Assembly Manufacturing

Assembly Manufacturing

The development of assembly manufacturing in Haiti was an outgrowth of the island's cheap labor, its proximity to the United States market, the increasing multinational nature of modern firms, and changes in the United States Tariff Code, which in 1962 began to exact duties only on the value-added of products assembled overseas. Assembly operations--typical examples included the sewing of garments, the stuffing of toys, or the stringing of baseballs--grew modestly in the depressed economic climate of the 1960s, but they accelerated rapidly in the early 1970s in response to new fiscal incentives enacted by the government. The warming of Haitian-United States relations after 1973 encouraged foreign investment. The number of assembly enterprises swelled from only 13 companies in 1966 to 67 by 1973 and then to 127 by 1978. When the subsector peaked in 1980, an estimated 200 assembly firms employed nearly 60,000 workers. Political instability, increased regional competition under the CBI, nascent union activity, and the failure of government institutions to attract further investment all contributed to a decline in assembly investment and employment after 1986. In 1989 approximately 150 assembly companies employed only 41,000 workers, more than three-quarters of them women. Assembly exports continued to expand, however, as a result of increased productivity on the part of assembly exporters.

Despite the low wages paid to workers, future growth in the assembly subsector was uncertain. Numerous constraints to growth included the highest utility costs in the Caribbean, excessive shipping and warehousing costs, underdeveloped infrastructure, a largely illiterate work force, scarce managerial personnel, foreign-exchange shortages, expensive or inferior-quality local inputs, political instability, and the personalized nature of business activity. Some United States officials predicted in the 1980s that Haiti would progress to become the "Taiwan of the Caribbean." The implementation of the CBI, however, appeared to hurt Haiti's position in assembly production, as other countries, such as the Dominican Republic, Jamaica, and Costa Rica, began to capitalize more effectively on the advantages of the initiative. In the mid-1980s, more than 40 percent of all assembly operations were owned by Haitians. The other operations were either owned by firms based in the United States or jointly owned by Haitian and United States interests. Asian investment in the country continued to grow.

Four industrial parks catered to the assembly industry; two were run by the government's National Industrial Park Company (Société Nationale des Parcs Industriels--Sonapi) and two by a private company. Most firms operated with short-term subcontracting arrangements under which Haitian factories filled requests of American companies that provided partial products, inputs, and machinery. Workers earned piece-work wages, with a guaranteed minimum wage of US$3 a day in 1989, and most made slightly more than that amount. These workers were among the best paid in Haiti, but most of them supported an average of four people on their wages.

The major products assembled in Haiti were garments, electronics, baseballs, games, sporting goods, toys, footwear, and leather products. The largest assembly activity in the late 1980s produced garments. The fastest-growing activity produced electronics; it included subcontracting work for the United States Department of Defense. One of the island's major baseball producers, MacGregor Sporting Goods, decided in 1988 to move its baseball-sewing operations to Mexico, however; and, as a result of the deteriorating political situation in Haiti, other assembly companies decided to fill their orders at the Free Zone of San Isidro, Dominican Republic.

Many Haitians were eager to find jobs in the assembly sector, but some criticized the effects of the industry on workers and on the economy. For example, unions complained that new employees earned only 60 percent of the minimum wage for their first few months and that short-term contracts and seasonal demand led to job instability and the annual dismissal of as many as 5,000 workers with no compensation. Some economists noted that, although assembly operations provided badly needed urban jobs, these operations industries forged few linkages with the rest of the economy. A few local plants utilized domestically produced glue, thread, sisal, and textiles, but the overwhelming share of producers opted for imported inputs, which were generally cheaper, of better quality, and more plentiful. Finally, others disapproved of the generous tax holidays and the duty-free imports that both domestic and foreign manufacturers enjoyed.

http://www.vahleinc.com/manufacturing-automation.html
http://countrystudies.us/haiti/


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