This is a joint post with Vijaya Ramachandran.
The first-ever National Business Census began in Haiti this month. A census of formal and informal businesses has never been conducted and there is no comprehensive business database. Although a daunting task, the census will likely help to strengthen small and medium enterprises and increase local procurement.
The survey began September 3rd and will be conducted by 500 interviewers recruited by 42 supervisors from across the country – at a cost of 26 million gourdes (around $600,000). Wilson Laleau, the Minister of Trade and Industry, explained that this survey will enable the government to assist entrepreneurs with access to credit, help meeting standards, and entering new markets. Maintaining crops, inventories, and production is notoriously difficult with disasters such as Hurricane Isaac. A comprehensive census could improve access to credit and insurance coverage for natural disasters. Prime Minister Laurent Lamothe said: “Everyone recognizes the importance of such an activity… [a census is a] prerequisite to any policy to support the development of entrepreneurship in Haiti.”
This will not be an easy exercise. The Haitian private sector is very fragmented and most businesses are informal; the UN Special Envoy for Haiti estimates that the formal sector generates no more than 10 percent of employment. A main goal of the census is to help bring small business from the informal to the formal sector.
The informal economy in Haiti is composed of many layers, from micro-level vendors to small and medium enterprises (SMEs). Especially in Port-au-Prince and surrounding areas, it is comprised mostly of vendors selling food, household items, used clothing and shoes, or other goods. Most of the goods are what is known as “pèpè” or “kennidies,” as the shipping of donated goods from the United States to Haiti began during the administration of President Kennedy. These goods are often castoffs from US thrift stores such as Goodwill or Salvation Army. Small business owners purchase the goods in bulk, often not knowing what they are going to find when they open a shipment. Profits are marginal as vendors have little control over inventory and pricing, and the streets in Port-au-Prince are crowded with stalls selling nearly identical items. Odds are that these micro-businesses will never expand and enter the formal sector – and it is likely that these vendors are not the target of the census.
Improving business registration procedures is necessary to bring larger SMEs into the formal sector. According to the World Bank’s Doing Business database, Haiti currently ranks almost last -180 out of 183 countries - for ease of starting a business (worse than Haiti: Guinea, Eritrea, and Chad). The report identifies 12 procedures which require an average of 105 days and cost more than three times per capita income. Things were even worse before 2011, when creating a new business required approval of the president or prime minister’s office.
Business registration may also help to increase demand for goods and services provided by SMEs. Our analysis of aid flows in the aftermath of the quake showed that direct contracts to local firms were few and far between. Approximately $9 million went to Haitian companies; which is less than two percent of US reconstruction spending. Three-quarters of this amount was to three of the largest companies: Operateurs Portaires Reunis (OPR), GDG Belton and Construction, and Sol Haiti. OPR is a private company that became the de facto National Port Authority under the Preval government. GDG is the primary supplier of concrete and the second largest equipment rental company. Sol Haiti is part of the Sol Group, a Caribbean petroleum company that was formed through the acquisition of Shell’s assets in the region in 2005. These sectors – marine cargo handling, petroleum, and construction – were the main recipients of international contracts.
A public registry can connect local businesses to donors, consulting agencies, and NGOs. Several Haitian business directories currently exist, although they lack information about how listings are maintained and companies are verified. Building Markets (formerly Peace Dividend Trust) created a revolutionary marketplace to list and vet businesses. However, their operations in Haiti closed in June 2012, and their registry is (supposedly) maintained now by the Ministry of Commerce and Industry. If local procurement can be improved by a properly-maintained business census, Haiti stands a real chance of reducing its dependence on foreign aid and growing its way out of poverty