What A Box of Sea Cucumbers Teaches Us About Foreign Aid
“This is slimy stuff,” says Ernst Charles. “It’s smelly and everything. I’ve never heard of it, never seen it.”
That was Charles’ reaction when a Haitian fisherman from the coastal town of Cap-Haïtien brought a box of sea cucumbers to his Port-au-Prince office in 2008 and told him that he could make good money exporting the echinoderm. Charles, who stands about 6’4” and litters his speech with business school jargon, dumped the box in the yard and forgot about the visit. A year later, when a fisherman from Haiti’s southern peninsula brought him the same slimy creature and made the same suggestion, he knew he’d made a mistake.
Largely thanks to an NGO based in New York City and Ottawa, Charles says he has exported 10 metric tons of sea cucumbers to Asia. There, the fare is a delicacy, supposedly an aphrodisiac that’s packed with health benefits. The Chinese eat them by the boatload when they celebrate their New Year.
Charles, a Haitian-American who grew up in Boston, moved to Haiti in 2005 to build cell phone towers for a telecom company. Once he finished his two-year contract, he decided to stay in his parents’ native country and start Sonac Agricole, a lobster exporting business. He later branched out into cocoa bean exports, and, eventually, sea cucumbers.
He credits Building Markets, an organization that connects local businesses to regional and global supply chains, with much of his export success. The NGO’s database of verified Haitian businesses gave Sonac Agricole essential credibility with Hong Kong importers.
But Charles’ business is an outlier—most of Building Markets’ (formerly known as Peace Dividend Trust) work involves helping Haitian firms apply for contracts from organizations like USAID and the United Nations.
In Haiti, USAID awarded only 0.02 percent of contracts for fiscal years 2010 and 2011 to local firms, according to the Center for Economic and Policy Research. By contrast, nearly 80 percent of such contracts went to government contractors in Washington, D.C., Virginia, and Maryland. Chemonics and Development Alternatives, Inc., two of USAID’s top six vendors for fiscal year 2011, combined to receive more than $1 billion of the Agency’s $15 billion in global program funding for the year.
A prominent goal of USAID Forward, the agency’s reform agenda, is to increase the amount of funds spent through local entities from a global average of 11 percent in 2011 to 30 percent by 2015. Building Markets' work demonstrates potential ways to channel more aid money through local businesses, in lieu of spending it in the United States.
The organization began in 2006 in Afghanistan. “Haiti’s experience is not unique,” founder Scott Gilmore wrote in an open letter to Haitian President Michel Martelly last year. “Again and again, the international community responds to war, tsunami, and earthquake the same way. Billions are pledged. Less is disbursed. And almost none enters the hands of the local community.”
Building Markets’ Afghanistan operation played right into the Afghan First strategy outlined by former U.S. Ambassador to Afghanistan retired Gen. Karl Eikenberry that aimed to place Afghans at the center of their own development. The organization has helped 680 Afghan businesses win contracts valued at more than $1 billion. It started in Haiti in 2009 and has also worked in Timor-Leste and Liberia.
According to Building Markets’ records, the organization facilitated nearly half-a-million dollars in subcontracts for Haitian hardware and construction suppliers from August 2010 to March 2011. A local paper company, MGR Papeterie, provided UNDP with about $500,000 in office supplies. Another large contract went to a small business that sells energy-efficient air conditioners to NGOs, the Haitian Government, and local businesses.
The organization hosts an online database of nearly 4,000 Haitian small and medium firms. It includes data such as owners’ contact information, languages spoken, and office GPS coordinates. Firms must be registered with the Haitian Government and pay taxes, requirements that increase accountability and help strengthen local government.
“It’s like a Yellow Pages for local businesses,” says Ségolène d’Herlincourt, Building Markets’ Haiti country director. The organization can’t verify every last detail about every company in its database. But clearing the NGO’s vetting process, which includes a site visit to each firm, and being listed in its database helps bridge the gap in trust between, say, Hong Kong seafood importers and a small Haitian exporter.
“We make a point of telling the potential buyers,” d’Herlincourt says, “if we cannot vouch for somebody to be honest, at least we can vouch that the business exists. A logistics company says on the website it has five trucks—we’ve seen the five trucks.”
Charles says that since he was just a guy on the other end of a phone call with potential Asian buyers, he couldn’t vouch for himself in any meaningful way. “Haiti is not known for sea cucumbers,” he says. “It’s something very new. When Building Markets came, it was a middle ground that screened me and said, ‘Yes, I can validate this man as a genuine sea cucumber exporter.’”
Building Markets has also trained 1,000 businesses in how to navigate international organizations’ procurement procedures and has facilitated more than $30 million in contracts for Haitian firms.
After three years in Haiti, the organization's grant from the Canadian International Development Agency will soon expire, and Building Markets is closing shop here at end of June. d'Herlincourt says that they've worked themselves out of a job—the group is handing over its services to the Ministry of Commerce and Industry. Building Markets employees have been working closely with the Ministry, which will continue the training programs, and a list of tenders currently available from international organizations has already been transferred to the government.
“Ultimately, we want these countries to be able to function on their own and to participate with us in a different relationship, more about investment and trade,” says Larry Nowels, a consultant to several foreign aid organizations who served on President-elect Obama’s transition team examining U.S. foreign assistance agencies. “One of the ways to move them out of foreign aid and into these other types of relationships is through letting them manage their own development more directly, and that’s the whole intention behind procurement reform.”
More local aid contracting can improve local firms' capacities and also expose them to global supply chains. But for development to sustain in countries like Haiti and Afghanistan, local businesses will one day have to transition from supplying the aid economy to trading in the private sector. The World Bank estimated that in 2010, 97 percent of Afghanistan’s GDP was derived from economic and military aid from foreigners.
Similarly, while Haiti’s post-earthquake aid sector may be the biggest show in town now, it’s ostensibly ephemeral and will dwindle one day.
“I think that what is actually missing into that equation, in terms of the reconstruction,” says Ernst Charles, “is that a lot of the American or European NGOs are not actually putting enough time to invest in the small and medium sized business.”
If U.S. aid reforms can focus on strengthening local firms, they could eventually help foster more Sonac Agricoles—companies with long-term business plans that rely on more than just aid dollars—in lieu of simply cultivating more UNDP vendors.