Would-be Haitian contractors miss out on aid

Out of every $100 of U.S. contracts now paid out to rebuild Haiti, Haitian firms have successfully won $1.60, The Associated Press has found in a review of contracts since the earthquake on Jan. 12. And the largest initial U.S. contractors hired fewer Haitians than planned. There are many reasons for the disparity. Some contracts were given out of urgency. There are also fears that with wide spread corruption in Haiti, it is too great of a risk to fund Haitian contractors directly. There is also a disconnect on the Haitian side, as they have limited understanding of U.S. government practices.

Using foreign aid to give local companies contracts is one of the most important aspects of reconstruction. Sadly, most people do not realize how detrimental it has been to Haiti to have received such a small amount of aid allocation. There are many 'spillover' effects which Haitians are missing out on as a result.

Harvard Business School economist Eric Werker, who researches foreign aid, says the spillover effects go beyond the aid itself.

"Some are obvious, like salaries and profits that stay in the local economy, but there are also ways to increase capacity of local firms by giving them progressively larger contracts," says Werker.

But there are many hurdles to signing a contract with Haitians.

The first is a no-bid process: 25 percent of the contracts went directly to U.S. contractors without even giving Haitians a chance to bid on them, sometimes because the needs were so urgent there wasn't time to go through a formal bidding process. In addition, some government requests for local Haitian subcontractors and expertise are published only in English, limiting access for many Haitians who speak Creole.

Also, at times of catastrophe, it can be easier to use an established contractor with a strong record than a previously unknown local one. The Haitian economy was so decimated by the earthquake that it was hard at first even to get wood or traps for shelters without importing them. Now, even though there are Haitian companies providing many products and services, the pattern of using foreign ones continues.

And finally, it's more complicated to contract directly in countries like Haiti, where corruption is rife. There has been price-gouging among some would-be Haitian contractors.

The unprecedented promise of $9 billion in aid, with the U.S. as a top giver, at first raised hope of rebuilding and even of a new and brighter future for the tragedy-prone island. But fewer than 10 percent of those funds have made it past the "promise" stage. Giving contracts to local businesses creates jobs, which help build the private sector. Also, most donors would rather see local businesses thrive than foreign companies profiting from a disaster. How do you feel about seeing your donations go directly to U.S. contractors? Does it dilute the good you intended? Or is it a fair compromise for the recipients?