Government Crisis Stalls Privatization

Reuters, 18 November 1998

PORT-AU-PRINCE, Haiti (Reuters) - For years, Haiti's national flour mill, run into the ground by mismanagement and corruption, sat rusting in the salt air near the shore at Laffiteau, some 10 miles north of Port-au-Prince.

But in a week the former Minoterie (Flour Mill) d'Haiti, now shiny and privatized, will open its doors once more, bringing homemade flour back to the hemisphere's poorest nation for the first time since the plant closed in 1992.

It was a difficult deal but when you see that plant shining, and every day rusted equipment is being repaired or replaced, and you see 250 people working, that's a good sign, Serge Devieux, executive vice president of Unibank, one of Haiti's leading commercial banks, said.

Unibank's subsidiary, Unifinance, an investment banking services company, and American companies Continental Grain Co. and Seaboard Corp., bought 70 percent of the flour company for $9 million in 1997. The Haitian government owns 30 percent.

Haiti began planning the privatization of its nine state-owned enterprises several months after the United States restored President Jean-Bertrand Aristide to power in 1994, ending a three-year military dictatorship.

But the flour company, renamed Les Moulins (Mills) d'Haiti, is the only one to have gone through the process. Reasons the others have been delayed include public resistance to selling Haitian enterprises to foreign owners, failure to find buyers and a long government stalemate that has left the country without anyone to sign off on otherwise finalized deals.

GOVERNMENT STANDOFF BLOCKS NATIONAL PROGRAMS

Haiti's last prime minister resigned 17 months ago and has not been replaced. Parliament rejected President Rene Preval's first three nominations for the post and a fourth, Education Minister Jacques Edouard Alexis, is said to be in trouble.

The long standoff has slowed or blocked many national programs including privatization and held up hundreds of millions of dollars in badly needed international aid.

An agreement to sell Haiti's cement company has been stalled for eight months because there has been no prime minister to sign the deal, and privatization of seven other enterprises-- the telephone company, electric utility, seaports, airport, the two national banks and the cooking oil factory-- also are on hold.

With privatization stalled international telecommunications companies including at least two U.S. phone giants are in talks to make wireless service available in Haiti without waiting for the privatization of state telephone company Teleco, business leaders said. There are only 60,000 telephone lines in Haiti, a country whose population is estimated at 7 million

What bothers me in the Teleco story is that Haiti could have gotten $300 million (for the company) three years ago, before all the advance in technology, said University of Haiti professor Kesner Pharel, who runs a private economic consultancy.

WIDESPREAD STEALING FROM ELECTRIC UTILITY

Electricite d'Haiti has attracted little international interest, he said. The utility

company is believed to lose 55 percent of its production to individuals and companies who steal power from its lines.

Devieux said privatization of the state flour mill will lay the groundwork for Haiti's plan to have a stock market. Of the $3 million Unifinance invested, the company plans to sell $2 million in shares.

If you want to create a stock market you need stocks, Devieux said. This will be the first widely held corporation in Haiti.

Haitian business leaders say privatization will improve the productivity of inefficient companies and put an end to nepotism and political favoritism in hiring.

But many public interest and political groups continue to fight against selling state

companies, arguing that privatization will raise prices and cost more jobs in a country where unemployment is estimated at 60 percent.

Privatizing these companies will make services unaffordable for people in Haiti, who already have very little buying power, Camille Chalmers, director of the Haitian Platform for Alternative Development, said.

If cement remains in the public sector, for example, we can regulate prices and maintain profits. If it belongs to multinationals, the main goal will be to maximize profits, which has nothing to do with the strategic development of infrastructure in Haiti, he said.

Chalmers said Haiti's state companies should be given the chance to function under a freely elected government. The military dictators who ruled from 1991-1994 and Francois Papa Doc and his son, Jean-Claude Baby Doc Duvalier, who ruled Haiti for 30 years before that, were notorious for using the state companies for their personal enrichment, he said.