Haiti: TELECO PRIVATIZATION: QUI BONO?

TELECO PRIVATIZATION: QUI BONO?
By Stanley Lucas centurionlucas@gmail.com
http://www.haitipolicy.org/content/3740.htm?PHPSESSID=8533cfa3d50ad775d8e3ff00f010c702
In a recent interview with the Miami Herald, Haitian President Rene Preval announced the privatization of the country’s largest state-owned enterprise TELECO. Haitian citizens fully understand the benefits of privatization as increased competition and therefore lower prices. However, experience with privatization under the Lavalas regime has left many Haitians – at home and abroad – skeptical.

Haiti’s history with privatization
In 1996, the Lavalas regime privatized the state-owned flour (Minoterie d’Haiti) and cement (Ciment d’Haiti) factories. The deal was much touted as a step towards progress and marketization in the Haitian economy. But the average citizen never felt the benefits of this restructuring, and it became clear that the factories were essentially given away to Lavalas cronies resulting in a de facto monopoly for government allies. [1] Prices for these commodities actually climbed. The lack of transparency during that process has led many to speculate that these transactions were political payoffs to businessmen close to Lavalas. Further, many citizens believed that the legality of these transactions must be challenged as the required parliamentary approval was never obtained. This, for many, remains an open issue for current officials to address.

It is especially important that the process of privatization of TELECO, the main communications provider and a major revenue generator, follow global guidelines of privatization. Many Haitians already have a strong perception that telecom business is riddled with corrupt domestic and international dealings. As reported by Lucy Komisar, the case of IDT was one clear example where Jean Bertrand Aristide received payoffs and kickbacks. Aristide and several of his former Lavalas ministers, who are working for the current Administration, have assets invested in the current telephone companies in Haiti. In fact, Aristide and his allies control the lion’s share of the sector. These companies will be involved in the bidding process. Therefore, there is already the expectation that TELECO will essentially become a political gift.

Will Haitians actually benefit?
There is little accountability in the use of TELECO funds, and revenues have been used for political purpose. The U.S. Justice Department Foreign Registration Act (FARA)[2] of the past ten years provides detailed documents on how Aristide has made many lobbyists quite wealthy supporting his telecom investments. One Aristide lawyer, according to recent public statement of former Prime Minister Latortue, made US$10 million in four years. TELECO revenues are still used by Aristide to pay “experts” to fabricate human rights report, and sponsor an international political network involved in character assassination and political propaganda under the pretense of supporting democracy. Essentially, revenues are used to purchase international support and credibility.

In addition to lavish lobbying contracts, the Lavalas government has always offered up “political gifts” in the form of favorable business deals to international business concerns as another way to buy international support and credibility. When elections are rigged or the government is under pressure for human rights violations, these international business ties are trotted out to counteract any unpleasant allegations. In addition there are recent allegations that Aristide is using telecommunications revenues to sponsor political violence in Haiti, including kidnappings, rape and assassination. What it comes down to is that Aristide – out of office but not out of power – and his network are still raping the Haitian people and the country of very limited resources. President Preval echoed his desperation during his Independence Day celebration speech several days ago: “Today the supporters of chaos do not want democracy. They are taking advantage of the current political instability to rip off the country’s public funds, to “fix” State contracts and continue with their black market businesses and drug trafficking”

How to get it right
First, Aristide needs to be held accountable. While this may be a complicated issue, it is not impossible to have the privatization of TELECO actually benefit the Haitian economy – rather than just benefiting a few people. In order to ensure transparency and avoid conflicts of interests during the privatization of TELECO, the Preval government should pass detailed regulations covering privatization of state owned enterprises. The International Monetary Funds (IMF) outlines the following recommendations:

Clearly define what privatization means
Privatization should entail the removal of existing privileges to create a level playing field, private ownership, independent management and market based competition.

Set clear objectives
Set objectives at the outset, before special interests can interfere and disrupt the process.

Maintain strong political commitment and effective communication
The privatization process should have strong support at the highest levels, the set objectives and the proposed privatization methods should be shared with the stakeholders early on.

Ensure transparency in the privatization process
A transparent decision making process is critical to securing a successful and politically tenable privatization.

Establish a regulatory framework that includes a level playing field
Privatization should be preceded by:
- Placing the state-owned enterprise on a level playing field with private
sector competitors
- Only the most limited commercial restructuring of the state-owned enterprise
- Promote competition by protecting against the state-owned enterprise’s dominant market power and cross-subsidization
- Taking measures to ensure that related regulatory reforms comply with international trade rules and result in a system of compliance that can carry forward

Limit post-privatization government oversight to a legitimate regulatory role
Government involvement in corporate governance and unrelated public policy mandates should be avoided where possible. Privatization should avoid giving a quid pro quo for universal service mandate. In addition, corporate governance should be independent from direct government input in management, avoiding placements of government officials as officers and directors. Government shareholding and other forms of influence should be avoided and should not be used as a basis for implementing measures that effectively create co-dependency that hampers the state-owned enterprise transition and harms its competitors and customers
[1] Haiti under the Lavalas regime was recently ranked the most corrupt country in the world according to Transparency International.
[2] As a legal matter, lobbyists are required to register with the Justice Department and disclose their clients and matters they are handling on behalf of their client.