Role of IEZs in Haiti’s Reconstruction and Development: Training on the Legal, Regulatory,

and Institutional Framework

Port-au-Prince, HaitiDecember 2011

Proposed Unified IEZ Regulatory Regime

Fundamental characteristics of new IEZ regulatory framework:

• Implementation via Presidential Executive Order

• Consolidates and harmonizes Free Zones Law, Investment Code, and Industrial Park Law under one unified national regulatory framework

• Enhances regulatory duties of Direction des Zones Franches (DZF) and Conseil National des Zones Franches (CNZF) consistent with Haitian law, without creating a new institutional authority Expanded scope of authority applicable to IEZs Zone Authorizations/Zone User Authorizations/Zone Certificates of

Residency IEZ “One-Stop” Shop

2

Administrative Structure of IEZ Regime Under Proposed Regulations

3

Ministry of Commerce and Industry (MCI)

Ministry of Economics and Finance (MEF)

Conseil National des Zones Franches

(CNZF)

Direction des Zones Franches

(DZF)“One-Stop” Shop/ CNZF Technical

Secretariat

Commission Interministérielle

des Investissements (CII)

General Customs Administration

(AGD)

SONAPI “One-Stop Shop”

(Autonomous Institutional Authority)

Key

Vertical arrow = reporting function

Horizontal arrow = overlapping/coordinating function on zone application/incentives approvals

Principal IEZ Administrative Powers of DZF/CNZF• To formulate and implement national IEZ strategic policy, in

collaboration with all competent authorities, such as SONAPI, including proposing sites for IEZ development

• To issue Zone Authorizations, Zone User Authorizations, and Zone Certificates of Residency

• To self-initiate establishment of IEZs under certain circumstances

• To coordinate the execution of Public-Private Partnership (PPP) arrangements

• To coordinate enforcement of anti-speculation measures

• To revoke, rescind, suspend, withdraw, or modify IEZ authorizations, certificates, building permits, or developer/operator agreements

• To prevent, in collaboration with all competent agencies, including SONAPI, undesirable activities in the IEZs

4

Key IEZ Duties, Functions, and Responsibilities of DZF/CNZF• To regulate and administer all IEZs in Haiti

• To arrange for and supervise, in collaboration with all competent agencies, including SONAPI, the design and construction of IEZ infrastructure

• To monitor, in coordination with the Ministry of the Environment, the protection of the environment at each IEZ

• To supervise, in collaboration with the relevant authorities, the execution of all land-use and zoning plans at the designated IEZ

• To coordinate with all competent agencies, including SONAPI, to facilitate the issuance of registrations and other publicly-required authorizations on an expedited basis

• To promote IEZs both nationally and internationally

5

Principal Regulatory Provisions: Zone Authorization Selection CriteriaA Zone Authorization shall not be issued unless essential conditions are satisfied:

• Technical/economic feasibility study satisfies zone investment requirements

• Proposed IEZ covers minimum land area (to be decided based on type of zone)

• Ownership of IEZ lands is undisputed and not subject to any contingency

• IEZ development plan complies with land-use, construction, and public-works laws

• Land area has access to actual or proposed off-site infrastructure

• IEZ designed for multiple zone users/zone residents

Zone Authorization may be issued when additional criteria satisfied:

• IEZ planned for multi-purpose activities

• Positive enterprise/job-creation and technical-training effects

• Utilization of existing local capacity promoting linkages with domestic economy

• Moderate degree of population displacement/relocation

• Applicant’s financial resources/technical capacity meet minimal requirements

6

Principal Regulatory Provisions: Withdrawal of Zone Authorizations• CNZF (or SONAPI) shall automatically withdraw a Definitive Zone

Authorization when, inter alia, Zone Authorization recipient:

Fails to adhere to the Definitive Zone Authorization development-operation schedule

Seeks bankruptcy protection under the laws of Haiti or any foreign jurisdiction

Provided false information or representations in IEZ authorization application

Engages in prohibited, unlawful, or illicit activity

• Upon withdrawal of a Definitive Zone Authorization, CNZF and other competent Haitian government authorities, including SONAPI, may take any other action available under applicable law

• Before substitute Zone Developer, Operator, or Developer/Operator is selected, DZF on behalf of CNZF and any other competent agency (e.g., SONAPI) shall function as the de facto Zone Developer, Operator, or Developer/Operator to protect all interests of any affected Zone Users or Zone Residents 7

Principal Regulatory Provisions: Establishment of IEZs Upon the Initiative of the Competent AgencyCNZF or any competent agency (SONAPI) may undertake

following activities on own initiative:

• Self-initiate establishment of IEZ on public lands:

Provided that planned land area satisfies essential conditions and additional evaluation criteria set out in regulations; and

Provided further that the Council of Ministers and the President of the Republic approve such administrative action

• Develop, operate, maintain, and promote a self-initiated IEZ in collaboration with any private enterprise pursuant to any PPP arrangement

• Select on behalf of Haitian State private developers/operators in accordance with any applicable tender-selection procedures

8

Principal Regulatory Provisions: Rights/Obligations of Developers/Operators

9

Rights

• To acquire and transfer zone lands on freehold/leasehold basis in conformity with applicable law

• To provide all utilities/basic services at designated IEZ

• To receive applicable incentives on expedited basis

• To transfer all funds freely into and outside Haiti

Obligations

• To monitor activities of zone users and any zone residents

• To maintain IEZ assets/infrastructure in fully operational condition

• To adhere to applicable performance requirements

• To provide technical training to Haitian workers employed by developers/operators

• To comply with national environment obligations for IEZs

• To provide security within IEZ perimeters

Principal Regulatory Provisions: Zone Users• Conditions for Qualification as Zone User

Hold a Zone User Authorization

Acquire and possess Zone Lands and other assets on such lands within 90 working days from effective date of Zone User Authorization

• Key Rights

To acquire, maintain, and transfer Zone Lands and assets on freehold/leasehold basis in conformity with applicable law

To be entitled to fiscal and customs incentives on expedited basis

To object to fees charged by Zone Developers/Operators for utilities and other basic services, if those fees do not reflect competitive market conditions

• Primary Obligations

To comply with business-performance schedule in Zone User Authorization

To adhere to internationally-recognized seismic and hurricane standards

10

Principal Regulatory Provisions: Zone Residents• Conditions for Qualification as Zone Resident

Receive written authorization from DZF on behalf of CNZF to acquire Zone Lands and real estate in IEZ residential area

Acquire and possess Zone Lands and real estate after receipt of authorization

Obtain Zone Certificate of Residency

• Basic Rights

To reside in designated IEZ

To transfer Zone Lands and real estate in IEZ residential area

• Primary Obligations

To adhere to applicable law, including Zone Certificate of Residency

To pay all customs duties and charges for any goods of foreign origin imported into IEZ residential area

To pay personal income taxes and other taxes

11

Principal Regulatory Provisions: IEZ Customs Treatment• Customs-Controlled Areas

An IEZ or any part thereof may constitute a customs-controlled area falling outside Domestic Customs Territory, provided that it constitutes a Free Zone

All goods or services of foreign or Haitian origin admitted into an IEZ customs-controlled area are exempt from customs duties/indirect taxes

IEZ customs-controlled areas subject to all other customs formalities

• International Customs Standards

DZF coordinates with AGD to implement customs-related rules/procedures to ensure compliance with World Customs Organization (WCO) standards:

• Global Positioning System (GPS) and other computerized cargo-tracking systems

• Standardized electronic customs declarations and automated customs clearance

• Risk-based entry examinations and prohibited/restricted goods profiling

• Post-entry audits, including on-line measures12

Principal Regulatory Provisions: IEZ Customs Treatment• Free Movement/Transit of Goods in IEZ Free Zone

• Strict Inventory-Control and Registry System

• Undocumented Merchandise Subject to Customs Duties and Indirect Taxes

• Sale of Free Zone Goods in Domestic Customs Territory Subject to Customs Duties and Indirect Taxes

• Haitian Certificate of Origin Issued for all Free Zone Goods Substantially Transformed in IEZ Free Zone

• Haitian Goods/Services Originating from Domestic Customs Territory and Sold in IEZ Free Zone Treated as Exports for Customs-Duty Drawback and Indirect Tax-Remission Purposes

13

Principal Regulatory Provisions: Environmental Regulation• DZF/CNZF (or SONAPI) coordinate with Ministry of the Environment to

protect environment in each IEZ in accordance with all Applicable Law, including Environment Decree Law of January 26, 2006 and all governing international environmental conventions

• DZF/CNZF (or SONAPI) coordinate with national environmental authorities to apply in each IEZ special rules/procedures issued by the Ministry of the Environment governing:

Environmental Impact Assessments

Environmental permits, approvals, and certificates

Air and water quality, emission, and effluent limits

Enforcement/monitoring mechanisms, including inspection/auditing procedures

Prohibited wastes, materials, substances, and chemicals

Forbidden manufacturing, processing, and transformation operations

Penalties, fines, sanctions, and remedial actions

14

“Demonstration Effect” Snapshot of New IEZ Regulations • Energy: Authority for private provision of energy

inside/outside zones to reduce energy costs

• Building Construction: internationally-recognized seismic/hurricane norms

• Security: Implementation of IEZ security provisions

• Authorizations/Permits: De Facto Account Executive "One-Stop” Shop facilitating IEZ authorizations, business registrations, and environment permits on “fast-track” basis

• Customs Procedures: Adoption of streamlined customs-clearance reforms, including electronic document-entry, verification, and ASYCUDA computerized tracking systems

15

QUESTIONS/DISCUSSION

16