#150: Privatization effort in Haiti moves toward year-end target (fwd)

[Robert Corbett <bcorbett@netcom.com>]

From:nozier@tradewind.net

Published Tuesday, July 13, 1999, in the Miami Herald 
Privatization effort in Haiti moves toward year-end target

By DON BOHNING Herald Staff Writer 

PORT-AU-PRINCE, Haiti -- A four-year effort to privatize Haiti's major
state-owned enterprises is slowly moving ahead with little fanfare amid
the country's ongoing political turmoil and economic stagnation.
A state-owned flour mill and cement plant already have been transferred
to private control through capitalization -- or joint venture --
arrangements, with the state retaining a minority interest in each.
The government hopes to conclude privatization by year-end, a target
that may be optimistic, for the four major state enterprises: the
telephone and electric companies and the Port-au-Prince airport and
seaport. Other companies on the original list of nine to be privatized
include two banks and a vegetable oil plant.``This is the right time to
do it; we really think so,'' says Michel Presume, one of
the five-member Council for Modernization of Public Enterprises, known
by its French initials as CMEP, in charge of the privatization effort.
CMEP's members -- all of whom have engineering backgrounds and two of
whom have MBAs in finance -- are regarded as among the more serious,
competent and dedicated of official and quasi-official agencies.
The privatization program is patterned after one in Bolivia, with
control transferred to private investors in one of three ways:
management contract, a concession, or capitalization (joint venture). In
the case of a joint venture, the government retains from 20 percent to
49 percent ownership.The telephone company privatization will be done
through a joint venture, the airport by a management contract, the
electric company by either a long-term concession or joint venture and
the seaport likely would start with a management contract to get it
better organized, and later going to a concession, the only form
that needs parliamentary approval.All four enterprises are considered
currently inefficient operations with the electric company and the
seaport in particularly bad shape. The telephone company is by
far the most profitable and has the best potential. It has about 60,000
subscribers in a country of eight million, and service is erratic.
Competitive cellular service is only just beginning in Haiti.
The four major enterprises combined have about 8,000 employees, far more
than needed, except at the airport which has only about 460.While
acknowledging that all four are overstaffed, Presume says, ``We are not
doing this process to put people on the streets. We are doing this to
make sure that we will be in a position to have more jobs later on, to
create the conditions for the private sector.''A successful
privatization program, he says, will help restore much-needed
investor confidence in Haiti as well as upgrade the country's
infrastructure,making it more attractive to investors.
Privatization -- or modernization as it is known here -- has been an
uphill struggle since it was included in Haiti's economic reform package
presented to the international community in 1994, even before former
President Jean-Bertrand Aristide was returned to office by a U.S.-led
invasion.Initially supporting the program after his return, Aristide
disavowed it in the fall of 1995, prompting the resignation of his
then-prime minister Smarck Michel.Privatization got back on track after
Rene Preval, who succeeded Aristide in the presidency in February 1996,
made it a priority. The CMEP first outlined an ambitious program that
would have nine state-owned enterprises privatized by
March 1998.The flour mill was privatized in September 1997, with 70
percent going to a consortium including Continental Grain and Seaboard
Corp. of the United States and Unifinance of Haiti and the government
retaining 30 percent ownership. It has since become operational,
although said to be operating at only a disappointing 40 percent of
capacity because of a glut of flour on the market, partly attributed to
uncontrolled smuggling through interior ports.But then an ongoing
political standoff that began mid-1997 left the country without
a functioning government and privatization was put on hold, although
CMEP continued the technical and financial work necessary to go ahead.
In January of this year, Preval declared the parliamentary term at an
end and in February declared Jacque Alexis his new prime minister by
decree, restoring a de facto government, needed to get privatization
going.In early May, Alexis signed the contract privatizing the cement
plant, giving giving 65 percent control to a three-company consortium,
including Colclinker of Colombia, Umar-Holderbank of Switzerland and
National Cement of Haiti. The government retained 35 percent of the
company, whose net worth Presume estimated at $24.4 million.
There is still some resistance to privatization but it seems to be
waning as people come to be more aware of its advantages rather than
view it as selling Haiti's patrimony, although given Haiti's political
uncertainty the controversy could be refueled.
``The problem is not who is going to manage the companies,'' says
Presume,``but what kind of service they are going to give. What kind of
jobs they are going to create. What the impact would be on the
economy.''``I think we have to be responsible and show the leadership to
make the right decisions,'' Presume says. ``It can be very hard, but I
think at the end the people will realize that it is in their best
interest.''