Rwanda and Haiti: Breaking Out of the Survival Trap–An Economic Transformation from the Heart of Africa

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By Rob Henning[1]

Telling people you received an offer for your dream job out of business school is usually an easy task. For me, it was more difficult; “….Mom and Dad, I’ve accepted a job in Africa to continue my career in economic development. Rwanda to be specific…” After a long pause, the typical litany starting with “genocide” and continuing with death, violence, and disease ensued. Not an auspicious start to a new and exciting career.

Rwanda’s transformation over the course of the intervening decade has been extraordinary. The country has recorded near 8% annual GDP growth. The tourism industry has grown from less than $5 million in revenues in 2002 to nearly $300 million in 2010 based on high value experiences. Firms from the largest mobile telecoms to small dynamic coffee exporters have identified and exploited profitable niches in domestic, regional and global markets. Rwanda seems to have found the recipe for success.

From Basket Case to Role Model
“How did Rwanda do it?” This was a question posed to me in 2008 at a gathering of more than 300 senior Haitian leaders from the public and private sectors. Although the plight of Haiti is de rigueur because of the catastrophic earthquake in January 2010, it was only the latest shock to Haiti’s economy. Even before the earthquake, the economic situation was grim, with per capita GDP at US $405 in 2006, representing a drop of nearly 50% from 1981 levels. The country was gripped in the Survival Trap, a vicious cycle of poverty and dependency.

In essence, the question the Haitians were asking was: “How did Rwanda manage to escape the Survival Trap?” Achieving this dramatic economic success requires addressing three major challenges:

  1. “Anti-business” operating environment: Foreign aid and remittances are typically 10 to 15 times higher than foreign direct investment in Haiti. Haiti is also the second worst economy in the World Bank’s “Doing Business” indicators.
  2. Culture of dependency: After decades of living off foreign aid and remittances, Haiti is optimized to maneuver for the next handout instead of engaging in productive activities.
  3. Survival business strategies: Because of imbalances caused by aid, there is little incentive to invest in productive sectors. Instead, distribution systems are optimized to distribute imported products.

The combination of these factors creates a Survival Trap where a country merely runs in place, highly dependent on the billions of dollars infused by the international community to stay afloat. The challenge for Haiti is to break this vicious cycle and move towards an Entrepreneurial Ecosystem built on a foundation of trust, innovation and strong leadership.

Building an Entrepreneurial Ecosystem in Haiti
Although the potential list of interventions required to foster an entrepreneurial ecosystem in Haiti would be extensive, five high priority opportunities will energize the process:

  1. Cultivate Leaders
    Every society faces a central or “adaptive” challenge that requires its leaders to re-examine their values, attitudes and actions. Rwandans from President Kagame down to the average citizen have embraced a new paradigm of leadership that embraces moral purpose, entrepreneurship and trust. Given the extremely low levels of trust In Haiti, and massive divide between the elite and majority of Haitians, this type of leadership must be carefully cultivated by the senior leaders of the public and private sectors and reinforced by targeted development programs for young emerging leaders from all walks of life.
  2. Transform the Business Environment
    Haiti needs a transformative approach to improving its economic infrastructure. Luckily, a role model exists in the form of Rwanda. In one year alone, the country improved its Doing Business ranking from 143 to 67, a jump of 76 places. Rwanda accomplished this through a combination of political leadership, concrete technical improvements and marketing of the initiatives to the IFC. The signals from the Martelly Administration are excellent in this regard, with a goal of cutting the country’s Doing Business ranking from 163 to 80 in one year.
  3. Reset the Relationship with the International Community
    President Kagame has become Africa’s spokesperson for the effective use of aid to foster development. His methods include aligning donor programs with national priorities, channeling more money through government institutions and investing in productive economic infrastructure. In comparison, Haiti is dependent on the infusion of money from abroad to sustain its economy with Overseas Development Assistance (ODA) and remittances equaling 30 to 40% of GDP over the past decade and at least 10 times the amount of FDI.
  4. Celebrate Entrepreneurs Throughout Society
    In Haiti, “private sector” has become associated with predatory behavior that tends to benefit a few at the expense of the majority. Improvements in the overall business environment will only benefit a few, not society as a whole. To mainstream entrepreneurship in Haitian society, the idea of “every fisherman or farmer is an entrepreneur” must take root. Even beyond the private sector, people from all walks of life must embrace a solutions mindset instead of being paralyzed by challenges.
  5. Implement a Shared Vision of Economic Growth & Entrepreneurship
    Rwanda’s economic transformation is the result of a tight focus on a small number of priority sectors such as coffee, tea, and tourism that have generated growth and acted as role models for the economy. This type of focus is important in countries where institutional, human and financial resources are scarce. The good news is that Haiti has already started down this path. Over the course of 2009, the Presidential Commission on Competitiveness developed a “Shared Vision for a Competitive and Prosperous Haiti,” a proposal for improving the competitiveness of the Haitian economy anchored around five priority sectors. Five-year investment costs will be US $1.5 billion, generating an incremental US $3.6 billion in revenues for the economy.

Rwanda as a Role Model for Haiti’s Transformation
Since my first conversation with my family about Rwanda, they have cautiously embraced my passion to tackle the challenge of global poverty in some of the world’s toughest environments. Moving beyond fear and skepticism, they have visited me in Rwanda, Afghanistan, and Haiti to understand these nations in a way that is impossible to do from just watching CNN.

Until recently, pointing to concrete outcomes from my work in these countries has been difficult. An approach focused on transforming the business environment, fostering productive mindsets, and articulating competitive strategies to leaders of fragile economies could have been dismissed as the musings of another first-world development practitioner. Rwanda’s transformation has made my job as an advisor easier by showing that following this process can lead to prosperity and concrete improvements for people at all levels of society.

The next chapter in my journey is to work with Haiti’s leaders to unlock the latent potential of this fiercely independent country. Given the constant inquiries from all levels of society about the continuing success of Rwanda, I am confident that Haiti will finally escape the Survival Trap and realize the 200 year old dream of its founders.

Source: http://www.daedalusexperiment.com/issue-2/rwanda-haiti-breaking-out-of-the-survival-trap.php


[1] Rob Henning has worked in Rwanda, Afghanistan and Haiti. He is one of the most experienced people in the world in post-conflict economies. This MBA has his shots up to date, a thick passport and a network of Presidents and Cabinet members around the world who rely upon him for advice only he can give.

 

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