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

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Presentation on theme: "Role of Integrated Economic Zones (IEZs) in Haiti’s Reconstruction and Development: Training in Market Demand Assessment Port-au-Prince, Haiti December."— Presentation transcript:

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 2 Integrated Economic Zones (IEZs) Are Development Districts That Combine Complementary Economic Activities 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 Panama Pacifico (former Howard Air Force Base), Panama

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

4 4 IEZs can focus on tourism develop- ment Include Free Zones and Industrial Parks, such as those already underway in Haiti Aqaba Special Economic Zone, Jordan

5 Presentation Outline/Topics 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 5

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

8 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 (m 2 ), pre-built facility space (m 2 ), and utility services in two 20-year scenarios:  A Base Case – likely scenario  An Aggressive Case – best-case scenario Analyzing Data 1) Existing studies/reports 2) Trade, investment, and CFI data 3) Interview results Identifying Sectors High-potential target sectors for possible IEZ location in Haiti Projecting Demand by Sector Serviced land and facilities at the national level, allocated to possible IEZ sites: 1) Base Case 2) Aggressive Case Haiti IEZs: Market/Demand Assessment Methodology

9 Steps to Assess the Market 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 9

10  Macroeconomic indicators  Financial risk levels  Investment risk levels  Ease of doing business  Taxation  Fiscal incentives  Labor cost to companies  Cost of land and buildings  Utilities cost  Shipping costs Benchmarking Factors China; Guangzhou Special Economic Zone Indonesia; Batam Island Free Trade Zone Direct Regional Competitors Global Comparators and Best-Practice Examples Location Benchmarking 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 10

11 11 Benchmarking Haiti’s Competitive Position in the Regional/Global Economy 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 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 Firm/Industry Specific Variables Firm/Industry Specific Variables Gaining Access to Technology and Skills Gaining Access to Technology and Skills Securing Access to Raw Materials Lowering Production Costs Staying Ahead of Competition Following a Sourcing Strategy Securing Market Access Firm-Level Decision Drivers 12

13 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 Exports by Value to US (USD thousands) Top Haiti Imports by Value from US (USD thousands) 13 Macro-Economic Factors: Trade

14 Operational Investment Projects – Sectoral Breakdown ( ) – CFI Data Approved or Eligible Investment Projects – Sectoral Breakdown ( ) – 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 14 Macro-Economic Factors: FDI

15 Sector Issues Likely Origins of Investment Local and foreign investors from Korea, DR, Brazil, US, and other countries in Asia Expansion/relocation of existing local investments to newer, larger facilities Investment Drivers HELP Act and “Plus One” program, possibility of Brazilian HELP Act Competitive wage rates for sewing operations Proximity to the US market, which is a key advantage over producers located in Asia (i.e., shorter shipment durations) Specific Investment Constraints Lack of pre-built facility space/serviced land Mid-level management capacity constraints/brain drain Lack of multiple workforce shifts Limited access to financing for capital investments Sub-Sectors/Products Knit (e.g., t-shirts, industrial uniforms, performance-wear) and woven (e.g., jeans and men’s suits) goods, fashion products (e.g., women’s fashion) Investor Requirements for Pre-Built Facilities and Infrastructure Pre-Built Facilities: 6,000 m 2 (small operations) – 12,000+ m 2 (large operations) for lease at no more than USD 3/m 2 /month Power Requirements: 100,000 kWh/month for sewing operations; 100,000+ kWh/month for more intensive operations (i.e., suits) Infrastructure: Long-term port in the North can reduce shipping times to 2 days 15 High-Potential Industry Sector Identification – Apparel/Garments in Haiti

16 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 17 Shared Assumptions Essential Requirements (“Must-Haves” Based on Investor Surveys and Expert Opinion): Adoption of a unified Regulatory Framework, including expedited process for business set-up/licensing for IEZ developers/operators and tenants (i.e., de facto “Account Executive” “one-stop” model) Initial pricing of approximately USD 3.00/m 2 /month in Port-au-Prince and approximately USD 2.70/m 2 /month in the North for pre-built facilities. It is expected that price levels will increase over time as the IEZ value proposition is tested in the market and Haiti becomes more attractive to higher-value industries Resolution of land-tenure and resettlement issues at IEZ locations, enabling recruitment of IEZ investment, development, and collateralized lending Availability/provision of reliable and competitively priced electricity and water to IEZ sites Expansion/rehabilitation/construction of roads and other infrastructure, including airports Availability of sufficient port capacity at the Port of Port-au-Prince, Terminal Varreaux, and Cap-Haïtien Maintenance of security and political stability in the aftermath of the presidential elections Ongoing and Longer-Term Requirements: Passage of an IEZs Law, codifying the unified Regulatory Framework Implementation of 3 x 8 workforce shift Longer-term port development in the North 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 18 Estimated Firm Size BreakdownProjected Net Land Requirement / Plot Sizes Industry SectorSmall FirmsLarge FirmsIndustry Sector Small Operations Large Operations Weighted Average Garments and Apparel (including Textiles)50%60%Garments and Apparel (including Textiles) 10,000 20,000 17,000 Agri-Business and -Processing50% Agri-Business and -Processing 5,000 10,000 7,500 Construction and Building Materials40%60%Construction and Building Materials 5,000 10,000 8,000 Logistics/Supply Chain Services50% Logistics/Supply Chain Services 5,000 20,000 12,500 BASE - Pent Up Demand ProjectionsAGGRESSIVE - Pent Up Demand Projections Est. Annual Distribution of Pent-Up Demand - BASE Est. Annual Distribution of Pent-Up Demand - AGGRESSIVE Year 1Year 2 Year 1Year 2 50% 60%40% BASE - New Demand ProjectionsAGGRESSIVE - New Demand Projections Estimated Growth Rates (New Demand) - BASE Estimated Growth Rates (New Demand) - AGGRESSIVE SectorYear 1 - 5Year Year SectorYear 1 - 5Year Year Garments and Apparel (including Textiles) 5%4%Garments and Apparel (including Textiles) 7%6% Agri-Business and -Processing 5%4%Agri-Business and -Processing 7%6% Construction and Building Materials 5%4%Construction and Building Materials 7%6% Logistics/Supply Chain Services 5%4%Logistics/Supply Chain Services 7%6% BASE - TotalAGGRESSIVE - Total Utilized Capacity (Year 1 to 5) 80%90% Business Retained (Year 2 to 20) 90%95% N/E of Port au Prince - Captured National-Level DemandNorth of Haiti - Captured National-Level Demand SectorBaseAggressiveSectorBaseAggressive Garments and Apparel (including Textiles)40%50%Garments and Apparel (including Textiles)30%35% Agri-Business and -Processing30%40%Agri-Business and -Processing40%50% Construction and Building Materials40%50%Construction and Building Materials30%40% Logistics/Supply Chain Services40%50%Logistics/Supply Chain Services40%50% Haiti: Demand Model Inputs Worksheet

19 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 20 N/E of Port-au-Prince: Demand Projections and Site Requirements Site Development Requirements Prepare resettlement plans Identify institutional arrangements for implementation Mobilize financing for trunk infrastructure Demand Factors Strong Korean investor interest in apparel/ garments Close to port and labor supply Anticipated rents for built industrial space: $3.00/m 2 /month Responds to shortage of serviced industrial land in PAP Total Area: 985

21 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 22 North of Haiti: Projected Demand and Site Requirements Site Development Requirements Mitigate negative environmental impacts after EIA is completed Ensure main road connectivity 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/m 2 /month An eco-tourism resort at Fort-Liberté is also foreseen in the longer-term. Total Area: 1,080

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


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