Role of Integrated Economic Zones (IEZs) in Haiti’s Reconstruction and Development: Training in Market Demand Assessment

1. Role of Integrated Economic Zones (IEZs) in Haiti’s Reconstruction and Development:Training in Market Demand Assessment Port-au-Prince, Haiti December 2011

2. Integrated Economic Zones (IEZs) Are Development Districts That Combine Complementary Economic Activities Panama Pacifico (former Howard Air Force Base), Panama • Many IEZs have industry at their core • Where offices and retail space are required, IEZs can include a business park • Others incorporate commercial, residential, and leisure areas

3. A Flexible Concept That Can Be Used to Develop Many Different Types of Places Subic Bay Freeport, Philippines • Some are linked to major transport hubs (ports, airports) and include logistics facilities

4. A Flexible Concept That Can Be Used to Develop Many Different Types of Places Aqaba Special Economic Zone, Jordan • IEZs can focus on tourism develop-ment • Include Free Zones and Industrial Parks, such as those already underway in Haiti

5. Introduction/Purpose of the Market/Demand Assessment • Steps to Assess the Market • Location benchmarking • High-potential industry sector identification • Demand assumptions/projections • Demand Model Inputs Worksheet • Outputs Graphics and Tables • Discussion/Questions Presentation Outline/Topics

6. Introduction • IEZ developments should be demand-driven and respond to market requirements • Information is used in Master Planning and Development Phasing • Enables “real-world” financial and economic-impact analyses • Best ensures that public investments in infrastructure are economically efficient • Examine potential market appetite and demand (both “pent-up” and new) for investment in manufacturing and commercial sectors bearing in mind the improved business environment offered by an IEZ regime • Once high-potential industry sectors likely to invest are identified, their requirements are assessed to enable recommendations on infrastructure and policy components of IEZs

7. Example IEZ Feasibility Study Process Legal/Regulatory/ Institutional Assessment Market/Demand Analysis Financial Analysis Implementation Plan/Bidding Documents Site Analysis Master Planning Infrastructure Design and Costing

8. Purpose of the Market/Demand Analysis • Identify the main target sectors for investment at IEZs • Determine investors’ critical investment drivers and constraints • Estimate investor demand for serviced land (m2), pre-built facility space (m2), and utility services in two 20-year scenarios: • A Base Case – likely scenario • An Aggressive Case – best-case scenario Haiti IEZs: Market/Demand Assessment Methodology

9. Desk research • Current global and regional industry trends, including trade flows and FDI • Other information (e.g., third-party databases such as COMTRADE, Trade Maps, UNCTAD, EIU, etc.) • Field research/data collection (in Haiti) • GoH representatives, including ministers, director generals, and their ministerial staff • Representatives of CFI, DZF, and SONAPI • Representatives of Haiti's Presidential Working Group on Competitiveness (PWGC) • Representatives of the Private-Sector Economic Forum (PSEF) • Interviews with more than 15 leading current and potential investors in a variety of sectors • Haitian industry associations, civil society, and financial institutions • Port operators and logistics/supply-chain service providers • International donors/organizations including USAID, IADB, OAS, and IOM • A three-tier assessment methodology • Location benchmarking • High-potential industry sector identification • Demand assumptions/projections Steps to Assess the Market

10. Global Comparators and Best-Practice Examples Direct Regional Competitors China; Guangzhou Special Economic Zone Indonesia; Batam Island Free Trade Zone Location Benchmarking • Fiscal incentives • Labor cost to companies • Cost of land and buildings • Utilities cost • Shipping costs Benchmarking Factors • Macroeconomic indicators • Financial risk levels • Investment risk levels • Ease of doing business • Taxation Costa Rica; Region Huetar Norte SEZ Dominican Republic; Santiago Industrial Free Zone El Salvador; International Free Zone Guatemala Free Zones Honduras; Pacific Industrial Park Nicaragua; Las Mercedes Industrial Park

11. Investors indicated the following key investment constraints/concerns: • Firm Start-Up/Licensing • Property Registration • Doing Business • Import/Export Documents • Availability/cost of serviced land, facilities, and utilities Benchmarking Haiti’s Competitive Position in the Regional/Global Economy Note: Although Haiti betters its rivals in the ease of hiring/firing, Labor Flexibility does not address the lack of multi-shift production, an issue for investors.

12. Securing Market Access Following a Sourcing Strategy Staying Ahead of Competition Lowering Production Costs Securing Access to Raw Materials Gaining Access to Technology and Skills Firm-Level Decision Drivers Firm/Industry Specific Variables

13. Macro-Economic Factors: Trade Top Haiti Exports by Value to US (USD thousands) • Trade trends demonstrate the performance of the economy in key traded categories of goods and services (HS 2-Digit Level) over a period of years • Growing values/volumes of trade suggest increased economic spending/production = potential areas of market opportunity • Collaborate with investment trends (next slide) • Potential to narrow in on underlying product categories (e.g., specific traded types of apparel/garments, such as men’s t-shirts, women’s pants, etc.) Top Haiti Imports by Value from US (USD thousands)

14. Macro-Economic Factors: FDI Operational Investment Projects – Sectoral Breakdown (2004-2009) – CFI Data Approved or Eligible Investment Projects – Sectoral Breakdown (2004-2009) – CFI Data • Operational projects have entered the market and established operations – a source of “pent-up” demand for land/facilities for relocation/expansion • Approved/eligible projects require land, facilities, financing, and personnel – another source of “pent-up” demand for land/facilities

15. High-Potential Industry Sector Identification – Apparel/Garments in Haiti

16. Demand Projections • Formulate key assumptions that will impact demand (next slide) • Estimate sources of demand – relocations/expansions and new companies • Demand projections for serviced land and facilities: • Sector-based • Two scenarios covering 20 years • Base Case • Aggressive Case

17. Assumptions That Drive Demand Projections Base Case: GDP growth at 5% (Year 6-10) and 4% (Year 11-15) and moderate levels of pent-up and new investment between Years 1-5. Aggressive Case: GDP growth at 7% (Year 6-10) and 6% (Year 11-15) and increased levels of pent-up and new investment over the Base Case between Years 1-5.

18. Haiti: Demand Model Inputs Worksheet

19. N/E Port-au-Prince: Economic Growth and Job Creation at Years 5 and 20 • Additional Factors • Construction jobs during industrial and residential site development • Residential demand for worker incremental housing units/apartments, row houses, and villas • % of direct/indirect workers requiring housing: 25%/15% • Workers per household: 1.2 • Households per DU: 1.1

20. N/E of Port-au-Prince: Demand Projections and Site Requirements Demand Factors • Strong Korean investor interest in apparel/ garments • Close to port and labor supply • Anticipated rents for built industrial space: $3.00/m2/month • Responds to shortage of serviced industrial land in PAP Site Development Requirements • Prepare resettlement plans • Identifyinstitutional arrangements for implementation • Mobilize financing for trunk infrastructure Total Area: 985

21. North of Haiti: Economic Growth and Job Creation at Years 5 and 20 • Additional Factors • Potential for tourism resorts (2 x 300 rooms) at Fort-Liberté with beaches and cultural sites • Construction jobs during industrial, residential, and tourism site development • Residential demand for incremental worker housing units/apartments, row houses, and villas • % of direct/indirect workers requiring housing: 40%/20% • Workers per household: 1.2 • Households per DU: 1.1

22. Demand Factors • NIP satisfies current industrial demand requirements in North • Potential for beach, eco-, and cultural tourism • Long-term potential as “end of chain” port platform for export to USA • Anticipated rents for built industrial space: $2.70/m2/month North of Haiti: Projected Demand and Site Requirements Site Development Requirements • Mitigate negative environmental impacts after EIA is completed • Ensure main road connectivity Total Area: 1,080 • An eco-tourism resort at Fort-Liberté is also foreseen in the longer-term.

23. … But Over 2,000 ha of Serviced Land are Required for Investors Total Area: 606 Total Area: 2,140

24. QUESTIONS/DISCUSSION