Report to Congress: Haiti Strategy Update

Report
February 1, 2015


This report is provided in response to the “Assessing Progress in Haiti Act of 2014” (P.L. 113-162) (“the Act”), which directs the Secretary of State, acting through the Assistant Secretary of State for Western Hemisphere Affairs, to coordinate and submit to Congress no later than 180 days after the date of the enactment of the Act a three-year Haiti strategy. The requested strategy, prepared by the Department of State in cooperation with other U.S. government agencies, is being submitted to the Committee on Foreign Affairs, the Committee on Appropriations and the Subcommittees on State, Foreign Operations, and Related Programs of the House of Representatives, and the Committee on Foreign Relations, the Committee on Appropriations and the Subcommittees on State, Foreign Operations, and Related Programs of the Senate.

The “Post-Earthquake U.S. Government Haiti Strategy: Toward Renewal and Economic Opportunity” was adopted on January 3, 2011 and continues to guide the overall approach to United States development assistance to Haiti. The U.S. government seeks to continue to support a Haitian-led response coordinating with other international, regional, and local actors to identify priority activities for U.S. government engagement. The full version of the 2011 U.S. Government Haiti Strategy can be found at Attachment B (pdf). This Strategy was intended to be a living document, designed to be flexible and subject to fine tuning and mid-course adjustment. The scope of changes and updates necessary to extend the Strategy through 2018 is described in Attachment A.

Despite significant progress to date in advancing our strategy in Haiti, the U.S. government has encountered some obstacles to achieving its assistance goals. For instance, procurement timelines have lagged, and projects have been slow in getting off the ground due to internal factors, such as major staffing shortages just after the earthquake, which have largely been remedied. Other challenges are external to the U.S. government and relate to the evolving political landscape in Haiti and shifts in Government of Haiti priorities. Strengthened Haitian public sector governance and capacity to provide security and respond to the needs of its citizens are key to the strategy’s success, but the Government of Haiti has lagged in undertaking several difficult but necessary reforms, especially in the energy and justice sectors. Haiti’s leaders are increasingly focused on electoral events scheduled for 2015, including long-overdue elections for Parliament and local officials, as well as the presidency. With the political jockeying and potential civil unrest that typically accompany election periods in Haiti, we can anticipate a continued lack of progress on reform measures, due to the Government of Haiti’s reluctance to tackle entrenched interests in uncertain times.

These obstacles and delays have necessitated a three-year extension of the U.S. government strategy to solidify and strengthen the important gains made so far and have sufficient time to realize the remaining objectives detailed therein.

The majority of U.S. government shelter funds have been dedicated to construction of permanent homes on new settlement sites in the Cap Haitien and Port-au-Prince development corridors. The U.S. government strategy envisioned the U.S. Agency for International Development (USAID) and other donors funding 100 percent of the cost of constructing detached single-family homes on land provided by the Government of Haiti. The Government of Haiti requested design changes to the size and amenities for the houses, however, resulting in higher than expected costs, with total costs per house at the first two sites more than four times the original estimates (including costs for construction, construction management, and community development.) Our housing efforts have also met considerable delays due to land ownership disputes. Moreover, completed settlements face sustainability challenges related to community development and governance, as well as institutional weaknesses of Government of Haiti entities responsible for site maintenance. With experience, we have learned that this approach is neither cost effective, nor sufficient to reach the intended number of beneficiaries.

Originally, the Government of Haiti requested USAID to study the feasibility of building a “greenfield” port in the region; however, subsequent market analyses have demonstrated that building the new port would not be financially viable because of a lack of interest by potential private sector investors and port operators. In late 2013, then-Prime Minister Laurent Lamothe asked the United States to redirect its assistance to improve an existing but underutilized port in the northern city of Cap Haitien. The U.S. government has adjusted its port development strategy accordingly.

Purely technical approaches to addressing energy sector problems will not bring about sustainable improvements. Electricité d’Haiti (EDH), Haiti’s government-owned electric utility, can become viable only if the Government of Haiti undertakes measures to address underlying management and financial issues. Accordingly, the overarching objective of the U.S. government energy program is to partner with the Government of Haiti to create an efficient, financially viable electricity sector that can satisfy current and forecasted demand. Strategic priorities include modernizing the sector by enhancing its commercial viability, improving sector governance, and attracting private sector participation. Parallel efforts include rehabilitating damaged infrastructure; expanding generation, transmission, and distribution systems; and reducing losses.

For at least the past 18 years, Government of Haiti administrations have expressed their desire to modernize the electricity sector, but past attempts to do so have been thwarted by entrenched interests. The administration of President Michel Martelly in 2011 signed a Memorandum of Understanding (MOU) with the U.S. government, the World Bank (WB), and the Inter-American Development Bank (IDB), reiterating Government of Haiti intention to reform the sector. Based on this commitment, the U.S. government, working through USAID, funded an $11 million transition management contract for EDH. Initial efforts of this assistance showed progress in reducing losses and increasing collection rates, however, the Government of Haiti shifted the focus of the effort to implementation of a much weaker program of operation improvement and technical assistance. By the end of the 2011-2014 assistance program, earlier gains have been reversed, and the Government of Haiti’s commitment to move forward with structural reforms is unclear.

In 2010, the U.S. signed a Memorandum of Understanding with the Government of Haiti and the IDB to collaborate on the development of an industrial park in the northern village of Caracol. Korean garment maker Sae-A agreed to occupy over 80 percent of planned Caracol Industrial Park (CIP) buildings. To make reliable power available to CIP tenants and residents of nearby communities, the U.S. government, working through USAID, funded construction of the 10-Megawatt Caracol Power Plant (CPP) that came on line in 2012. The CPP is providing reliable electricity to all of the tenants of the CIP, as well as over 8,600 households, businesses and government offices in the communities surrounding the CIP. By collocating security assistance with economic development investments through the U.S. government-funded construction of a police station near the CIP, we ensured the nearby community now also benefits from consistent Haitian National Police (HNP) presence. Beginning in May 2013, the U.S. government funded through USAID a three-year operations and maintenance contract of the CPP and surrounding electricity service area. The objective is to have a financially viable mini-utility that could be transferred at the conclusion of the implementation period to an appropriate private sector entity, in consultation with the Government of Haiti.

The U.S. government will continue to work with all stakeholders to make the Caracol utility financially self-sustainable[1]. These actions may include options to lower generation costs, adjusting all tenants’ electricity tariffs upward[2] over a period of time, as well as extended U.S. government support to plant operations and maintenance. Options are being developed with conditions that will need to be met by the Government of Haiti to make the mini-utility attractive to private sector investors.

The growth and improved professionalism of the Haitian National Police (HNP) are significant achievements in the post-earthquake period. The police added 3,300 trained officers to the force for a current total of 12,200, improved their ability to restore order and control crowds, and increased their capacity in investigations, leading to a pronounced reduction in kidnappings. While the HNP also undertook some successful initiatives to manage more effectively its internal affairs, the force’s administrative, budgeting, and strategic planning capabilities remain weak. Continued development of the HNP remains a strategic priority to ensure the force reaches its target size of 15,000 by the end of 2016, and ultimately grows beyond this goal. The force must continue along the path of taking on increasing responsibilities to project security beyond Port-au-Prince, particularly as the UN Stabilization Mission in Haiti (MINUSTAH) continues its drawdown of peacekeepers. As Haiti’s president has promised elections in 2015, both the HNP and a consolidating MINUSTAH will face additional logistical and security-related duties associated with the elections. In the longer term, a more robust and professional HNP by itself, however, is not sufficient to ensure Haiti’s stability. The police will require reliable corrections and justice partners, sectors that currently lag behind police development. Prison overcrowding above 500 percent capacity and a soaring 73 percent pre-trial detention rate countrywide are serious concerns, largely caused by Haiti’s outdated criminal procedure code, ineffective judiciary, and lack of political will by the Government of Haiti to act on the issues. The United States will continue to urge the Government of Haiti to take decisive policy action to address pre-trial detention and prison conditions, and the structure of future U.S. support will be guided by evidence of Government of Haiti political will to implement those policies.

_________________________________

[1] The Government of Haiti contributed $1.5 million to a fuel reserve fund and the U.S. government agreed to fund operations and maintenance expenses through a utility management contract for the period 2013- 2016 to cover initial operational funding for the mini utility. The fuel funds were depleted by August 2014 and the United States has requested the Government of Haiti to replenish the account with over $2.0 million, the current estimate to cover the subsidy costs from October 2014 to September 2015. The Government of Haiti has agreed to provide the funds in the form of fuel supply to the CPP.

Because of a lower interest in large clients to establish/move operations to Caracol, and slower construction of park facilities, actual demand for the plant’s generation has been much less than anticipated during planning. Currently, the total demand for electricity from the plant is about 20 percent of its capacity, over 60 percent of which is from off-site communes. The major consumer of electricity is the anchor client Sae-A which has a low negotiated tariff for electricity as part of incentive package for its $80 million investment in Caracol. Customers outside the Park are charged at the EDH tariff, which has not been adjusted since 2007 and is inadequate to meet the cost of generation. As a result, the Caracol plant does not cover its costs at this time.

[2] Any changes to the rate for Sae-A will have to be approved by the Government of Haiti and the IDB, who are also signatories to Sae-A’s agreement.