A majority of Haiti’s economy relies on foreign aid, with over half of its annual budget coming from outside sources. In 2010 a 7.0 magnitude earthquake hit Haiti which inflicted $7.8 billion in damage which caused the GDP to contract by 5.4%. Foreign aid skyrocketed and about $13.5 billion in donations and pledges flooded in with 75% of them coming from donor nations and the other 25% coming from private charities or organizations. Even 5 years after the earthquake, the situation hasn’t improved. Haitians are still dependent on foreign donations to live. The heavy dependence on donations makes up for Haiti’s low participation in the global economy, which is also negative. Besides the foreign aid, Haiti exports very few products -- with annual exports that are about a third of Jamaica's exports. The United States, a country that has trade agreements with Haiti, accepts 83.2% of their exports which only makes up for less than one-twentieth of the Haitian GDP. This economic engagement is under the Haitian Hemispheric Opportunity through Partnership Encouragement Act and provides Haiti duty-free access to the U.S. These statistics further emphasize that Haiti is not independent enough to function by itself. One of the top reasons Haiti cannot develop economically is because of their history of unstable governments and policies on foreign investment. Business transactions with other countries have been difficult, because of the corrupt bureaucracies and inefficient communication with past trade partners. Many other countries are wary about opening their doors up to Haiti which has caused their economy to suffer continuously.
A proposed solution is to create a new economic model which would favor the small enterprises that already exist, today. If the government were to open up opportunities for entrepreneurs, small businesses could be established and there would be less dependence on large corporations. Non-governmental and aid organizations have slightly helped conditions in Haiti, but they will not help the self sufficiency needed to make Haiti prosper. If the government were to take advantage of the NGO and foreign aid, progress could be made. However, there are holes. This solution is similar to the import substitution industrialization policy in which governments encourage local production of items that had previously been imported. While local production would decrease dependence on imports, Haiti does not have the funds to industrialize their economy. If Haiti were to industrialize the majority of their economy, these industries would most likely not be globally competitive enough to attract more trade partners. Plus, if Haiti were to take advantage of the foreign aid, this would contradict the point of becoming financially independent.
Another solution for this issue that has been suggested by the USAID has been to “double the agricultural incomes” for certain crops such as rice or cacao. This would be achieved through investment in farm productivity, agriculture infrastructure, and development of agribusiness. This solution, however, will force Haiti to rely on raw materials even more. Even with the focus on agriculture and farming, Haiti will still not be sufficient enough to be a global competitor in exporting crops because of their lack of industrialization. Plus, environmental conditions such as deforestation and climate change are making it harder for farmers to sustain large crops due to soil erosion or irregular weather. Also, increasing agricultural incomes will harm other jobs such as service jobs which make up 50.4% of the workforce in Haiti.
SOURCES:
Fallon, Paul E. "Haiti’s Economic Aftershocks." The New York Times. The New York Times, 12 Jan. 2015. Web. 10 Dec. 2015. <http://www.nytimes.com/2015/01/12/opinion/haitis-economic-aftershocks.html>.
"Still Waiting for Recovery." The Economist. The Economist Newspaper, 05 Jan. 2013. Web. 10 Dec. 2015. <http://www.economist.com/news/americas/21569026-three-years-after-devastating-earthquake-republic-ngos-has-become-country>.
"Still Waiting for Recovery." The Economist. The Economist Newspaper, 05 Jan. 2013. Web. 10 Dec. 2015. <http://www.economist.com/news/americas/21569026-three-years-after-devastating-earthquake-republic-ngos-has-become-country>.
"Economic Growth and Trade." Economic Growth and Trade. United States Agency of International Development, 26 Aug. 2015. Web. 11 Dec. 2015. <https://www.usaid.gov/haiti/economic-growth-and-trade>.
Knox, Richard. "5 Years After Haiti's Earthquake, Where Did The $13.5 Billion Go?" NPR. NPR, 13 Jan. 2015. Web. 9 Dec. 2015. <http://www.npr.org/sections/goatsandsoda/2015/01/12/376138864/5-years-after-haiti-s-earthquake-why-aren-t-things-better>.
"Economic Growth and Trade." Economic Growth and Trade. United States Agency of International Development, 26 Aug. 2015. Web. 11 Dec. 2015. <https://www.usaid.gov/haiti/economic-growth-and-trade>.
A proposed solution is to create a new economic model which would favor the small enterprises that already exist, today. If the government were to open up opportunities for entrepreneurs, small businesses could be established and there would be less dependence on large corporations. Non-governmental and aid organizations have slightly helped conditions in Haiti, but they will not help the self sufficiency needed to make Haiti prosper. If the government were to take advantage of the NGO and foreign aid, progress could be made. However, there are holes. This solution is similar to the import substitution industrialization policy in which governments encourage local production of items that had previously been imported. While local production would decrease dependence on imports, Haiti does not have the funds to industrialize their economy. If Haiti were to industrialize the majority of their economy, these industries would most likely not be globally competitive enough to attract more trade partners. Plus, if Haiti were to take advantage of the foreign aid, this would contradict the point of becoming financially independent.
Another solution for this issue that has been suggested by the USAID has been to “double the agricultural incomes” for certain crops such as rice or cacao. This would be achieved through investment in farm productivity, agriculture infrastructure, and development of agribusiness. This solution, however, will force Haiti to rely on raw materials even more. Even with the focus on agriculture and farming, Haiti will still not be sufficient enough to be a global competitor in exporting crops because of their lack of industrialization. Plus, environmental conditions such as deforestation and climate change are making it harder for farmers to sustain large crops due to soil erosion or irregular weather. Also, increasing agricultural incomes will harm other jobs such as service jobs which make up 50.4% of the workforce in Haiti.
SOURCES:
Fallon, Paul E. "Haiti’s Economic Aftershocks." The New York Times. The New York Times, 12 Jan. 2015. Web. 10 Dec. 2015. <http://www.nytimes.com/2015/01/12/opinion/haitis-economic-aftershocks.html>.
"Still Waiting for Recovery." The Economist. The Economist Newspaper, 05 Jan. 2013. Web. 10 Dec. 2015. <http://www.economist.com/news/americas/21569026-three-years-after-devastating-earthquake-republic-ngos-has-become-country>.
"Still Waiting for Recovery." The Economist. The Economist Newspaper, 05 Jan. 2013. Web. 10 Dec. 2015. <http://www.economist.com/news/americas/21569026-three-years-after-devastating-earthquake-republic-ngos-has-become-country>.
"Economic Growth and Trade." Economic Growth and Trade. United States Agency of International Development, 26 Aug. 2015. Web. 11 Dec. 2015. <https://www.usaid.gov/haiti/economic-growth-and-trade>.
Knox, Richard. "5 Years After Haiti's Earthquake, Where Did The $13.5 Billion Go?" NPR. NPR, 13 Jan. 2015. Web. 9 Dec. 2015. <http://www.npr.org/sections/goatsandsoda/2015/01/12/376138864/5-years-after-haiti-s-earthquake-why-aren-t-things-better>.
"Economic Growth and Trade." Economic Growth and Trade. United States Agency of International Development, 26 Aug. 2015. Web. 11 Dec. 2015. <https://www.usaid.gov/haiti/economic-growth-and-trade>.