75 •Focus on prioritizing upgrading infrastructure in Industrial Parks to accelerate progress •Prioritize the establishment of efficient public servicesin parks (energy, water supply, waste management), and expand to other areas over time •Develop parks using the cluster model, with parks seeking to attract related companies and nurture local suppliers Industrial Parks and “Enterprise Zones” to focus Business Environment Improvement State of Cluster Development 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •The private sector can contribute to the solution of many of the socialand environmental issues in Haiti •Foreign companies that offer products and services to meet unmet local needs and serve underserved customers should be welcomed to Haiti •NGOs should partner with local companies and other stakeholders on projects for social improvement Engage the Private Sector 76 Sophistication of Company Operations and Strategy 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter77 •Departments should play a crucial part in the development of Haiti •Define clear roles for the national level and the department level of government to move to greater decentralization •Each local area needs to leverage its own competitive assets and cluster potential •Local actors should participate actively in policy-makingand business environment reform •Departments need to improve and take more responsibility for policy implementation and accountability •Implement e-government one-stop models to increase access to public services in rural or dispersed communities Increase Department Level Responsibility States, Regions and Cities 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter78 Economic Integration with the Dominican Republic •Improving economic integration with the Dominican Republic can substantially improve Haitian competitiveness •Improve coordination of the transportation network •Create an efficient regional energy network •Simplify and harmonize cross-border regulations and paperwork •Take advantage of the Dominican Republic’s capabilities for workforce development •Facilitate cross-border trade Neighboring Countries 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter79 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter80 •Strategy means choice –Haiti can not be good at everything but needs to define how existing strengths are to be deepened and broadened to provide specific distinctive value to business •Strategy means focus –Haiti can not improve everything at the same time but needs to prioritize the most pressing issues •Strategy means action –Haiti does not need another plan but an action agenda that drives change through a process and institutional structure focused on implementation The Need for a National Strategy 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter81 Towards a Distinctive Value Proposition for Haiti Unique strengths to build on •Strategic position close to important markets (US, DR, Cuba, and Caribbean Islands) •Open economy with active trade agreements •Well educated diaspora located in strategic locations •Rich culture and history •Reservoir of young Haitians eager to learn •Multilingual population (French, Spanish, English and Creole) •A creative workforce •Deep cultural linkages with African countries •A set of emerging clusters •Haiti needs to build a consensus on its strengths across society 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter A trading nation with the U.S. and neighboring countries The most productive workforce in the Caribbean Home to a growing number of vibrant clusters A creative nation with a unique culture The open door for Africa in the Americas Active diaspora Involved in many development initiatives A Vision for Haiti Elements of a Haitian Value Proposition Existing and Emerging Clusters: •Tourism •Niche and organic agriculture products •Apparel/Textiles •BPO/IT service •Renewable energy •Creative Industries •Earthquake and hurricane safe local construction A nation that preserves and builds its natural and cultural resources 82 Haiti should establish a set of national goals around these areas 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter83 1.Introduction 2.Haiti’s Economic Performance 3.The Competitiveness Framework 4.Haiti’s Competitive Position 5.Recommendations 6.Towards an Overall Economic Strategy for Haiti 7.Moving to Action Agenda 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter84 Create a National Council on Competitiveness for Haiti National Competitiveness Council Energy Chaired by the President Co-Chaired by representatives from the private sector and economic development agencies Representatives from the donors and business community Act as a coordinating agency for guiding long-term economic strategy Task Forces Workforce Development Competition Land rights Monitoring Progress Cluster Strategy Coordination NGOs and Donor Coordination Technical Secretariat 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter85 Role of the National Council on Competitiveness •Facilitate dialogand coordinated action between public and private sectors •Coordinatedonors and NGOintervention •Develop and communicate a common strategy for the country –Communicate the strategy to all nationaland international stakeholders •Coordinate cluster development across stakeholders •Measure and report progress 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter Priority Immediate Long term Strategy Sequencing 86 •Open up competition rules •Simplify the costs of doing business •Upgrade the skills of the workforce •Reform the energy sector •Adopt a cluster development vision including FDI attraction •Simplify regulations to increase formality •Improve physical infrastructure and its sustainability •Improve the efficiency of the public sector •Establish property and land rights •Continue improving the quality of education •Establish political stability, social stability, and personal safety •Launch a sophisticated anticorruption campaign •Engage the diaspora 20170722—Haiti Competitiveness Overview Copyright 2017 © Professor Michael E. Porter •Institutionalize National Days of Servicein which all citizens are invited to participate –Neighborhood cleanliness, order and beautification –School improvements and repairing other public facilities •Create a friendly rivalry among communities to create initiatives and implement best practices •Establish bottoms-up cluster groups at the local or micro-clusters to activate local citizen participation •Createcitizen forums with government to identify key needs and set priorities Engage Citizens Some Possibilities 87