4. Industrial Policies
In order to attract investment to certain industries, the Investment Code created a privileged status for some manufacturers. Foreign and Haitian investors enjoy equal protection under the Law. Under the Investment Code, eligible firms can benefit from customs, tax, and other advantages. Investments that provide added value of at least 35 percent in the processing of local or imported raw materials are eligible for preferential status.
The statute allows for a five- to ten-year income tax exemption. Industrial or crafts-related enterprises must meet one of the following criteria in order to benefit from this exemption:
- Make intensive and efficient use of available local resources (i.e., advanced processing of existing goods, recycling of recoverable materials);
- Increase national income;
- Create new jobs and/or upgrade the level of professional qualifications;
- Reinforce the balance of payments position and/or reduce the level of dependency of the national economy on imports;
- Introduce or extend new technology more appropriate to local conditions (i.e., utilize non-conventional sources of energy, use labor-intensive production);
- Create and/or intensify backward or forward linkages in the industrial sector;
- Promote export-oriented production;
- Substitute a new product for an imported product, if the new product presents a quality/price ratio deemed acceptable by the appropriate entity and comprises a total production cost of at least 60 percent of the value added in Haiti, including the cost of local inputs used in its production;
- Prepare, modify, assemble, or process imported raw materials or components for finished goods that will be re-exported;
- Utilize local inputs at a rate equal or superior to 35 percent of the production cost.
For investments that match one or more of the criteria described above, the Haitian government provides customs duty and tax incentives. Companies that enjoy tax-exempt status are required to submit annual financial statements. Fines or withdrawal of tax advantages may be assessed to firms failing to meet the Code’s provisions.
A progressive tax system applies to income, profits, and capital gains earned by individuals.
Foreign Trade Zones/Free Ports/Trade Facilitation
A law on Free Trade Zones (FTZ) was established in 2002. The law defines the conditions for operating and managing economic FTZs, with exemption and incentive regimes granted to investment in such zones. The law is not specific to a particular activity. Instead, it defines FTZs as geographical areas to which a special regime on customs duties and controls, taxation, immigration, capital investment, and foreign trade applies, and where domestic and foreign investors can provide services, import, store, produce, export, and re-export goods.
FTZs may be private or joint venture. The law provides the following incentives and benefits for enterprises located in FTZs:
- Full exemption from income tax for a maximum period of 15 years, followed by a period of partial exemption that gradually decreases;
- Customs and tax exemptions for the import of capital goods and equipment needed to develop the area, with the exception of tourism vehicles;
- Exemption from all communal taxes (with the exception of fixed occupancy tax) for a period not exceeding 15 years;
- Registration and transfer of the balance due for all deeds relating to purchase, mortgages, and collateral.
A FTZ has been established in the northeastern city of Ouanaminthe, where a Dominican company, Grupo M, manufactures clothing for a variety of U.S. companies at its CODEVI facility. Additionally, several American apparel companies lease factory space in this free zone. All the factories at CODEVI combined employ over 13,000 Haitians as of February 2020.
In October 2012, the Haitian government, with the support of the Inter-American Development Bank and the United States government, opened the 617-acre Caracol Industrial Park located near the town of Caracol in Haiti’s northeastern region. As of 2020, five companies are operating in the park: S&H Global, a South Korean company; MAS Holdings, a Sri Lankan company; Everest, a Taiwanese factory; and two Haitian companies, Peintures Caraibes and Sisalco. Altogether, these companies employ over 13,000 Haitians. S&H Global is the single largest private sector employer in Haiti.
In 2015, three major FTZ’s were added to the list: Agritrans, the first agricultural free trade zone in Haiti; Digneron, an entity of the Palm Apparel Group which also owns and operates the Palmiers free trade zone; and Lafito, a USD 150 million Panamax port and industrial park. Port Lafito, located 12 miles north of Port au Prince, includes port facility business services that cater to bulk and loose cargo imports, as well as terminal services to worldwide container service shipping lines. The Lafito economic zone currently includes a cement plant, but the industrial park portion of the project is not yet operational.
Performance and Data Localization Requirements
Foreign firms are encouraged to participate in government-financed development projects. However, performance requirements are not imposed on foreign firms as a condition for establishing or expanding an investment, unless indicated in a signed contract.
Under Haitian laws, foreign investors operate their businesses and use their assets to organize production freely. Companies are not forced to localize or to use local raw materials for the production of goods. Foreign information technology providers are not required to turn over source code or keys for encryption to any public agencies.
7. State-Owned Enterprises
The Haitian government owns and operates State-Owned Enterprises (SOE). The Haitian commercial code governs the operations of the SOEs. The sector included a flourmill, a cement factory, a telephone company, the electricity company (EDH), the national port authority, the airport authority, and two commercial banks: Banque Nationale de Crédit and Banque Populaire Haïtienne. The law defines SOEs as autonomous enterprises that are legally authorized to be involved in commercial, financial and industrial activities. All SOEs operate under the supervision of a sectorial ministry, and are expected to create economic and social return. Today, some SOEs are fully owned by the state, while others are jointly owned commercial enterprises. The Haitian Parliament has full authority to liquidate state enterprises that are underperforming. The majority of SOEs are financially sound, with the exception of EDH. EDH receives substantial annual subsidies from the Haitian government to stay in business.
In response to the economic difficulties of the late 1990s and mismanagement of the SOEs, the government liberalized the market and allow foreign firms to invest in the management and/or ownership of Haitian state-owned enterprises. To accompany the initiative, the government established the Commission for the Modernization of Public Enterprises in 1996 to facilitate the privatization process.
In 1998, two U.S. companies, Seaboard and Continental Grain, purchased shares of the state-owned flourmill. Each partner currently owns a third of the company, known today as Les Moulins d’Haiti. In 1999, a consortium of Colombian, Swiss, and Haitian investors purchased a majority stake in the national cement factory. In 2010, a Vietnamese corporation, Viettel, officially acquired 60 percent of the state telecommunications company Teleco (now operating as Natcom), with the Haitian government retaining 40 percent ownership. The government has allowed limited private sector investment in selected seaports. Competition is not distorted in favor of state-owned enterprises to the detriment of private companies.
The Haitian government has allowed private sector investment in electricity generation to compensate for EDH’s inability to supply sufficient power. Three independent power producers previously provided electricity generation for EDH in the Port au Prince metropolitan area. The Finance Ministry was instructed in 2019 to suspend payments of any value in connection with the execution of contracts between the government and the three independent power producers. During a council of ministers meeting on October 2019, the Haitian government, through the Ministries of Finance and Public Works, had expressed its intention to suspend contracts with the three private companies which supplied it with electricity: Haytian Tractor & Equipment Co. SA (Haytrac), E-Power, and Société Générale d’Energie SA (Sogener). As of April 2020, E-Power was the only independent power producer still operating in Port au Prince. E-Power opened a 32-megawatt heavy fuel oil power generation plant with financing from the World Bank and International Finance Corporation in 2011. In November 2019, the Haitian government filed criminal fraud charges against Sogener, which had been operating two collocated power plants in Port au Prince starting in 2004.
The National Regulatory Authority of the Energy Sector in Haiti (ANARSE), a state body created by decree in February 2016, launched a series of prequalification rounds for regional electricity grids and power production starting in August 2019. The ANARSE tenders are for the concession of the public service for the production, transmission, and distribution of electrical energy in the Miragoane, South (Les Cayes) and North East (Caracol) networks. On March 2020, the names of prequalified firms were released. More prequalification tenders for additional regional grids are expected in 2020. ANARSE also concluded a prequalification round for mini electricity grids in 2019.
8. Responsible Business Conduct
Awareness of responsible business conduct among producers and consumers is limited but growing. Though rather informal, some Haitian firms have a Corporate Social Responsibility (CSR) component to their business plan. Irish-owned telecommunications company Digicel, for example, sponsors an Entrepreneur of the Year program and has built 120 schools in Haiti. Natcom provides free internet service to several public schools throughout the country. Les Moulins d’Haiti, partially owned by U.S. firm Seaboard Marine, provides some services including electrical power to surrounding communities. In the aftermath of the 2010 earthquake, many firms provided logistical or financial support to humanitarian initiatives, and many continue to contribute to reconstruction efforts. Haiti’s various chambers of commerce have also become more supportive of social responsibility programs. As of March 2020, many Haitian, U.S., and other foreign owned firms in Haiti started donating to the country’s efforts to prevent and treat the COVID-19 outbreak.
The Haitian government has not established any incentives to encourage adherence to Responsible Business Conduct.
14. Contact for More Information
Embassy of the United States of America
Boulevard du 15 Octobre, Tabarre 41
Please address email correspondence to PAPECON@state.gov.