By IPS Correspondents
PORT-AU-PRINCE, Apr 27 1996 (IPS)

The World Bank has taken a hard look at Haiti and acknowledged the obvious: the country is poor, but it needs substantial aid.

However, a leaked World Bank background paper circulating here says that in dispensing such aid the International Development Association (IDA) — the unit of the bank that provides aid to the world’s poorest nations on concessionary terms — is running “considerable risks”.

That is because of the “disastrous economic and social situation, as well as the anticipations of credits made on the return of the constitutional regime” in October 1994.

Dated Apr. 11, the document is entitled “An outline of the aid strategy of the Bank group towards the Republic of Haiti”. It is under limited circulation in Haiti, including sectors involved in the reconstruction process that began in October 1994. IPS has obtained a copy of the document.

That was when Jean Bertrand Aristide, deposed by the military and forced into exile in 1991 shortly after he was elected in democratic elections, got reinstalled by a military intervention spearheaded by the United States.

The Bank’s experts say “though risks are high, the potential benefits in terms of an improvement of the living conditions of the poor, so long neglected in Haiti, justify the firm and steady support of the IDA.”

To respond satisfactorily to Haiti’s particular situation, IDA has developed a medium term emergency aid strategy in collaboration with other funding agencies. The two proposals concentrate on the struggle against poverty.

IDA’s emergency aid strategy as part of emergency credit and a relaunching of the economy was presented to the Bank in December 1994. It aims to supply goods and basic services destined to meet urgent needs.

Priority economic and social infrastructures have been rehabilitated. Aid from donors has been coordinated. The 40 million dollars released in June 1995 has enabled the government to finance essential imports.

In the medium term, World Bank strategy applied through IDA consists in supporting — in cooperation with other donors — the Haitian government’s development programme. The emphasis will be placed on relaunching economic growth, the anti-poverty struggle and repairing environmental decay.

The accent is placed on the reform of economic policy by this strategy. The loan programme will be on a selective basis, but based on the reduction of poverty, the exploitation of human resource and sustainable development.

World Bank experts estimate that “any development strategy for Haiti is destined to fail if economic growth cannot be revived”.

To improve the economic and social position, growth strategy must be based on an environment conducive to the development of the private sector, the strengthening of institutional training programmes and the repair of basic infrastructure.

The development of the private sector requires, according to the Bank, the restoration of confidence in this sector by good government management and reforms in economic policy, as part of an intensive dialogue between the government, the private sector and the trade unions.

Political stability, security and the establishment of an operational judicial system constitute the three aspects of governance most propitious to the development of the private sector in Haiti, estimates the World Bank.

The best way to control inflation in the country lies in “the improvement and mobilisation of resources and not in the reduction of expenditures”.

In this sense the Bank recommends to the government grant priority to bringing tax evasion under control and enlarging the tax base. The aim should be to return in the short term to the level of fiscal revenues collected in 1991, which amounted to 7.6 percent of the gross domestic product (GDP), and eventually to reach 10 percent in the medium term.

The Haitian government should increase responsibility for expenditures and reach an equilibrium between running costs and salaries, as well as reorienting expenditures on basic social services

The World Bank judges indispensable the “liberalisation of trade so that Haiti can be transformed into a country with a competitive economy”. To encourage economic efficiency the ensemble of customs duties should be reduced still further and exemptions limited, taking into account the effects on the budget.

Telecommunications, electricity, ports, agro-industries, banks and cement plants controlled by the state should be “completely and rapidly privatised in one form or another,” the document says.

State control over these companies and the resulting deterioration in their services have discouraged private sector development and imposed significant economic and social costs.

In the domain of agriculture, the Bank believes that the non- definition of property rights hinders the recovery of production and investment.

It recommends deregulation of agro-industries and industry in general. The public sector is too extensive, does not have the appropriate personnel and suffers from mediocre organisation. Infrastructure will have to be restored, in particular the congestion eased at the main port, considered the most expensive in the Caribbean.

Only six inhabitants out of 1,000 have access to a telephone line, and the 140 megawatt capacity of installed energy production represents only one seventh of the Dominican Republic’s. Irrigation is limited to 50 percent of the arable land.

The Bank recommends the government invest in collaboration with non-governmental organisations in the struggle against poverty, in health and education.

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