COUNTRY PRIVATE SECTOR DIAGNOSTIC
Investment opportunities and growth pathways to
higher value addition, resilience, and inclusion
CREATING MARKETS IN
THE DOMINICAN REPUBLIC
October 2023
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging
markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing
countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries,
leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of
global compounding crises. For more information, visit www.ifc.org.
For more information, visit www.ifc.org.
© International Finance Corporation 2023. All rights reserved.
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Finance Corporation or of the International Bank for Reconstruction and Development (the World Bank) or the governments they represent.
Cover Photos: Shutterstock/Wirestock Creators, metamorworks, GreenOak, Kitreel, and antoniodiaz.
iii
CONTENTS
ACKNOWLEDGEMENTS IV
ABBREVIATIONS AND ACRONYMS V
EXECUTIVE SUMMARY VII
A Roadmap for the Short to Medium Term x
Key Private Sector Investment Opportunities to Grow Markets in a Sustainable Economy xiv
COUNTRY CONTEXT
1.1 Macroeconomic Fundamentals: Strong Growth but Shrinking Fiscal Space and
Lagging Inclusion 1
1.2 Disaster and Climate Change Risks Present an Increasingly Critical Challenge 5
1.3 The Role of the Private Sector in Pivoting toward a More Inclusive and Resilient Economy 8
. PRIVATE SECTOR CONTEXT
2.1 Most SMEs Are Characterized by Low Productivity, High Informality, and Low-Quality Jobs 11
2.2 FDI Is Concentrated in Tourism and Real Estate and Has Not Suciently
Contributed to GVC Integration 12
2.3 Exports Mirror the Concentration in FDI and Reveal a Strong Duality in the Dominican
Economy 17
2.4 The Reconfiguration of Global Value Chains (Nearshoring) Is a Window of
Opportunity for the DR 22
. KEY CHALLENGES TO PRIVATE SECTOR GROWTH
3.1 Regulatory Complexity and Institutional Fragmentation, Leading to an Opaque Business
Environment 28
3.2. The Skills Gap and Low-Quality Education 35
3.3. Energy and Electricity 41
. KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
4.1 Medical Devices 48
4.2 Industrial Real Estate and Eco-industrial Parks 70
4.3 Agri-logistics 95
APPENDIX
Appendix A: History of Special Fiscal Regimes in the Dominican Republic 123
Appendix B: Mapping of Investment Incentives in the Dominican Republic and Comparator
Countries 125
Appendix C: Government Measures to Support the Private Sector amid the COVID-19 Pandemic 128
NOTE
iv
ACKNOWLEDGMENTS
The Dominican Republic Country Private Sector Diagnostic was prepared by a joint
team from the World Bank Group led by Jade Salhab (Senior Private Sector Specialist,
IBRD) and Juan Pablo Celis Gomez (Economist, IFC). The core team included David
Corcino Paulino (Private Sector Specialist, IBRD) and Diana Hristova (Consultant,
IBRD). Substantive contributions were provided by Nadia Rocha (Lead Economist,
IBRD), Fausto Patino (Economist, IBRD), Sylvia Solf (Lead Economist, IBRD),
Yago Aranda Larrey (Private Sector Specialist, IBRD), Christina Wiederer (Senior
Economist, IBRD), Tulio Marti (Consultant, IBRD), and Luis Aldo Sánchez Ortega
(Consultant, IBRD), Alvaro Espitia (Consultant, IBRD) and Mike Nyawo (Consultant,
IBRD), Luiz Almeida (Economist, IFC), Adrian Fossaceca (Economist, IFC), in
addition to valuable suggestions by María Paulina Mogollón (Principal Investment
Ocer, IFC), Carina Fichard (Senior Investment Ocer, IFC), Pedro Rodriguez
(Program Leader, IBRD), Huong Mai Nguyen (Energy Specialist, IBRD), Gabriel
Roberto Zaourak (Senior Economist, IBRD), and Carmen Amaro (Operations Ocer,
IBRD).
The medtech sector assessment was led by Gloria Ferrer and Kieron Swift (The Cluster
Competitiveness Group). The eco-industrial parks sector assessment was led by Etienne
Kechichian (Senior Economist, IBRD) and Carlos Senon Benito (Financial Sector
Specialist, IBRD), with substantive contributions by David Corcino Paulino (Private
Sector Specialist, IBRD), Ignacio Miró (Consultant, IBRD), and Nidal Mahmoud
(Consultant, IFC), Georey Mersan (Operations Ocer, IFC). Finally, the agri-
logistics sector assessment was led by Alvaro Diaz, Dayana Peñaranda and Ivan Ruiz
(The Cluster Competitiveness Group).
Administrative support was provided by Paula Houser, María Hermann, Alexandra
Soto Ortiz, and Margarita Camposano.
The team is also grateful to government and private sector representatives who
generously shared their time and insights. The team is grateful for the valuable
comments provided by the WBG peer reviewers: Roberto Echandi (Senior Trade
Specialist, IBRD), and Vincent Palmade (Lead Economist, IBRD).
This work was carried out at the request and under the guidance of IFC and World
Bank leadership. The team is grateful for the ongoing support and guidance provided
throughout the preparation of the Country Private Sector Diagnostic by Yira Mascaró,
Tatiana Nenova, Luciana Harrington (Strategy Ocer, IFC), Denis Medvedev, Michel
Kerf, Ronke-Amoni Ogunsulire, Carolina Cardenas, and Alexandria Valerio.
v
ABBREVIATIONS AND ACRONYMS
B2B business-to-business
B2C business-to-consumer
BCRD Central Bank of the Dominican Republic
BPO business process outsourcing
CAGR compound annual growth rate
CDEEE Corporación Dominicana de Empresas Eléctricas Estatales
CEM Country Economic Memorandum
CNE National Energy Council
CNZFE Consejo National de las Zonas Francas (National Council of Free Trade
Zones)
CO2 carbon dioxide
CPSD Country Private Sector Diagnostic
DGA General Directorate of Customs
DR Dominican Republic
DVX indirect value added
EDE Empresas Distribuidoras de Electricidad
EIP eco-industrial park
E&S environmental and social
ESG environmental, social, and governance
EU European Union
FDI foreign direct investments
FVA foreign value added
GDP gross domestic product
GHG greenhouse gas
GTR general tax regime
GVC global value chain
IBRD International Bank for Reconstruction and Development
ICT information and communication technology
IDA International Development Association
IDB Inter-American Development Bank
IFC International Finance Corporation
vi
IMF International Monetary Fund
IP industrial park
ITBIS Tax on the Transfer of Industrialised Goods and Services
KPO knowledge process outsourcing
LAC Latin America and the Caribbean
MARENA Ministry of Environment and Natural Resources
MEM Ministry of Energy and Mines
MERCADOM Dominican Wholesale Center for Agricultural Supplies
MESCyT Ministry of Higher Education, Science, and Technology
MFA Multi Fiber Agreement
MH Ministry of Finance
MICM Ministry of Industry, Commerce, and SMEs
MNC multinational corporation
MSME micro, small, and medium enterprise
ND-GAIN Notre Dame-Global Adaptation Initiative
OECD Organisation from Economic Co-operation and Development
PA productive alliances
PPA power purchase agreement = the normal nomenclature
PPD public-private dialogue
PPP public-private partnership
PVRS photovoltaic rooftop systems
R&D research and development
REIT real estate investment trust
SEZ special economic zone
SME small and medium enterprise
STEM science, technology, engineering, and mathematics
TFP total factor productivity
UNDP United Nations Development Programme
VAT value added tax
VUCE Ventanilla Única de Comercio Exterior (Single Window for Foreign
Trade)
WDI World Development Indicators
vii
EXECUTIVE SUMMARY
The Dominican Republic (DR) has long had a strong private sector, which has
supported two decades of remarkable growth and poverty reduction. The country
is the Caribbean’s largest economy—and the eighth largest in Latin America—with
a population of 11.2 million (2022). The Dominican Republic is endowed with
productive resources that, together with market-oriented reforms and macroeconomic
stability, have positioned the country as an attractive investment destination. Foreign
direct investments (FDI) of about 4 percent of GDP, on average, have over the past 20
years fueled tourism, services, manufacturing, construction, and mining (figure 2.12).
1
Supported by domestic demand and favorable external conditions, the DR’s economy
expanded by 5.8 percent, on average, over 2005–19 (Figure 1.1)
2
, driven primarily by
capital accumulation. Private investment reached 24 percent of GDP in 2019, higher
than its regional peers such as Jamaica (21 percent) and Guatemala (12.4 percent), and
gaining on Panama (31 percent)
3
. Substantial growth also led to reductions in poverty
and inequality. The poverty line for the DR, as an upper-middle-income country, is
defined as less than US$6.85 in 2017 purchasing power parity per day. From 2002 to
2004, the DR’s poverty rate increased from 40 percent to 57 percent of the population
because of the economic shock from the banking crisis, but the rate began a steady
decline in 2013 and by 2021 had fallen to 23 percent. The country has also reduced
extreme poverty to less than 1 percent as of 2021.
4
Income inequality has also
improved as reflected by the Gini coecient falling from 0.51 to 0.38 over 2000–21.
5
Despite strong economic growth and progress in social indicators, labor informality
remains high and poverty reduction has been spatially imbalanced. Average poverty
reduction conceals significant gaps: three out of four people moving out of poverty
during 2017–19 lived in urban areas, where poverty rates were lower than in rural
areas. According to the ongoing World Bank Poverty Assessment, poverty in the two
provinces near Haiti is twice as high as in the Santo Domingo metropolitan area
(where economic activity is concentrated) and the tourism centers (Cibao Nordeste
and Yuma). Moreover, as identified by the World Bank Jobs Diagnostic (2021), the
Dominican economy has performed quite well in terms of the number of new jobs
generated over the past two decades. The economy’s performance has been less
successful in generating high-quality jobs.
6
The incidence of informality is high in
general and when compared with other countries. In the Dominican Republic, 57.3
percent of workers were informal in 2021, above structural or regional peers like
Costa Rica (39.3 percent) and Panama (55.7 percent). These workers tend to work in
small firms and have low skills. Informality is often a symptom of low productivity
and low wages, but it is also part of a vicious cycle. High informality could reflect
low benefits associated with paying taxes or social security contributions. At the
same time, high informality reduces the tax base and the viability of social insurance
systems, which can result in a lower quantity and quality of public goods and services.
These eects are particularly important in the Dominican Republic, where fiscal space
is increasingly limited.
viii
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Public sector debt is sustainable, but downside risks persist and remain elevated. The
Dominican Republic’s fiscal space has been strained by the policy measures deployed
during the pandemic, but preexisting costly fiscal incentives were already eroding
revenues and making public finances vulnerable to shocks. The government launched
a robust fiscal and monetary policy response to mitigate the COVID-19 crisis, which
lessened poverty impacts. The debt of the consolidated public sector grew from 37
percent to 51 percent of GDP over 2010–19 and further to 69 percent by end-2020,
before gradually decreasing in 2021 and 2022, closing at 58.6 percent of GDP in
2022 (figure 1.3)
7
. But the fiscal challenges predate the pandemic. Tax collection is
3.2 percentage points of GDP lower than the average for regional peers (Guatemala,
Jamaica, Panama) and 4.5 percentage points of GDP lower than structural peers
(Costa Rica and Bulgaria), reflecting a narrow base because of tax incentives and
exemptions—more than 4 percent of GDP—coupled with relatively low collection
eciency (figure 1.5)
8
. Although public finances are deemed sustainable, the debt ratio
can be derailed by external shocks.
Climate change looms as a fundamental risk to the DR’s development trajectory,
increasingly threatening the economic contribution of critical sectors, such as tourism
and agriculture. The stability of the growth path is and will continue to be subject to
risks from recurrent natural events that hit Caribbean countries, and that are likely to
increase in frequency and magnitude with climate change. The country scored 46.5
on the 2020 ND-GAIN Index, with 100 being the highest possible score, ranking
101st out of 182 evaluated countries. This score reflects its limited preparedness to
improve resilience against climate-related vulnerabilities. Additionally, the Dominican
Republic is the world’s 12th-most-aected country by natural disasters over 1998–
2017, according to the 2019 Global Climate Risk Index, with hurricanes generating
annual economic losses of 0.5 percent of GDP on average since the early 2000s. In
this context, diversifying the export and FDI portfolio to greener products—as well
as upgrading productive infrastructures, such as industrial parks, to become more
resilient to climate eects—can strengthen the sustainability of the country’s economic
growth and mitigate climate-change-related risks such as to tourism, agriculture, and
manufacturing plants.
Exports and FDI contribute to the DR’s economic performance, but their portfolios
are undiversified and increasingly dependent on tourism and a small number of
goods, exacerbating the exposure to climate change risks. Exports are heavily
concentrated in tourism, agricultural commodities such as cacao and bananas, and
gold, although a burgeoning diversification is notable owing to the recent growth
in higher-value-added manufacturing exports. In fact, tourism accounts for an
impressive 44 percent of total exports (2019).
9
This sectoral concentration is also
manifested in FDI, which is largely resource and eciency-seeking:
10
Tourism
captured 25 percent of FDI inflows in 2022, followed by real estate, with 15 percent
(figure 2.12)
11
. Considering that tourism is particularly exposed to climate change
impacts, adaptation and impact mitigation measures should include not only
diversification within tourism (away from beach tourism) but also diversification of
both FDI and exports beyond tourism. The DR’s participation in global value chains
remains, indeed, among the lowest in the world (figure 2.16), adding on average 30
percent of value added to exports since 2000, a rate below global structural peers
such as Tunisia (57 percent) and Costa Rica (37 percent).
12
ix
EXECUTIVE SUMMARY
Amid a declining share of exports, however, manufacturing activities in special
economic zones (SEZs) are contributing to a surge in higher-value-added products and
diversification, although with an associated fiscal burden. Exports of the Dominican
Republic peaked at about 34 percent of GDP in 2000–04 and have been on a declining
trend since 2004, reaching 24 percent of GDP in 2019 (figure 2.17). The downward
trend has been partially mitigated as of 2013 by the surge of gold exports. On the flip
side, the growth rate of medical device manufacturing (5.1 percent)—all located in
industrial parks benefiting from the SEZ regime—outpaced that of total exports (4.5
percent) in the 2011–20 period. (figure 4.4) Given the SEZ regime’s contributions to
export diversification and value addition, but also the cost of the fiscal expenditure it
represents, recent analyses by the World Bank and the Inter-American Development
Bank have highlighted the need for a robust cost-benefit analysis to help optimize its
scope and impacts.
However, the Dominican economy is characterized by a constraining duality, resulting
from the absence of meaningful backward linkages between the small number of
formal and export-oriented firms operating under the SEZ regime (774 firms) and
the larger group of local firms (5,198 firms) in the manufacturing and related services
sector under the general tax regime (GTR)
13
. This duality manifests in three main
dimensions. First, GTR exports are mostly oriented toward the European market
and rest of the world, whereas SEZ exports are almost entirely directed to the United
States. Second, exports dier in technological content and complexity levels across
regimes. Sixty percent of SEZ exports have some level of technology and involve
some level of sophistication in their production process, unlike non-SEZ exports,
which are predominantly commodities (for example, gold, cocoa, and bananas). Last,
non-SEZ exports lack diversification: gold and ferronickel account for half of GTR
exports, while the other products have single-digit shares (figure 2.20)
14
. In contrast,
SEZ exports are less concentrated, with the highest share (medical devices) reaching
18 percent, with tobacco, electrical equipment, and jewelry also all reaching double-
digit shares.
15
In this context, maximizing linkages between SEZ and non-SEZ firms
is an important challenge. Pro-business reforms have not always yielded the expected
results in terms of linkages, and tax incentives remain the default measure to address
market failures. Recent decades did, however, witness an array of economic reforms
including the liberalization of foreign exchange transactions, trade agreements, and the
elimination of price controls and of restrictions on FDI in almost every sector.
x
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
A ROADMAP FOR THE SHORT TO MEDIUM TERM
Given this country and private sector context, the global reconfiguration of some
global value chains (GVCs)—often referred to as “nearshoring”—represents a timely
opportunity for the DR to harness and pivot toward a more competitive, inclusive,
and resilient economic trajectory. Trade tensions between the United States and China,
COVID-19, and Russia’s invasion of Ukraine are leading to the reversal of global
economic integration. Firms and policy makers are increasingly considering trusted
countries with aligned political preferences to make supply chains less vulnerable to
geopolitical tensions. However, the interest to relocate operations is not uniformly
distributed across regions, with surveys of multinational companies indicating that
only 4 percent of the global reshuing of FDI is considering Latin America as a
destination. The DR’s outlook, however, seems favorable within this global setting.
In 2022, total FDI closed 33 percent higher than its pre-pandemic level and surpassed
the US$4 billion threshold for the first time in history, with SEZs’ FDI inflow being 39
percent higher than in 2019 (figure 2.25)
16
. Most importantly, industrial SEZ exports
increased 11 percent in real terms between 2019 and 2022, with medical devices and
pharmaceuticals contributing to almost half of that growth
17
.
To fully seize this opportunity, the Dominican Republic’s unique selling proposition
should be more strongly based on structural and sustainable competitive advantages.
Beyond capitalizing on its natural endowments, such as its strategic geographic
location, the DR should strengthen its assets in key enabling sectors such as education,
logistics, and financial services by harnessing the private sector and leveraging capital
markets. For example, the DR could accomplish desired results by prioritizing policy
eorts that structurally improve its human capital, industrial infrastructure, and
energy mix while also promoting capital market mobilization instruments, such as
specialized investment vehicles and green bonds. It could further support public-private
partnerships and cross-border private sector investment. The structural reinforcement
of its assets and enabling sectors will gradually decrease the country’s dependence
on fiscal incentives and widen the range of policy options to level the field across the
economy while sustaining and increasing the attractiveness of the DR for investors. In
turn, this reinforcement will have the added value of reducing barriers to growth for
small and medium enterprises (SMEs) to become suppliers to exporting firms (or start
directly exporting) and to boost formal job creation.
To help inform this pivot, this Country Private Sector Diagnostic (CPSD) identifies
three cross-cutting policy areas that are critical for a more resilient and inclusive
(including on gender aspects) path forward, and also provides sector assessments
of three sectors where private capital can be leveraged to contribute to this pivot.
The three identified policy challenges are (a) improving the business environment by
gradually decreasing complexity and the fragmentation of the institutional context; (b)
enhancing education and skills development to reduce the skills mismatch in sectors
with strong export potential and to improve linkages with local suppliers; and (c)
reforming the electricity sector to reduce the cost of energy, increase the reliability
of the grid, and promote the renewable energy sector in line with the country’s
decarbonization targets. The three sector assessments focus on one tradable sector
(medtech), one domestic sector (real estate with a focus on eco-industrial parks), and
one enabling sector (agri-logistics). The sector-assessment sample is meant to merely
illustrate the potential of harnessing and accelerating private investment in a three to
five years’ horizon, in a way that supports diversification (away from dominant sectors
such as tourism and minerals) while promoting a more resilient and inclusive economy.
xi
EXECUTIVE SUMMARY
A Complex Business Environment and Fragmented Institutional
Context
The DR has implemented several reforms to ease constraints in dierent business
regulatory areas, but the prevailing business environment continues to be perceived
as opaque and aected by excessive discretion. Measures over the course of recent
years include the introduction of the Formalízate one-stop shop for business
registration; the 2019 amendment of the Law of Commercial Corporations and
Limited Liability Companies; the enactment of a new Law on Movable Collaterals in
2020; the introduction of a specialized commercial court division and a mediation-
and-conciliation framework; the adoption in 2017 of the Law on the Securities
Market; the enactment of the law on Publicly-Oered Securities; and Law No. 167-
21 on Regulatory Reform and Simplification of Administrative Procedures. More
recently, in 2022 the Portal for Dominican Government Services was launched.
This platform centralizes information about dierent administrative procedures.
18
Reform eorts have resulted in gradual improvements in international rankings,
but the country’s standing across various indicators remains low. The Transparency
International’s Corruption Perception Index 2022 ranks the DR at 123rd position out
of 180 countries, up from 137th out of 180 countries in 2019.
19
In the World Bank’s
Worldwide Governance Indicators 2022 update, the DR scored 54.8 out of 100 points
in the Government Eectiveness indicator, up from 38.9 in 2019.
20
The DR also ranks
78th out of 141 in the World Economic Forum’s overall Global Competitiveness Index
2019, up from 92nd out of 138 countries in 2017.
21
Complex business regulations and fragmented institutions play a key role in creating
the conditions for an opaque business environment. The processes of licensing and
authorization are unwieldy, mainly as a result of (a) a lack of database and information
sharing across agencies; (b) a lack of eective risk-based regulations and systems;
and (c) the poor or partial digitalization of licensing and authorization processes.
Various policies and lack of action have aected the problem. First, the presidentially
championed Zero Bureaucracy initiative aims to streamline and digitalize licensing
and procedures for investors, but existing fragmentation hampers reform eorts.
Second, an insucient level of coordination and synergies among the large number of
institutions supporting the development of the private sector exacerbates the perception
of a fragmented and complex business environment and reduces the eectiveness
of private sector support. For example, interviews consistently pointed to weak
operational coordination between institutions responsible for investment promotion
and aftercare, suggesting that this task remains dependent on the personal initiative
of appointees, and that a framework for a clear vision, strategy, and coordination is
pending. Third, even though some tax exemptions under the various fiscal regimes
have arguably helped attract FDI and diversify exports, others have been found to
constrain productivity and backward linkages.
xii
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The assessment recommends specific policy actions that would enhance DR’s
competitiveness and business climate. The critical steps to streamlining, modernizing,
and digitalizing the regulatory environment for business include (a) creating a fully
integrated transactional service delivery platform for the private sector (across all
regimes, even if gradually); (b) automating the approval process of firm establishment;
(c) digitalizing and streamlining the licensing processes; (d) introducing risk-based
approaches for licensing and permitting;(e) providing comprehensive and interactive
information on all available incentives on the websites of investment promotion
agencies; and (f) strengthening the regulatory and institutional framework for digital
governance. Recommendations for improving the coordination and client orientation
of private sector support institutions include two measures: (a) mapping and
comparing the de jure and de facto mandates and activities of the three FDI promotion
and aftercare-related agencies and (b) articulating a results-based framework for
client orientation and strategic coordination between the three institutions through
an interinstitutional memorandum of understanding or a special purpose vehicle. And
finally, for improving FDI attraction and retention, it is recommended that an ex post
holistic assessment be made of the impact of incentives in the DR, the corresponding
return on investment, and reforms needed, leveraging the International Monetary
Fund–provided assessment tools already used by the Ministry of Finance of the
Dominican Republic.
The Skills Gap and Low-Quality Education
Educational outcomes in the Dominican Republic are far below what would be
expected for a country at this level of economic development. Labor productivity is
roughly half the level of aspirational peers and 44 percent lower than in structural
peers
22
. The resulting skills shortage and mismatch is one of the most important
structural obstacles to private sector investment and growth across the economy—
but especially so for high-value-added activities. For example, a detailed assessment
of the skills, competencies, and professional training for logistics in the Dominican
Republic conducted by the World Bank in 2023 revealed that there is increased
stang demand driven by the growth and expansion of the logistics sector, with the
biggest share of vacancies at the operative level (50 percent to 60 percent), and at
the administrative level (30 percent to 40 percent). The survey found a shortage of
candidates with adequate logistics skills in the market, with 85 percent of interviewed
companies perceiving a shortage of qualified candidates for operative level positions
(especially crane operators) and 78 percent indicating a shortage of qualified sta
for administrative level positions. Consequently, most companies recruit personnel
without proper knowledge, and then invest in on-the-job training related to the
specific technical or operational aspects of the job. The availability of pre-employment
education for logistics is limited, with 45 percent of companies indicating limited
vocational oerings and 75 percent indicating limited university and college oerings,
the provision of which is further exacerbated by weak foundational skills in science,
technology, engineering, and mathematics (STEM) fields.
xiii
EXECUTIVE SUMMARY
Progress toward gender parity in education has not been matched by a comparable
increase in economic opportunities for women. The country ranks 112 out of 189
countries worldwide in the 2020 United Nations Development Programme (UNDP)
Gender Inequality Index, and the COVID-19 crisis has widened existing gaps,
especially among the most vulnerable. Women are more likely than men to experience
unemployment and to work fewer hours; they are also likely to earn less than men even
when employed in the same sector (on average they earn 85 percent of men’s earnings).
The wage gap is even larger in the informal sector, where women make only 60 percent
of men’s earnings on average. Top interventions to close gender gaps include expanding
access to aordable and quality child care, facilitating school-to-work transition,
attracting more women into STEM fields, and improving the performance of women-
owned firms.
The assessment recommends specific actions by the private sector to close the skills
gap across industries in the Dominican Republic, including (a) leveraging performance-
based skills by private sector workers in industrial sectors such as logistics, medtech,
or other growing fields, based on successful work placements; (b) increasing
labor force proficiency in English through a comprehensive language program; (c)
improving awareness of job and career opportunities in these growing sectors and
increasing educational enrollment in STEM-related fields; (d) increasing and scaling
sector-specific training programs focused on specialization areas, technologies, and
capabilities identified by firms in these growing sectors; (e) adapting, scaling, and
improving university programs that provide specialized skills relevant for growing
sectors through collaboration between industry and academia; and (f) reforming
incentives to support FDI investors who provide targeted continued education and
upskilling of employees.
Energy and Electricity
Poor performance of the Dominican Republic’s electricity sector is a major
impediment to a sustainable and inclusive economic growth. The electricity sector
is characterized by one of the region’s highest prices for the industrial sector, a
precarious and economically inecient supply, frequent outages, a fragmented
institutional framework, weak regulatory enforcement, and a financially unsustainable
distribution segment that requires large subsidies from the central government. In
addition, high reliance on imported fossil fuels for generation (80 percent of total
supply)
23
poses a threat to the financial and environmental sustainability of the sector.
To enhance climate resilience and sustainability, the government has facilitated the
development of renewable energy resources to mitigate the country’s dependence on
imported fossil fuels and lower the sector’s carbon intensity. The Electricity Pact is
supporting a least-cost approach to power generation through a recently signed decree
establishing competitive auctions for renewable energy with opportunities for local
and international project developers. Removing distortions in the energy sector can
potentially unlock a 0.09 percentage point increase in the GDP by reducing blackouts
that disrupt manufacturing activity.
24
xiv
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The assessment recommends specific policy actions to increase the penetration of
renewables in line with the country’s decarbonization targets. Recommendations
include (a) implementing and streamlining competitive tenders to lower taris and
mitigate the risk of developer concentration; (b) optimizing the stability and integration
of renewable energy into the power grid; (c) preemptively addressing environmental
and social issues through a standardized approach, including biodiversity and land
rights acquisition assessments; (d) enabling the introduction of battery systems in the
market; and (e) increasing investment in the transmission sector.
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO
GROW MARKETS IN A SUSTAINABLE ECONOMY
While cross-cutting constraints are gradually addressed, the CPSD also highlights
opportunities in three sectors where private sector capital and investment can be
leveraged to diversify and boost exports while helping the economy pivot toward a
more resilient and inclusive trajectory. First, the medtech assessment helps showcase
how private sector investments and public policy actions can support growth in high-
value-added manufacturing sectors (which are also leading employers of women),
while helping to develop backward linkages and scale a new growth paradigm that
is more inclusive of local SMEs and local talent. Recommendations aim to help seize
potential nearshoring opportunities (and manufacturing FDI more broadly) and
strengthen the broader set of high-value-added manufacturing sectors in the DR, such
as electronics and pharmaceuticals. Second, the industrial real estate sector assessment
shows how ripe opportunities for the development of eco-industrial parks (EIPs) can
improve access to the next generation of serviced industrial land. A better industrial
infrastructure will strengthen the competitive advantage of the DR and reduce the
share of fiscal incentives in its unique value proposition. The private sector already
plays a leading role in oering serviced industrial land in the DR, but reforms can
help better leverage capital markets, increase resilience in the face of disaster risks,
decarbonize the growth of manufacturing, improve the circularity of the economy, and
position the DR as a leading destination in Latin America for green FDI. Third, the
agri-logistics sector assessment identifies investments and reforms that can promote
climate-smart agriculture, while also providing a blueprint of how logistics, more
broadly, can better leverage the geographic position of the DR to promote higher-
value added exports. The rationale for the shortlisting of these three sectors is rooted
in many considerations (elaborated upon in the report) that include export and FDI
diversification away from dominant sectors like tourism), the wider relevance of the
analysis to similar sectors, and the opportunity to showcase how capital markets
can be leveraged to achieve developmental objectives, as well as complementarity to
recently published diagnostics and reports.
xv
EXECUTIVE SUMMARY
Medtech Sector
The DR is an attractive location for eciency-seeking medtech firms, but addressing
persistent challenges could greatly enhance growth and linkages with the local
economy. The Dominican Republic is a politically and economically stable country
with proximity to US headquarters of multinational corporations (MNCs) that are
major medical device manufacturers. Exports have grown substantially, and since
2009 the medtech sector has rivaled the DR’s apparel sector for the highest volume
of exports and has become the largest exported group of goods with US$2.2 billion
in 2022 (figure 4.4).
25
Many globally leading medtech firms are now present in the
Dominican Republic and their plants supply global value chains of some medical
products such as disposables, surgical and medical instruments, and therapeutic
devices. The sector has also contributed to increasing the skills premium in the
DR labor market and been a leading employer of women (64 percent share of total
employment in the sector - figure 4.5).
26
Global trends are driving the increased demand in the medtech sector in the
Dominican Republic and provide opportunities for private sector investment to
transform health care and facilitate earlier disease detection, less invasive procedures,
and more eective treatments. Demographic factors around the world, such as an
aging population, mass displacement of people, and income polarization, as well as
rapidly increasing spending on health care, are among the trends that are changing the
demand for medtech. Technological innovations are helping companies develop new
models for health care and facilitating a shift from a treatment-of-the-sick approach
(reactive model) to a prevention-and-cure approach (proactive model). Finally,
existing high standards of product safety and quality concerns contribute to a high
concentration in the global industry, as few firms can sustain the high investment
costs required and simultaneously maintain strong global production and marketing.
However, medtech firms have struggled to find local suppliers and continue to rely on
their global suppliers rather than try to source locally, which presents some challenges.
Channeling the growing foreign investment in medtech in the Dominican Republic
into the local economy requires connecting MNCs with firms located domestically
(local or foreign), because most of the growth comes when the already established
MNCs increase their production and add vertically integrated operations. Key
constraints and challenges include (a) reducing the technical gap between the local
suppliers and the MNCs’ requirements, (b) developing technological skills and digital
capabilities, and (c) improving the local entrepreneurship ecosystem. Alternatively,
it would require attracting foreign firms that can source inputs and complete the
supply chain within Dominican territory. All these actions are necessary to build the
foundation for the next wave of FDI (including in other sectors), because proximity
and competitive labor costs are insucient to continue attracting investment in the
medical devices sector.
xvi
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The assessment identifies opportunities to increase the competitiveness of the medtech
sector in two identified markets:
• Disposable medical devices and therapeutical products for the US market. Most
firms in the Dominican Republic already specialize in producing and exporting low-
risk medical devices, which have the lowest barriers to entry and least demanding
requirements. The main challenges in this segment are related to the regulatory
context and the lack of quality management systems, low technical capabilities
for product design and production, information asymmetry between buyers and
suppliers, and the lack of an accreditation body for sterilization and lab testing
companies. Local suppliers also face long receivables delays and high cost of
improvements to meet requirements, as well as low bargaining power in the face of
international supply contracts and MNC vertical integration. The CPSD identifies
specific private sector investment opportunities for disposables (or Class 1) medical
devices, such as (a) providing increased ancillary services to MNCs, including
sterilization and lab testing, or local production of main packaging supplies, and
(b) increasing local manufacturing of components, such as molded components,
extruded plastic tubes, and metal components.
• Services for health care providers. The general transition toward preventive health
care provides development opportunities for medtech services segments that use
medical devices and technologies supported by information and communication
technology (ICT). The main constraints, however, include limited human capital to
drive higher-value outsourcing services and a low level of English fluency, insucient
experience in existing business process outsourcing (BPO) operations with process
definition and execution requiring teams to use dierent interfaces and automation,
and low research and development (R&D) networking and agglomeration spillovers.
The CPSD identifies specific private sector investment opportunities in services
to health care providers, including investing in local BPO and knowledge process
outsourcing (KPO) companies to position the country as a US nearshore hub of
outsourced services, such as appointment scheduling, and digitalization including
telemedicine, patient portals, and data analytics.
Finally, the assessment recommends specific policy actions to grow DR medtech
markets in three to five years. These include (a) narrowing the certification and
accreditation gap between domestic and international firms; (b) supporting technology
and capability adoption by digitalizing firms and providing incentives to upskill
domestic firms; (c) establishing an R&D program to strengthen firm capabilities in
medtech by improving firm categorization, performing technical audits, piloting
collaboration between anchor firms and suppliers, and developing customized training
programs; (d) increasing access to invoice factoring to local suppliers to improve their
liquidity and increase their investment in competitiveness-enhancing infrastructure,
machinery, technology, and capacity building; (e) shifting the FDI strategy toward
a proactive approach by adopting a nearshoring strategy that targets high-potential
sectors (such as medtech) and reinforcing the value chains and stronger integration
in GVCs; (f) simplifying registration processes for the establishment of medtech
companies under the regime for SEZs; and (g) incorporating the medtech sector in the
priority list when creating a single window centralizing the reception of information
and interconnecting agencies and databases. Importantly, the medtech sector should
especially benefit from skill development interventions aimed at closing the skills
gap, which are outlined in more detail in the section on that cross-cutting constraint,
section 3.2.
xvii
EXECUTIVE SUMMARY
Industrial Real Estate and Eco-industrial Parks Sector
The Dominican Republic has leveraged industrial parks for decades to spur
manufacturing-led growth. As of 2022, 86 of them were dedicated to exports and had
enabled the expansion and diversification of the country’s export basket, with exports
from firms under the SEZ regime (to which all exporting firms in industrial parks
belong) increasing from US$4.2 billion in 2010 to US$7.8 billion in 2022.
27
Although
the share of total exports of goods by these firms had decreased from 62 percent to
57 percent in the same period, the main reason was the emergence of gold exports
and ferronickel (accounting for 49 percent of total exports by firms under the GTR in
2022 - figure 2.20).
28
Industrial parks have also attracted US$2.9 billion in FDI during
2010–22 (figure 2.12). However, exceptional tax treatment and labor regulations have
also led to trade-os and reduced positive spillover eects. Although the fiscal policy
layer of the Dominican Republic’s industrial parks needs to be further analyzed within
the larger macroeconomic and political-economy context, the essential aspect of the
industrial parks’ value proposition to customers (other than their overall geographic
proximity to US markets and integration with ecient logistic corridors to that
market) lies in the adequacy of the infrastructure and its business services to hosted
industrial activities. Strengthening these aspects can only reduce the weight of fiscal
incentives in the overall unique value proposition.
There has been an acceleration in the demand for serviced industrial land (that is,
industrial parks) in the Dominican Republic (figure 4.11). In 2022, the country had
approximately 49 million square feet of industrial shells (that is, actual buildings
ready to be rented out), of which 47.5 million square feet were occupied, resulting
in a 96 percent occupation rate.
29
Nearshoring estimations suggest that throughout
a 5-year horizon, the country could host between US$1.5 billion and US$2.7 billion
of additional exports, with the baseline growth projections generating a minimum
estimated need of 8.3 million square feet for new industrial shell space or a 19 percent
increase of total capacity relative to 2021.
30
Recent data show that 5 million square
feet have been already built and occupied in 2022, surpassing the one-year growth
estimations of industrial shell space based on nearshoring. Data for 2022 are starting
to confirm that this demand is materializing, as FDI toward SEZs increased by 28
percent compared with 2021 and was 38 percent higher than its pre-pandemic levels
(figure 2.25).
31
With global consumer appetite moving toward more sustainable products, industrial
real estate with environmental and social indicators in place could help the Dominican
Republic increase its export competitiveness in the long term. Eco-industrial parks
provide an alternative to classic industrial land development approaches. Research
has shown that EIPs provide a center of excellence for environmental, social, and
governance (ESG) compliance, knowing that studies show a positive correlation
between ESG-score improvements by firms and their share price. EIPs can also enable
the economy to gradually shift its unique selling proposition from one based on special
fiscal regimes to one based on the quality of infrastructure and services, stronger
resilience to the eects of climate change, and adequate certifications and standards
for firms seeking to decarbonize their production process and compete in the emerging
global green economy—in addition to equally important assets such as improved skills,
business environment processes, and energy reliability and cost.
xviii
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Among the various constraints that slow down the development of such a new
generation of industrial parks, two stand out: inecient industrial land markets and
limited access to adequate long-term finance. Industrial land markets are inecient
in the Dominican Republic. The lack of a clear ex ante definition of which lands can
respectively be used for residential, industrial, or agricultural purposes creates a lack
of visibility on which assets are available on the market, as well as distortions in their
pricing. Commercial and residential uses (which are higher in density, often with
higher rates of return on investment) can crowd out industrial uses. Taking stock of
this, and of the apparent shortage of land dedicated to industrial development, the
government launched the Santo Domingo 2050 decree, which incorporates 985 million
square feet of public land and dedicates a significant part of it to the creation of an
industrial corridor around the Circunvalación de Santo Domingo Avenue (that is,
the beltway). Provided adequate territorial and land use plans are elaborated shortly,
this policy action can significantly help address the constraint on the short term.
Another key constraint relates to the lack of diversity and depth in the financial market
to provide adequate access to long-term finance to develop green assets and nudge
developers to respond to the demand of industrial land with higher ESG standards.
Finally, the report also highlights gaps in the DR’s legislation as it relates to industrial
parks’ sustainability practices and shortcomings hindering the crowding in of private
sector capabilities into underutilized public assets.
The assessment identifies and describes three main market opportunities where the
private sector can be leveraged to be part of the solution and contribute to resilient and
green industrial growth. In a three- to five-year horizon, projections of nearshoring
opportunities suggest an increase in demand for high-quality industrial land at a higher
rate than recent growth trends, yielding an investment need of up to US$690 million
(see investment opportunity section):
• Establishing special purpose vehicles that tap into capital markets to provide
competitive sources of long-term finance to developers of greenfield EIPs. Total
expansion in industrial shell space in the next five years is projected to be between
4.4 million square feet, based merely on past growth performance, and 8.3 million
square feet, based on the nearshoring-backed baseline scenario. Access to more
suitable long-term finance can increase the interest of the private sector in the
development of EIPs—instead of regular Class B industrial parks (IP)—and real
estate investment trusts (REITs) and debt funds, based on institutional capital
mobilization, could be an option to achieve that goal. EIPs will also help showcase
how IPs can evolve beyond fiscal incentive-based competitive advantages to compete
on a more substantive unique value proposition.
xix
EXECUTIVE SUMMARY
• Green retrofitting of existing parks through sustainability-linked long-term finance,
including corporate loans, bonds, and project finance. The energy eciency of
buildings could increase by 27 percent if the roof and exterior walls were better
insulated, glass eciency for windows were increased, and more ecient lighting
were installed for internal and external areas. In terms of water eciency, a
typical factory shell can save 9.63 percent by employing lower-flow technologies in
restrooms and kitchens.
32
Furthermore, IPs’ exposure to 15 hazards was analyzed
under four hazard categories of wind, water, fire, and geoseismic risk. A preliminary
assessment was conducted of their vulnerability and the adoption of recommended
resilience measures to mitigate relevant hazards. The results suggested that industrial
park assets in the Dominican Republic could strongly benefit from retrofitting and
upgrading to incorporate resilience measures that help avoid economic losses for
park operators and tenants. A range of long-term finance vehicles and instruments
could facilitate that work.
• Investments in utility-scale photovoltaic rooftop systems (PVRS) to decarbonize
industrial growth. PVRSs could ease the burden of high electricity bills significantly,
thereby reducing occupancy costs for tenants. These systems can be significant in
the Dominican Republic where electricity prices are among the highest in the region.
Potential installed capacity of existing industrial parks in the DR is approximately
400 megawatts. From the park operator perspective, an alternative use of PVRSs
is utility-scale generation, which creates an additional line of business for parks
by becoming a renewable energy supplier to the grid through a purchasing power
agreement (PPA) with distribution companies. A major industrial park in the country
is developing PVRS, which could serve as a scalable precedent for a green market
that would benefit from better access to long-term finance.
Finally, the assessment also recommends specific actions to (a) improve access to
serviced industrial land (that is, industrial parks) by promoting coherent land use
planning that identifies suited lands for sustainable industrial development, and their
related infrastructure and connectivity needs; (b) leverage domestic and international
capital markets to provide green long-term finance to the development of EIPs through
seed public financing and investment trusts strictly focused on developing green
industrial parks or EIPs; (c) facilitate access to green finance to existing industrial
zones to strengthen their resilience and promote decarbonization; (d) introduce reforms
that improve EIP-related regulations, such as the adoption of green certifications and
standards for zones and responsible use of resources.
xx
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Agri-logistics Sector
The Dominican Republic’s geographic position is an outstanding asset for the
development of logistics, yet some challenges in infrastructure and services remain
to be addressed. In terms of transportation infrastructure, the main gaps for agri-
logistics in the DR are related to the insucient and inadequate conditions of
secondary and tertiary roads. Significant investments have been made in the expansion
and modernization of the port and airport infrastructure, but air transportation
infrastructure can further benefit from improvements and regulatory upgrading. As
for services, authorities have made recent strides toward improving the institutional
framework for logistics, but competition and market demand issues in the ground
transportation services sector continue to constitute a major drag on the DR’s logistics
performance. Key challenges include (a) anticompetition practices in the transport
market resulting in uncompetitive price setting for shipments, (b) weak contract
enforcement with producers, (c) informality, (d) empty returns in shipping trips, and (e)
a greatly outdated truck fleet. Weaknesses in cold-chain management (exacerbated by
issues related to energy reliability and aordability) and logistic services are among key
hindrances for export competitiveness in semi-perishable and perishable Dominican
products, such as fruits.
This sector assessment focuses on agri-logistics because of the key role it can play
in driving climate-smart agricultural development, and it highlights constraints
and investment opportunities in three markets for fruit produce. In particular, the
agri-logistics assessment focuses on fruits as a relevant group that oers growth
opportunities in local and global markets. The diagnostic includes a description of the
main global trends in the agricultural markets and their corresponding implications
for agri-logistics agents and processes, which tend to point more strongly toward
shortcomings in “soft” logistics—rather than transport and infrastructure per se. The
agri-logistics value chain, with its constraints and opportunities, diers depending on
the end market.
The first market highlighted in the assessment for furthering competitiveness of the
agri-logistics sector is international buyers in export markets, such as the United States
and the European Union. High-value-added fresh fruits need a reliable cold chain and
traceability with an emphasis on reducing the environmental footprint. Global trends
indicate a growth in consumption of healthy foods and environmental responsibility,
the emergence of new regional and global competitors in the fresh fruit segment,
and an increasing relevance of cold-chain reliability during handling, transport, and
storage. Challenges in the agri-logistics value chain for international markets relate to
(a) poor post-harvesting and handling due to deterioration of secondary and tertiary
road networks, (b) low control of temperature and humidity variables, (c) low cold-
chain capacity in warehousing and consolidation centers, (d) inadequate packaging
and processing and gaps in the last-mile cold chain, and (e) inadequate customs
inspection practices for port and air freight. The CPSD identifies specific private
sector investment opportunities in agri-logistics for this international market that
would help increase the capacity of cold-chain storage and rural collection centers, the
local production of main packaging supplies (such as boxing, strapping, and pallets),
and the sophistication of agri-logistics services provided through data analytics and
technological solutions.
xxi
EXECUTIVE SUMMARY
The second market is in the local hospitality industry (indirect exports). The main
implications of global trends for agri-logistics actors relate to the need to provide
traceability to consumers and hospitality buyers. Hotels also require minimally
processed fresh fruits produce, a better shelf life, and high-quality products, and the
local agricultural sector already supplies 85 percent of the total fresh primary products
required by the tourism industry.
33
Challenges in the agri-logistics value chain for
the hospitality industry include (a) the lack of rural accessibility, (b) post-harvest
heat removal facilities and temperature-controlled warehouses near farms, (c) the
low quality of equipment and noncompliance with delivery times, and (d) the lack of
production capacity and technology for IV range products, those fruits and vegetables
ready for consumption with minimal processing. The CPSD identifies specific private
sector investment opportunities in agri-logistics for the hospitality market that would
improve specialized agri-logistics services, such as on-demand planning and daily
transport with cold-chain capacity of ready-to-eat small batches of locally sourced
products or extension of the services of fruit packaging companies (through skills and
technology acquisition) to include ready-to-eat products—for example, peeled fruit,
juice, smoothies, and sauces.
The third is the local wholesale markets and supermarkets, because the per capita
consumption of fresh fruit and milk in the Dominican Republic is higher than the
world average. The central implication of global trends for the local agri-logistics
supply chain relates to increasing the quality of fruits and food locally sourced by
improving times from farm to the table while supporting local producers in planning
their crops and harvest. Challenges for local wholesale markets and supermarkets
include (a) inconsistent refrigerated transportation from farms to packing houses,
(b) uncompetitive transportation services, (c) obsolete packaging equipment and
technology, and (d) underdeveloped logistics automation processes. The CPSD
identifies specific private sector investment opportunities for the local wholesale
market that would improve the quality of services in the chain from farmer to retailer,
cold-chain facilities for the wholesale market, and specialized transport from farms to
collection centers to supermarkets, wholesale markets, and grocery stores.
The assessment recommends specific actions in the agribusiness logistics sector. These
include measure to (a) improve last-mile logistics, such as structuring investment
projects (by obtaining concessionary loans, blended finance, or equity) to build or
upgrade cold-chain capabilities and facilities; (b) improve first-mile logistics and
collection capacity by supporting firms (particularly SMEs) through concessional
loans or lines of credit to increase cold chain storage and rural collection center
capacity, as well as sophistication of services through technological solutions and
data analysis; (c) facilitate the export process and reduce storage times in the port/
airport by improving awareness of the Single Window for Foreign Trade (VUCE)
and implement an integrated simultaneous inspection system at ports/airports; (d)
develop a comprehensive intervention program to improve food safety; (e) promote
productive alliances and/or value chain–specific public-private dialogues between, on
the one hand, supermarkets and fruit producer associations and, on the other hand,
agri-logistics agents and tourism operators to address information asymmetries and
improve alignment between suppliers and buyers; (f) redefine MERCADOM’s strategy
to reinforce its role as a supplier to other businesses (business-to-business [B2B]),
rather than business-to-consumer (B2C); (g) build skills in areas such as food handling,
pre-cooling, cold-chain equipment and facilities operations, and fruit-packaging
xxii
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
management through a specialized training program; and (h) carry out a supplier
development program, with a financing component (soft loans or matching grants),
for packaging. The agri-logistics sector can also benefit from skills development
interventions aimed at closing the skills gap; these are outlined in more detail in
section 3.2, where the cross-cutting constraints on skills are addressed.
Table ES.1 summarizes all the policy recommendations in the CPSD.
TABLE ES.. SUMMARY OF POLICY RECOMMENDATIONS DETAILED IN THE REPORT
THEME/SECTOR POLICY RECOMMENDATION TIMELINE
Regulatory
Complexity and
Institutional
Fragmentation
Streamlining
and modernizing
the regulatory
environment for
business
• Automate approval process of firm establishment in SEZs.
• Map and concentrate information on all available incentives on the CNZFE
website.
• Digitalize and streamline the licensing processes.
• Introduce risk-based approaches for licensing and permitting.
Short term
• Create a fully integrated transactional service delivery platform for firms.
• Strengthen the regulatory and institutional framework of digital
governance.
Medium term
Improving private
sector institutions
• Map and compare the de jure and de facto mandates of the FDI
promotion and aftercare-related agencies.
Short term
• Articulate a results-based framework through an inter-institutional MOU
between the three investment promotion institutions.
Short term
Improving FDI fiscal
incentives
• Make an evidence-based assessment of all fiscal incentives to quantify
their value addition.
Medium term
Skills Gap and
Low Quality of
Education
Closing the skills gap
(applies to all sectors
covered below)
• Leverage performance-based private sector provision of vocational skills.
• Increase labor force proficiency in English through a comprehensive
language program policy.
• Improve public awareness and attractiveness of jobs in growing sectors
such as medtech and logistics.
Short term
• Establish more comprehensive sector-specific specialized training
programs for skills in high-demand sectors.
• Scale and improve university programs that provide specialized skills in
growing sectors; reform curricula based on industry-academia dialogue.
• Promote FDI investment in continued education and upskilling of
employees.
Medium to long
term
Energy and
Electricity
Increasing
penetration of
renewables
• Implement and streamline competitive tenders by establishing
standardized project documents.
• Optimize the country’s grid renewable energy integration and stability.
• Address E&S issues through a standardized approach.
• Enable the market introduction of battery systems.
Short term
• Increase investment in the transmission sector. Medium to long
term
Note: CNZFE = Consejo National de las Zonas Francas; E&S = environmental and social; FDI = foreign direct investments; SEZ = special economic zone.
xxiii
EXECUTIVE SUMMARY
THEME/SECTOR POLICY RECOMMENDATION TIMELINE
Medical Devices Strengthening
certification and
accreditation
• Adopt measures to narrow the certification and accreditation gap
between domestic and foreign firms.
Short to
medium term
Incubating and
promoting linkages
• Support technology and capability adoption through dedicated programs
with financial instruments.
• Establish an R&D program to increase firms’ investment in higher-value-
added product/service development.
Medium term
• Increase access to invoice factoring to local suppliers to improve liquidity
and increase investment.
Short to
medium term
Orienting FDI
promotion to linkages
• Shift the FDI strategy toward a proactive approach focused on reinforcing
the value chains, and targeting critical suppliers in the GVC, to ensure the
enabling environment for MNCs to invest in the Dominican Republic.
Short term
Closing the skills gap
• Recommendations are consolidated and outlined under the Skills Gap
section.
Short term
Reducing
bureaucratic hurdles
for investment
• Simplify registration processes for the establishment of medical devices
companies under the SEZ regime.
• Incorporate the medtech sector in the priority list when creating a single
window.
Short to
medium term
Eco-industrial Parks Improving access to
serviced industrial
land
• Identify land within Santo Domingo 2050 for EIP development.
• Map the land available for industrial park development or expansion in
existing parks.
• Consider PPP-based development of industrial land owned or currently
managed by ProIndustria.
• Consider the legal process that would allow ProIndustria to hire private
management.
Short term
• Elaborate a comprehensive land use plan for EIP development within
Santo Domingo 2050
Medium term
Leveraging capital
markets and green
finance
• Clarify and codify a regulatory framework of REITs.
• Modify the mandate of public sector trust to mobilize capital markets.
• Promote green finance to retrofit brownfield EIPs.
• Promote the creation of debt funds to facilitate access to long-term
finance.
Short term
• Explore the possibility of creating a public-private REIT focused on EIPs. Medium term
Introducing reforms
to EIP regulation
• Develop a national strategy for EIPs with a potential certification scheme.
• Strengthen institutional support to IP operators.
• Integrate EIP requirements into the development and operation of public-
private developed IPs.
Short term
• Improve building codes associated with green buildings and develop
institutional support that promotes green building certification.
Medium term
Note: EIP = eco-industrial park; FDI = foreign direct investments; GVC = global value chain; IP = industrial park; MNCs = multinational corporations; PPP = public-private
partnership; R&D = research and development; REIT = real estate investment trust; SEZ = special economic zone.
xxiv
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
THEME/SECTOR POLICY RECOMMENDATION TIMELINE
Agri-logistics Closing the skills gap
• Recommendations are consolidated and outlined under the Skills Gap
section.
Short term
Closing the
infrastructure gap
• Adopt multiple measures related to improving last-mile logistics (such
as increasing cold-chain capabilities in ports, airports, and wholesale
markets; building cold storage for cargo inspection processes).
• Adopt multiple measures related to improving first-mile logistics and
collection capacity (such as rural collection centers and cold-chain
storage).
Short Term
Addressing market
and governance
constraints
• Adopt multiple measures (such as implementing simultaneous inspection
systems in ports/airports); ensure interoperability with the VUCE to
facilitate the export process and reduce storage times in the port/airport.
• Develop and implement a comprehensive intervention program to
improve food safety.
• Promote PA between fruit producers and supermarkets.
• Promote PA and/or facilitate PPD between agri-logistics agents and
tourism operators.
• Redefine MERCADOM's strategy to be focused on B2B, instead of B2C.
• Carry out supplier development programs, with a financing component
for packaging in the Dominican Republic.
• Facilitate access to equipment and technology adoption loans.
Short Term
Note: B2B = business-to-business; B2C = business-to-consumer; MERCADOM = Dominican Wholesale Center for Agricultural Supplies; PA = productive alliances; PPD =
public-private dialogue; VUCE = Ventanilla Única de Comercio Exterior.
1
. COUNTRY CONTEXT
. MACROECONOMIC FUNDAMENTALS: STRONG
GROWTH BUT SHRINKING FISCAL SPACE AND LAGGING
INCLUSION
The Dominican Republic (DR) experienced strong overall economic growth during
the past decades. The country has a population of 10.4 million (2020) and is the
largest economy of the Caribbean and Central America, and eighth largest in Latin
America and the Caribbean (LAC), reaching US$114 billion in 2022. With growth
averaging 5.8 percent per year from 2005 to 2019, the DR outperformed most LAC
economies and became one of the top performers among emerging markets (figure
1.1). Two decades of fast economic growth (interrupted only in 2002–03 by a banking
crisis and more recently by the COVID-19 pandemic) allowed the country’s per capita
income to increase almost threefold.
34
As figure 1.2 indicates, there was a catch-up or
economic convergence process in the DR. The remarkable growth was underpinned
by macroeconomic stability and an array of market-oriented economic reforms. The
reforms started in the 1990s and included tax incentives, the liberalization of foreign
exchange transactions and trade agreements, and elimination of price controls and of
restrictions on foreign direct investment (FDI) in almost every sector.
FIGURE .. REAL GDP GROWTH, AVERAGE %
FIGURE .. GDP PER CAPITA IN THE DR AND SELECTED
PEER COUNTRIES IN PERCENTAGE OF US GDP PER CAPITA,
Source: CPSD core team based on World Bank World Development Indicators dataset.
Note: GPD = gross domestic product.
*IBRD and IDA countries only for regional aggregates. GDP per capita is measured using 2017 constant prices adjusted by purchasing power parity.
GUATEMALA
PANAMA
DOMINICAN
REPUBLIC
COSTA RICA
SOUTH ASIA
EUROPE &
CENTRAL ASIA
MIDDLE EAST &
NORTH AFRICA
LATIN AMERICA &
THE CARIBBEAN
OECD MEMBERS
%
%
%
%
%
%
%
% % % % %
COSTA RICA
DOMINICAN REPUBLIC
PANAMA
JAMAICA
GUATEMALA
LATIN AMERICA & THE CARIBBEAN*
.%
2
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Poverty and inequality have declined consistently since the early 2010s. While the
poverty rate (defined as the population with less than US$6.85/day, adjusted by
purchasing power parity) increased from 41 to 57 percent of the population over
2002–04 because of the economic shock from the banking crisis, since 2013 there has
been a steady decline, and by 2021 it had fallen to 23 percent. Similarly, the middle
class (incomes between US$13/day and US$70/day) expanded from 25 to 42 percent,
outnumbering the poor in 2014. Income inequality improved (the Gini coecient
fell from 0.51 to 0.38 over 2000–21), as the per capita income for the poorest 40
percent of the population grew compared to the top 60 percent (3.4 versus 2.9 percent,
respectively, during 2004–16 and 6.2 versus 5.8 percent, respectively, during 2017–19).
Despite the country’s sustained growth levels and strong economic outcomes,
improvements in its social indicators remain below target. The rates of poverty
reduction in the DR are comparable to those achieved by other regional peers, despite
the DR’s higher economic growth. Persistent inequality is linked to a lack of high-
quality job opportunities. Despite robust economic growth, more than half of the jobs
in the DR are in the informal sector, mostly concentrated in nonexporting activities.
Additionally, the country’s performance in reducing monetary poverty has narrowed
the gaps between rural and urban areas, but there is room for improvement. Three
out of every four people that moved out of poverty between 2017 and 2019 resided in
urban areas, where poverty rates were already lower than in rural areas.
35
COVID-19
emergency transfers narrowed the urban-rural gap, but recent simulations suggest
that after their removal, the gap could widen again since the crisis did not remove
structural inequalities across regions. Finally, since 2005, poverty rates have been
consistently higher among women than men, and by 2019 the share of women-headed
households living below the poverty line was 25 percent (versus 19 percent for men-
headed households).
According to International Monetary Fund (IMF) and World Bank assessments, the
public-debt-to-GDP ratio remains sustainable but has been increasing steadily and
significantly since 2005 (figure 1.3), reflecting fiscal weaknesses that were compounded
by the COVID-19 pandemic. In 2020, the central government balance deteriorated
sharply (figure 1.4), due largely to emergency spending, resulting in an increase in debt
levels—notably external. The 4.2 percent of GDP fiscal stimulus that was adopted
in 2020 in response to COVID-19 is slowly being lifted as the recovery gathers pace
(COVID-19-related spending amounted to about 3.3 percent of 2020 GDP, while
forgone revenue reached 0.9 percent of GDP). Although public debt declined in 2021
as the fiscal position gradually returns to prepandemic levels and growth recovers,
weaknesses in the government debt profile expose it to risks from peso depreciation
and higher interest rates globally, because external debt accounts for three-fifths of
total consolidated debt (figure 1.3).
3
COUNTRY CONTEXT
FIGURE .. CONSOLIDATED PUBLIC DEBT AS PERCENTAGE
OF GDP
FIGURE .. CENTRAL GOVERNMENT FISCAL BALANCE AS
PERCENTAGE OF GDP
Source: CPSD team’s calculations based on data from Minister of Finance and Central Bank of the Dominican Republic.
Beyond the impacts of the COVID-19 crisis on public finances, the Dominican
Republic has historically been among countries with the lowest levels of revenue as a
share of GDP in the region (figure 1.5). Low tax revenues can be partially attributed
to high tax expenditures (6.7 percent of GDP in 2016) resulting from numerous value
added tax and excise exemptions and other tax incentives provided to firms operating
in special tax regimes. Low tax revenues can also be attributed to a relatively high tax
threshold (only 14 percent of formal workers pay personal income taxes) and a low tax
base because of informality and fiscal expenditures.
36
%
%
%
%
%
EXTERNAL INTERNAL
4
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX .. LOWER GROWTH AMID GEOPOLITICAL TENSIONS AND HIGHER INFLATION
While limited, challenges from the impact of the war in Ukraine and tightening in global financial conditions
confront the DR. Supply chains in key commodity markets (especially food, fertilizers, and energy) have
been disrupted by the war, aecting volumes and prices of products that are relevant to the DR. According
to the IMF, aggregate merchandise trade linkages with the Russian Federation and Ukraine are very
limited, at about 0.7 percent of total trade in those countries. But there is some concentration in certain
imports, in particular steel and iron—which accounted for about 10 percent of total steel and iron primary
imports in 2020—and fertilizer from Russia, about 7 percent of total imports of fertilizer. In this context,
inflation reached 7.8 percent at the end of 2022, which also prompted the Central Bank of the Dominican
Republic to raise its monetary policy rate aggressively, to 8.5 percent from 3.0 percent in November 2021.
While declining—inflation came in at 5.9 percent in March 2023—inflation is projected to remain close to
the 5 percent upper bound of the target range toward the end of 2023. In the short term, tighter domestic
and global financial conditions will make borrowing more expensive, resulting in a slight deceleration of
economic activity—GDP growth is expected to slow down to 4.4 percent in 2023—amid a still-constrained
fiscal policy space.
URUGUAY
EL SALVADOR
CHILE
NICARAGUA
COLOMBIA
PERU
BRAZIL
COSTA RICA
DOMINICAN REPUBLIC
GUATEMALA
PANAMA
FIGURE .. TAX REVENUE AS PERCENTAGE OF GDP, OR LATEST
Source: CPSD team’s calculation based on World Bank World Development Indicators dataset.
.
5
COUNTRY CONTEXT
. DISASTER AND CLIMATE CHANGE RISKS PRESENT AN
INCREASINGLY CRITICAL CHALLENGE
Another structural challenge that could erode socioeconomic gains is the economy’s
low resilience in the face of climate change impacts. The geographic location of the DR
makes it highly exposed to climate change, disasters, and climate-related risks, which
are expected to increase in magnitude and frequency (figure 1.6). Over 60 percent of
the population is concentrated in continuously expanding urban areas, most of which
are in coastal areas or areas at high risk of experiencing extreme weather events.
37
Similarly, the Notre Dame-Global Adaptation Initiative (ND-GAIN) Country Index
compares countries based on their vulnerability and readiness toward climate change
challenges and ranks the DR 103rd among 182 countries. The evaluation locates the
biggest vulnerability issues in (a) food production, especially the change of projected
cereal yields; (b) water, especially dam capacity; and (c) infrastructure because of
dependency on imported energy. The current way of doing business is not considering
the risks climate change poses to the country’s economic development, and the DR
shows low readiness to address the eects of climate change, according to the ND-
GAIN Country Index. The absence of innovation is a key challenge, with the DR’s
score being very low in the ND-GAIN Index for readiness, which aects the DR’s
capability to adapt to the consequences of global warming.
38
The budget allocation
for climate actions is estimated at 0.7 percent on average for the period 2001–21,
equivalent to 0.1 percent of GDP, while similar countries such as Mauritius have
allocated 0.6 percent of the GDP.
39
FIGURE .. NATURAL DISASTERS IN LAC AND THE DR BY DECADE AND EVENT TYPE
Source: EM-DAT: The Emergency Events Database.
Panel A:
Number of natural disasters by event type LAC
(1967-2016)
Panel B:
Number of disasters events in the DR by decade and event type
(1960-2017)
GRENADA
SAINT KITTS AND NEVIS
ANTIGUA AND BARBUDA
DOMINICA
ST. LUCIA
BELIZE
JAMAICA
EL SALVADOR
PANAMA
DOMINICAN REPUBLIC
COSTA RICA
NICARAGUA
HONDURAS
GUATEMALA
HAITI
HYDROMETEOROLOGICAL GEOLOGICAL OTHER TROPICALSTORMS
FLOODS
DROUGHT
EARTHQUAKE
WILDFIRE
6
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The lack of diversification of exports and FDI in the Dominican Republic exacerbates
the potential impacts of climate events, as key industries are vulnerable to increasing
natural hazards. The Dominican Republic is vulnerable to climate change impacts,
including extreme events such as floods and hurricanes and long-term changes from
sea level rise, shifts in rainfall patterns, and increasing temperature (ND-GAIN
Index score: 46.4/100). Annual average loss from hurricanes is US$345 million
(approximately 0.5 percent of GDP), and the probable maximum loss for hurricanes
is at least US$11.482 billion (approximately 16 percent of GDP). Industry and tourism
assets and value chains are frequently exposed to the impacts of these natural hazards.
Tourism (when including both direct and indirect activities) makes up 15.9 percent
of the DR’s GDP, and 17.2 percent of total employment, while international tourism
contributes 38.4 percent of total exports (2019); this concentration exacerbates the
exposure of the economy to climate events.
40
In addition, historical data reveal that
rising temperatures between 2015 and 2020 were associated with productivity losses
of between 2 and 9 percent among manufacturing firms located in the Dominican
Republic’s poorest regions. Finally, key economic assets including both residential
buildings and industrial and commercial buildings are at risk. Hurricane Maria (2017),
for instance, resulted in total damage of approximately US$931 million to industries
such as tourism (9 percent of all losses) and agriculture (33 percent).
Beyond disaster risk management, adaptation to the more gradual eects of climate
change is an increasingly key consideration for private sector investment and
sustained growth. Tourism, again, will be one of the main sectors to bear the potential
consequences of the projected erosion of up to 30 percent of the DR’s beaches,
41
the
loss of marine biological diversity, and projected sea level rise, not to mention increases
in frequency or severity of storms. Additionally, tourism is increasingly suering from
excessive amounts of sargassum, which are stimulated by warmer ocean water and
fertilizer waste and arrive at the most important shores for the industry, such as Punta
Cana and Samaná. Destruction of mangroves and coastal ecosystems and the death
of coral reefs, together with the overexploitation of fishing grounds, further increase
the risks of flooding because of loss of natural protection, resulting in the reduction of
biodiversity in the Dominican Republic.
42
7
COUNTRY CONTEXT
In this context, water supply and infrastructure, as well as waste and wastewater
collection and treatment, are inecient and underfunded. Reduced availability of
water will have important impacts on various economic sectors, such as agriculture,
with changes in rainfall patterns and overexploitation of water resources. The 2014–15
drought in the Dominican Republic was associated with a 10.8 percent reduction
in crop production within the country and led to an 8.0 percent rise in staple food
prices.
43
By 2050 freshwater resources are expected to decrease up to 25 percent.
44
The most critical challenges for water and sanitation services are (a) the rationing of
the water supply due to droughts; (b) the pressure from rapidly growing urban zones;
(c) old and obsolete infrastructure; (d) low percentages of invoicing and payment for
services of drinking water; and (e) not enough investments in distribution, collection,
and treatment systems. Wastewater treatment plants do not operate eectively due
to a lack of financing and unwillingness of the wastewater producer to pay for basic
services, due to a lack of knowledge of proper operation or water treatment procedure,
and due to a dysfunctional governmental audit system.
45
This results in approximately
96 percent of all wastewater, industrial and household, being released untreated into
rivers, the sea, or the ground, where it contaminates water reserves, soils, and aquifers.
In the region of Santo Domingo, 81 percent of households are not connected to a sewer
system. The DR’s solid waste management is also lacking organization, financing, and
infrastructure, which leads to environmental damage and contributes significantly to
the country’s greenhouse gas emissions due to open dumping practices.
Finally, the economy is yet to adopt infrastructure upgrades and production
processes that help to mitigate climate change, and timely reforms and investments
can accelerate a greener growth model. The main drivers of greenhouse gas (GHG)
emissions in the DR are the high dependency on fossil fuel energy, lack of treatment
of waste, and intensive use of fertilizers in agriculture. The DR has recorded a steady
increase in overall and per capita GHG emissions since the 1990s, but with 3.9 tonnes
of CO2 equivalent per capita, the country is still below the world’s average of 6.45
tonnes per capita (2018 CAIT Climate Watch data). Climate Watch data indicate
that 64.0 percent of all emissions come from energy production, 24.0 percent from
agriculture, 7.0 percent from waste, and 8.3 from industrial processes. Emissions from
industrial processes are now seven times higher than in 1990, with F-gas making up
a significant part of the increase and constituting 41 percent of all GHG emissions
from industrial processes in 2018.
46
However, distributed generation has increased in
the past 10 years, with significant emission reduction potential as consumers decouple
from an energy grid heavily driven by fossil fuels. Between 2011 and 2020, 179
megawatts of solar rooftops have been installed in the DR, with a large portion being
integrated in special economic zones (SEZs).
8
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
. THE ROLE OF THE PRIVATE SECTOR IN PIVOTING
TOWARD A MORE INCLUSIVE AND RESILIENT ECONOMY
In conclusion, inclusion and resilience are critical country-level challenges for the
economy, and policy action can help leverage private sector capital and skills to
pivot the economy toward a more competitive, inclusive, and resilient trajectory. As
discussed, solid macroeconomic fundamentals have reduced poverty, but inclusion
remains a challenge; structural fiscal weaknesses and increasing vulnerability to
shocks could weaken economic resilience, which is further eroded by climate change.
The private sector can play a pivotal role in supporting the transition to an inclusive,
low-carbon, and resilient economy, but reforms will be needed. Furthermore, the
development of solutions to address inclusion and climate change challenges will
require a large amount of financing. Given existing strong fiscal constraints, mobilizing
and catalyzing private climate finance at scale will also be crucial, particularly in areas
such as renewable energy, adapted infrastructure and decarbonization of industrial
processes, green technologies, and water- and energy-ecient manufacturing.
9
. PRIVATE SECTOR
CONTEXT
The Dominican Republic is a US$114 billion emerging market, primarily driven by
the private sector. Although the sectors aggregated under services constitute more than
one-half of the economic fabric (including tourism at 6.0 percent—not accounting for
indirect jobs—and transport at 8.5 percent), no single sector commands more than
a 20.0 percent share of GDP.
47
Construction stands as the largest sector, holding a
15.2 percent share, but it also faces the challenge of having the lowest formality rate
of 13.2 percent.
48
Manufacturing is the second largest sector, accounting for 14.9
percent of GDP—local manufacturing (focused on food and beverages, alcohol, and
tobacco) comprises 11.6 percent, and SEZ manufacturing (focused on medical devices,
electronics, tobacco, and garments) comprises 3.3 percent. The sector faces many
challenges in terms of productivity, competitiveness, and links between exporting
and local firms (see below). Agriculture stands at 6 percent of GDP, and except for
a limited number of products (for example, cocoa and bananas), it has largely been
oriented toward the internal market. After the banking crisis of 2003, the contribution
of overall total factor productivity (TFP) to GDP growth has been nonnegative, but
it has not increased in lockstep with per capita income. To achieve inclusive and
resilient growth, the Dominican Republic needs to generate increases in productivity
by increasing the quality of investment (including FDI), improving the provision of
high-quality public services, deepening the connection and contribution to global value
chains (GVCs), and upskilling the labor force.
For the past two decades, the Dominican Republic has oered numerous competitive
advantages to promote private sector growth, but real GDP growth has been mainly
driven by capital accumulation (figure 2.1). The DR’s attractiveness for private
investment has been based on structural assets and business environment factors such
as political, social, and economic stability; strategic geographical location; access to
the world’s main markets through various trade agreements; legal certainty; and a
tax incentive regime to promote FDI in tourism, manufacturing, and export-oriented
services.
49
Factors such as investment and private consumption have been the main
engines of growth (figure 2.2). From 2014 to 2019, the construction sector contributed
an average of 1.2 percentage points of GDP (18.5 percent of total growth). Investment
as a share of GDP was about 25 percent (figure 2.3)—most of which was carried out
by the private sector—which was higher than most comparator countries (figure 2.4).
However, the potential positive impact of FDI on the country’s participation in GVCs
and domestic links has not been maximized in recent years, and trade has contributed
very little to growth (see below Contrary to structural and aspirational peer economies
such as Costa Rica and Uruguay, the growth of TFP for the DR has been modest,
averaging a growth rate of 0.9 percent each year, and has not increased in lockstep
with per capita income.
50
As noted by the Country Economic Memorandum (CEM), a
1 percentage point increase in TFP above its historical average would lift GDP growth
to nearly 7 percent, increasing the average income of the poorest households by nearly
17 percent by 2030 and substantially reducing the inequality income gap.
10
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
FIGURE . CONTRIBUTION TO GROWTH OF FACTORS OF
PRODUCTION
FIGURE . DR, CONTRIBUTION TO GDP GROWTH BY
COMPONENTS, PERCENTAGE POINTS
Source: CPSD team calculations based on data from the World Bank World Development Indicators (WDI) using the Growth Accounting Tool and Central Bank of the
Dominican Republic (National Accounts).
TFP LABOR CAPITAL IMPORTS
EXPORTS
INVESTMENT
GOVERNMENT CONSUMPTION
PRIVATE CONSUMPTION
REAL GDP
CRI DR PAN ESV PRIVATE
PUBLIC
CONSTRUCTION
MACH. & EQUIP.
SECTOR TYPE OF INVESTMENT
FIGURE . INVESTMENT AS A SHARE OF GDP, DR VERSUS
COMPARATOR COUNTRIES
FIGURE . DR INVESTMENT BY SECTOR AND TYPE
Source: CPSD team calculations based on data from the WDI and the Central Bank of the DR.
Note: CRI = Costa Rica; ESV = El Salvador; PAN = Panama.
PERCENT %
SHARE OF INVESTMENT
% % % % % %
% % % % % %
11
PRIVATE SECTOR CONTEXT
. MOST SMEs ARE CHARACTERIZED BY LOW
PRODUCTIVITY, HIGH INFORMALITY, AND
LOWQUALITY JOBS
Firms in the Dominican Republic are predominantly small and medium enterprises
(SMEs) and they tend to be characterized by limited export activity, high dependency
on imports, and low technology adoption and innovation capacity. The nearly
20,000 SMEs (97 percent of all firms) in the Dominican Republic employ more than
2.7 million people (60 percent of the workforce) and generate almost 40 percent of
GDP. SMEs are mostly present in sectors such as services and retail. Large firms, on
the other hand, are mostly present in mining, manufacturing, and accommodation
(tourism). Only 10 percent of formal firms in the Dominican Republic are involved
in exports, which is below the percentage of formal and exporting firms in other
upper-middle-income countries, while 58 percent of manufacturing firms import
from abroad, which is above the comparator’s average. Broad-based dependence
on imported inputs reflects, among other things, the high cost of production in the
Dominican Republic (outside of SEZs), as well as limited innovation. Innovation in the
Dominican Republic’s private sector is lagging, as measured by the level of technology
adoption among micro, small, and medium enterprises (MSMEs). According to the
2019 World Economic Forum’s Global Competitiveness Index, the DR is close to the
bottom 50 of 141 economies regarding innovation capability (85th out of 141) and
information and communication technology (ICT) adoption (79th out of 141).
Despite robust economic growth, more than half of the jobs in the DR are in the
informal sector, mostly concentrated in low-productivity and non-exporting activities.
Since 2010, formal employment has increased by 4.5 percent, while informal jobs
have decreased by 0.1 percent (figure 2.5). But the incidence of informality in the
Dominican Republic is high, even when compared with peer countries, and it worsened
during the COVID-19 pandemic. In the Dominican Republic, 57.3 percent of workers
were informal in 2021, above structural and regional peers like Costa Rica (39.3
percent) and Panama (55.7 percent). Informality is particularly high for low-skilled
workers: between 2010 and 2015, more than 80 percent of workers with primary or
no education were working in the informal sector, whereas 50 percent of workers
with secondary education and less than 20 percent of workers with tertiary education
were working in the informal sector. Informal employment rates are particularly
high in low-productivity sectors, with 80 percent informality in agriculture, close to
50 percent in services, and less than 25 percent in manufacturing (figure 2.6). The
negative correlation of informality with firm productivity is well documented in the
literature
51
—because informal firms have incentives to remain small and cannot benefit
from economies of scale, workers in informal firms tend to be lower skilled and less
productive, and the lower exposure to international trade lowers competitive pressures.
12
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Source: CPSD team calculations based on data from Oficina Nacional de Estadística.
Note: WAP = working age population.
. FDI IS CONCENTRATED IN TOURISM AND REAL
ESTATE AND HAS NOT SUFFICIENTLY CONTRIBUTED TO
GVC INTEGRATION
Foreign direct investment (FDI) significantly contributes to the DR’s economic
performance. The Dominican Republic performs roughly in line with comparator
countries with respect to the inflow of FDI. In the past decade, the inflow of FDI into
the DR averaged about 3 percent of GDP and has consistently been a significant source
of external finance for the country alongside remittances (figure 2.7). On average,
GDP per capita has risen more rapidly in the Dominican Republic than in other Latin
America and the Caribbean (LAC) countries, while FDI stock has increased less than
the regional average (figure 2.8).
FIGURE . EVOLUTION OF LABOR MARKET INDICATORS
FIGURE . INFORMAL EMPLOYMENT RATE BY
EDUCATIONAL ATTAINMENT AND ECONOMIC ACTIVITY
FORMAL EMPLOYMENT
INFORMAL EMPLOYMENT
UNEMPLOYMENT
INACTIVE
SHARE OF WAP %
%
%
%
%
%
%
NONE
PRIMARY
SECONDARY
TERTIARY
AGRI.
MANUF.
SERVICES
EDUCATIONAL ATTAINMENT ECONOMIC ACTIVITY
ALL
13
PRIVATE SECTOR CONTEXT
Source: CPSD team calculations using Central Bank of the Dominican Republic
information.
Source: UNCTAD (FDI stock) and World Development Indicators (GDP per capita).
FIGURE . DR’S FDI INFLOWS VERSUS OTHER SOURCES OF
EXTERNAL FINANCE,
FIGURE . DR’S INWARD FDI STOCK AND INCOME GROWTH
PATH,
REMITTANCES FDI INFLOWS PORTFOLIO INFLOWS
GDP PER CAPITA CURRENT US
FDI STOCK PERCENT OF GDP
Dominican Republic, 2009
Dominican Republic,
2019
LAC,
2009
LAC,
2019
%
%
%
%
%
%
,
,
,
,
Because capital stock was initially low, however, and inflows have been average, DR
lags comparator countries with respect to the accumulated stock of FDI (figure 2.11).
FDI inflows have generally totaled between 4 and 5 percent of GDP on average across
the Latin America and the Caribbean (LAC) region, among upper-middle-income
countries, and among emerging and developing countries overall, slightly above the
3 to 5 percent of GDP recorded in the Dominican Republic. FDI stock rose from 35
percent of GDP in 2009 to around 50 percent of GDP in 2019. While the pace of
this increase is on par with comparators, the low starting position of the Dominican
Republic has resulted in an FDI stock below most comparators in the LAC region
as well as below the averages for emerging economies and upper-middle-income
countries. The stock of FDI in many comparator countries is well above 50 percent
of GDP. It will be critical for the DR to ensure it has an enabling environment and
investment climate to maximize its attractiveness as an investment destination in the
context of postpandemic economic recovery and growth.
Advanced economies in Europe and North America are the primary source of inward
FDI for the Dominican Republic. The United States and European countries such
as the Netherlands, Luxembourg, and Spain make up the largest sources of inward
FDI, with each holding more than US$1.5 billion of assets in the Dominican Republic
(figure 2.9). Italy is also a large contributor of inward FDI, holding over US$1.2
billion. With a relatively diverse set of investors, the Dominican Republic is among the
top third of least concentrated countries across the globe in terms of FDI sources, with
Costa Rica and Honduras ranking as less concentrated (figure 2.10).
14
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Source: CPSD team compiled from country sources.
Note: For figure 2.9, data shown are the stock of FDI from a given source country as estimated at the given year. Excludes FDI from countries designated as tax
havens. For figure 2.10, the Herfindahl-Hirschman Index (HHI) of geographic concentration is defined as the sum of the squares of FDI inward stock from a given
country. It would take the value of 1 in a case where all FDI originates from one country and approach zero the more dispersed FDI projects are across source
countries. Calculation excludes FDI from countries designated as tax havens. Negative bilateral stocks are treated as zeros.
CRI = Costa Rica; DOM = Dominican Republic; ECU = Ecuador; HND = Honduras; JAM = Jamaica; TUN = Tunisia.
FDI in the DR has mainly been natural resource–seeking and has become increasingly
concentrated in tourism and real estate (construction) during the past decade. Tourism
represented 22.7 percent of FDI stock in 2022, followed by commerce, with 21.6
percent (figure 2.12). There have been 39 new projects or expansions in the hospitality
industry since 2009, far outpacing all other industries. Beginning in 2009, projects in
the hospitality sector are estimated to create more than 17,000 jobs, almost four times
more than the next largest sector. It is noteworthy that tourism is particularly exposed
to climate change impacts and that adaptation and impact mitigation measures include
diversification within tourism and diversification of exports beyond tourism. There
have been 18 projects in the communications sector totaling US$1.8 billion as well as
13 projects in the utilities sector totaling US$2.4 billion. Other sectors had varying
project counts but totaled less than US$700 million each. Relative to 2019, FDI
increased in the energy sector (by 172 percent), driven by investments in renewables,
and in SEZ manufacturing (by 39 percent), accounting for 19 percent and 9 percent,
respectively, of total inflows in 2022.
52
FIGURE . DR’S MAIN SOURCES OF INWARD FDI STOCK,
FIGURE . DEPENDENCY ON FDI SOURCE COUNTRIES
HHI,
NETHERLANDS
UNITED STATES
SPAIN
LUXEMBOURG
ITALY
BRAZIL
MEXICO
CANADA
GERMANY
FRANCE
.
.
.
.
.
.
.
.
.
.
CURRENT US, MILLIONS
MOST CONCENTRATED
JAM
TUN
ECU
HND
CRI
DOM
LEAST CONCENTRATED
,
,
,
,
,
15
PRIVATE SECTOR CONTEXT
Source: Central Bank of the Dominican Republic, Pro Dominicana Data Market, and UNCTAD.
Note: FDI stocks are presented at book value or historical cost. For many economies, FDI stocks are estimated by cumulating FDI flows over a period or adding flows
to an FDI stock that has been obtained for a particular year. LAC = Latin America and the Caribbean.
Data on investments received in the DR suggest that eciency-seeking FDI flows have
been limited and have not led yet to high GVC participation by the DR. Analysis of
FDI flows also suggests that the DR’s participation in GVCs is among the lowest in
the world, and declining. DR’s indirect value added (DVX) in exports—the value
of exports from the Dominican Republic that are used as inputs elsewhere and then
exported onward as final goods—peaked in 2004 (figure 2.13). Foreign value added
(FVA)—the value of imports to the Dominican Republic that are used as inputs in the
production of goods that are subsequently exported to other countries—also peaked
in 2004 (figure 2.14). Figures 2.15 and 2.16 show the Dominican Republic’s overall
GVC intensity, which is the sum of DVX and FVA as a share of the total value of
exports. The Dominican Republic’s GVC intensity peaked at 34 percent of exports in
2011, and then fell to 30 percent by 2018, well below Tunisia (57 percent), Jamaica (44
percent), Costa Rica (37 percent), Ecuador (35 percent), and Honduras (34 percent). In
fact, as shown in figure 2.16, the Dominican Republic’s GVC intensity was among the
lowest of any country with 2018 data available, and below most countries with similar
income levels. These figures underscore not only the impact of past low levels of FDI,
especially eciency-seeking FDI, on the Dominican Republic’s integration into global
value chains, but also the opportunity that remains for significant deepening of the
level of integration.
FIGURE . INWARD FDI STOCK FIGURE . FDI STOCK BY SECTOR,
PERCENT OF GDP
COSTA RICA DOMINICAN REPUBLIC ECUADOR
HONDURAS
JAMAICA TUNISIA LAC
EMERGING ECONOMIES UPPER MIDDLE INCOME
23%
22%
4%
10%
5%
8%
13%
15%
1%
Finance
Special
Economic
Zone
Mining
Real
Estate
Transport
Tourism
Commerce/
Industry
Telecommu-
nications
Energy
16
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
FIGURE . DR’S INDIRECT VALUE ADDED IN EXPORTS
DVX,
FIGURE . DR’S FOREIGN VALUE ADDED IN EXPORTS
FVA,
Source: CTAD-EORA database and World Bank WDI.
Note: DVX (indirect value added) is the share of exports that are not consumed in the importing country but are instead reexported by that country to a third country
as part of a good or service. FVA (foreign value added) is the share of foreign inputs used in the production of goods and services for export. LHS = left-hand side; RHS
= right-hand side.
FIGURE . GVC INTENSITY: DR VERSUS COMPARATORS,
FIGURE . GVC INTENSITY: DR VERSUS WORLD,
DVX (US$, millions) (LHS)
Dominican Republic, 2018
FVA (US$, millions) (LHS)
DVX (percent of GDP)
(RHS)
,
,
,
%
%
%
%
%
%
%
%
%
%
%
,
,
,
,
,
.%
.%
.%
.%
.%
.%
%
.%
.%
.%
.%
.%
.%
.%
.%
%
FVA (percent of GDP)
(RHS)
Source: UNCTAD-EORA database and World Bank WDI.
Note: GVC (global value chain) intensity is the sum of DVX and FVA, as a share of total value added of exports.
COSTA RICA DOMINICAN REPUBLIC ECUADOR
HONDURAS
JAMAICA TUNISIA
YEAR LOG OF GDP PER CAPITA
GVC INTENSITY % OF EXPORT VALUE ADDED
Other countries, 2018
17
PRIVATE SECTOR CONTEXT
Links with the local economy have also decreased over time. Because FDI flows in
SEZs are predominantly export oriented and driven by multinational companies
(MNCs) competing in international markets, vertical links have predictably been
dicult to achieve, given the scale and technology level of inputs they require.
However, the DR also underperforms in horizontal links between MNCs and local
firms, even though such linkages are both feasible and desirable as a vehicle for
positive spillover eects. Between 2005 and 2018, the share of inputs that were
sourced domestically went from 22 to 18 percent. The sectors that rely most heavily on
imported inputs are textiles and apparel, medical instruments, pharmaceuticals, and
electronics—all industries that are primarily located in SEZs and that need new and
more sophisticated inputs that the domestic economy does not produce or where local
production does not fulfill the necessary technical, regulatory, or quality standards.
Although the system of exemptions granted to export-oriented firms under the SEZ
regime has further incentivized these firms to intensify the foreign input content
within their tradeable product, there is room to increase domestic value addition by
integrating more domestic services and inputs across all broad sectors.
53
This points to
an opportunity to deepen the level of integration and increase the inclusion of SMEs in
GVCs, which can facilitate productivity increases through technology transfer and the
creation of better jobs.
. EXPORTS MIRROR THE CONCENTRATION IN FDI
AND REVEAL A STRONG DUALITY IN THE DOMINICAN
ECONOMY
Trends in the relative share of exports are concerning (figure 2.17). Even though
exports of products grew year to year, except during the global financial crisis in
2009, real exports grew at 3.2 percent annually compared with aggregate economic
activity at 5.0 percent, resulting in a contraction of the share of exports in GDP from
32.8 percent in 2000 to 23.9 percent in 2019. DR’s export performance also remains
low compared with countries with similar levels of income. This points to significant
unrealized export potential and correlates with the inability of the economy to create
more formal jobs. The literature is broadly consistent on the fact that FDI expands the
production set of the economy toward more sophisticated goods or introduces more
advanced technology, which increases the demand for skilled labor and leads to a
higher skill premium, increased average wages, and higher labor productivity.
54
18
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Source: CPSD team calculations, WDI data.
Note: LHS = = left-hand side RHS = = right-hand side.
Exports are generally dominated by tourism and a small number of low-value-added
products (figure 2.18). The share of services trade over total trade has been increasing,
consolidating the dominance of tourism. Tourism accounted for an impressive
44 percent of total exports in 2019 and has weathered very well the eects of the
COVID-19 pandemic. Tourism receipts fell 51 percent in 2020 relative to prepandemic
levels, but they quickly rebounded to 87 percent of prepandemic levels in 2021 before
reaching the record level of US$8.4 billion in 2022. The success and challenges of the
sector have been extensively covered by the literature, and the Dominican Republic
is actively focused on strengthening the sector’s competitiveness and diversifying its
products (away from beach tourism). In terms of goods, minerals, driven by gold, have
contributed the most to export growth between 2015 and 2020, with contribution
to export growth reaching 34.3 percent between the two periods.
55
The presence of
agriculture, mineral products (for example, gold), and textiles has been driving the
country’s overall low export complexity (figure 2.19). The elimination of the Multi-
Fiber Agreement (MFA) and the signing of Preferential Trade Agreements led to shifts
in the composition of exported transformed goods over the past decade, and the role of
the textile sectors in the DR’s exports decreased after the elimination of export quotas
in textiles. While the sector is still in the top five exported products, contributing to
8.6 percent of total DR exports, the average nominal value of textiles and clothing
exports decreased from 2.5 billion in 2003–04 to 1.6 billion between 2015 and 2020,
reflecting a restructuring of the sector from large-scale sewing to more just-in-time,
short series production and full package solutions.
56
REAL EXPORTS REAL GDP EXPORTS % OF GDP RHS
FIGURE . EVOLUTION OF EXPORTS RELATIVE TO AGGREGATE ECONOMIC ACTIVITY
.
.
.
.
.
.
EVOLUTION OF REAL EXPORTS AND REAL GDP
VALUE =
SHARE OF EXPORTS IN GDP PERCENT
19
PRIVATE SECTOR CONTEXT
FIGURE . EXPORTS OF GOODS AND SERVICES, AS
PERCENT OF TOTAL EXPORTS,
FIGURE . EXPORT COMPLEXITY RANKING, CROSS
COUNTRY COMPARISON
Source: CPSD team calculations based on data from Harvard Growth Lab’s Atlas of Economic Complexity data viz tool and the Central Bank of the Dominican
Republic.
Within manufacturing, however, firms located in industrial parks and benefiting from
the SEZ regime are starting to establish footholds in emerging higher-value-added
products. Except for gold, the top five exported products come from firms under
the SEZ regime and are manufactured products that require some level of industrial
transformation (cigars, automatic circuit breakers, medical devices). Similarly, among
the remaining top 10 exported products, four are manufactured by firms in the SEZ
regime (T-shirts, jewelry, appliance for ostomy use, and ultraviolet apparatus). Exports
of machinery and electronics, for example, have started surging in recent years,
with medical devices and ultraviolet apparatus accounting for 7.1 and 2.0 percent,
respectively, of total exports in 2020. Similarly, exports of pharmaceutical products
also have grown substantially over the past decade (8.6 percent average annual growth
rate). This export basket reshuing has helped the Dominican Republic develop
comparative advantages in new sectors. Chemicals, plastic products, and metals are
other examples of sectors that gained comparative advantage over the past decade.
RANKING
SERVICES AGRICULTURE STONE MACHINERY
TEXTILES CHEMICALS ELECTRONICS METALS
OTHER MINERALS VEHICLES
USA
CHINA
THAILAND
COSTA RISCA
VIETNAM
DOMINICAN
REPUBLIC
HONDURAS
20
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
However, this trend is also leading to a stark duality in levels of export complexity
between firms benefiting from the SEZ regime and firms outside of that regime. First,
general tax regime (GTR) exports are almost entirely oriented toward the European
market and rest of the world (87 percent of GTR exports), whereas SEZ exports are
mostly directed to the United States (72 percent of SEZ exports).
57
Second, firms
operating under the SEZ regime—accounting for approximately 60 percent of the
country’s total exports—tend to export goods with some level of technological
transformation (for example, medical equipment and electronics), whereas non-SEZ
exporters, which account for 40 percent of exports, focus on primary and resource-
based products (for example, minerals, tobacco, and agriculture commodities) (figure
2.20). In 2020, almost 70 percent of SEZ exports had some level of technology,
compared with less than 30 percent of non-SEZ exports (figure 2.21). The share of
high- and medium-technology export products among SEZ firms has been rising,
while that of primary products increased more among non-SEZ firms. The share of
primary products in non-SEZ exports rose from 7.4 percent in 2006 to 52.5 percent
in 2020. This dierence in value addition between SEZ and non-SEZ exporters
suggests potential barriers that non-SEZ exporters face. More favorable market access
conditions do not explain why a given product is exported to one market and not the
other. Instead, dierences in the specialization of export baskets by destination market
(United States versus European Union) can be explained by the presence of big buyer
firms and/or high concentration of supply. Last, non-SEZ exports lack diversification—
gold and ferronickel account for one-half of GTR exports and the remaining
products have single-digit shares. In contrast, SEZ exports are less concentrated,
with the highest share (medical devices) reaching 18 percent, while tobacco, electrical
equipment, and jewelry have double-digit shares. In this context, maximizing links
between SEZ and non-SEZ firms is an important challenge.
21
PRIVATE SECTOR CONTEXT
FIGURE . TOP EXPORT PRODUCTS BY TAX REGIME,
Source: CPSD team calculations using information from the General Directorate of Customs (DGA).
Notes: Figures show top 10 exports from SEZs and non-SEZs by destination.
FIGURE . TECHNOLOGICAL COMPOSITION OF EXPORTS BY REGIME,
a. Top 10 export products by non-SEZ firms (percent in total non-
SEZ exports)
b. Top 10 export products by SEZ firms (percent in total SEZ
exports)
a. Non-SEZs b. SEZs
Source: CPSD team calculations using information from the DGA and the classification of product categories by level of technology in S. Lall,”The Technological
Structure and Performance of Developing Country Manufactured Exports, 1985–98,” Oxford Development Studies 28, no. 3 (2000): 337–69.
Note: Figures show technological content of DR’s SEZ and non-SEZ exports.
GOLD IN UNWROUGHT FORMS
FERRONICKEL
PLASTICS AND ARTICLES THEREOF
FRUIT AND NUTS, EDIBLE;
PEEL OF CITRUS FRUIT OR MELONS
SUGARS AND SUGAR CONFECTIONERY
MINERAL FUELS, MINERAL OILS AND
PRODUCTS OF THEIR DISTILLATION; ...
COCOA AND COCOA PREPARATIONS
ANIMAL OR VEGETABLE FATS AND OILS
AND THEIR CLEAVAGE PRODUCTS; ...
SALT; SULPHUR; EARTHS, STONE;
PLASTERING MATERIALS, ...
PRODUCTS OF THE MILLING INDUSTRY;
MALT, STARCHES, INULIN, WHEAT GLUTEN
MEDICAL OR SURGICAL
INSTRUMENTS AND APPARATUS
TOBACCO AND MANUFACTURED
TOBACCO SUBSTITUTES
ELECTRICAL MACHINERY AND
EQUIPMENT AND PARTS THEREOF
NATURAL, CULTURED PEARLS;
PRECIOUS, SEMIPRECIOUS STONES;...
APPAREL AND CLOTHING ACCESSORIES;
KNITTED OR CROCHETED
PHARMACEUTICAL PRODUCTS
PLASTICS AND ARTICLES THEREOF
FOOTWEAR; GAITERS AND THE LIKE;
PARTS OF SUCH ARTICLES
COTTON
NUCLEAR REACTORS, BOILERS,
MACHINERY AND MECHANICAL...
. . . . . .
US EU OTHER US EU OTHER
HIGH TECHNOLOGY
LOW TECHNOLOGY
MEDIUM TECHNOLOGY
PRIMARY PRODUCTS
RESOURCE BASED
HIGH TECHNOLOGY
LOW TECHNOLOGY
MEDIUM TECHNOLOGY
PRIMARY PRODUCTS
RESOURCE BASED
SHARE IN NONSEZ EXPORTS PERCENT
SHARE IN NONSEZ EXPORTS PERCENT
.
.
.
.
.
.
.
.
.
.
22
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
. THE RECONFIGURATION OF GLOBAL VALUE CHAINS
NEARSHORING IS A WINDOW OF OPPORTUNITY FOR
THE DR
The post-COVID-19 global economy is witnessing an acceleration of a series of
preexisting trends that are reconfiguring GVCs and the behavior of FDI in the world,
which creates opportunities for the DR to improve its economic model. Amid an
increasingly unstable global landscape, FDI flows are considering relocating among
geopolitically aligned and geographically proximate countries. Trade tensions
between the United States and China, COVID-19, and Russia’s invasion of Ukraine
are leading to the reversal of global economic integration. Firms and policy makers
are increasingly considering trusted economic partners to make supply chains
less vulnerable to geopolitical tensions. This phenomenon is often referred to as
nearshoring. As captured in an IMF text-mining exercise of earnings call reports,
firms’ interest in reshoring coincides with the increase in geopolitical risk, which
measures how geopolitically distant country pairs have become.
58
Most important,
the firms expressing interest in relocating their GVCs are on average larger in terms
of employees, more profitable, and more knowledge-intensive. Other challenges in the
global trade arena are contributing to the nearshoring trends: (a) labor costs and trade
taris have increased in China; (b) proximity to the end consumer is strategic where
speed of new product introduction is key; (c) resilience of supply chains is deteriorating
because shocks lasting for a month occur every 2.7 years; and (d) environmental,
social, and governance (ESG) considerations and environmental regulations are
becoming increasingly stringent.
59
As captured in figure 2.22 based on an IMF text-
mining exercise of earnings call reports, firms’ interest in reshoring coincides with the
increase in geopolitical risk, which measures how geopolitically distant country pairs
have become. Most importantly, the firms expressing interest in relocating their GVCs
are on average larger in terms of employees, more profitable, and more knowledge
intensive (figure 2.23).
FIGURE . RESHORING INTEREST AND GEOPOLITICAL RISK
FIGURE . FIRM CHARACTERISTICS AND RESHORING
INTEREST
Source: IMF, World Economic Outlook, April 2023.
Note: EBIT = earnings before interest and taxes; RHS = right-hand side.
GEOPOLITICAL RISK ANNUAL AVERAGE, =
INTEREST IN RESHORING RHS
NO MENTION OF RESHORING WITH MENTION OF RESHORING
SHARE IN NONSEZ EXPORTS PERCENT
NUMBER OF
EMPLOYEES
SALES DOLLARS,
LOGARITHM
INTANGIBLE
ASSETS SHARE
OF TOTAL ASSETS
PROFITABILITY
EBIT TO ASSETS
COVID
US CHINA
TRADE
TENSION
RUSSIAN INVASION
. . . .. . . .
23
PRIVATE SECTOR CONTEXT
However, the interest in relocating operations is not uniformly distributed across
regions. The World Bank global surveys of multinational companies with operations
scattered across the world indicatively illustrate the dierences in appetite by regions,
and they signal which regions are set to become winners of the nearshoring trend. The
surveys ask CEOs in which regions they expect to reduce and increase their assets the
most. Flows from East Asia are highly touted as the main target for other countries
to attract; however, most outflows from East Asia seem to be absorbed by the region
itself, hinting toward a recomposition of FDI within the region, while South Asia and
Europe and Central Asia seem to be the winners of East Asia’s FDI diversions. In fact,
analysis of global FDI flows points to a decreasing share of Latin American FDI (figure
2.24). Heightened political volatility among systemically important Latin American
countries could be playing a role, especially in markets where the investment climate
has deteriorated. Nevertheless, countries like the DR could take advantage of the
diversion of investment flows to attract new FDI by undertaking structural reforms, as
well as by expanding and improving the quality of infrastructure (box 2.1).
FIGURE . FDI FLOWS IN EMERGING MARKETS
Source: CPSD team calculation using UNCTAD, World Investment Report: Investing in Sustainable Energy for All (UN, 2023).
Note: EM = Emerging markets; RHS = right-hand side.
LAC SHARE OF EM FLOWS RHS
DEVELOPING ECONOMIES
LATIN AMERICA AND THE CARIBBEAN
,
%
%
%
%
US BILLIONS
24
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Despite this general sentiment toward Latin America as a region, FDI and SEZ export
data suggest that investors’ interest in the Dominican Republic has not subsided,
hinting at an increase in interest. The country has maintained its status as a rapid-
growing and stable economy, with the absence of strong political swings that might
jeopardize its long-lasting market-oriented environment. Furthermore, recent data
suggest that the Dominican Republic is harnessing some of the diversion of FDI flows.
For 2022, overall FDI in the country was 33 percent higher than its prepandemic level
and surpassed the US$4 billion threshold for the first time in history. This surge in
FDI was driven by tourism, energy, and firms under the SEZ regime whose inflow was
48 percent higher than their prepandemic level (figure 2.25). While the eect of FDI
tends to materialize with some delay, the postpandemic surge in FDI was accompanied
by an immediate recovery of real exports within the SEZ sector, which was partly
explained by existing firms reinvesting and expanding in the country. Industrial SEZ
exports increased 11 percent in real terms between 2019 and 2022, mainly driven by
high-value-added sectors, such as medical devices, whose growth contribution was 5
percentage points (figure 2.26).
FIGURE . SEZ FDI, FIGURE . SEZ GROWTH CONTRIBUTIONS,
Source: CPSD team calculations, Central Bank of the Dominican Republic.
Note: Both FDI and SEZ exports data corrected by price eects (using 2015 constant US$).
CONSTANT US, MILLIONS
INDUSTRIAL SEZ EXPORT BASKET
%
%
%
%
%
AVERAGE
%
%
MedTech 4.9%
Others 4.5%
Tobacco 3.1%
Jewelry 1.9%
Pharma 0.4%
Textiles -2.3%
Electricals -0.2%
Footwear -1.6%
25
PRIVATE SECTOR CONTEXT
BOX . THE DR’S STRATEGY TO SEIZE NEARSHORING OPPORTUNITIES
A recent comparative study on the country’s overall
performance has sought to determine which
manufacturing sectors could present the greatest
potential to take advantage of the nearshoring
trend. To this end, a sectoral index was constructed
by the Ministry of Industry and Commerce (with
advice and review provided by the World Bank
global FDI team), based on
• an intensive analysis of the Dominican Republic’s
export basket and revealed comparative
advantages, emphasizing the evolution of
Dominican exports to the US market;
• analysis of FDI attraction by sector;
• the evolution of US imports from the Dominican
Republic and China; and
• several other factors that aect trade flows
(Dominican Republic–Central America Free
Trade Agreement, freight costs, taris).
The index was applied to 14 economic sectors that
represent 60 percent of the country's export basket
between 2012 and 2020. It yielded the following
sector prioritization for nearshoring opportunities:
• The medical devices and pharmaceutical
sector obtained the first position in each of the
categories analyzed and could be profiled as one
of the sectors with the greatest potential to take
advantage of the nearshoring phenomenon.
• The electrical and electronic equipment sector
was in second position.
• The garment and textile manufacturing industry,
which stands out for its high productive
specialization, was in third position.
• Finally, the plastic articles sector followed in
fourth position, given its strategic importance
as a key input that conditions the production
processes of dierent sectors.
The study also identified aspirational sectors that
the country could migrate toward in the short
term, including chemicals, mechanical equipment,
furniture, and metal manufacturing. These
sectors represent 51 products and US$44 billion
in US imports, of which China currently sources
35 percent. Several factors particular to China,
including a 24.7 percent tari on these products and
sensitivity to shipment costs given that 71 percent
of these products enter through the east coast of
the United States, could steer attention toward the
Dominican Republic as an alternative production
location.
To complement the study and deepen the
understanding of the barriers that aect the
competitiveness of the sectors analyzed, a literature
review was conducted and semistructured
interviews with representatives of various
economic sectors were carried out, leading to the
identification of a series of proposals for measures
that could promote a greater attraction of FDI and
thus strengthen the participation of the Dominican
Republic in value chains.
Based on all of the above, policy actions on
the following areas were included in the DR
Nearshoring Strategy: (a) branding of the DR to
generate international recognition of the country’s
strategic position as an industrial and logistics
platform in the region; (b) specialization of human
talent to strengthen people’s employability in
these sectors; (c) simplification of tax permitting
and regulation to strengthen the regulatory
environment and investment climate; (d) productive
linkages and small and medium enterprise capacities
reinforcement to strengthen value proposition;
and (e) extension and upgrading of industrial
infrastructure and land to meet the highest
international standards for attracting FDI.
26
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Ultimately, harnessing the potential of nearshoring will depend on the country’s
ability to improve its investment climate and to shift the country’s comparative
advantages rapidly and strategically. Although the Dominican Republic’s
fundamentals broadly allow it to remain an attractive destination for FDI, seizing the
window of opportunity emanating from the changing patterns of trade in the current
global context and attracting investments in sectors with higher value-addition will
require swift and determined policy action. In particular, the Dominican Republic
must lay the groundwork to enhance its attractiveness for investors that are mindful
of the country’s talent pool and are increasingly vigilant about the sustainability and
inclusiveness of its production process, factors that are rapidly becoming critical for
consumers in destination markets. Fostering a stronger business environment across
the economy and firmly rooting the growth of exports within the local economy are
crucial steps toward enhancing economic inclusion, resilience, and creation of high-
quality jobs.
27
. KEY CHALLENGES
TO PRIVATE SECTOR
GROWTH
Multiple cross-cutting challenges hold back private sector growth, especially in
sectors that contribute to export diversification and inclusive high-quality jobs; the
CPSD report focuses on three: (a) the fragmented institutional and fiscal environment,
(b) the structural gaps in skills and education, and (c) the high prices and low
reliability of electricity. These challenges are particularly stifling the ability of the
private sector to seize emerging opportunities and contribute to a more resilient
and inclusive economy. A 2020 World Bank survey of firms located in free zones in
the Dominican Republic found that the business environment was perceived to be
the main bottleneck for the private sector (39 percent of firms), followed by human
capital (19 percent) and electricity (13 percent).
60
(See figure 3.1.) Although these
barriers cannot be entirely overcome in a three- to five-year horizon, this report aims
to shed light on key components of these barriers and to identify areas where policy
action can gradually alleviate the identified constraints and private sector investment
can be part of the solution.
FIGURE . SEZ MAIN BOTTLENECKS FOR THE PRIVATE SECTOR IN THE DOMINICAN REPUBLIC
(as % of firms identifying each bottleneck as key)
Source: World Bank Survey (2020) conducted among firms located in Zonas Francas in the DR.
BUSINESS ENVIRONMENT
HUMAN CAPITAL
ELECTRICITY
LOCAL LINKAGES
NONE
TRANSPORT
CONNECTIVITY
BACKWARD/FORWARD LINKAGES
ACCESS TO FINANCE
28
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
. REGULATORY COMPLEXITY AND INSTITUTIONAL
FRAGMENTATION, LEADING TO AN OPAQUE BUSINESS
ENVIRONMENT
During the last decade, the DR has implemented several reforms to ease dierent
business regulatory areas, such as business registration, secured transactions,
protections of minority shareholder rights, and insolvency. Measures taken in
recent years include the introduction of the Formalízate one-stop shop for business
registration and the 2019 amendment to the Law of Commercial Corporations and
Limited Liability Companies; the enactment of a new Law on Movable Collaterals in
2020; the introduction of a specialized commercial court division and a mediation and
conciliation framework; the adoption in 2017 of the Law on the Securities Market; the
enactment of the Law on Publicly Oered Securities, which encourages the placement
and trading of private sector securities on the local stock exchange; and the adoption
of a law that introduced a reorganization procedure and facilitates continuation of the
debtor’s business during insolvency proceedings. In August 2021, the government also
enacted Law No. 167-21 on Regulatory Reform and Simplification of Administrative
Procedures, which entered into force in February 2022. In 2022, the Portal for
Dominican Government Services was launched; this platform centralizes information
on dierent administrative procedures.
61
Despite these eorts, the prevailing business environment and regulatory governance
continue to be perceived as opaque and aected by excessive discretion and potential
capture, which in turn impacts the private sector’s global competitiveness.
62
Surveyed
businesses have consistently identified corruption as the biggest obstacle to private
sector growth. Reform eorts have resulted in gradual improvements in international
rankings, but the country’s standing across various indicators remains low.
Transparency International’s Corruption Perception Index 2022 ranks the DR 123rd
out of 180 countries, up from 137th out of 180 countries in 2019.
63
In the Worldwide
Governance Indicators 2022 update, the DR scored 54.8 out of 100 points in the
Government Eectiveness indicator, up from 38.9 in 2019.
64
Its lowest 2022 score on
that indicator is Control of Corruption at 31.2 points, below the average score for LAC
and for upper-middle-income countries (49.8 and 44.4 points, respectively). Similarly,
the DR ranks 92nd out of 140 economies in the World Justice Project’s Rule of Law
Index 2022, with its lowest scores in the Absence of Corruption and Regulatory
Enforcement factors, with 0.39 and 0.43 points out of 1, respectively. The DR also
ranks 78th out of 141 in the World Economic Forum’s overall Global Competitiveness
Index 2019(GCI), up from 92nd out of 138 counties in 2017.
65
Additionally, DR scores
2.7 out of 7 points in the GCI’s subindicator of Burden of government regulation (See
figure 3.2.)
29
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
Source: WEF Competitiveness Index.
Systemic economywide issues, related to private sector regulation and governance,
undermine the business environment. This report focuses on three of them.
Historically, the overall regulatory and institutional context has enabled the actors that
are most familiar with the status quo, while depressing the entry of disruptive firms
and agents into the economy. Three factors are central to creating the conditions for
this opaque business environment:
First are the unwieldy processes of licensing and authorization. The problem is mainly
due to (a) the lack of database and information sharing across agencies, (b) the lack of
eective risk-based regulations and systems, and (c) the poor or partial digitalization
of licensing and authorization processes. The Dominican Republic ranks 92nd out
of 193 in the United Nations’ E-Government Survey 2022, underperforming Costa
Rica, Colombia, and Ecuador.
66
Under a presidentially championed Zero Bureaucracy
initiative, eorts are ongoing to streamline and digitalize licensing and procedures
for investors in the DR. Fragmentation, however, not only increases the bureaucracy
and opacity of the existing regulatory environment, it also hinders reform eorts.
For example, the government is currently working on at least five “single windows”
directed toward investors (in addition to the ones related to citizen services in health
or housing): (a) Ventanilla Única de Inversión; (b) Ventanilla de Formalización de
Empresas; (c) Ventanilla Única de Comercio Exterior (VUCE); (d) Ventanilla única
para impulsar la inversión extranjera en energía renovable; and (e) Ventanilla Única
de Construcción, which applies to the construction of manufacturing facilities. The
lack of interconnection of databases among agencies risks confusion and increases
transaction costs that weigh particularly heavily on smaller firms. A recent analysis
FIGURE . SELECTED GLOBAL INDICATORS ON HOW THE DR COMPARES TO PEERS IN TERMS OF BUSINESS ENVIRONMENT
a. Global indicators or regulatory governance score,
0–5 (best)
b. Degree to which vested interest and cronyism distort
decision making, 0–4 (worst)
DOMINICAN REP.
STRUCTURAL
LATEST YEARS
ASPIRATIONAL
LATEST YEARS
REGIONAL
LATEST YEARS
ECUADOR
URUGUAY
TUNISIA
DOMINICAN REP.
STRUCTURAL
LATEST YEARS
ASPIRATIONAL
LATEST YEARS
REGIONAL
LATEST YEARS
ECUADOR
URUGUAY
TUNISIA
. . . . . . . . . . .
30
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
MOLDOVA
of the administrative procedures needed to establish companies in three special
regimes (SEZ, Border Development, and Logistics) shows that medtech firms, for
example, face an average 44 weeks wait time to start operations in SEZs—which
remains considerably more ecient than the equivalent under the General Tax
Regime (GTR)—as they go through 12 administrative procedures, fulfill 96 dierent
requirements, and interact with six dierent public institutions.
67
Carrying out some
procedures in parallel is also not possible given that the overall process has not yet
been streamlined based on an ambitious reform strategy that includes all relevant
agencies. Addressing the fragmented institutional context is fundamental for the
digitalization agenda and the success of the “Burocracia Cero” initiative.
Second, the level of coordination among the wide range of institutions that provide
support to firms and investors is insucient. This lack of coordination exacerbates
the perception of a fragmented and complex business environment and reduces the
eectiveness of support. The investment promotion and after-care policy area is one
example, among many, in which remediating action can be taken. ProDominicana
is the main investment promotion agency of the Dominican Republic, formally
reporting to the Ministry of Industry, Commerce, and SMEs (MICM). But in
practice, investment promotion eorts in the manufacturing sector are often led, and
significantly aected, by the Consejo National de las Zonas Francas de Exportación
(National Council of Free Trade Zones; CNZFE), which also reports to MICM.
Although the management boards of both institutions include cross-representation,
operational coordination—including on the definition of policy and strategy—remains
implicit and dependent on the personal initiative of appointees.
68
The crucial need for
a stronger unifying policy framework and institutionalized cooperation is evident in
the arm’s-length interactions between Proindustria and MICM (the former reports to
the latter), or ProDominicana and the MICM. Proindustria has a separate law outside
the tax code for local manufacturing (similar to SEZs) and dierent implementation
protocols; in practice, it operates as an autonomous executing agency that manages
industrial zones and channels the government’s policy on industrial real estate destined
to local manufacturers. Cross-institutional synergies among these public institutions
remain wanting. To increase the eectiveness and eciency of investment promotion,
facilitation, and after-care services in the Dominican Republic, it is critical to (a)
coordinate senior management appointments in these institutions, (b) clarify and
synergize their institutional mandates in a way that recognizes and addresses overlaps,
and (c) set ambitious, measurable, and trackable targets that stimulate cooperation.
Third, the fiscal context is fragmented and riddled with dierent regimes. This
creates an uneven playing field and barriers between firms in dierent regimes (see
appendix A). While some of the existing layers of fiscal and regulatory fragmentation
are the result of appropriate public sector responses to externalities, others are
creating counterproductive market distortions. The development of industrial zones
(most often by private sector developers) has aimed to provide spatial solutions
to manufacturing needs by encouraging agglomeration and economies of scale
(underpinning many of the positive results described in chapter 2). The streamlining
of regulations and digitalization of licensing within SEZs have also been largely
successful and should be scaled and expanded to all industrial zones (under the other
regimes) and the rest of the economy. Tax incentives and exemptions extended to
firms within SEZs, on the other hand, have shown a more nuanced impact, attracting
FDI and helping diversify exports while also creating distortions that weaken spillover
eects on the rest of the economy.
31
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
Economic distortions from special tax regimes increased between 2007 and 2017,
generating significant productivity and growth leaks.
69
SEZ firms do not often or
easily buy inputs from domestic suppliers across all sectors
70
—except for low-medium
technological manufacturing—and these uneven incentives weaken intersectoral
linkages.
71
For example, when conducting business with companies in the local
market, SEZ firms have to provide invoices with tax receipts, inclusive of the VAT
Tax on the Transfer of Industrialised Goods and Services (ITBIS), and report and
pay the ITBIS invoiced on a monthly basis. To be eligible for the upfront ITBIS
credit, companies must comply with the regulations established by the Internal Tax
Directorate, despite their status as exporters in free trade zones; this process adds an
additional layer of bureaucracy with another government agency, which most firms
prefer to avoid. Furthermore, market interviews point out the connectivity problems
and the administrative barriers from the domestic firm’s perspective: sales from the
national territory to the SEZs are considered “exports,” which means local firms must
undertake a heavy administrative process at the Customs Directorate.
72
This stifles the
development of a “missing middle” of SMEs, which could become suppliers or form
clusters around FDI-driven SEZs.
Recent studies suggest that tax exemptions in the Dominican Republic could constrain
productivity due to resource misallocation in low-sophistication manufacturing
sectors. Analyses reveal that formal manufacturing firms in low-tech activities (such
as textiles, clothing, and metal products), which benefit from special tax regimes
(SEZ regime), are approximately 30 percent less productive than peers operating
outside the SEZs under the GTR. Furthermore, firms under the SEZ regime exhibit
higher labor and capital demand compared to GTR firms. These findings indicate that
lower-performing firms receive more resources (labor and capital), leading to lower
aggregate sector productivity in low-tech manufacturing due to allocative ineciencies.
Additionally, firms registered under the SEZ regime remain in the market longer,
despite lower productivity levels, with an exit rate of 9 percent under the GTR and 7
percent under the SEZ regime during the 2007–16 period.
The nuanced impact of the fragmented fiscal context, combined with the increasing
fiscal vulnerability resulting from a low tax base and low revenues, suggests that
the Dominican Republic’s unique selling proposition should gradually become less
dependent on fiscal incentives and more strongly based on substantive and sustainable
competitive advantages. To achieve that end, the DR should capitalize on its natural
endowments (such as strategic geographic location) and accumulated assets (such as
advanced private sector capability to oer modern and well-serviced industrial land),
as well as new assets and reforms in enabling sectors (such as education, logistics, and
financial services). This eort will have the added value of reducing barriers to growth
for SMEs, allowing them to become suppliers to exporting firms (or to start directly
exporting) and boost formal job creation.
A detailed analysis of investment incentives in the Dominican Republic and
comparable countries shows that most—86 percent—come from tax exemptions and
reduced rates. No tax credits are oered, and accelerated depreciation represents only a
small proportion (5 percent) of all incentives. The distribution of the types of incentives
in the Dominican Republic is similar to that of regional counterparts such as Panama,
Costa Rica, and Colombia (see figures 3.3 and 3.4). Costa Rica oers the highest
number of incentives for SEZs, in particular (17), followed by the Dominican Republic
(12), while Mexico and Colombia oer only 2. Compared to the Dominican Republic,
32
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
only in Mexico do tax credits and accelerated depreciation represent the majority of
incentives oered; in the rest of the countries, exemptions and reduced rates dominate.
Also, the most recurrent incentive in the rest of the countries is exemptions—except
in Colombia, where the majority are reduced rates. Furthermore, the DR is the only
country that oers rebates; Panama and Ecuador are the only ones with tax stability
regimes, which can be an important instrument to encourage investment. The study
also compares the share of SEZs in the countries’ respective GDP (figure 3.5—see also
appendix B).
FIGURE . FISCAL INCENTIVES IN DR AS % OF TOTAL FISCAL INCENTIVES
Source: CPSD team.
FIGURE . DISTRIBUTION OF FISCAL INCENTIVES IN QUANTITY
Source: CPSD team.
74
12
5
7
2
Reduced rate
Accelerated depreciation
Rebates
Deductions
Exemptions
COSTA RICA COLOMBIA ECUADOR MEXICO DOMINICAN
REPUBLIC
PANAMA
EXEMPTIONS REDUCED RATE ACCELERATED DEPRECIATION FISCAL CREDITS
DEDUCTIONS TAX REBATES TAX STABILITY
33
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
Source: Asociación de Zonas Francas de las Américas (AZFA), 2020 compilation.
The cost-benefit of the incentives framework (that is, the diverse fiscal regimes)
deserves a thorough assessment and, based on a dialogue with the private sector,
gradual reform to produce more ecient results. The Ministry of Finance currently
uses an IMF cost-benefit assessment tool to assess, ex ante, each application to
establish a business in the DR’s wide range of regimes. There is benefit to be gained
in applying the same approach to assess the overall impact of the fiscal incentives
(individually and collectively), ex post and in considering their negative externalities
on value chain linkages across regimes. The government could then define new
objectives and refine incentive provisions to attract FDI based on transparent ex
ante criteria, including (a) the strategic importance of investments to the country
and their alignment with national priorities; (b) the cost-benefit ratio of applying the
incentive, usually more positive in the case of eciency-seeking investments; and (c)
the eectiveness of the incentives in influencing investor behavior and creating desired
economic benefits (such as engaging local suppliers).
Table 3.1 outlines priority actions to tackle the constraint of the DR’s opaque business
environment.
FIGURE . SEZS EXPORTS AS A SHARE OF GDP
.%
PANAMA
PACIFIC
URUGUAY CURAZAO
CURINDE
PANAMA
ZLC"
DOMINICAN
REPUBLIC
COSTA RICA
.%
%
.%
.%
.%
34
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . MATRIX OF PRIORITY ACTION ON REGULATORY COMPLEXITY AND INSTITUTIONAL FRAGMENTATION
POLICY SPECIFIC ACTIONS TIMELINE LEAD ACTOR
Streamlining
and modernizing
(including
digitalization)
the regulatory
environment for
business
• Automate the approval process of firm establishment in SEZs. Remove
the de jure discretionary aspect of the authorization process and convert it to an
automated process based on preset, objective eligibility criteria.
• Map and concentrate information on all available incentives on the CNZFE
website to increase transparency of and access to information for investors.
• Digitalize and streamline the licensing processes (for firms investing in SEZs)
for sanitary and environmental regulations (especially for low-risk categories).
Pilot similar processes in municipalities that have export-oriented industrial zones
(including Santo Domingo and Santiago).
• Introduce risk-based approaches for licensing and permitting, starting with
regulatory areas impacting multiple sectors and facilitating nearshoring (including
environmental).
Short term CNZFE
CNZFE
MICM
MARENA
MAP
MARENA
MPA
MICM
• Create a fully integrated transactional service delivery platform for firms
with a user-centric interface that facilitates complete transactions rather than
individual processes; modernize back-oce procedures across agencies to make
them fully integrated and digital; and enable direct data-sharing by harmonizing and
linking the databases of relevant agencies, eliminating duplications of information
requests. The existing public service portal—currently a catalog of procedures—can
be leveraged for this purpose.
• Strengthen the regulatory and institutional framework of digital
governance. To enable agile policy making and provide digital government-to-
business services, coherent regulatory and institutional frameworks are essential.
This requires reviewing or designing laws and regulations in areas such as protecting
citizens’ data, cybersecurity, and information and communication technology
standards and norms.*
Medium
term
CNC
OGTIC M
ICM
CNC OGTIC
Improving
coordination and
client orientation
of private
sector support
institutions
• Map and compare the de jure and de facto mandates and activities of FDI
promotion and after-care-related agencies (ProDominicana, ProIndustria, and
CNZFE) to identify overlaps, consider options for harmonization and consolidation of
responsibilities and roles, and develop alignments between resources and mandates.
Short term MICM
• Through an inter-institutional memorandum of understanding,
articulate a results-based framework for client orientation and strategic
coordination between the three investment promotion institutions.
Include specific targets and operational performance metrics, so actions are
coordinated systemwide and are strategy driven.
Medium
term
Improving fiscal
incentives for FDI
• Make an evidence-based assessment of all fiscal incentives to determine
their value added. For example, use an adapted version of the IMF cost-benefit
assessment tool already used by the Ministry of Finance for ex post analyses.
Short term MH MICM
Note: CNC = National Competitiveness Council; CNZFE = National Council of Free Trade Zones; MAP: Ministry of Public Administration; MARENA = Ministry of
Environment and Natural Resources; MH = Ministry of Finance; MICM = Ministry of Industry, Commerce, and SMEs; OGTIC = Government Oce of Information
Technology and Communication.
*Detailed recommendations are provided in a dedicated 2023 World Bank report, Report on Approval Procedures for Company Establishment in Three Special
Regimes: Special Economic Zones, Border Development, and Logistics.
35
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
.. THE SKILLS GAP AND LOWQUALITY EDUCATION
Educational outcomes in the DR are significantly below what would be expected for
a country at its level of economic development and a key constraint to the country’s
productive potential.
73
(See table 3.2.) The 2018 World Bank Human Capital Index
ranks the Dominican Republic 101st out of 157 countries.
74
This ranking is low
compared to its LAC regional peers and income group, mostly owing to the indicators
that reflect learning outcomes, such as the harmonized test scores and the learning-
adjusted years of school. Although approximately 70 percent of the labor force
has completed secondary school—3 percentage points higher than structural peer
countries and only 2 percentage points below aspirational peers—labor productivity
is roughly half the level of aspirational peers and 44 percent lower than in structural
peers.
75
According to World Bank estimates, only 19 percent of the DR’s students
complete primary school with a minimum achievement level in math (figure 3.6). The
2018 test scores from the Organisation for Economic Co-operation and Development’s
(OECD’s) Programme for International Student Assessment (PISA) showed that the
Dominican Republic ranked, on average, 23 positions below its structural comparators
and 43 positions below its aspirational comparators. Household survey data show that
workers joining the labor market in the DR had an average learning gap of four years
relative to their peers in the United States for a similar length of time spent in school.
76
While there is gender parity in terms of learning outcomes in basic education, slightly
in favor of girls, young women face cultural norms and constraints that cut short their
educational aspirations and trajectory in the system. Early pregnancy is rampant,
with 93 births (in 2018) per 1,000 women ages 15–19, much higher than the average
for LAC (56) and the average for the DR’s income group.
77
Additionally, Dominican
women face considerable asymmetries in the labor market compared to men. Starting
with a lower labor participation rate (64 percent for women versus 74 percent for
men), women are more likely than men to experience unemployment and to work
fewer hours; they are also likely to earn less than men even when employed in the same
sector (earning, on average, 85 percent of men´s earnings).
78
This fundamental challenge for the Dominican Republic results from decades of
avoiding critical reforms in the sector, leading to ineciency in expenditures and,
ultimately, poor access to qualitative education. Although the budget has increased
substantially since 2013 (the pretertiary education budget has doubled, from 2.3 to
4.0 percent of GDP), the system still grapples with decades of underinvestment in the
sector. That underinvestment translates into the current situation of underprepared
students (low penetration of early childhood education), pedagogical inputs not
aligned with teaching-learning activities (old curriculum, lack of resources in schools,
limited school hours), underqualified and unmotivated teachers, and system and school
management mechanisms that do not support the teaching-learning process.
36
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Canada
Finland
United States
Australia
Norway
Germany
Belgium
Netherlands
Croatia
Russian Federation
Lithuania
Iceland
Slovak Republic
Greece
Romania
Uruguay
Costa Rica
Montenegro
Mexico
Bulgaria
Jordan
Brazil Colombia
Argentina
Peru
Thailand
North Macedonia
Azerbaijan
Georgia
Indonesia
Morocco
Belarus
Ukraine
Serbia
Romania
Moldova
Montenegro
Bulgaria
Albania
Bosnia and Herzegovina
North Macedonia
Kazakhstan
Kosovo
Estonia
Ireland
Poland
Sweden
United Kingdom
Denmark
Slovenia
France
Portugal
Czechia
Austria
Switzerland
Latvia
Italy
Hungary
Iceland
Luxembourg
Turkiye
Slovak Republic
Greece
Malta
Cyprus
Chile
Panama
Dominican Republic
Israel
United Arab Emirates
Jordan
Brunei Darussalam
Qatar
Saudi Arabia
Lebanon
China (B-S-J-Z)
Singapore
China (Macao)
Hong Kong SAR, China
Korea
New Zealand
Japan
Australia
Malaysia
Indonesia
Philippines
325
375
425
475
525
575
0 20000 40000 60000 80000 100000 120000
PISA 2018 Score in Reading
GDP Per capita in 2018 or latest, PPP (constant 2017 USD) World Bank WDR
Source: World Bank, World Development Report 2018: Learning to Realize Education’s Promise (Washington, DC: World
Bank, 2018) based on Programme for International Student Assessment (PISA) 2015.
FIGURE . THE DOMINICAN REPUBLIC IN THE GLOBAL CONTEXT FOR EDUCATION
a. Percentage of students that complete primary education with a minimum achievement level in
math
b. Ratio of development and performance level in PISA 2015
HIGHINCOME COUNTRIES UPPERMIDDLE INCOME
COUNTRIES
LOWERMIDDLE
INCOME COUNTRIES
LOWINCOME
COUNTRIES
NICARAGUA
PISA SCORE IN READING
GDP PER CAPITA IN OR LATEST, PPP CONSTANT USD WORLD BANK WDR
DOMINICAN REPUBLIC
DOMINICAN
REPUBLIC
BOLIVIA
PARAGUAY
CHILE
, , , , , ,
37
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
Skills shortages are among the most critical structural obstacles reported by private
sector firms across the economy.
79
A survey of firms in the SEZ regime revealed that 19
percent of firms have reported that deficient human capital is a bottleneck for private
sector development, making it the second main bottleneck.
80
Similarly, a national
survey of the private sector revealed that nearly 10 percent of firms consider inadequate
human capital a constraint for business development, the fourth main constraint
in the survey.
81
Specifically, 40 percent of those firms referred to a lack of technical
skills as a major constraint for filling vacancies, a problem that is more pronounced in
large firms. Among firms with more than 250 employees, 54 percent reported having
diculty filling a vacancy compared to 41 percent of micro enterprises with 16 to
19 employees. Nearly 70 percent of all firms indicated that their labor force requires
stronger technical skills to improve job performance, a share that goes up to 82 percent
in electricity, 81 percent in the communication sector, 74 percent in the retail trade
sector (or commerce), and 73 percent in hospitality (figure 3.7).
The magnitude of the skills mismatch is further demonstrated by the estimated gaps
between potential demand for skills in fast-growing sectors and current insucient
demand. A recent study of the medical device production cluster indicates the sector
expects to reach 35,000 jobs, which will generate a demand in the next five years for
(a) 15,983 assemblers, (b) 4,599 machine operators and basic technicians, (c) 3,502
senior technicians, and (d) 2,199 professionals from engineering and related areas.
82
The inability to supply professionals with the required skills in the projected volumes
could become a significant barrier to developing the growth potential of the fastest
growing export sector (in chapter 4, see Policies That Aect Linkages with Education
and Skills Training Institutions in the section, Medtech Context). Employers in the
medtech cluster are already working with local institutions to train workers. But
current programs are insucient to keep up with the demand for technicians, and
some are not located near employment opportunities.
83
In 2023, the World Bank conducted a detailed assessment
84
of the skills, competences,
and professional preemployment and on-the-job training available for logistics in
the DR, as well as the demand for logistics skills, as a proxy for these gaps The
logistics sector in the Dominican Republic is growing, and policy eorts aim to
position the country as a regional logistics hub. Growth and expansion projects
executed by shippers and other companies in the logistics sector are driving stang
demand, with the biggest share of unfilled vacancies in operational (50 to 60 percent)
and administrative (30 to 40 percent) occupations. The survey found a shortage of
candidates with adequate logistics skills in the market: 85 percent of interviewed
companies pointed to a shortage of qualified candidates for operative-level positions
(especially crane operators), and 78 percent indicated a shortage of qualified sta for
administrative-level positions. The shortage of operative and administrative sta is
reflected in the low scores and maturity levels across various demand-side categories
assigned by the World Bank report
85
based on interviews with industry organizations
and stakeholder groups (figure 3.8). Consequently, most companies recruit personnel
without proper knowledge and then invest in on-the-job training related to the
specific technical or operational aspects of the job. Every operative logistics sta
member needs training during the first months of employment. Length of training
can vary from 2–3 months in some companies to 6–11 months in others. Because
many logistics companies and producer associations have invested in cold chain
facilities, the skills that are most in demand include cold chain facility operation and
management, as well as precooling techniques that are needed for optimum storage of
38
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
the products. In agri-logistics, food packaging companies, the wholesale market, and
hotel suppliers require personnel with knowledge or certification in food hygiene and
safe food handling. In transportation and logistics, key skill shortages include freight
forwarding, dispatchers of ships or port terminals, ship/terminal yard planners and
operations supervisors, and superintendents or chief supervisors.
86
A national survey
87
found that companies reported 5,277 vacancies in the transportation and warehousing
economic activity group in 2020; a projection indicated the potential for 19,894
vacancies for operational jobs in a five-year period, 5,673 vacancies for administrative
and technical jobs, and 818 vacancies for managerial positions. In contrast, in the year
the survey was conducted, there were 94 graduates from the logistics careers oered by
universities and colleges and 411 graduates from the two logistics technical high school
programs, highlighting the breadth of the skills gap in logistics.
FIGURE . PERCENTAGE OF FIRMS REPORTING A NEED FOR
SKILLS TRAINING, BY SECTOR,
FIGURE . MATURITY LEVELS FOR THE DEMAND SIDE
BEST
FIGURE . MATURITY LEVELS FOR THE SUPPLY SIDE
Source: Assessment data from World Bank, Dominican Republic: Assessment of Logistics Skills, Competencies, and
Training (Washington, DC: World Bank, 2023).
Note: Maturity levels used in the assessment: Level 1 = Minimal Capability, Level 2 = Marginal Capability, Level 3 = Average
Capability, Level 4 = Advanced Capability, Level 5 = Global Best Practice.
AGRICULTURE
TRANSPORT
CONSTRUCTION
MANUFACTURING INUDSTRIES
WATER
HOTELS, BARS, & REST
MINING
TRADE
COMMUNICATIONS
ELECTRICITY
RECRUITMENT OF OPERATIVE
LOGISTICS STAFF
SKILLS LEVEL OF EXISTING OPERATIVE
LOGISTICS EMPLOYESS
RECRUITMENT OF ADMINISTRATIVE
LOGISTICS STAFF
SKILLS LEVEL OF EXISTING
ADMINISTRATIVE LOGISTICS EMPLOYEES
RECRUITMENT OF LOGISTICS
SUPERVISORS
SKILLS LEVEL OF EXISTING LOGISTICS
SUPERVISORY EMPLOYEES
RECRUITMENT OF LOGISTICS
MANAGERS
SKILLS LEVEL OF LOGISTICS MANAGERS
CURRENTLY IN POST
AVAILABILITY OF VOCATIONAL EDUCATION IN LOGISTICS
QUALITY OF VOCATIONAL EDUCATION IN LOGISTICS
AVAILABILITY OF LOGISTICS EDUCATION BY PRIVATE TRAINING PROVIDERS
QUALITY OF LOGISTICS EDUCATION BY PRIVATE TRAINING PROVIDERS
AVAILABILITY OF LOGISTICS EDUCATION BY UNIVERSITIES
QUALITY OF LOGISTICS EDUCATION BY UNIVERSITIES
AVAILABILITY OF INHOUSE TRAINING
QUALITY OF INHOUSE TRAINING
CERTIFICATIONS OF LOGISTICS SKILLS
ROLE OF ASSOCIATIONS
ATTRACTIVENESS OF LOGISTICS INDUSTRY
AVAILABILITY OF RECRUITMENT SERVICES
.%
.%
.%
.%
.%
.%
.%
.%
.%
.%
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
YES NO
39
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
The skills mismatch and shortages in the logistics sector can be partially addressed
through joint strategies with private sector associations and through specialized
programs. The rapid growth of the sector needs to be met with the requisite strategies,
policies, and resources to support relevant skill generation. The World Bank
assessment
88
finds low levels of maturity for the availability and quality of vocational
and university programs in logistics compared to in-house training (Figure 3.9). The
availability of preemployment education for logistics is limited, with 45 percent of
companies indicating limited vocational oerings and 75 percent indicating limited
university and college oerings. The main providers of vocational education and
technical programs are the governmental institution Instituto de Formación Técnico
Profesional (INFOTEP) and several business associations. The latter have developed
programs to cover basic logistics topics, but they do not cover the growing needs of the
sector. A technical high school program on logistics and transportation is also being
oered in several schools, but many of the companies interviewed for the logistics
assessment were not aware of it, suggesting limited coordination between providers
and the private sector. The educational oerings from universities and colleges remain
limited, with three institutions oering a total of seven specialized programs: three
at technician grade, three at bachelors’ grade, and one at masters’ grade. A lack of
qualified instructors and teachers to support existing programs adds to the challenge
of developing more programs, and the overall low level of foundational skills in the
science, technology, engineering, and mathematics (STEM) fields weakens the pipeline
of qualified students entering these programs. Additionally, women and girls in the DR
continue to be underrepresented in STEM careers as they account for no more than 40
percent of graduates in STEM fields.
89
As a result, and since many of the professionals
in the sector come from more general careers (such as industrial engineering,
management, and international commerce), training on logistics-specific skills is often
provided on the job, through private training providers, or both. Companies have
developed internal training programs and provide in-house training for 50 to 100
percent of required skills. The main challenges in in-house training include limited
availability of trainers that combine practical knowledge and pedagogical skills,
limited capacity to train all required personnel in the required time, and diculty
balancing the workload of trainers and trainees against regular daily activities.
Opportunities are growing for the private sector to participate in closing the skills
gaps across industries in the Dominican Republic. Private sector associations play a
pivotal role not only in informing the design and curricula of specialized programs
but also in closely coordinating policies. A structured public-private dialogue can help
address the multiple channels that contribute to closing the gap, including (a) the use
of performance-based private sector providers of essential training, such as English
language proficiency, as well as specialized and vocational training in agri-logistics,
medtech, and other rapidly evolving sectors; (b) design of curricula in universities
and continuing education centers; and (c) orientation of scholarships abroad. Support
for industry networks can also improve the flow of skills and alleviate the mismatch.
Recent IMF analysis of firm-to-firm hiring found higher match quality associated with
hiring from buyers or suppliers than from unconnected firms; such hiring led to further
benefits, such as higher firm productivity growth, faster employee wage growth, and
longer job match duration.
90
Table 3.2 oers priority actions to deal with the constraint of the DR’s skills gaps.
40
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . MATRIX OF PRIORITY ACTIONS TO ADDRESS THE SKILLS GAP AND LOWQUALITY EDUCATION
POLICY SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Closing the skills
gap
• Leverage performance-based private sector provision of relevant
vocational skills in sectors such as logistics and MedTech to address current gaps
in targeted sectors, based on gap assessment with private sector associations,
where providers are paid for successful and sustained (more than 8–12 months) work
placements of trainees.
• Increase labor force proficiency in English through a comprehensive
language program focused on short-term results (create business-oriented
versions of Inglés por Inmersión, provide scholarship and internship opportunities
abroad through MESCyT) and long-term impact (early childhood, middle school, and
high school).
• Improve the attractiveness and public awareness of jobs (and growth
prospects) in sectors such as logistics, medtech, and other fast-growing
sectors to increase educational enrollment through promotional campaigns, fairs,
internships, and so on.
• Develop case studies on good practices and lessons learned from countries
where skills improvement (such as English) has been successfully achieved.
Short term MICM
• Establish more comprehensive sector-specific specialized training
programs for skills in high-demand sectors, scaling and improving
university programs that provide specialized skills: Reform university curricula
through industry-academia dialogue to oer flexible and customizable courses
that are responsive to changing market needs and geared toward competencies
relevant for higher-value-added processes and products. Also, develop university-
level certification programs for specific sought-after technical skills or short-cycle
postsecondary programs provided by polytechnical schools. Sector-specific training
should stress (a) specialized areas, such as medical devices and e-health, smart
manufacturing, and global shared services (for medtech); and food handling,
precooling, cold chain equipment management (for agri-logistics); (b) technology,
focused on 3D printing, robotics, and new materials; and (c) capabilities, focused on
creativity and design thinking, customer centricity, technology design, and soft skills.
• Promote FDI investment in continuing education and skills training of
employees.
Medium to
long term
MESCyT
sector
clusters
MH
CNZF
MESCyT +
universities
Note: CNZFE = National Council for Exporting Special Economic Zones; MESCyT = Ministry of Higher Education, Science, and Technology; MH = Ministry of Finance;
MICM = Ministry of Industry, Commerce, and SMEs.
41
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
.. ENERGY AND ELECTRICITY
Unreliable electricity infrastructure and the high cost of energy is another key
constraint to private sector competitiveness, especially in manufacturing. (See table
3.3.) According to the World Bank’s 2016 Enterprise Survey, 14 percent of Dominican
firms rank electricity as a main barrier to growth, as energy losses continue to be an
obstacle to an ecient and well-functioning electricity system. While, historically,
losses in the national interconnected system have been high, such losses had been on
a downward trend converging toward 20.0 percent before abruptly reversing toward
30.0 percent due to the pandemic shock; since 2020, they have oscillated above 30.0
percent, closing at 32.4 percent in 2022. Losses are particularly high in areas with high
poverty rates, where distribution networks are often poorly managed and are highly
vulnerable to fraud. The eastern region of the country, for example, faces lagging
and outdated infrastructure, which undermines its collection capacity and makes it
an outlier in terms of energy losses. Meanwhile, electricity service quality indicators
remain among the lowest in the Latin America and Caribbean region.
91
As a result,
poor and vulnerable households are disproportionally aected by unreliable access to
basic electricity services. Moreover, despite eorts from the 2020–24 administration
to minimize interruptions, they continue to be a drag on competitiveness. On average,
Dominican firms lose 5 percent of their sales due to power outages. Removing
distortions in the energy sector could potentially unlock 0.09 percentage points
increase in GDP by reducing blackouts that disrupt manufacturing activity.
92
The electricity sector in the DR is segmented
93
with a high level of private
participation in power generation. Privately owned generation accounts for 73
percent (3,822 megawatts) of the country’s total installed capacity, with the
remaining delivered by fully public companies or through PPPs.
94
The publicly owned
Electricity Transmission Company (Empresa de Transmisión Eléctrica Dominicana;
ETED) is in charge of the management, operation, and maintenance of the National
Interconnected Electric System (Sistema Eléctrico Nacional Interconectado; SENI)
95
and of preparing the transmission expansion plan. Almost all power distribution
96
is
carried out by three state-owned, regional electricity distribution companies (Empresas
Distribuidoras de Electricidad; EDEs)
97
—EDE Norte, EDE Sur, and EDE Este—each
controlling about a third of the market. However, concessions exist whereby private
sector operators run a vertically integrated electricity market, with noticeably higher
overall performance levels than the EDEs.
42
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The sector lacks financial viability, indicating the need for state-owned enterprise
reforms and increased private sector participation in renewable energy generation.
The DR’s electric system features the third highest industrial electricity price in
LAC (approximately US$ 16 cents/kilowatt-hour).
98
Below-cost electricity taris,
which function as a generalized subsidy, disproportionately benefit high-income
households, resulting in a heavy burden for the state, representing 1.3 percent of
GDP in 2022. The tari revenue received by the EDEs covers only about two-thirds
of costs, and regulations requiring indexation of taris to fuel prices and exchange
rates have not been implemented per existing tari regulation. Bono Luz, a social
transfer program for poor and vulnerable households, adds to government expenses
and exacerbates the burden on the state derived from the electricity sector. The
November 2021 tari increase was the first electricity tari adjustment in over a
decade. However, the scheduled increase in taris was paused in June 2022 due to
political backlash, as higher electricity bills for households reinforced inflationary
pressures experienced during the postpandemic era. This tari revenue shortfall
together with high energy losses (mostly due to widespread energy theft) as well as
high generation and operating costs have produced chronic financial deficits in the
EDEs. On the distribution segment, the World Bank is supporting authorities through
a Multiphase Programmatic Approach aimed at improving the operational, financial,
and environmental performance of the EDEs.
99
Private investment can further support
the enhancement of the electricity sector by expanding the penetration of renewables in
the generation segment.
Sector governance faces significant challenges including an outdated legal framework,
a fragmented institutional framework, and weak regulatory enforcement. The
Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE) was created
to be the overall coordinating body of all state-owned enterprises operating in the
sector. The central government allocated substantial resources to the CDEEE to
finance investment projects and cover the financial losses of public enterprises in the
electricity sector. Over time, it established de facto policies and was the recipient of
all government subsidies while operating within an environment of weak government
oversight and lack of transparency.
100
Consequently, the 2020–24 administration
dissolved CDEEE; it was at this point that the Unified Council of the EDEs was
created, reporting directly to the Ministry of Energy and Mines (MEM). Persistently
high financial losses and low operational performance in the EDEs highlight continued
challenges to improving the oversight and accountability of sector entities. For many
years, electricity rationing was the answer to low operational performance and
financial losses. This in turn has created a cycle of poor quality of service, lack of
trust between distribution companies and consumers, poor payment discipline, and
electricity theft.
Given the large share of fossil fuels in the grid and their historically high costs,
private sector investment in renewable energy projects is instrumental in ensuring a
sustainable and competitive electricity system. High reliance on imported fossil fuels
for power generation (80 percent of the country’s primary energy supply) has made
the DR vulnerable to adverse international fuel price shocks; it has also contributed to
high emission intensity and poses a threat to achieving GHG emission reduction goals
and improving local air quality. By December 2022, clean generation accounted for
18.1 percent of the country’s energy supply (figure 3.10), of which nonconventional
renewables represented 10.6 percent. But given the country’s significant endowment of
renewable energy resources, the potential generation is 6 gigawatts (GW) by 2030.
101
43
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
Despite the low share of nonconventional renewables in its energy grid, the Dominican
Republic rearmed its commitment to raising the regional share of renewables in
the power generation mix to 70 percent by 2030 at the United Nations (UN) COP26
climate conference. This aspirational goal will require substantial eorts on the policy
side to ensure that private sector generation of renewables increases significantly within
a seven-year window. In February 2021, the government signed and approved the
Electricity Pact (Pacto Eléctrico), which is expected to help diversify the nation’s energy
matrix with cleaner technologies, reduce electricity losses in the distribution network,
and promote financial sustainability of energy distributors. The pact also promotes
distributed energy
102
to make the energy system more ecient.
FIGURE . SHARE OF ELECTRICITY BY SOURCE,
Source: Ministry of Energy and Mines.
Securing a reliable and sustainable—environmentally and financially—electricity
supply is the cornerstone of the DR’s National Development Strategy (NDS) 2030.
As described previously, to strengthen the sector’s governance, the government
amended the General Electricity Law to liquidate CDEEE and provide clear roles
and responsibilities to key sectoral entities. Authorities are also taking steps to
improve the governance and management of the distribution companies, mainly
through performance indicators and improvements in the contracting framework
for outsourced commercial functions (for example, meter reading, collection, and
client and fraud management). Also, an amendment to the General Electricity Law
for a “Harmonized Law of the Electricity Sector” has been submitted for Congress’s
approval. The amendment formally designates MEM as the overarching governing
body in the sector and integrates the National Energy Council (CNE) into MEM
to centralize and strengthen the planning functions, while moving the regulation
of electricity cooperatives from CNE to the Superintendency of Electricity (SIE).
Further revision and convergence of taris toward cost recovery and incentives to
reduce distribution losses will improve the financial self-suciency and operational
performance of the electricity sector and contribute to GHG emissions reduction.
These policy actions will facilitate the establishment of a PPP between the EDEs and
private companies.
34.7%
34.7%
8.6%
7.5%
5.1%
4.3%
1.2%
Oil
Hydro
Wind
Solar
Biomass
Gas
Coal
44
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Private sector investment in renewable energy is enhancing the sector’s climate
resilience and sustainability, as is the government’s acceleration of the development of
renewable projects to mitigate the country’s dependence on imported fossil fuels. The
Electricity Pact is supporting a least-cost approach to power generation that could lead
to competitive renewable energy auctions in the medium term, with opportunities for
local and international project developers. The authorities involved in this planning
need to consider the system’s flexibility to accommodate further renewable energy
penetration in line with the country’s decarbonization targets. One of the pillars
will be creating direct opportunities for private sector participation, either (a) to
help improve the financial sustainability of the sector, (b) to meet specific targets
for renewable energy generation, or (c) to promote distributed energy. Competitive
procurement procedures, if implemented as envisaged by Presidential Decree 65-23,
will further contribute to the reduction of renewable energy costs. Furthermore, a
draft of the Energy Eciency law is currently in Congress; it provides the regulatory
basis for the implementation of pertinent measures for buildings and industry. In
anticipation of this bill, the presidential decree for public sector energy eciency was
signed in April 2023; the decree mandates standards for public institutions, including
the scope for replacement of energy-ecient equipment and rooftop solar in public
sector buildings. This will contribute to reducing costs, enhancing the resilience of the
power grid, and promoting private sector investment in power generation.
Private developers have mainly focused on solar projects; however, the country has
significant wind potential that remains untapped. Potential installed capacity of
commercial wind generation in the Dominican Republic is approximately 35.3 GW
at an average capacity factor of 29.8 percent, with some highly attractive zones at
35.3 percent.
103
Most important, not only have the costs of developing wind projects
substantially decreased and the impacts on land use lessened, the country also
benefits from a wind generation profile that complements solar energy—wind output
is strongest in evenings and mornings. Private sector investment can be accelerated if
sector-specific constraints are addressed; these include environmental and social issues,
which tend to delay and increase the cost of projects, and the need for onsite wind
measurement and biodiversity surveys.
Table 3.3 lists priority actions to address the constraints of the DR’s energy and
electricity constraints.
45
KEY CHALLENGES TO PRIVATE SECTOR GROWTH
TABLE . MATRIX OF PRIORITY ACTIONS TO INCREASE RENEWABLE ENERGY PENETRATION
POLICY SPECIFIC ACTIONS TIMELINE LEAD ACTOR
Increasing
penetration of
renewables
• Implement the decree and streamline competitive tenders by establishing
standardized project documents. This will reduce uncertainty and legal costs and
speed up procurement processes. Expanding the bidder pools can increase competition
in tenders, resulting in lower taris, and enhancing tender design can mitigate the risk
of developer concentration and ensure competitive taris.
Short term MEM
MEM
CNE
SIE
OC
MEM
CNE
• Optimize the integration and stability of renewable energy in the country’s
grid. The country benefits from complementarity of wind and solar resources, given
that wind output is strongest in the evenings. Improving the regulatory framework for
remuneration of firm capacity will help replace polluting generation (such as coal) and
facilitate the development of renewable energy projects with storage. The site selection
process must prioritize development nearby, readily available evacuation capacity and
be done in tandem with planned transmission sector investments.
• Address environmental and social issues early on through a standardized
approach. Perform early-stage biodiversity work to inform (a) optimal site selection,
(b) appropriate wind and solar power plant design, (c) avoidance of collision with
threatened bat and bird species (for wind) and jeopardizing agricultural production (for
solar). In addition, address social risk via preparatory work for land rights acquisition
in ways that reflect industry best practices—a step that is crucial in a market with high
uncertainty and ambiguity pertaining to land titles (development of land use rights
agreement, cadastral mapping, rights registration).
• Enable the introduction of battery systems in the market. Design and
implement regulation pertaining to the dierent market uses of battery technology, as
well as their remuneration schemes in ways that provide clarity to investors.
SIE
• Increase investment in the transmission sector aligned with predetermined sites
where renewable sources are abundant but evacuation capacity is inadequate.
Medium to
long term
ETED
Note: CNE = National Energy Council; ETED = Dominican Electricity Transmission Company; MEM = Ministry of Energy and Mines; OC = Energy Grid Coordinator; SIE=
Superintendency of Electricity.
46
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Shutterstock/Wirestock Creators
47
. KEY PRIVATE SECTOR
INVESTMENT
OPPORTUNITIES TO
GROW MARKETS
Although structural cross-cutting constraints are gradually being addressed, some
sectors oer opportunities for private sector investment while helping the economy
pivot toward a more resilient and inclusive trajectory. The sector selection process for
this report looked at a long list of sectors (including tourism, agriculture, medtech,
electronics, garment manufacturing, real estate, and logistics) where accelerating private
sector investment in a three- to five-year horizon is feasible, and where sector growth
contributes to pivoting the economy toward a more inclusive and resilient trajectory.
The following sector assessments highlight opportunities in three short-listed
sectors. First, the medtech assessment helps showcase how private sector investments
and public policy actions can support growth in high-value-added manufacturing
sectors (which are also leading employers of women), while helping to develop
backward linkages, and scale a new growth paradigm that is more inclusive of local
SMEs and local talent. Recommendations aim to help seize potential nearshoring
opportunities (and manufacturing FDI more broadly) and strengthen the broader set
of high-value-added manufacturing sectors in the DR (for example, electronics and
pharmaceuticals). Second, the industrial real estate sector assessment shows how
ripe opportunities for the development of eco-industrial parks can improve access
to the next generation of serviced industrial land. A better industrial infrastructure
will strengthen the competitive advantage of the DR and reduce the share of fiscal
incentives in its unique value proposition. The private sector already plays a leading
role in oering serviced industrial land in the DR, but reforms can help better leverage
capital markets, increase resilience in the face of disaster risks, decarbonize the
growth of manufacturing, improve the circularity of the economy, and position the
DR as a leading destination in Latin America for green FDI. Third, the agri-logistics
sector assessment identifies investments and reforms that can promote climate-smart
agriculture, while also providing a blueprint of how logistics, more broadly, can better
leverage the geographic position of the DR to promote higher-value added exports.
48
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The rationale for the short-listing of these three sectors is rooted in many
considerations, including the fact that (a) they oer a wide-ranging illustration (one
tradable sector, one non-tradable sector, and one cross-cutting sector) of opportunities
for private sector investment in the short term that also contribute to strengthening
sector competitiveness and expanding sector growth in the mid-to-long term; (b)
they draw attention to sectors that are not yet very dominant (for example, tourism
is already a major player in the DR economy) but that have a significant potential
to grow and thereby diversify FDI and the exports basket; (c) they serve as a proxy
example to a larger set of sectors with similar characteristics (for example, the medtech
diagnostic and recommendations bear relevance to a wider range of manufacturing
sectors such as electronics and pharmaceuticals); (d) they help provide insights on
opportunities where capital markets can be leveraged to achieve developmental
objectives (for example, recommendations about special purpose vehicles to finance
the development of eco-industrial parks through capital markets are relevant to the
wider range of investments in sustainable infrastructure); and (e) their assessment
complements, instead of duplicates, available and recent findings in the literature (for
example, a recent IDB report extensively covered the logistics sector, and the focus on
the agri-logistics segment aims to bring complementary granularity).
. MEDICAL DEVICES
The medical technology industry—often referred to as medtech—is transforming
health care. The Advanced Medical Technology Association (AdvaMed)
104
defines the
industry as “the companies that develop, manufacture, and distribute the technologies,
devices, equipment, diagnostic tests, and health information systems that are
transforming health care through earlier disease detection, less invasive procedures,
and more eective treatments.” A visualization of the medtech value chain can be
seen in figure 4.1. Likewise, AdvaMed defines “a medical device as an instrument,
apparatus, implant, machine, tool, in vitro reagent, or similar article that is used to
diagnose, prevent, mitigate, treat, or cure disease or other conditions, and, unlike a
pharmaceutical or biologic, achieves its purpose by physical, structural, or mechanical
action but not through chemical or metabolic action within or on the body.”
FIGURE . MEDICAL DEVICES GLOBAL VALUE CHAIN
RESEARCH
& PRODUCT
DEVELOPMENT
COMPONENTS
MANUFACTURING ASSEMBLY DISTRIBUTION
MARKETING &
SALES
POST-SALES
SERVICES
Prototype, process
development,
regulatory
approval,
sustaining
engineering
Software devices,
electronic components,
precision metal works,
plastics extrusion &
molding, weaving &
knitting textiles
Assembly,
packaging,
sterilization
Final products: capital
medical equipment,
therapeutic devices,
surgical & medical
instruments,
disposables
Market segments:
cardiovascular,
orthopedics,
infusion systems,
others
Training,
consulting,
maintenance,
repair
Input suppliers:
resin, metals, chemicals, textiles
Buyers:
hospitals, nurses, patients
Source: P. Bamber and G. Gere, “Costa Rica in the Medical Devices Global Value Chain: Opportunities for Upgrading” (Durham, NC: Duke University Center on
Globalization, Governance and Competitiveness, August 2013).
49
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Medtech products can be classified according to the typology in table 4.1. This
typology includes a minor adjustment on the one introduced by Bamber and Gere
in 2013:
105
it replaces “capital equipment” with “diagnostic/imaging equipment.”
Nevertheless, it preserves the general idea that products increase in complexity, cost,
and strategic importance to medtech manufacturers as one goes down the table.
This assessment includes a description of the main global trends and their implications
for medtech agents and processes. Key markets include (a) Class 1 medical devices
(disposables and other low-risk products) and Class 2 higher-tech medical devices
for the US market, and (b) services for health care providers. After describing the
trends in the industry and their implications, the CPSD identifies a series of growth
opportunities in the DR medtech sector. Contrasting these opportunities with the
current situation, it identifies a set of constraints and gaps for every value chain.
Finally, it highlights private sector investment opportunities, which can also enable the
growth and competitiveness of medtech in the DR. The section ends with a summary
of policy recommendations that the DR government can implement in the coming
years to unleash private sector investment and growth in the medtech sector in a three-
to five-year horizon.
TABLE . MEDTECH PRODUCT TYPOLOGY
PRODUCT CATEGORY MAIN CHARACTERISTICS COMPANIES OPERATING IN DR
Disposables
High-volume commodities; single-use
products such as bandages, surgical
gloves, plastic syringes, catheters, and
needles.
• Cost-driven
• Large numbers of production
• Less need for medical expertise
• Follow specific quality standards for
medical devices
Surgical and medical instruments
Multi-used products that need
sterilization between uses with dierent
patients. Products such as forceps,
medical scissors, dental drills, and
specialized surgical instruments.
• More medical expertise needed
• Some instruments have electronics
• Many of them are increasingly cost-
driven
Therapeutic devices Implantable and non-
implantable devices for physical illness or
disability. Products such as hearing aids,
pacemakers, and prosthetics.
• Requires medical expertise and
specialists
• Obtaining bio-compatibility and
regulatory approvals is a costly process,
increasing the price of the device
Diagnostic imaging equipment (Class 2)
Single-purchase equipment to use
repeatedly over some years. Products to
use in patient monitoring, diagnostics, and
imaging. From blood pressure monitors
or infusion pumps to MRI equipment or
operating room (OR) robots.
• Ongoing management of accessories,
services, and parts
• High need of medical expertise and
dierent types of engineering skills
• Long-term investments
Sources: P. Bamber and G. Gere, “Costa Rica in the Medical Devices Global Value Chain: Opportunities for Upgrading” (Durham, NC: Duke University Center on
Globalization, Governance and Competitiveness, August 2013); T. Marti, “Desarrollo de Encadenamientos Productivos para el Clúster de Dispositivos Médicos de la
República Dominicana,” 2016 .
50
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Medtech Context
Global trends
Medtech is a global industry valued at US$520.32 billion in 2021. The industry has
grown at a compound annual growth rate (CAGR) of 4.2 percent in the past five years.
Some 55.5 percent of global revenue is made by the top 20 firms (figure 4.2). North
America is the largest regional market and, therefore, the main contributor to global
medtech revenue. In 2020, the United States was the largest exporter of medtech
products at 17.9 percent of global market share, followed by Germany (12.2 percent),
the Netherlands (11.0 percent), and China (9.5 percent).
The global health sector is evolving due to the confluence of fast-evolving trends such
as the transition of the basis of pharmaceutical manufacturing from chemistry to
biotechnology, or the increased sophistication of medical equipment and instruments
made possible by new technologies and connectivity. These major transitions could be
categorized in five dimensions: demographics, political and regulatory, sociocultural,
technological, and industry dynamics.
In terms of demographic factors, three key themes are also aecting the demand for
health care and medtech: an aging population, mass displacement of people, and
income polarization. The 2010s saw the global population over age 70 grow by 627
million, increasing from 5 percent to 12 percent of the total population. In another
decade, 16 percent of the world’s eight billion people will be over 70.
106
An increase in
the number of older adults is correlated with an increased risk for noncommunicable
diseases, such as heart disease, diabetes, and cancer, and thus an increased need for
health care. The UN High Commissioner for Refugees
107
comments that more than 70
million people were forcibly displaced in 2018, up from slightly more than 43 million
a decade earlier in 2009. This situation places unexpected demand on the health
infrastructure of receiving countries, which negatively aects their ability to provide
health care to citizens. Finally, recent research
108
and a 2016 IMF report
109
show that
income polarization will be a long-term challenge to growth in the world’s largest
medtech markets. At the top of the income pyramid, the expansion of income will
likely increase the use of private and preventive health care, which in turn will drive
up health care costs associated with new technology
110
and further limit health care
accessibility for low-income populations.
Political and economic changes are also aecting the provision and accessibility of
health care and thereby the demand for medtech. The World Health Organization
(WHO)
111
reports that domestic spending on health—both out-of-pocket and publicly
funded—is rapidly increasing worldwide. Between 2000 and 2017, global health
spending outpaced economic growth by 0.9 percent. However, this figure masks the
picture in low-income countries, where average health spending was 70 times lower
than in high-income countries (US$41 per person versus US$2,937 per person in
2017). Countries with fast-growing economies increased their health spending in sync
with their increases in income. However, among the economies growing the fastest, the
picture was not as clear: 42 increased their public spending on health care by 2 percent
of GDP on average, but in 17 others, public spending as a percentage of current health
spending declined, even in the face of economic growth.
51
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Over the years, health care has shifted from a treatment-of-the-sick approach
(reactive model) to a prevention-and-cure approach (proactive model). Several factors
brought about this shift, including an increased understanding of the importance of
preventive health care, changing health care needs of individuals and communities, and
advances in medical technology.
112
Traditionally, the health care system has focused
on treating illnesses and diseases after they have developed, often through medications
and procedures—this focus has driven the growth of the medical devices industry.
However, this approach can be costly and is not always eective in improving long-
term health outcomes. In recent years, there has been a growing recognition of the
importance of preventing and detecting illnesses, emphasizing lifestyle changes, health
education, and regular checkups.
113
Preventive health care involves taking proactive
steps to reduce the risk of developing illnesses and diseases. Such steps include
vaccination, regular exercise, healthy eating habits, stress management, and regular
screenings for diseases like cancer, diabetes, and heart disease. By adopting these
preventive measures—often through technological devices to aid in data collection
and monitoring—individuals can reduce their risk of developing chronic illnesses and
improve their overall health and well-being.
114
Technological innovations are helping companies develop new models for health
care. Such innovations include increased interconnectivity of health care technologies
and smart solutions for medication administration. Global medical device companies
are actively developing and applying new Industry 4.0 technologies for process
digitalization and additive manufacturing. As the costs of these technologies decline
and they become more widespread, greater pressure is exerted on prices and costs
in health products and services (due to patent expirations and greater regulatory
requirements for new products).
Finally, the industry is witnessing an increasingly high concentration and integration
with other businesses, which presents both challenges and opportunities. The global
competitive environment for medical devices is dominated by a small group of large
companies (the first 15 represent more than 50 percent of the market). Industry
dynamics have shifted so that start-ups now represent a larger proportion of drug
discoveries and inventions, and those firms are subsequently acquired by the larger
players. This trend has persisted throughout the 1990s and 2000s
115
and is expected
to continue.
116
Finally, a 2021 McKinsey report
117
highlighted the potential for digital
technologies to drive health care cost savings of up to $3 trillion a year by 2030 while
simultaneously improving health care quality if medtech companies were to more
eectively embrace those technologies. These eciency-driven savings can be realized
by capitalizing on opportunities to integrate digital technologies at dierent stages of
the patient pathway, from primary prevention and screening to surveillance and self-
management at home.
52
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
FIGURE . MAIN PLAYERS OF THE SECTOR
LOCATED IN DR RANK COMPANY REVENUE (Billions US$)
1 Medtronic
2 Johnson & Johnson MedTech
3 Siemens Healthineers
4 Royal Philips
5 Medline Industries
6 GE HealthCare
7 Stryker
8 Cardinal Health (medical segment)
9 Abbott (medical device segment)
10 Baxter
11 Henry Schein
12 Boston Scientific
13 Owens & Minor
14 BD (medical segment)
15 B. Braun Melsungen
16 3M Co. (health care segment)
17 Alcon
18 Fujifilm Holdings (health care only)
19 Zimmer Biomet (minus ZimVie spino)
20 Olympus (medical business)
21 Terumo
22 Intuitive Surgical
23 Hologic
24 Edwards Lifesciences
25 Smith+Nephew
26 Steris
27 Fresenius Medical Care (health care products)
28 Canon Medical
29 Dentsply Sirona
30 BioMérieux
Source: Becker’s Hospital Review, 2021.
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53
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
DR sector size and performance
The DR is an attractive location for eciency-seeking medtech firms. It is a politically
and economically stable country with competitive salaries, ease of starting up
operations, and proximity to US headquarters of MNCs that are major medical
device manufacturers. The DR government and the medtech supporting bodies are
supporting the sector through tax exemptions in the SEZs, a supplier categorization
tool to stimulate more linkages between the free zone medical device companies and
local suppliers, and closer collaborations with the universities and technical schools to
close the skills gaps faced by the industry. Similarly, the nonprofit agency representing
private firms under the SEZ regime (ADOZONA) and the Medical Devices Cluster
provide strategic and complementary support in ways that improve the medtech
business environment in the country.
The crowding of other locations, such as Costa Rica and Mexico, makes the DR an
attractive option for US medical device manufacturers who wish to nearshore or
diversify their supply chains by capitalizing on the oerings of a competitive and
stable economy in the Caribbean. Early medical device companies were attracted by
a variety of factors such as its free zone parks (second half of the 1980s), but also the
tari advantage of the Caribbean Basin Initiative, an economic program that arose
because of the US Act for the Economic Recovery of the Caribbean Basin (1983). The
DR’s macroeconomic stability, its SEZ tax exemptions, and the access it provides to
reduced labor costs compared with the United States and Puerto Rico (US) can be
harnessed as the country also invests in strengthening more structural competitive
advantages based on skills and advances supporting services.
The initial profile of the early medical device sector entrants was labor-intensive
assembly and packaging operations. Many firms used a twin-plant model: they
operated a plant in Puerto Rico (or elsewhere) responsible for complex and sensitive
processes and another plant in the DR responsible for assembly operations and
packaging. The greatest growth of medical device firms occurred in textile-based
medical products. For many years, the textiles sector led the free zones in export
volumes, investment, and job creation. Both international and Dominican firms were
involved. The same US tax code changes that attracted the medical device firms also
attracted companies from the other electronics and jewelry industries at about the
same time. Medtech companies in the DR have grown steadily (figure 4.3).
As some firms gained experience and achieved good operational results in DR,
their plants evolved into more complex operations. The more complex operations
have included automated and semiautomated assembly and packaging, molding,
and extrusion; E-beam and ethylene oxide (EtO) sterilization; and larger and more
sophisticated clean rooms. Some have since started vertically integrating more aspects
of the manufacturing process, including the transfer of operations from other countries
(Puerto Rico, for example).
118
54
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Many globally leading medtech firms are now present in the DR, including Medtronic,
Cardinal Health, Fresenius, B. Braun, and BD (see table 4.2). Their DR manufacturing
plants are part of the global manufacturing networks of these companies and supply
the global value chains of some segments of medical products. Most of the medical
devices produced in the DR remain disposables and surgical and medical instruments.
There are also some therapeutic devices produced in the country, but they are mostly
non-implantable ones. In terms of assembly, six of the 20 main global medtech players
have manufacturing plants in the DR. These MNCs are complemented by original
equipment manufacturers (OEMs) and other contractors that provide services to the
MNCs. The operation profile of this group of companies includes basic assembly
operations, automated and semiautomated assembly, and packaging. As shown in table
4.1, the companies operating in the DR are mostly producing disposables. B. Braun,
for example, is producing mostly IV sets with a current capacity of 160 million units
per year and a growth plan to double in seven years.
FIGURE . MEDICAL DEVICES SECTOR IN THE DR
a. Number of MedTech Companies in Dominican republic, by year b. Percentage of Companies by country of origin 2021
Source: CNZFE, Informe Estadistico, 2022.
Note: Only three companies in the Dominican Republic’s medical devices sector are domestic companies.
The cluster also starts to include supporting services, but backward linkages remain
limited. An example is sterilization, which is a critical requirement of medtech
manufacturing due to the industry’s highly regulated nature. Sterilization usually takes
place in-house or is outsourced outside the country, but a local facility—run by the
American firm Cosmed Group—is now providing the service. The company started
its operations in the DR three years ago because of the demand from its clients in the
United States. Similarly, molding and extrusion components are manufactured by
global suppliers located in the DR (such as Hayco) or by vertical integration of the
medtech MNCs. Local suppliers, such as Plásticos Multiform, are producing only some
noncritical components, such as packaging, and they are few.
NUMBER OF COMPANIES BY YEAR
GROWTH: .% CAGR
UNITED STATES
EUROPEAN
UNION
DOMINICAN
REPUBLIC
CANADA
.%
.%
.%
.%
55
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Exports have grown substantially, and since 2009 medtech has rivaled the DR’s
clothing and textiles sector for highest volume of goods exports (figure 4.4). Medtech
has become the largest exported good, surpassing gold, reaching US$2.2 billion
in 2022. Between 1996 and 2022, the medical devices and pharmaceuticals sector
saw exports increase from US$154.1 million (5 percent of total free zone exports) to
US$2.18 billion (28 percent of total free zone exports).
119
All the production of the
medical devices sector is in the free zones, as well as all the exports. There are no
companies outside the free zones that are manufacturers of this sector.
FIGURE . MEDICAL DEVICES EXPORTS US, MILLION
CLOTHING & TEXTILES
ELECTRICAL & ELECTRONIC PRODUCTS
MEDICAL & PHARMACEUTICAL PRODUCTS
TOBACCO & ITS DERIVATIVES
,
,
,
,
Source: CNZFE 2021.
The medical and pharmaceutical products sector is generating jobs in the DR that
are increasing, and the female employee percentage is higher than in the rest of the
free zone sectors and national companies. As of 2021, medical and pharmaceutical
products account for 15.7 percent of free zone jobs (figure 4.5, panel a).
120
Moreover,
medical and pharmaceutical products is the only sector of the top three exporting
sectors (the others being electronics and tobacco and its derivatives) that has had
positive job growth over the past decade. Females hold 64 percent of the medical
devices and pharmaceutics jobs (figure 4.5, panel b), which is significantly higher than
the 48 percent average in SEZs or 40 percent average nationwide.
56
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
FIGURE . JOBS IN MEDTECH
a. Compared to jobs in other SEZ sectors b. Jobs by gender in SEZs, 2021
Source: CNZFE, 2021.
Finally, the accumulated investment in the medical devices and pharmaceuticals sector
grew over the past 10 years. Medical devices and pharmaceuticals initially accounted
for the equivalent of 71 percent of the investment in clothing and textiles, but they
now account for 210 percent of that sector’s investment. The DR’s two main regional
competitors are Costa Rica and Mexico. Mexico is the largest exporter of medtech
products in Latin America and the Caribbean and the top supplier to the United States
(table 4.2). Medical devices are the top export product from Costa Rica.
TABLE . THE DR’S MAIN COMPETITORS
DR COSTA RICA MEXICO
Jobs (medtech vs.
total jobs)
0.63% 2.22% 0.23%
Number of companies
(medtech vs. total
companies)
0.02% 0.26% 0.05%
Exports (medtech vs.
total exports)
15.49% 33.41% 1.34%
Main characteristic Third-largest Latin
American supplier of
medical devices and
pharmaceuticals
Medical devices are
Costa Rica’s number 1
export product.
First exporter in Latin
America and the
Caribbean and first
supplier to the United
States
Sources: STATISTA, “Market Share of Medical Technology Exports Worldwide in 2020, by Country,” 2022; Switzerland Global
Enterprise, “Industry Report: The Automotive, Aerospace and Medtech Sector in Mexico Explained,” 2021; TecCH Mex,
“Doing Business in Mexico,” 2021; International Trade Administration, “Mexico—Country Commercial Guide: Healthcare
Products and Services,” 2022; E&N, “Costa Rica se fortalece como la joya de la industria MedTech,” 2022, https://www.
estrategiaynegocios.net/empresasymanagement/costa-rica-se-fortalece-como-la-joya-de-la-industria-medtech-
AC10210000; Cinde, “Costa Rica Shines In MedTech Exports in First Half of 2021,” 2021; Trademap 2022, https://www.
trademap.org/Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c; Diario Libre 2022, https://
www.diariolibre.com/actualidad/nacional/2022/11/15/rd-pais-que-mas-exporta-dispositivos-medicos/2141274.
TOBACCO & ITS DERIVATIVES
MEDICAL & PHARMACEUTICAL
PRODUCTS
CLOTHING & TEXTILES
ELECTRICAL AND ELECTRONIC
PRODUCTS
MALE FEMALE
,
,
,
,
,
,
,
CLOTHING &
TEXTILES
MEDICAL &
PHARMACEUTICAL
PRODUCTS
ELECTRICAL AND
ELECTRONICAL
PRODUCTS
TOBACCO & ITS
DERIVATIVES
% % % %% % % %
57
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Main public policies that aect the sector
Policies that aect linkages with the local economy and industry
High standards of product safety and quality concerns characterize the medical
devices industry. There is a high concentration in the industry because few firms can
sustain the high investment costs required and simultaneously maintain strong global
production and marketing.
121
Although the medical devices firms in the DR are largely
based on assembly operations, they face dierent challenges because they are part of
a highly regulated industry, and their markets (Europe, Japan, and the United States)
are very demanding. These firms prefer to use their existing suppliers from their
global value chains rather than try to buy locally. The evidence for that statement is
twofold: (a) MNCs continue to import most of their raw materials (including plastic
components and plastics for packaging), and local raw materials purchases remain
less than 5 percent of total purchases—though it is worth noting that in Costa Rica,
despite eorts made to develop local linkages, these increased only modestly from
6 percent to 9 percent between 2012 and 2014 (while in electronics, they remained
negligible
122
); (b) where local purchases of raw materials are made, they tend to focus
mainly on paper, cardboard packaging, and printed materials. Such items are primarily
used as secondary packaging or support materials for production processes.
123
Those
materials carry the lowest requirements, so the firms can more easily choose local
suppliers, maintain lower inventories, and achieve quicker delivery times.
124
Various institutions have spearheaded initiatives in response to the barriers and to
strengthen the Dominican manufacturing sector. In 2017 the Association of Industries
of the Dominican Republic (AIRD) and the National Competitiveness Council
(CNC) developed a General Plan for the Promotion of Linkages. It had action lines
to develop the suppliers, improve supply-demand mechanisms, reduce the complexity
and transaction cost between companies of dierent tax regimes and identify and
attract potential investments to generate and exploit growth opportunities. In 2017,
ADOZONA participated in the Digital Production Linkages Program (Programa
Encadenamiento Productivo Digital) by the DR government to develop a tool to
categorize the local suppliers of medical devices. It is a process to evaluate and
categorize each potential supplier based on the requirements of the purchasing
companies. They subsequently transferred the tool to the Ministry of Industry,
Commerce, and SMEs, which is now in charge of the categorization. So far, 18 local
companies have been categorized, and only five comply with the requirements to be
sector suppliers. Box 4.1 describes hurdles in obtaining licensing and permits.
Policies that aect linkages with education and skills training institutions
Another factor that aects the competitiveness of the DR as an attractive site for
medical device manufacturers is the demand for talent. Four key factors shape that
demand: (a) plant expansions, (b) the production of more complex products, (c) the
inclusion of higher technological content in products, and (d) the growth of operations
within existing plants. The demand for talent can be categorized in three ways: (a)
demand for more skilled workers; for example, Marti estimated that 3,500 technicians
and 2,200 engineers would be needed in the five-year period starting in 2019,
125
(b)
demand for new skills including specialized manufacturing knowledge, the ability to
handle new regulatory requirements, and a better understanding of medical products
and technologies to complement manufacturing knowledge, and (c) demand for new
functions that, although not new to the industry, may be new to local operations and
include plastic molding, sterilization, and automation.
58
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
As discussed in section 3, education is not producing enough well-trained graduates
for most of these categories. A constraint that aects the amount of available talent in
this industry is that there are fewer STEM graduates from universities and technical
schools than the sector needs.
126
Each firm is then forced to carry out its own internal
training, which results in higher incremental operational costs at the firm level and
duplication of eort across sectors. These ineciencies are barriers to the competitive
growth of the sector in the DR.
As part of the policy eort to address this gap by tapping into the global supply of
education services, the Ministry of Superior Education, Science, and Technology
annually gives more than 1,700 scholarships to Dominicans to study abroad, but
allocations can be substantially improved. Every year the DR government spends
US$30 million in scholarship grants to send Dominican students to 62 international
universities in Europe, Latin America, and the United States. The degrees must be in
what the government considers strategic areas: innovation, tourism, technology, basic
sciences, education, and engineering. Interviews with firms and beneficiaries suggest
that the selection process of beneficiaries could be substantially improved, objectified,
and made more transparent, to ensure that the qualifications of grantees meet the
needs of the industries. Similarly, a stronger and institutionalized coordination
between the ministry and the strategic industry is recommended to ensure better
targeting and adaptation to the needs of the private sector, as well as employment
prospects by grantees upon their return.
BOX . STREAMLINING LICENSING AND PERMITS TO TACKLE BUREAUCRATIC HURDLES IN THE
MEDTECH SECTOR
As highlighted in section 3.1 on the business environment, ongoing advisory services by the World Bank have
found that the process of establishing companies to produce medical devices under the SEZ special regime
remains burdensome and lengthy: it includes 12 administrative procedures, 96 dierent requirements, and
an average wait time of 11 months. There is no single window where the entrepreneur can go through the
entire process. Instead, firms have to interact with six dierent public institutions. Bottlenecks are often
found in the environmental licensing and the sanitary registry, but the redundancy is also explained by the
fact that each institution asks for the same requirements multiple times because databases of the various
agencies are not digitalized, linked, or streamlined based on a coherent strategy that includes all relevant
agencies. For the same reason, it is also not possible to carry out procedures in parallel. As a result, the wait
time for an entrepreneur to start operations remains about 44 weeks (much less than in the GTR but far
longer than the time that would allow the DR to be well positioned to seize the nearshoring opportunities).
59
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Medtech Opportunities
The investment opportunities of the medtech sector in the DR are distributed across
two main markets (table 4.3). The first is increasing the export of Class 1 and some
Class 2 medical devices to the United States, further expanding the niche currently
occupied by the DR. The second domain of opportunity is leveraging the current base
of business process outsourcing (BPO) and call center firms to expand the provision
of services to health care providers. Because of the diering characteristics of those
markets, this section addresses them separately, each time providing an overview of the
market opportunities, potential investment areas, and constraints and challenges that
must be overcome to pursue the investments in each of the markets.
TABLE . OVERVIEW OF INVESTMENT OPPORTUNITIES
MEDTECH MAIN MARKETS INVESTMENT OPPORTUNITIES
Disposables, surgical instruments, and therapeutic
medical devices for the US market
A. Local supplier of services for MNCs
B. Local manufacturing of packaging supplies
C. Local manufacturing of components
Services for health care providers Information technology or outsourcing services
Market 1: Class 1 and some Class 2 medical devices for the US market
As shown in section 2.3, most firms in the DR specialize in producing and exporting
medical devices of relatively low to medium technological complexity. The US medical
devices market is expected to grow annually by 5.4 percent during the forecast period
2022–29.
127
Specifically, the product category of disposables is expected to grow 16.7
percent annually between 2021 and 2028.
128
Companies in the DR have been growing
significantly in recent years in response to this demand. For example, B. Braun is
currently manufacturing about 170 million intravenous (IV) sets per year, and it is
expecting to double its production in six years. Its sta has also grown: four years ago,
B. Braun had 1,800 employees, and it currently has 2,700. This is a profitable niche,
and other destinations in Latin America and the Caribbean, such as Costa Rica and
Mexico, increasingly compete for it.
The estimated market size for medical device product lines with the highest potential
for being supplied by local companies in the DR ranges from US$145 to US$175
million.
129
These products are classified as materials with the lowest barriers to
entry and the least demanding requirements. They are commodity-type components,
packaging materials, or materials that do not go into the product but are used in
the production process. Specific product examples include basic flexible plastics (for
example, plastic bags, plastic rolls and sheets, heat-shrinkable plastic, plastic labels,
and adhesive tapes); thermoformed plastics (for example, trays and thermoformed
components); and paper and cardboard (for example, corrugated cardboard and
packaging paper, printed matter, and labels).
60
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
An additional US$100 million market opportunity is also estimated for materials
with higher requirements and barriers, but where local supplier capacities could
be developed.
130
These products are materials and components that have medium
potential for successful linkage between free trade zone (SEZ) medical device
companies and local suppliers. The basic manufacturing technologies exist in the DR,
but local firms would need to develop additional capacities and knowledge to supply
them. Specific product examples include molded plastics (for example, containers, lids,
and accessories for assembly and packaging) and chemicals (for example, solvents,
cleaners, and adhesives).
Opportunity analysis and market landscape
In the low-sophistication medical devices segment of the market, there are three
opportunities that the Dominican Republic can pursue: (a) local suppliers of health
services for MNCs; (b) local manufacturing of packaging suppliers (such as individual
plastic bags, plastic bags for transporting, cardboard boxes, and pallets); and (c) local
manufacturing of components. In each case, MNCs need various products and services
as primary or intermediate inputs that they have been providing internally or sourcing
from the United States because of the lack of options in the country.
131
Services
considered here are (a) sterilization, (b) lab tests, and (c) calibration services. Regarding
packaging, some local companies provide such supplies, including Plásticos Multiform,
Jabil, and IntraPac. MNCs usually have more than one supplier to mitigate risk and
be able to manage last-minute needs. Because the components are inputs to finished
products, it would reduce time to have them manufactured locally. Currently, there are
several eorts and a suppliers’ specialization program led by the government to link
the local industry and free trade zone (SEZ) medical device companies.
The government-led suppliers’ specialization program has not yet had the desired
eect in increasing local linkages, for two main reasons. First, a stronger and
dedicated convening power is needed to achieve the required coordination at the
national level among all the relevant players. Second, the program mainly focuses on
supplier categorization but does not provide the resources that firms need to improve
their capabilities once they have been audited and categorized. Other constraints
aecting the exploitation of the low-sophistication medical devices market segment
are detailed in box 4.2. Furthermore, there are structural trends that pose a challenge
to backward linkages, such as the tendency of MNCs to vertically integrate the
production of the components. For example, B. Braun in the DR buys injection-
molded components from other US B. Braun plants, but it will be done internally
in the DR in the future. It is doing plastic extrusion already in new facilities in the
DR. Also, disposable medical devices are commodities and therefore have high price
sensitivity. Automation and vertical integration of plants are key to reducing costs.
The conditions have made it an unattractive opportunity for new local suppliers
entering this segment because of the high barriers to entry and the high bargaining
power of the buyers (MNCs).
61
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
BOX . MAIN CHALLENGES FOR THE CLASS AND CLASS MEDICAL DEVICES MARKET
Local firms that either currently supply or wish to enter the supply chains of the large MNCs for the
production of Class 1 and Class 2 medical devices faced some key constraints:
• Technical constraints (in order of importance):
– Regulatory and quality management system
certifications (for example, ISO 13485, which is a
standard for the medical device industry; this is
the most important technical factor and most
commonly cited by medical device companies)
– Technical capabilities for product design and
production (the technical gap is larger in
services because the knowledge and equipment
are more complex)
– Control of materials, processes and inspection,
environment, and health and safety plan
– Handling, storage, packaging, and
transportation of materials
– Training, recordkeeping, and good
manufacturing practices
• Financial: Local suppliers may face long
receivable delays and high cost of company
improvement to meet MNC requirements.
• Information asymmetry: Buyers (manufacturers)
lack detailed info on local supply capacities and
suppliers lack info on purchase requirements,
despite the initial eorts of the suppliers’
specialization program (the success of which has
been hampered for the reasons set out above).
• Low suppliers’ bargaining power: MNCs are
locked into supply contracts and international
suppliers are more competitive than local
companies, and they have even started to
vertically integrate the production of some
components.
• Lack of accreditation body in the DR for
sterilization and lab testing companies:
Suppliers interested in providing these services
are accredited by Entidad Costarricense de
Acreditación (ECA), the Costa Rica Accreditation
Entity.
62
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Specific investment opportunities
Investment Opportunity A: Increase local supplies of services for MNCs
There is an opportunity to increase the provision of the necessary ancillary services
required by medical device manufacturers to oset the current lack of options within
the country (table 4.4). These services include sterilization and lab testing (box 4.3).
TABLE . EXAMPLE OF INVESTMENT OPPORTUNITIES IN LOCAL SUPPLY OF SERVICES FOR MNCS
SERVICE INVESTMENT OPPORTUNITY DESCRIPTION
EtO sterilization
services
There is an opportunity to further
grow the sterilization market in
the country.
A US company that started in the DR in 2021, is interested in expanding its
operations to deploy ovens in the market, which have a capacity of 30 pallets,
53-foot containers. Investment needs are estimated to be at least US$ 16 million in
equipment only.
Lab testing
services
There is an opportunity within the
local value chain to provide these
types of services, as well as the
calibration services that are also
locally demanded.
The opportunity is to provide microbiology testing services to meet medical device
manufacturers’ sterilization validation and laboratory testing needs. MNCs are
currently buying these services in the United States.
• Medical device lots produced have test requirements before being distributed to
the client, such as sterilization or Limulus amebocyte lysate (LAL) tests.
• Conducting these recurrent lab tests within the country rather than outsourcing
to suppliers in the United States would reduce cost and lead time.
Sterilization services companies cover this service in other countries, yet not
in the DR. Local lab testing suppliers serving the food industry could get test
accreditations needed to fill that void.
BOX . BENCHMARKING COSTA RICA STERILIZATION SERVICES AND LAB TESTING SERVICES
Sterilization Companies
There are two sterilization companies in Costa Rica,
both from the United States: Steris (T/A “Synergy
Health AST, SRL”), which opened in 2009, and
Sterigenics, which started operating in 2013. Sterics
provides ethylene oxide (EtO) and electron beam
(E-beam) sterilization, while Sterigenics provides
EtO services only.
In 2021 Costa Rica’s medical devices exports
reached US$5.21 billion, as compared with the DR’s
US$1.93 billion in medical devices exports in the
same period. These amounts indicate that despite
a market that is almost three times as large as the
DR’s, Costa Rica’s manufacturers are currently
supplied with one more contract sterilization
company than the DR has.
Medical devices can now be exported directly from
Costa Rica to various destinations worldwide,
thanks to on-site sterilization services and logistics
companies. This ability has resulted in significant
savings in production time, transportation, and
warehousing.
Lab Testing
Apart from the provision of E-beam and EtO
sterilization services in Costa Rica, Steris is also
certified to provide the laboratory testing service for
the testing of biological indicators, associated with
the provision of sterilization services. Having this
service available locally is an important factor in
improving logistics eciency for Costa Rica-based
manufacturers.
63
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Investment Opportunity B: Local manufacturing of packaging supplies
There is an opportunity to supplant international suppliers by providing packaging
materials for medical device manufacturers. A local packaging supplier,that works
mostly in the agribusiness industry, started working for the medtech industry
providing firms with primary and secondary packaging. It was part of the local eort
from the government and ADOZONA to link the local industry and Free Trade Zone
Medical Device Companies. It took almost two years from the first MVP (minimum
viable product) to get all the requirements, clean rooms, and certifications that the
sector needs (table 4.5).
TABLE . EXAMPLE OF INVESTMENT OPPORTUNITY IN PACKAGING BUSINESS
SERVICE INVESTMENT OPPORTUNITY DESCRIPTION
Packaging MNCs require local supply to
mitigate risk, even if they have
foreign suppliers. COVID-19 supply
chain disruptions increased this
need. Local supply of high-quality
labels, solvents, and glues is also
important.
Replicate and expand local success stories; estimated
costs: US$ 5 million investment, excluding the cost of the
land where the plant would be built.
The facility's design and construction, including air
and power systems; estimated cost: US$ 2.5 - 3 million.
Producing packaging equipment; estimated cost:
US$ 2 million.
Investment Opportunity C: Local manufacturing of components
There is an opportunity to supply a group of key components with high requirements
and barriers for existing local suppliers, such as molded components, extruded
plastic tubes, and metal components. Currently, a Chinese company, Hayco, provides
injection-molded parts, plastic extrusions, and metal components. It has factories
in China and in the DR with a total of 6,000 employees. These figures indicate that
there is a market, and interviews have confirmed that there is space for growth of local
supply, should standards be met.
64
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . MAIN CHALLENGES FOR HIGHERTECH MEDICAL DEVICES
Higher-tech medical devices for the US market
The constraints faced by the DR to upgrade into the
production of higher-tech devices for supplying the
US market are considerable, as follows:
• Talent: Producing high-tech equipment requires
more and more highly skilled talent, and at the
same time, the labor cost to produce it has a
lower impact on its total cost.
• R&D: Higher-tech equipment requires
specialized capabilities for product design and
development and large investments.
• Financial: Higher capital outlay is needed to set
up operations and a longer payback period.
• Coordination: Tighter coordination is required
among manufacturers, suppliers, educational
institutions, and government.
As shown in earlier sections in this chapter, some
of the major global medtech players in surgical
and medical instruments and therapeutic devices
have manufacturing plants in the DR that are part
of their global supply chains. Nonetheless, these
types of firms tend to restrict the production of
higher-tech medical devices to their home bases or
other developed countries because of proximity to
the talent required, the destination markets, and
the availability of adequate intellectual property
protection. With the requisite supplier development
programs in place, there could be an opportunity for
the DR to begin producing and exporting higher-
tech devices.
Opportunity Analysis and Market Landscape
The more technology-intensive a product is,
the less labor cost becomes a decisive factor
in its production. The major medical device
manufacturers prefer to keep their non-labor-
intensive production—which can be automatized
and is critical to their strategic growth—close to
their home bases. Alternatively, they oshore it
to other developed countries where they can be
certain to find an adequate level of talent and a
greater surety of intellectual property protection
for their strategic products. This poses a challenge
for the DR, which can only be addressed by
sustained (beyond a three- to five-year horizon)
and transformative investment in skills, intellectual
property rights regulation, R&D investment, and
the scaling of the cluster to create a critical mass of
specializations and suppliers.
The scale of these challenges suggests that
investments in higher-tech medical devices are
not likely to be significant in the short term.
Interviews with MNCs’ headquarters suggest that
the location decision for higher-tech medical device
production plants is less dependent on low labor
costs and tax exemptions. They prefer to produce
higher-tech product categories closer and even
in the same country as headquarters where they
can find an adequate, reliable level of talent and
protect intellectual property. Gere, Frederick, and
Bamber in 2019 show that it took 15 years for Costa
Rica to see a significant upgrade toward producing
product categories of higher technological content.
However, in the meantime, the policies aimed
in that direction can benefit other knowledge-
intensive sectors, as is also the case in Costa Rica.
Policy recommendations are made later in this
document.
Source: Interviews with US headquarters of medtech firms; Gary Gere, Stacey Frederick, and Penny Bamber, “Diverse Paths of Upgrading
in High-Tech Manufacturing: Costa Rica in the Electronics and Medical Devices Global Value Chains,” Transnational Corporations Journal
26, no. 1, 2019.
65
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Market 2: Services for health care providers
As discussed in the global trends section, the transition from a conventional, reactive
model centered on treating sickness to a proactive model focusing on patients'
demands and prevention of illness is changing the health care industry. Preventive
treatments involve several players interacting with each other and integrating data
from various sources while facilitating communication between patients and health
providers. The development of health services that involve medical devices and
technologies supported by ICT is becoming necessary.
132
By 2023, the global market for health care outsourcing is anticipated to grow at a
12.3 percent CAGR to reach US$449.6 billion,
133
and nearshoring such services is
an increasingly attractive strategy. North America accounts for a major share of
the market, in terms of revenue, owing to the presence of many service providers
in the region. This outsourcing trend helps vendors minimize delivery costs and
improve electronic medical records management, consumer engagement, and clinical
transformation. It also helps minimize errors in medical billing and sta training costs.
The DR has more than 60 call centers and BPO companies in SEZs contributing almost
29,000 jobs. The Dominican Contact Center and the business process outsourcing
industry started in the mid-1990s, outsourcing their services to Canada, Europe, Latin
America, and the United States. Currently, 62 percent of the companies provide services
to the telecommunications and financial sectors. The rest of the companies cover many
other industries, including health and IT services (for example CCD Health and Arium).
A mix of local firms and multinationals, such as Teleperformance, are located in two
main hubs in the country, Santo Domingo and Santiago.
Opportunity Analysis and Market Landscape
This group of opportunities includes services outsourced by medtech manufacturers
and health care providers, as well as other e-health solutions; they could be
summarized as follows:
a. Services for handling complaints about medical devices: Regulatory requirements
by the U.S. Food and Drug Administration for handling complaints about medical
devices have become stricter in recent years. MNCs like Olympus USA have
a massive center with more than 200 people dedicated to creating reports and
processes in the United States. Some of them have this service outsourced with a
clear potential for being nearshored in places with call center infrastructure and
medical devices expertise.
b. Scheduling services for health interventions: Call centers operating in the DR
can support outpatient health care providers for appointment scheduling and
engagement. The idea would be to target US-based health care providers who
nearshore these types of services.
c. Decision-making solutions: There is demand for information system solutions
to support decision making in the health system, including companies, centers,
and their professionals. Medical stang shortages in the United States will be an
increasing problem, with a deficit of 122,000 physicians by 2032.
134
Outsourcing
support diagnosis services will become part of the solution.
66
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
d. Digitalization services for health care providers: Services are also required to
facilitate electronic health records, interoperability among players (insurance,
health care providers, pharmacies, laboratories, and so on), and decision making
related to treatment or outcomes. Box 4.5 describes the challenges faced by services
companies in the DR aiming to cater to health care providers.
e. ICT and software services for e-health solutions: Small R&D companies operating
in life sciences and digital health are part of a patient-centric solution focused on
a preventive approach. The means of delivery could be mobile app solutions, small
electronic devices, software connected to remote medical teams, and continuous
glucose monitoring systems, among others.
BOX .. MAIN CONSTRAINTS AND CHALLENGES FOR SERVICES FOR HEALTH CARE PROVIDERS
Pursuing opportunities in services requires overcoming a set of critical constraints including the following:
Talent: Low level of English fluency and
limited human capital to drive higher-value
outsourcing services
• Insucient English fluency to attend to patients
– This is a key advantage in Costa Rica, and a key
weakness in the DR.
• Scarcity of highly trained sta to move from
BPO agents responding on the phone to higher-
trained sta capable of relying on tech to solve
complex problems through dierent interfaces
and provide support
• High sta turnover due to scarcity of English and
tech skills
• Remote monitoring of patients by contact
centers requires nurses, social workers, and
medical assistants (that is, persons with the
relevant medical skills to understand health
indicators and act accordingly). Such assistants
are not available in the DR.
• e-Health solutions require multiple technology
skills such as 3D printing, robotics, AI and
machine learning, robotic process automation,
big data and user experience and user interface
(UX/UI) among others.
Technical: Required process definition for
operations that are centered on process
execution and tasks by health care providers
• From routine tasks to multi-interfaces. BPO
operations are currently centered on low-tech
service delivery with a large pool of people
executing routine tasks. Health care service
providers require teams that can implement
more sophisticated tasks and work on the
development of design-centric solutions in
dierent interfaces.
• R&D networking and agglomeration spillovers.
Electronic, BPO, and digital service companies
are seldom interacting with each other. They
would benefit from the domain expertise from
one type of company and the digital capabilities
of the other type.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Specific investment opportunities
Investment Opportunity: Services for Health Care Providers
There is an opportunity to invest in local BPO and KPO companies and position the
country as a US nearshore hub of outsourced health care services. For example, CCD
Health is a local BPO company that already works for health care providers in the United
States (table 4.6). It was founded in 2011. In 2017 it was acquired by Amergent Capital, a
private equity investment firm (a mix of local and US capital), and it turned the company
to exclusively work for the health sector. CCD Health has grown from 200 employees
in 2017 to more than 1,300 in 2023, growing from call center agents to higher technical
skills and engineering jobs. The company pays an average monthly salary of RD$35,000.
(The minimum salary in the SEZ is RD$8,310.) Its specialization is scheduling
appointments for radiology interventions for US hospitals and health centers. CCD Health
has also developed an artificial intelligence (AI) tool that predicts no-shows, which is a
critical and costly problem for health care centers. It is already working on developing
services to diagnose patients remotely and capitated health care models.
135
Local BPO companies are already working for health care providers in the United
States. One company has seen strong growth and as a result expanded its workforce
from 200 employees to 1,300 employees in the past 6 years. Its activities include:
scheduling appointments for interventions for US hospitals and health centers.
TABLE . EXAMPLE OF INVESTMENT OPPORTUNITY IN SCHEDULING SERVICES FOR HEALTH
INTERVENTIONS
SERVICE
INVESTMENT
OPPORTUNITY DESCRIPTION
Scheduling
services
Appointment
scheduling and
engagement call centers
for outpatient US health
care providers who
outsource these types
of services nearshore
BPO companies, could target the health sector with an
initial investment of over US$ 10 million per company.
Capital expenditures (including computers, IT infrastructure,
cabling, and site support) are estimated at US$ 5 million
per 1,000 seats, with an average use life of seven years.
Operational expenditures vary based on customer and
service type, ranging from US$ 1.4 million to US$ 1.8 million.
There is also an opportunity to leverage the DR’s base of BPO and KPO firms to
provide digitalization services such as telemedicine, patient portals, and data analytics
to nearshore markets. Digitalization services for health care providers incorporate
technology and digital tools into health care operations to improve patient care
and outcomes, increase eciency, and reduce costs. For example, local companies
like Arium have already started providing such services (and could provide them to
locally based firms like CCD Health). Arium helps health care providers to transform
digitally: through electronic health records, and interoperability among players
(insurance, health care providers, pharmacies, laboratories, and so on), and decision-
making related to treatment or outcomes. Its target market is Latin America and the
Caribbean, and its employees are not only technical professionals but also doctors
and nurses, to help understand both worlds (IT and health). This is a growing field
as US medical stang shortages are projected to be an increasing problem, with a
deficit of 122,000 physicians by 2032, and outsourcing support diagnosis services will
increasingly become part of the solution (table 4.7).
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . EXAMPLE OF INVESTMENT OPPORTUNITY IN DIGITALIZATION SERVICES FOR
HEALTH CARE PROVIDERS
SERVICE INVESTMENT OPPORTUNITY DESCRIPTION
Digitalization
services
Improvements and solutions
based on information systems
to support decision making in
the health system, companies,
centers, and their professionals
There is an opportunity to create additional
companies that provide solutions based on
information systems, such as Arium.
The creation of an additional company like Arium
would require capital investment that ranges
between US$1 million and US$1.5 million in software,
cloud, equipment, and R&D investment. The exact
requirements of investment will vary depending on
the precise services supplied.
Recommendations
The medtech sector has been growing significantly in the DR, but most of the growth
has come from the already established MNCs increasing their production and adding
vertically integrated operations. Channeling the growing investment in medical devices
in the DR into the local economy requires connecting them. Connecting them means
reducing the technical gap between the local suppliers’ and MNCs’ requirements.
Reducing the technical gap is easier for local packaging suppliers or other noncritical
inputs, but these inputs are commodity products that generate less added value around
them. Reducing the technical gap is more complex in services such as sterilization and
lab testing.
Developing technological skills and digital capabilities and improving the local
entrepreneurship ecosystem are necessary for forming the foundation of the next
wave of FDI (including in other sectors). Proximity and cheap labor are insucient
to continue attracting investment in the medical devices sector.
136
Table 4.8 describes
recommendations across key policy areas that could relax constraints that are binding for
investment opportunities and growth of the sector in the time horizon (three to five years):
TABLE . MATRIX OF PRIORITY ACTIONS FOR MEDTECH
MEDTECH
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Strengthening
certification
and
accreditation
Adopt measures to narrow the certification and accreditation gaps between
domestic and foreign firms through the following:
1. Create or upgrade local institutions tasked with attaining international credentials and
capabilities to certify domestic firms.
2. Consider cooperation with Costa Rican Ministry of Health’s department of medical devices
and its accreditation body.
3. Support domestic labs to cater to medtech MNCs by reducing information asymmetries
and providing financial or nonfinancial incentives that enable labs to attain necessary
accreditations to enter the lab testing market.
Short to
medium
term
MICM
INDOCAL
ODAC
ECA
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
MEDTECH
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Incubating
and promoting
linkages
Support technology and capability adoption though dedicated programs with
financing instruments:
1.
Digitalize firms by (a) supporting entrepreneurs developing digital-first business models
and best practices and (b) facilitating financing for digital development and growth.
2.
Provide incentives that target investment in training to support the development of
competitive capabilities of sta in domestic firms.
Medium
term
MICM
CNC
Centro de
Capacitación e
Investigación del
Plástico
Organizations
that support
the start-up and
entrepreneurial
ecosystem
Establish an R&D support program to strengthen firms’ investment in higher-
value-added product/service development:
1.
Leverage MICM’s existing categorization platform to promote linkages with suppliers (such
as packaging).
2.
Perform technical and technological audits (for example, by Centro de Capacitación e
Investigación del Plástico for plastics) to identify existing gaps in capability and technology
to meet requirements by medical device manufacturers.
3
Engage anchor MNCs to collaborate with suppliers (for example, the experience of
Plásticos Multiform) on pilot orders. Provide financial and nonfinancial support to pilot
collaborations.
4.
Develop customized training programs to address the needs in terms of packaging design,
material selection, quality control, and regulatory compliance (see table 4.1).
Increase access to invoice factoring to local suppliers to improve their liquidity
and increase their investment in competitiveness-enhancing infrastructure, machinery,
technology, and capacity building of sta and management. Tap into multilateral
organization programs that facilitate that access.
Short to
medium
term
Private, public,
and development
financial
institutions
Orienting FDI
promotion
to increase
linkages
Shift the FDI strategy toward a proactive approach:
1.
Adopt a nearshoring strategy that targets medtech and sectors with the highest
nearshoring potential (such as electronics) and orients FDI attraction eorts to reinforcing
the value chains and stronger integration in GVCs.
2.
Prioritize public investments in building local capabilities or closing business environment
gaps for these sectors.
3.
Engage in FDI attraction eorts that target foreign firms that are critical suppliers in the
GVC, providing products and services that increase the competitive advantages for MNCs
to invest in the DR.
Short term MICM
CNZFE
ADOZONA
Pro -Do minicana
ProIndustria
Closing the
skills gap
Recommendations are consolidated and outlined under the Skills Gap section in chapter 3. Short term
70
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
MEDTECH
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Reducing
bureaucratic
hurdles for
investment in
medtech
• Simplify registration processes for the establishment of medical devices
companies under the regime for Special Economic Zones by reducing
administrative procedures from 12 to 8, number of requirements from 96 to 67, and the
time from 44 to 32 weeks (based on findings and recommendations from world bank
report on Procedures for the Establishment of Companies in Three Special Regimes of the
Dominican Republic).
• Incorporate the medtech sector in the priority list when creating a single
window centralizing the reception of information and interconnecting the involved
agencies and databases (see the preceding recommendation on the business
environment).
Short to
medium
term
CNZFE
MH
DGII (Taxes)
DGA (Customs)
MSP
MARENA
Note: CNC = National Competitiveness Council; CNZFE = National Council for Exporting Special Economic Zones; DGA = General Customs Directorate; DGII = Internal
Revenue Directorate; ECA = Costa Rica Accreditation Entity; MARENA = Ministry of Environment and Natural Resources; MH = Ministry of Finance; MICM = Ministry of
Industry, Commerce, and SMEs; MINERD = Ministry of Education; ODAC = Dominican Accreditation Body; OGTIC = Government Oce of Information Technology and
Communication; Pro-Dominicana = National Export and Investment Promotion Agency; PROINDUSTRIA = Industrial Development and Competitiveness Center.
. INDUSTRIAL REAL ESTATE AND ECOINDUSTRIAL
PARKS
Industrial Parks versus Special Economic Zones
Industrial parks (IPs) are real estate areas oriented toward industrial activity
and equipped with adequate infrastructures and business services adapted to
manufacturing. The advantages of IPs to manufacturing and auxiliary firms stem
from (a) the customization of infrastructure and services to the specific needs of
manufacturing (such as wider streets and waste collection and treatment but also
professional services, shared conference space, or care facilities), (b) the agglomeration
eects and economies of scale they generate for firms in related activities, and (c) the
spatial buering they help create with residential and mixed-use areas (those due to
sound pollution or road safety concerns). The intrinsic advantages of this real estate
product are relevant independently from additional fiscal or similar advantages
sometimes provided to firms in industrial parks because of industrial policies (such as
the ones the Dominican Republic provides through its SEZ regime). Industrial parks
have become a ubiquitous industrial and investment policy tool, in both developed and
developing economies, where they can be a key enabler of Industrial growth. In their
various forms, IPs have over the past 50 years been a popular tool implemented by
governments in developing economies to foster industrial investment and production,
particularly of manufacturing for exports.
SEZs are industrial parks to which fiscal or regulatory advantages are attached (e.g.,
tax incentives, custom regimes, streamlined administrative procedures), and global
experiences suggest that these have a mixed record in terms of impacts (figure 4.6).
The main distinctive factor between these areas and other entities containing similar
industrial activities (including other industrial parks) is not only related to the quality
71
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
of the infrastructure or the service, but to a legislated special treatment in terms
of customs and fiscal advantages, business services, or ease of doing business. The
number of SEZs is estimated to have grown from 79 in 29 countries in 1975 to over
5,400 operational SEZs in 147 countries in 2018
137
and has most likely increased
further since. SEZs have a mixed track record; in some cases, they are a catalyst for
industrialization and export-led growth (where they were well-designed and supported
by a conducive business environment). However, some zones fail in attracting investors
and boosting competitiveness and have been the object of much debate about their
economic rationale, eciency, and impacts on their host economies.
138
FIGURE . FROM INDUSTRIAL LAND TO SEZS: A SPECTRUM
Hierarchy of industrial park complexity/impact
SERVICED
INDUSTRIAL
LAND
MANAGED
VALUE-ADDING
INFRASTRUCTURE
BUSINESS FACILITATION
• Under existing policy
regime
• National or local one-stop
facilities
• Customs bonds
SPECIAL
REGULATORY/POLICY
ENVIRONMENT
ALTERNATIVES SPECIAL ECONOMIC
ZONES
INDUSTRIAL PARKS
Land Market
Agglomeration externalities
Government and coordination failures
Source: Adapted from Farole, Special Economic Zones in Transition Economies: Experience and Lessons Learned, 2019.
In the Dominican Republic, the special regulations that used to be designated to free
trade zones have been expanded beyond any specific geographic area to all firms
that fit a certain profile (such as firms operating in preferential sectors like logistics,
of primarily exporting firms), eectively turning what used to be a series of specific
geographic zones with fiscal advantages into a broader “SEZ fiscal regime.” Similarly,
industrial parks in the Dominican Republic can be covered by the SEZ regime or
outside of it (for example, there were 86 IPs in the DR in 2022 under the SEZ fiscal
and customs regime, but the total number of IPs in the country was larger and included
parks dedicated to local SMEs targeting the local market). Although there are strong
synergies between the two policy tools, it is important to distinguish between the
public debate around the relevance and impacts of the SEZ fiscal regime (addressed
in the recent CEM by the World Bank
139
) and the intrinsic value of industrial parks to
industrial development, and the additionality of promoting sustainable parks relative
to the current standards used on newly built industrial real estate, which are addressed
more extensively in this CPSD.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
This sector assessment is focused on the role of the private sector in the development
of industrial parks in the Dominican Republic. It will explore how industrial parks
can be better leveraged to promote decarbonization, resilience, and circularity in the
industrial sector in the Dominican Republic, while also facilitating the attraction of
more and greener FDI, especially in higher-value-added products that contribute to
export diversification. This approach aligns with the larger focus of the CPSD on how
to strengthen the DR’s competitive advantages in a way to wean the economy o the
dependence on fiscal incentives.
Global Trends
The nearshoring trend is likely to increase demand for industrial land in economies
around the US market, as in the case of the Dominican Republic. Several challenges
in the global trade arena are contributing to the nearshoring trends: (a) labor costs
and trade taris have increased in China, (b) proximity to the end consumer is
strategic where speed of new product introduction is key, (c) resilience of supply
chains is deteriorating as shocks lasting for a month occur every 2.7 years, and (d)
environmental, social, and governance (ESG) considerations and environmental
regulation are becoming increasingly stringent and Asian manufactured products are
generating higher carbon emissions. Analytical studies conducted by the World Bank
to support the nearshoring strategy of the Dominican Republic (see box 2.1 on the DR
nearshoring strategy) and interviews with global manufacturers in the automotive and
medical device industries confirm that these global trends are taking shape in the Latin
America and Caribbean region.
Because global consumer appetite is simultaneously moving toward more sustainable
products, global manufacturers are increasingly adopting ESG standards, while
their suppliers in emerging economies are increasingly facing compliance costs.
Studies have shown that there is generally a positive correlation between ESG-
score improvements and share price outperformance, even in emerging markets.
140
Executives of multinational companies contemplating nearshoring strategies are
increasingly incorporating environmental and social considerations in their decision-
making process about localization. Interestingly, 75 percent of the average company’s
ESG footprint lies with suppliers (many of which are SMEs) because these suppliers
need to pay for premiums in power purchases, invest in upgrading facilities (including
in renewables) and technologies to improve energy eciency, and adopt recognized
ESG certifications. This situation is particularly salient for Dominican IPs, which host
American and European firms and export most of their goods to those markets.
In that context, having industrial real estate with environmental and social indicators
in place is becoming critical for both ESG compliance and competitiveness. As both
corporates and governments intensify their transition toward energy eciency and
carbon-neutral standards to minimize adverse environmental externalities, the nexus
between spatial planning initiatives and green approaches has become strategic for the
global manufacturing sector. Park developers stand to gain and attract more FDI from
building a new generation of industrial parks—as well as from retrofitting upgrades of
existing ones—according to standards that respond to the evolving global demand and
the Paris Agreement. In other words, promoting ESG standards represents a de facto
FDI attraction policy. Research has shown that eco-industrial parks (see box 4.6),
for example, can decrease operational costs by up to 37 percent, achieve higher sale
premiums of up to 31 percent and faster sale times, up to 23 percent higher occupancy
rates, and higher rental income of up to 8 percent.
141
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
A timely adoption of an EIP approach can help countries like the DR leverage
this trend to promote sustainable growth and achieve their climate mitigation and
adaptation objectives. While the EIP concept was formulated and piloted in the 1990s,
it took o over the past couple of decades and has been implemented in various forms
and names (including low carbon zones, eco-industrial parks, green parks, and RE 100
Zones). As of 2020, a global survey identified 438 industrial parks that have adopted
EIP technologies (figure 4.7), 56 percent of which were established since 2001.
142
FIGURE . GLOBAL DISTRIBUTION OF INDUSTRIAL PARKS ADOPTING
Source: World Bank, “Circular Economy in Industrial Parks: Technologies for Competitiveness” (World Bank, Washington,
DC, 2021).
BOX . ECOINDUSTRIAL PARKS AND ESG COMPLIANCE OF INDUSTRIAL INFRASTRUCTURE
Eco-industrial parks (EIPs) have emerged in dierent countries as a model to better manage
environmental aspects in industrial parks (IPs), while deriving competitiveness benefits from
more ecient and sustainable industrial practices. An EIP is defined as a dedicated area for industrial
use that supports sustainability through the integration of social, economic, and environmental quality
aspects into its site selection, planning, management, and operations. Specifically, better management of
environmental aspects, decarbonization, resource eciency and circularity, climate resilience, and so on, is
expected in EIPs through dedicated regulations, institutions, equipment, infrastructure, or a combination
of those, as well as support to tenant companies for green innovation and technology adoption.
Environmentally and economically beneficial linkages can also be developed with other industries, cities,
or both outside of EIPs, aiming to benefit the largest number of firms possible and to maximize positive
spillovers. See figure. B4.6.1.
34%
8%
50%
3%
2%
2%
1%
Latin America &
the Caribbean
15
South Asia
11
Middle East &
North Africa
7
Sub-Saharan Africa
4
East Asia &
Pacific
220
North
America
34
Europe and
Central Asia
147
74
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
FIGURE B.. EIP PERFORMANCE REQUIREMENTS
Process of Continuous Improvement
Going beyond the EIP performance pre-requisites
EIP PERFORMANCE REQUIREMENTS
CORE EIP CATEGORIES AND TOPICS
Park management
performance
Environmental
performance
Social performance
Economic
performance
• Park management
services
• Monitoring
• Planning and zoning
• Environmental
management and
monitoring
• Energy management
• Water management
• Waste and material use
• Natural environment
and climate resilience
• Social management
and monitoring
• Social infrastructure
• Community outreach
and dialogue
• Employment
generation
• Local business and
SME promotion
• Economic value
creation
7 pre-requisites 2
performance indicators
15 pre-requisites 15
performance indicators
2 pre-requisites 12
performance indicators
7 pre-requisites 4
performance indicators
Compliance with local and national regulations and alignment with international standards
Source: World Bank, UNIDO, and GIZ, “International EIP Framework,” 2021. For more details, refer to recent publications on EIPs, including
World Bank, UNIDO, and GIZ, “International EIP Framework,”
Eco-industrial parks build on good fundamentals of industrial park development and need to be
grounded on current and future market demand for serviced industrial land. They should provide
a focus on piloting and spurring regulatory reform and infrastructure that can help unlock or trigger
increased demand from local and foreign investors. The EIP framework opens the door to integrating the
ESG angle through a combination of regulatory improvements and technology adoption. In the Republic
of Korea, through a national program, more than 100 industrial parks introduced EIP measures between
2005 and 2015. This eort mitigated greenhouse emissions by more than 2 million tons carbon dioxide
equivalent (CO2-eq), resulted in 36.8 million tons of wastewater reused/recovered, increased energy savings
by 383,000 tons of oil equivalent (ToE), and catalyzed US$761 million of private investments, thus increasing
economic benefits by US$ 2.4 billion. In Germany’s Höchst Industrial Park, over 500,000 metric tons CO2
emissions are mitigated every year through various EIP interventions such as improved energy eciency
and increased use of renewable energy sources within the park. The park also generated €6.65 billion worth
of investment and 22,000 jobs.
Among the global industrial parks surveyed, waste treatment and renewable energy technologies
are widely adopted in EIPs. The World Bank survey identified 227 industrial park cases (51.8 percent of the
total number of EIPs) where renewable energy technologies were deployed, and 248 EIPs (56.6 percent) that
are actively using waste treatment technologies. Adoption of waste treatment and renewable technologies
is higher (22.0 percent and 26.0 percent, respectively) than resource eciency (41.3 percent), industrial
symbiosis (45.9 percent), and water eciency (47.5 percent) technologies.
Source: World Bank, UNIDO, and GIZ, “International EIP Framework,” 2021. For more details, refer to recent publications on EIPs, including
World Bank, UNIDO, and GIZ, “International EIP Framework,” and World Bank, “Circular Economy in Industrial Parks: Technologies for
Competitiveness” (2021). Park et al. 2018.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Sector size and performance in the Dominican Republic
The Dominican Republic has been leveraging industrial parks to promote exports
of goods ever since the Gulf and Western Corporation was established in 1969 (see
appendix A for a detailed historical overview of the evolution of industrial parks
and special economic zones in the Dominican Republic). In 1990, Law 8-90 was
passed to promote exports and trade, providing favorable fiscal and customs regimes
to industrial parks dedicated to exports (in this document, this is referred to as the
SEZ regime, as described previously). Law 392-07 later extended these privileges to
IPs developed and operated by ProIndustria, the DR’s public agency dedicated to the
promotion of industrial development.
Built industrial shell space in industrial parks has steadily increased since 2000,
registering a 3.5 percent compound annual growth rate (CAGR) between 2000 and
2021, with occupation rates of industrial parks reaching 93 percent at the end of
2021. As of 2021, half of the Industrial parks under the SEZ regime were located in
the Northern Region, 24 percent were in the National District and Santo Domingo
Province, and the rest were scattered across the south and east of the country.
Industrial real estate (built shell space) reached approximately 49 million square feet in
area by 2022, a 14.3 million square foot increase relative to 2010. Of this total area,
47.5 million square feet is currently occupied, with 8.6 million square feet dedicated
to exported services and specialized zones under the SEZ regime (such as Alorica,
TelePerformance), and approximately 1.4 million square feet to logistics, with the
remaining 37 million square feet dedicated to manufacturing activities.
The private sector has been a major player in developing and operating industrial
parks in the DR, with 76 percent under the SEZ regime privately owned and 4
percent operating under a mixed public-private administration. The remaining 20
percent of parks are owned by the government. IPs benefiting from SEZ regimes
in the Dominican Republic can be (a) privately developed and managed (including
Las Americas and PISSA II), (b) developed and operated by a public-private or not-
for-profit organization (such as Corporación Santiago); (c) publicly developed and
operated by ProIndustria—the governmental agency in charge of the promotion of
industrial development (as La Vega is), or (d) publicly developed (by ProIndustria) but
privately operated through an outsourcing or PPP agreement (such as San Pedro de
Macorís). Some policy actions on regulatory shortcomings and coordination failures
could significantly improve the country’s ability to harness private capital, capacity,
and skills to promote higher environmental and social standards that also enhance
competitiveness (as described further in this section).
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The Dominican Republic’s industrial parks have played a supportive and evolving
role in promoting manufacturing and export diversification. After fueling economic
growth during the 1980s and 1990s, industrial park employment plummeted and
exports stagnated in the 2000s, following the Multi-fiber Agreement in 2005, the
increased Asian competition (largely influenced by China’s entrance to the World Trade
Organization), and the Great Financial Crisis in 2008. Yet, industrial park exports and
employment levels have been on a recovery path since 2009, with medical equipment,
electrical apparatuses, chemicals and plastics, and footwear partially filling the void
left by textiles (previously a third of DR’s export basket). In 2022, 16.0 percent of
the tenant companies’ activities were in tobacco, followed by clothing and textiles
manufacturing (12.0 percent), agro-industrial products (7.8 percent), medical and
pharmaceutical products (5.0 percent), cardboard (3.9 percent), footwear (3.5 percent),
and electrical products (3.1 percent). It’s worth noting that these occupation ratios do
not reflect shares of exports, productivity, or the growth trend. Exports from IPs under
the SEZ regime increased significantly, valued at US$4.2 billion in 2009 versus US$7.8
billion in 2022. Despite hosting only a relatively small number of the tenant firms (5
percent of total firms), the medical product and pharmaceutical product manufacturers
were responsible for the largest share of the IP’s exports in 2022 at 29 percent, valued
at US$2.2 billion. Electronic products and tobacco products were responsible for 16
percent (US$1.2 billion), and clothing and textiles, 13.4 percent (US$1 billion).
As such, these industrial parks enabled the attraction of US$2.9 billion during the
2010–22 period toward manufacturing activity, accounting for 8 percent of all FDI.
In terms of investment accumulated in 2022, 38 percent (US$1.5 billion) originated
from the United States while another 18 percent (US$712 million) originated from
Spain and Mexico evenly, with the rest originating in Europe and Canada. The
economic activity held in these parks was responsible for 58 percent of the net foreign
reserve increase in 2021,
143
which highlights the other avenue through which it
provides relief on external accounts. By contrast, the absolute contribution of the free
zone regime in Costa Rica in 2018 totaled US$4.7 billion or 7.9 percent of its GDP;
the country’s economic zones furthermore generated 115,000 direct jobs and 57,000
indirect jobs, representing 12 percent of the total private sector’s formal employment
in the Central American country.
144
While total employment in SEZs is relatively low (4 percent in 2022), firms in
industrial parks also generate positive impact in terms of inclusion. Over 150,000
households in the DR are positively aected through direct or indirect jobs generated
from economic activity in industrial parks,
145
and they maintain a significant higher
employment rate for women (see figure 4.8). Of the aected households, 40 and
47 percent are categorized as vulnerable and poor, respectively. Wages received by
workers at industrial parks constitute approximately two-thirds of household income
for these families. The informality rate in export-oriented IPs in the DR is practically
null (compared with a 34 percent average informality rate in the industry sector as
a whole), which oers another advantage to working families by providing access to
social security, stable jobs, health care facilities on site, and less fragility in periods
of crisis like the COVID-19 pandemic. Firms in these IPs also experienced a faster
recovery during the pandemic, surpassing 2019 formal employment levels by 4 percent
in 2021, whereas aggregate formal employment outside industrial parks remained
below pre-pandemic levels.
77
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
FIGURE . JOBS BY GENDER, NATIONAL VS. SEZS,
Source: CNZFE (Consejo Nacional de Zonas Francas Exportadoras), “2022 Statistics Report.”
However, there are limited economic linkages between firms within parks and
domestic firms.
146
FDI for export-oriented firms within industrial parks increased from
4 percent of total FDI in 2010 to 9 percent in 2019. Total sales from industrial parks
accounted, on average, for nearly 3 percent of GDP over 2010–19, but the contribution
of industrial parks to growth and job creation in the wider economy remains below
the contribution of local firms not benefiting from the same special regime. A 1 percent
increase in industrial parks output leads to an estimated average increase in output in
the rest of the economy of only 0.6 percent, and to a 0.5 percent increase in indirect
employment creation. In comparison, a 1 percent increase in local manufacturing
production leads to an estimated average increase in production in the rest of economy
of 1.4 percent, and to a 1.7 percent increase in indirect job creation. This dierence is
largely due to the lack of linkages between exporting firms inside SEZs and the non-
exporting local firms outside of them (see section 3.1).
Harnessing global trends, the Dominican Republic has an opportunity to update its
industrial parks policy and position the parks as a green investment location to attract
high-quality investors, independent from the debate on fiscal incentives. As competition
for investment locations has increased, countries like Costa Rica have revamped
their development strategy to position themselves as a carbon-neutral and sustainable
investment location. The Dominican Republic has taken steps toward updating its
Nationally Determined Contributions and embarking on a green taxonomy strategy
for the country. These can be incorporated into the DR’s economic growth strategy by
targeting a large portion of its industrial base located in industrial parks.
MALE FEMALE
NATIONAL MEDICAL DEVICES AND
PHARMACEUTICS FREE ZONE
OTHERS FREE ZONE
% % %% % %
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Main public policies that influence the development of industrial
real estate
Policies that distort industrial land markets
Industrial land markets are inecient in the Dominican Republic. As described in the
Urbanization and Territorial Development Report,
147
the DR suers from fractioned
territorial planning (urban versus rural), which does not allow for proper management
of urban growth and peri-urban areas. There is also a lack of clarity between the
competences of the dierent institutions responsible for territorial planning and a
lack of inter-institutional coordination. This failure contributes to weak land use
planning in the Dominican Republic, with a lack of ex ante definition of which land
can be used for residential, industrial, or agricultural purposes, leading to information
asymmetries and inecient markets for industrial land. It also creates distortions in
pricing, as commercial and residential uses (which often have higher densities and rates
of return) can crowd out industrial use in the absence of analytically underpinned land
use planning. Taking stock of this need, the government launched the Santo Domingo
2050 decree, which incorporates 985 million square feet of public land and dedicates a
significant part of it to the creation of an industrial corridor around the Circunvalación
de Santo Domingo Avenue. This eort can significantly help address the constraint in
the midterm, provided adequate and comprehensive territorial and land use plans are
elaborated shortly.
If the DR wants to eectively use IPs as an instrument for economic and territorial
development, it has to create a transparent and ecient industrial land market and
strive to elaborate a clear spatial strategy. Adequate territorial planning continues to
be a challenge in the country, and that challenge has implications on the eciency of
land markets. Some of the main issues identified in the report are that (a) the current
institutional and regulatory framework is weakly interlinked and has major gaps; (b)
planning instruments are poorly advanced and implemented across the board (at the
national, regional, and local levels); (c) there is a strong prevalence of tourism-oriented
sectoral territorial planning; (d) the capacity required to develop planning instruments
(and their implementation) is still poor, particularly at the local level; and (e) basic and
thematic information required to develop territorial planning instruments is missing.
Policies that stifle the mobilization of private sector capabilities to optimize the
use of public assets for industrial development
The government of the Dominican Republic holds a significant amount of land in
strategically located areas suitable for industrial development, as previously stated.
These assets could be optimally leveraged by tapping into the sophisticated capacities
of the country’s private sector to own, develop, and operate industrial parks. In this
regard, the new PPP law is still not optimal for engaging the private sector in managing
these assets because it is fairly new and contains critical weaknesses. Although the law
in general is in line with regional standards, it has three key weaknesses that could
deter investors: (a) after the PPP project is awarded, this decision needs to be approved
by Parliament; this step adds an additional risk that is dicult to mitigate; (b) the
grantors (infrastructure line ministries) are not part of the National Council (created
by the law), which is led by the Ministry of the Presidency, and this could reduce
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
incentives for line ministries to claim ownership and champion a project; and (c) the
funding for management and operations by the PPP agency (Dirección General de
Alianzas Público Privadas) and the grantor’s contract supervision could be very limited
(2.5 percent of total capital costs in total), undermining the eciency and ecacy
of these bodies. It is worth noting that these issues are applicable to the broader
spectrum of sector and assets eligible for PPPs (not solely for industrial development),
as conveyed in the Dominican Republic Country Economic Memorandum prepared by
the World Bank.
The Dominican Republic’s relatively diverse experience with vehicles for the
development of projects with construction risks also oers an equally suitable
route to mobilize private sector capital with potentially shorter lead periods for
implementation. The government has gained relevant experience since 2013 in putting
together public trust funds to mobilize private sector capital for a diversity of purposes.
For instance, the first one to be created with the purpose of supporting the operation
and management of roads is RD Vial, which has even been used to leverage resources
via a bond issuance for an equivalent of US$468 million. Additional public trust funds
include the newly created Pro-Pedernales, which seeks to combine public and private
sector capital for developing the region of Pedernales.
Policies that aect the access to long-term finance
In recent years, the growing trend toward long-term finance solutions has emerged
as a promising means of financing projects with a construction component, such
as industrial parks. In contrast to traditional financing mechanisms, like bank
financing, that have short repayment periods, long-term financing oers several
distinct advantages that cater to the unique needs of industrial parks. Industrial park
projects are capital intensive and require substantial financial resources for their
successful implementation. In most cases, these projects require large investments
in land preparation, infrastructure development and refurbishment, construction of
buildings, and procurement of machinery. Therefore, long-term financing solutions,
which provide for a more extended repayment period (such as 15 years), give these
projects sucient time to generate revenues and become self-sustaining. These
longer-term financing solutions result in repayment schedules that better match the
project's revenue generation capacity. Consequently, the burden of debt servicing is
reduced, giving projects the ability to sustain regular cash flow streams to support
new investments. A long-term finance solution provides room for diversification of
investors (domestic and international), combining banks and institutional investors like
pension funds. These institutional investors seek to deploy capital to viable ventures
with investment horizons that match the needs of their own clients. This would result
in industrial parks enjoying flexibility, accessing sucient working capital, and being
structurally aligned with the investment horizon of institutional investors, which
would ultimately lead to their long-term success.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
However, financing such projects can be challenging, particularly in developing
countries where capital markets are less developed. In this context, there has been
growing interest in long-term finance solutions that can provide the necessary funding
for these projects. One example of a global experience toward long-term finance
solutions for industrial parks is the Asian Infrastructure Investment Bank (AIIB).
148
Another example comes from Brazil, which has created a dedicated line of credit
within the Brazilian Development Bank (BNDES) to provide long-term financing for
industrial parks.
149
In China, the government also has been active in promoting the
development of industrial parks through the establishment of dedicated funds. For
example, the China Industrial Parks Development & Investment Fund has been set
up to provide long-term financing for industrial park projects. The fund also provides
other forms of support, such as guidance for project development and management.
In the Dominican Republic, banks’ ability to continue to provide financing may be
aected by two interrelated factors: the concentration of sponsors in the form of
conglomerates within the industrial park sector and the regulatory regime imposed
by single borrower limits. Additionally, solvency constitutes another limitation.
By the end of 2022 banks had a loan portfolio of around US$24.5 billion (21.7
percent of GDP),
150
with very low exposure to industrial parks. Growth rates of
banks’ loan portfolios reached a composite average growth rate of 10 percent in the
past five years, which gives room to increase future financing of industrial growth,
provided constraints on single borrower limits are addressed. Indeed, anecdotal
evidence suggests that regulatory restrictions could increasingly limit the ability
of the banking sector to be the sole source of funding for growth in industrial real
estate. Particularly, the single borrower lending limit, which restricts the aggregated
loan amounts of banks to a single borrower, at a conservative 10 percent of core
capital,
151
may be reached given the projected increase in demand for industrial parks.
Even under conservative scenarios, the demand is likely to exceed US$690 million,
while the limit was about U$466 million as of December 2022. The concentration of
sponsors (who develop the projects) across sectors in the country, often in the form
of conglomerates, may limit the diversity of projects and financing opportunities
available. This concentration poses risks as it increases the exposure of financial
institutions to specific sponsors. Also relevant is the fact that lending to the expected
demand of IPs would significantly reduce banks’ solvency ratio as, according to the
local regulation,
152
those loans carry a risk weight of 100 percent, the same as any
other unsecured loan according to the local regulation.
153
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Institutional investors, such as pension funds, are increasingly relevant potential
providers of finance for the development of industrial parks (see box 4.7). Pension
funds look to diversify their portfolios and seek out investments with reliable income
streams, which industrial parks could provide given their potential for long-term lease
agreements and steady rental income. By investing in industrial parks, pension funds
can benefit from regular cash flows and the potential for capital appreciation over the
long term. Pension funds in the Dominican Republic have assets under management for
US$17.3 billion, equivalent to 15.4 percent of GDP. Their rapidly growing portfolios
are highly concentrated in government securities, reaching about 75 percent between
central bank and Ministry of Finance bonds (see figures 4.9 and 4.10). For instance,
pension funds in Colombia and Mexico do invest in projects via investment funds,
using the local variations of real estate investment trusts (REITs) and debt funds.
Colombian pension funds had about US$350 million in real estate funds—REITs or
otherwise—in 2022 while Mexican pensions funds had about US$8.1 billion in REIT
investments by March 2023, or 2.8 percent of their portfolio. While only a portion of
those investments is for industrial parks, it shows that pension funds have a preference
to outsource their investments to professional teams when real estate and construction
risks are involved. Debt funds also play a crucial role in financing industrial park
development by channeling pension funds’ capital. These funds specialize in providing
debt capital to projects and can oer flexible financing solutions tailored to the specific
needs of industrial park developers. Their expertise in evaluating risk and structuring
financing arrangements can be valuable for institutional investors, which usually face
limitations when performing these activities.
Source: SIPEN.
FIGURE . PENSION FUNDS’ ASSETS UNDER MANAGEMENT
AND GROWTH RATES
US$, billion
FIGURE . PENSION FUNDS INVESTMENT PORTFOLIO,
AUGUST
ASSETS UNDER MANAGEMENT GROWTH RHS
AUG
%
%
%
%
%
%
18.0%
57.7%
9.1%
2.3%
3.4%
9.3%
Banking sector
Corporates
Trust Funds
Investment
Funds
Ministry of Finance
Central Bank
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . SUCCESSFUL CASES OF UTILIZING INVESTMENT FUNDS AS PLATFORMS TO CHANNEL
PENSION FUND RESOURCES TOWARD INDUSTRIAL REAL ESTATE.
Although historically focused on the tourism and commercial real estate markets, institutional investors
are starting to take interest in the industrial real estate market. Recent examples include the following:
• Nigua Free Zone. Pioneer, an investment fund
management company, acquired Nigua Free Zone
through Fondo de Desarrollo de Sociedades II in
2020. Nigua is an industrial park under the SEZ
regime with over 30 years in operation and over
400,000 square feet for manufacturing or service
operations. After Pioneer acquired the asset
under the fund, it listed the fund in the domestic
capital market and sold shares to investors, largely
represented by pension funds in the country. As
of December 2022, the Fondo de Desarrollo de
Sociedades II, which includes other assets besides
Nigua, was valued at approximately US$ 115
million and was entirely owned by AFP Popular,
one of the main pension funds in the country
• Zona Franca Tamboril. Altio, another key player
in the investment fund arena, acquired Tamboril,
an 813,000-square foot industrial park which
holds 31 industrial shells and 8 buildings with a 100
percent occupation rate. Tamboril is, however,
held under a closed real estate investment fund
that invests in commercial, corporate, and
tourism real estate. Key pension funds (Popular,
Reservas, Crecer, Siembra) have channeled US$ 87
million through this fund
In the Dominican Republic, the Capital Market regulator, the Superintendencia de
Valores (SIMV), is contemplating regulatory changes aimed at deepening the market
to attract institutional investors, thereby increasing capital flow. The proposed changes
encompass several key aspects aimed at facilitating investment and promoting capital
flow. These changes include
• Dierentiated requirements and expedited processes for public oerings specifically
targeted at institutional investors. This streamlining of authorization processes can
reduce bureaucratic hurdles, making it easier for institutional investors to participate
in public oerings and access investment opportunities.
• Elimination of regulatory hurdles to encourage private corporations to go public.
Law 163-21 focuses on promoting initial public oerings among private corporations
by eliminating various regulatory hurdles related to stock issuance and transactions.
• A one-stop window for pension fund investments would be aimed at streamlining
and centralizing the process for including pension funds in investment funds. Once
operational, this platform will provide a unified and ecient mechanism for pension
funds to invest in a range of investment funds. Besides simplifying the investment
process, this can enhance transparency and facilitate capital allocation.
• Harmonization of regulations related to the requirements established by the Risk
and Investment Limits Committee (CCRLI). This harmonization eort seeks to align
and standardize regulations, ensuring consistent application of investment limits and
risk management practices across dierent entities. This can contribute to a more
cohesive and transparent investment landscape.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Moreover, the potential for the financial sector to play a significant role in supporting
climate finance and mitigation, in particular, is a central opportunity for the
Dominican Republic. The financial sector can contribute to climate finance through
various avenues. One key aspect is the integration of ESG factors into investment
decision-making processes. By considering climate risks and opportunities, financial
institutions can identify investments that align with sustainable development goals
and contribute to climate mitigation eorts. This can involve financing projects related
to renewable energy, energy eciency, sustainable agriculture, waste management,
and other climate-friendly initiatives. Furthermore, the financial sector can support
climate finance by facilitating the mobilization of private capital toward climate-
resilient infrastructure projects. Such initiatives include developing innovative financial
instruments and mechanisms that attract investments in sustainable infrastructure,
such as green bonds, climate funds, and specialized investment vehicles.
The potential for the financial sector to play a significant role in supporting climate
finance and mitigation is a central opportunity for the Dominican Republic. While
progress is being made in sustainable finance initiatives, additional regulatory reforms
are needed to scale capital market mobilization for funding sustainable industrial
growth. Key areas for beneficial reforms include enhancing disclosure and reporting
requirements with clearer guidelines for ESG disclosure, promoting issuance of
green bonds to facilitate financing of sustainable projects, and strengthening investor
protection. The government is reviewing dispute resolution mechanisms to align with
sustainable development goals and attract domestic and foreign investments in eco-
friendly projects. The collaboration between the World Bank, the Ministry of Finance,
and other stakeholders reflects a proactive approach to developing a national green
taxonomy, showcasing the country's commitment to green financing and sustainable
investment practices through its local capital markets.
Finally, carbon markets can play a crucial role in facilitating the finance of eco-
industrial parks in the Dominican Republic by providing an additional revenue
stream for projects that reduce greenhouse gas emissions and promote sustainable
practices. As highlighted in the following sections, eco-industrial parks and retrofitting
investments in existing brownfield parks can reduce or oset carbon emissions, as well
as increasing resilience to climate change eects. Investments can include renewable
energy installations, energy eciency improvements, waste management initiatives,
and reforestation eorts. Developers and operators of IPs can generate carbon credits
from these investments and sell them on the carbon market, providing a new source
of revenue that can be used to finance the development and operation of parks, or to
improve their bottom lines. Investors favoring eco-friendly portfolios may support EIPs
with verified carbon osetting, boosting their value proposition through participation
in carbon markets and generating carbon credits. Government policies and regulations
are essential to support the participation in carbon markets and facilitate these
financing opportunities for eco-industrial parks. The government is currently working
with multilateral institutions to improve relevant regulations, but further guidelines
can be incorporated to ensure the credibility and environmental integrity of carbon
credits that can potentially be generated by eco-industrial parks.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Policies that aect the adoption of green technologies, circular economy, or
decarbonization
Eco-industrial parks are influenced by a wide set of regulations that cover legal
aspects of industrial land and zones, environment, social elements, and local economic
development. Good-practice industrial park laws and regulations generally adopt the
country’s environmental and social laws, unless they are weaker than international
standards. This means that promoting eco-industrial parks requires a review of the
potential uptake of certain actions and technologies by industrial parks and the role of
regulations that may promote or hinder this dynamic (table 4.8).
TABLE . EIP INTERNATIONAL FRAMEWORK: REGULATORY ANALYSIS
Park management
Examples include national regulations on park ownership (private); reporting
requirements; environmental and social management at the industrial park level
Environmental
Allowance of waste exchanges (industrial symbiosis); green building standards;
energy management standards; captive generation of renewable energy;
adaptation and business recovery standards
Economic
Regulations that allow for linkages with local companies; regulations and actions
that encourage local job creation
Social Regulations related to grievance mechanisms
Source: World Bank, UNIDO, and GIZ, “International EIP Framework,” 2021.
Notable gaps and opportunities exist in the Dominican Republic’s current legislation
as it relates to industrial park sustainability practices, legal requirements, and the
Eco-Industrial Parks International Framework. This section will focus on those
policy instruments influencing parks terms of their administrative procedures,
environmental performance, social performance, and economic performance. High-
level recommendations to bridge existing gaps between local recommendations and
the EIP Framework are included. Certain countries have enshrined the EIP approach
into their economic park legal framework, providing as guidance to industrial park
developers and operators a certification program for EIPs (including China, Türkiye,
and Vietnam).
Energy-related regulations—in aspects of energy eciency, renewables, energy
management, and networks for waste heat recovery in general and as they relate
to industrial parks—are generally well defined. In renewables, Law No. 57-07
establishes a generous incentives regime that covers projects relevant to industrial park
development and operations including solar (photovoltaic) installations of any size
and biofuel plants of any production volume; the law is further reinforced by feed-in
taris, net metering, interconnection standards, and auctions that already form part of
the renewable energy package of existing regulations. In promoting energy eciency,
provisions of Article 40 of Law 64-00, requires companies aecting the environment
with their activities to obtain permits from the Ministry and Environment and Natural
Resources, thereby obligating industrial parks and others to implement energy and
emissions reduction measures. The industrial park sector’s energy consumption could
benefit from revised building codes and a Green Buildings Certification Program
specifically, incentives (loans, credits, rebates) for energy eciency, and defined
national targets for energy eciency.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
The General Law of Integral Management and Co-processing of Solid Waste (225-
20), enacted in 2021, introduces key concepts to help industrial park operators and
their tenants leverage circular economy principles. The law addresses extended
producer responsibility measures and the promotion of green markets related to
waste, in addition to establishing a green bond framework to finance green projects.
Despite this law, there is a lack of institutional support to help generate and promote
industrial symbiosis in industrial parks. That goal requires companies to report
waste material and a specialized institution to identify waste exchanges between
companies in industrial parks. In the Republic of Korea, the Korea Industrial Complex
Organization developed a program to promote industrial symbiosis. More than 450
feasibility studies were conducted on industrial symbiosis across the country as part
of the national EIP program, 247 out of which were commercialized. In total, 1,865
companies have participated in identifying industrial symbiosis opportunities to date,
generating around US$41.6 million in cost savings every year.
Business continuity through resilient construction, although not a feature of
sustainable production, is likewise covered by local legislation, though notable gaps do
exist. Recent developments, including the Law on Territorial Planning (368-22) and the
establishment of the Ministry of Housing and Buildings (which streamlined multiple
agencies and the sector’s governance), complement the 2030 National Development
Plan that acknowledges the need for resilience planning. Despite important recent
advances on this front, existing building codes still don’t have a legally enforceable
code for design for high winds, raising concerns for infrastructure built in a hurricane-
prone region of the world where climate change is expected to increase their intensity.
In terms of oversight, it has also been reported that construction monitoring is rarely
enforced for small and medium-sized projects, a fact that is exacerbated by a lack of
legal accountability should construction fail—be it for residences, commercial and
public buildings, and industrial structures.
All stakeholders within the DR’s economic zone sector have a role to play to enhance
the resilience of industrial assets. Governance structures must be improved to ensure
their enforcement at the design stage and, through site audits, to the construction
stage. Meanwhile, developers and industrial tenants should be encouraged to increase
their understanding of hazard exposure and integrate resilience solutions that
surpass those established by existing regulations into the zones’ master planning and
monitoring activities by using self-diagnostic tools such as IFC’s Building Resilience
Index or contracting experts.
Finally, although not enshrined by law, several government programs do foment
improved performance in social and environmental matters, to the benefit of industrial
parks and the private sector broadly. These include capacity building for companies
and their workers through the National Institute for Technical and Vocational
Training (INFOTEP), training in cleaner production and circular economy projects
for MSMEs hosted by the Ministry of Industry and Commerce, and the creation in
2018 of the National System of Innovation and Technological Development (SNIDT),
which encourages innovation and technology development—all of which directly
and indirectly support industrial park developers in their quest to pursue greener and
more sustainable operations in line with international investors and premium export
markets. Box 4.8 describes some similar eorts in Mexico.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . IMPROVING POLICIES FOR EIPS IN MEXICO
There are over 500 industrial parks (IPs) in Mexico, which account for three million jobs in the automotive,
distribution and logistics, metalworking, electronics, plastics, food and beverages, chemicals, construction,
pharmaceuticals, paper, textiles, medical devices, and aerospace sectors. The industrial parks in Mexico
represent an estimated 7 percent of the energy consumption of the country and a total of 30 percent of
the greenhouse gas emissions of the industry sector. If the industries within these industrial parks were
to lower their emissions by 20 percent, as indicated by the Nationally Determined Contributions, it would
significantly contribute to Mexico’s reaching its targets under the Paris Agreement by 2030.
Recent discussions with park operators highlight an increased demand for land—especially those with
EIP-type interventions in place. Under a World Bank technical assistance project, a regulatory review was
conducted to identify the main constraints to the adoption of EIP approaches. These included the following:
• Water management principles, especially for industrial institutions, have limited coverage in the
regulations.
• While energy eciency has been identified as a focus area, a larger spectrum of resource eciency,
waste, and by-product synergies has limited reference, Hence, implementation arrangements,
frameworks, and support systems for those eorts are limited
• Development of a green technology market within Mexico, with a focus on enhancing the export of
goods and services from the country, contributions to the local economy, and employment generation, is
not actively referred to in any legislation.
• Although not explicitly referred to by name, industrial symbiosis and waste/by-product exchange
are mentioned as “waste recycling” in several laws and regulations. However, other synergies (non-
waste industrial symbiosis) have limited reference. For EIP specific applications, regulatory bylaws on
renewable energy generation, occupational health and safety, and resource eciency are limited.
Source for emission figures: Greenhouse gas emissions by sector, Mexico, 2019, https://ourworldindata.org.mcas.ms/grapher/ghg-
emissions-by-sector?time=latest&country=~MEX.
Investment opportunities
Over a five-year horizon, projections of nearshoring opportunities suggest an increase
in demand for high-quality industrial land at a higher rate than recent growth trends
of industrial real estate development and a resulting investment need of up to US$690
million (figure 4.11). Global nearshoring analyses show that in the next five years,
sectors that are already hosted by the DR’s industrial zones could see US$1.3 trillion
in exports diversify or modify geographies.
154
Regarding the DR, under an optimistic
scenario,
155
the potential of new trade flows from nearshoring (compared with the
exports levels in the absence of nearshoring) could reach US$2.7 billion in a five-year
horizon, while a baseline approach using Inter-American Development Bank (IDB)
estimates suggests that approximately US$1.6 billion in additional exports could be
harnessed.
156
Consequently, the total additional industrial shells required to host new
exporting activity from nearshoring
157
could range between 4.4 million and 8.3 million
square feet—a 10.0 to 19.5 percent increase from its 2021 level. The 2022 observed
data have already surpassed projections, as an additional 5 million square feet of
industrial shell space were built, of which 1.4 million correspond to logistics activities
and 3.3 million to manufacturing, reaching a total of 47.5 million square feet.
158
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Source: CPSD team calculations based on CNZFE data on historic occupied industrial shell space, IDB projections (US$1.58
billion), and assuming DR can capture its current share of global export of the McKinsey nearshoring estimates (US$ 2.7
billion). Projections assume the current exported value per square foot (US$191 per square foot) will remain constant and
use the nearshoring estimates of additional export flows generated from nearshoring to construct the projected occupied
shell space required to host additional manufacturing activity. IDB estimates can be found in the June 7, 2022, news
release at https://www.iadb.org/en/news/nearshoring-can-add-annual-78-bln-exports-latin-america-and-caribbeanInter-
American Development Bank – 2021 and McKinsey estimates are in Susan Lund et al., Risk, Resilience and Rebalancing in
Global Value Chains (McKinsey, 2020).
Considering global trends and recent data from the DR, three main opportunities
for the private sector to contribute to resilient and green industrial growth can be
identified: (a) investments in real estate investment trusts to develop and operate
greenfield EIPs; (b) green financing to decarbonize and strengthen the resilience of
brownfield parks; and (c) investments in utility-scale photovoltaic rooftop systems to
decarbonize industrial growth.
Investment Opportunity 1: Investment trusts to develop and operate
greenfield EIPs
There is an opportunity for private sector investment in real estate to support
decarbonized and resilient industrial growth, particularly by promoting eco-industrial
parks standards in greenfield developments. The development of eco-industrial parks
will also help showcase how IPs can evolve beyond fiscal incentive-based competitive
advantages (to attract both FDI and local investments) to compete on a more
substantive unique value proposition. Depending on the impact of nearshoring, the total
investment needed for building modern and resilient industrial real estate could vary
between US$200 million and US$400 million (for a total expansion in industrial shell
space between 4.4 million square feet—based merely on past growth performance—and
8.3 million square feet—based on the nearshoring-backed baseline scenario).
FIGURE . INDUSTRIAL PARKS SHELL SPACE OCCUPIED, SQUARE FEET
Projections
Observed
47,488,229
56,582,660
High nearshoring scenario
50,716,133
Low nearshoring
scenario
46,839,770
Baseline – current trend
scenario
29,268,270
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Access to more suitable long-term finance can increase the interest of the private
sector in the development of EIPs—instead of regular Class B IPs—and REITs could
be an option to achieve that goal by mobilizing private sector capital.
159
REITs are
trusts that acquire, develop, operate, and recycle income-generating real estate,
mostly attracting institutional capital through a favorable tax regime, a transparent
capital structure, and a predictable dividend payment profile. The key feature indeed
is that they are comparatively ecient flow-through structures, as they are required
to redistribute almost all their net earnings to their shareholders in exchange for not
being liable to corporate tax. Most are publicly listed on the stock exchange markets,
although this does not always need to be the case as participation in their capital can
take place via private transactions. The Dominican market has several mutual funds—
locally called investment funds but often sharing the characteristics of REITs—
dedicated to real estate which hold US$767 million
160
in assets under management
mostly in the housing, commercial and hotel sectors. According to the local investment
fund association (ADOSAFI) by December 2022 there were 13 real estate funds with a
total of US$723.9 million of assets under management. However, there are other funds
that may invest in real estate as part of a mixed strategy while some funds classified as
real estate have excess liquidity invested in securities not related to real estate. Most
importantly, these funds are oered to institutional investors such as Pension Funds,
which hold over 50 percent of the total amount of investment funds, or other private
investors.
Leveraging REITs to finance the development of private greenfield EIPs could be
straightforward in the Dominican Republic, although a clearer regulation could
reinforce the process. A potential business model involves creating a REIT dedicated
to EIPs and open to international investors. Initially, the sponsor/owner could make an
in-kind contribution in the form of land and existing (income-producing) parks to the
REIT, securing a sizeable equity stake based on the valuation of those assets. Private
sector developers would then contribute with cash to finish building enough equity for
the REIT to start developing new assets. After an initial investment period (which does
not have to be defined ex-ante unlike in most private equity funds), the REIT would
hold a stable portfolio long enough to build up a credible dividend payment profile,
and recycle portions of its portfolio to test the valuation and demonstrate likely uplifts
resulting from nearshoring and sustainability gains. A plausible and beneficial exit
strategy could be to then proceed to an IPO and open the REIT to retail investors,
particularly from the Dominican Republic. Partial ownership of any involved public
agency in the REIT could be recycled via divestiture, at a later stage. Adoption of
this model is feasible in the Dominican Republic, with experienced asset managers
capable of structuring and oering REITs to investors. Improving information on
the opportunities for investors and reporting to regulators are tasks that are already
taking place. However, while nothing impedes replicating an adapted or improved
version of the structure of REITs, no specific regulation exists for them, so regulatory
improvements and clear government norms—including a definition—could increase
the interest in this type of instrument.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
In cases where land ownership is and has to remain public, REITs could also be
limited to providing debt, while also increasing mobilization of private sector capital
by introducing trust generating skills for IP management. Privatizing public land could
prove to be controversial and fraught with capture risks, but the development of EIPs
on public lands could remain possible even when maintaining land ownership with
the government. A REIT could, for example, lend to the project or become a partner
in the project (under a PPP agreement), renting land from the government, developing
it and renting it out to final users. In these cases, an additional advantage of a REIT,
is the leveraging of third-party professional management. Managed funds could
make institutional investors feel more secure in providing their capital if they see a
specialized professional asset management team in charge of the investments. Securing
a professional, well-regarded asset manager for the REIT should be straightforward
in the Dominican Republic: operating the REIT requires expertise that can easily be
found in the DR’s private sector, but also in a few public sector entities with private
sector standards.
In both cases, private or public-private EIP projects, construction risks may not easily
be absorbed by investors of REITs, so some credit enhancement might be needed
to create the market. While REITs may take construction risk, they usually have a
diversified portfolio with a number of investments that provide positive cash flows.
This would hardly be the case with greenfield EIPs. Therefore, final investors may
prefer to see a clear indication that if construction risks materialize, at least a portion
of their investments will be protected. This would require some form of guarantee or
liquidity support from a credible third party. A guarantee will make sure that a lender
will get repaid in case of a missed payment while liquidity support would provide
additional capital to keep the construction ongoing and thus avoid a missed payment.
Both instruments would work on a contingent basis, that is that they would be
disbursed upon reaching a specific condition, such as a ratio deteriorating or missing
an obligation.
Investment Opportunity 2: Finance to green brownfield industrial parks
The industrial parks in the Dominican Republic oer significant opportunities in
greening existing operations and those of the tenant firms. An analysis conducted
using IFC EDGE Green Building and Building Resilience Index (BRI) as benchmarks
has estimated the potential in GHG emissions savings that could be achieved in the DR
in the coming three to five years, by making a portion of existing factory shells green
and resilient, as well as investment need it would entail.
Increased resource eciency measures in factory shells located in the DR’s industrial
parks present a clear area of opportunity and investment, with quicker returns
estimated if implemented at the design and construction stages.
161
Findings from an
analysis using IFC’s EDGE tool, which was developed to roughly mimic the factory
shells present across the Dominican Republic, demonstrate that the highest energy
savings stem from cooling, heating and lighting; given that these factory shells can
vary in function (warehousing, manufacturing, mixed use, and so on), eciencies from
refrigeration, equipment and pumps are considered secondary or within the realm of
the tenants’ operations.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The EDGE application’s analysis of a 17,000 square foot (or 1,580 square meter)
factory shell in the DR found significant potential savings in energy, followed by
water, if certain retrofits are applied. Concretely, energy eciency of the building
could increase by 27 percent if the roof and exterior walls are better insulated, glass
eciency for windows is increased, and more ecient lighting is installed for internal
and external areas. This translates to 17.92 megawatt-hour/year in energy savings and
approximately 7.5 fewer tons of carbon dioxide-equivalent (CO2-e)/year in net carbon
emissions. In terms of water eciency, a typical factory shell can save 9.63 percent by
employing lower-flow technologies in restrooms and kitchens. Overall, contemplating
both energy and water eciency measures, utility cost savings can increase by
US$11,000 compared to a business-as-usual scenario.
The size of the investment and payback period for employing the most cost-eective
energy eciency measures depends largely on the building’s construction stage.
A newly built 17,000 square foot factory shell employing materials and measures
from the sample park (with. steel structure, concrete floor, non-insulated metal
roof, concrete wall blocks, and aluminum windows) in 2023 costs approximately
US$540,000 (or US$33 per square foot); the same newly built 17,000 square foot
factory shell employing highly ecient materials and measures (with. steel structure,
concrete floor, insulated metal roof, insulated foam and metal panel walls, and
aluminum-glass windows) would cost US$630,000 (US$55 per square foot)) or an
additional US$90,000 with a payback period of 8.2 years. For existing buildings,
applying the same measures to maximize eciency to a similar 17,000 square foot
enclosure costs approximately US$172,000, largely as a result of demolition costs
associated with dismantling and replacing structural elements; the payback period for
a retrofit is 15.6 years, highlighting the advantages of integrating such measures at the
design stage during industrial park expansions and greenfield developments. Metal
panel walls in the DR have likewise proved economically attractive owing to their
inherent flexibility, allowing park operators to modify the size of rented space based on
client needs.
By introducing onsite rooftop solar power to industrial parks, eciencies are higher
still. Using IFC’s EDGE application, and assuming a minimum 25 percent annual
energy use, industrial park operators employing the same aforementioned resource
eciency measures can further increase their utility cost savings by US$39,325/year (or
US$50,325/year compared to the existing less ecient sample) while reducing their net
carbon emissions by an additional 15.9 tons of CO2e. Installing rooftop solar solutions
onto the Dominican Republic’s factory shells, even at the minimum 25 percent annual
use, likewise pushes eciencies beyond the 40 percent threshold required for EDGE’s
Zero Carbon Ready Certification, thus signifying a clear decarbonization pathway and
access to targeted global and regional funds that define such criteria for disbursement.
Currently, park operators, tenants, or both that choose to forgo eciency measures
and invest only in solar rooftops will spend approximately $US18.50 per square foot or
US$1.20 per watt. Operators and legislators alike must take care to weigh the potential
trade-os between resource eciency stemming from the use of certain materials
and their resilience to climate change and natural disasters, subsequently described in
greater detail.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
The resilience of Dominican Republic’s industrial parks to climate change and other
natural disasters presents a clear area of opportunity and investment. Significant
gaps were identified in the national building codes, signaling inherent vulnerabilities
for the existing industrial building stock. With inputs from experts and one sample
industrial park, a high-level analysis of the construction practices employed in existing
factory shells was conducted utilizing IFC’s Building Resilience Index, a web-based
hazard mapping and resilience assessment framework for the building sector. The
tool evaluated an industrial park asset’s exposure to 15 hazards under four hazard
categories of wind, water, fire, and geoseismic, and its vulnerability based on the
adoption of resilience measures recommended to mitigate relevant hazards. The
results suggested that industrial park assets in the Dominican Republic generally fail
to incorporate most of the recommended resilience practices in their planning and
construction. When these assets experience disasters, avoidable economic losses for
park operators and tenants are likely.
The assessments demonstrate that industrial assets in the DR are likely to be
extremely vulnerable to wind hazards. Primary structures in the country’s economic
zones are designed to withstand only up to 160 kilometer-per-hour windspeeds
(about a Category 2 hurricane) and are observed to survive Category 3 hurricanes.
However, since 2019, the country and immediate region experienced at least nine
violent hurricanes with maximum windspeeds exceeding 240 kilometers per hour
(including Hurricanes Laura, Eta, Iota, and Ian). Considering that climate change
is increasing the intensities and frequencies of hurricanes in the region, global best
practices recommend that buildings be designed to withstand 290 kilometer-per-hour
windspeeds.
Water related risks, often accompanied by hurricanes and tropical storms, are
evident in the current inventory of the country’s factory shells. Much of the essential
mechanical and electrical equipment is found at floor level, which is prone to be
damaged even in smaller localized flooding events. Elevating mechanical and electrical
equipment and connections, installing hydrostatic flood vents and backflow valves,
and ensuring rain drainage systems are designed with future heavy precipitation
estimations would mitigate these risks in industrial buildings.
Fire resilience is another problematic area for industrial assets in the DR. The
commonly exposed steel structures of existing industrial assets are likely to withstand
fires for a very short duration. Coating them can improve their fire rating. Sprinkler
systems and adequate water supply must be introduced. Access routes between
industrial buildings were also found to be inadequate for fire engines and emergency
personnel; remediating this problem would require careful planning by existing zone
operators.
In terms of geoseismic risks, a decent degree of resilience is present in existing
industrial assets. This is most likely due to the seismic design of buildings being
firmly regulated by existing regulations and high compliance by practitioners.
Nevertheless, resilience can be further improved with a range of solutions, including
retrofits to ensure steel braces are installed between load-bearing structural elements.
For buildings hosting high-value operations, seismic base isolation could likewise
be introduced, though it would be more dicult and costly to implement in existing
buildings, highlighting the need for strategic design-stage interventions to leverage
cost-benefit dynamics. In locations where landslides could be a possibility, defensive
structures can be required to protect the assets.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The business case for investing in resilience in buildings globally is well-established
and applies equally to those located in the Dominican Republic. The National Institute
of Building Sciences estimates that the update and adoption of building codes can
yield a benefit-cost ratio of 11:1, while pushing a building beyond codes to match
global best practices from its design or as a retrofit provides an additional 4:1 benefit-
cost. For factory shells in the Dominican Republic, the incremental cost for adopting
recommended global best practice measures is estimated at up to US$280,000 per
factory shell, depending on the location-specific hazard exposure of each industrial
asset and the targeted level of resilience enhancement; this figure excludes the
disassembly costs for existing assets and the costs for measures that ensure operational
continuity. Given how varied industrial parks are, in terms of their size, density, and
number of firms that might share a factory shell, cost-benefit estimates at the national
level are, at this stage, impossible to quantify.
Investment Opportunity 3: Leveraging underutilized rooftops for Utility-
Scale Photovoltaic Projects
Integrating photovoltaic rooftop systems (PVRS) can reduce electricity costs and
increase profitability for industrial parks. As mentioned previously, PVRSs could ease
the burden of high electricity bills by up to 95 percent,
162
thereby reducing occupancy
costs for tenants. This is more salient in the Dominican Republic where electricity
prices are among the highest in the region, with industrial electricity taris oscillating
around US$16 cents/kilowatt-hour,
163
14 percent higher than in comparable regional
peer Costa Rica.
164
From the park operator perspective, an alternative use of PVRSs
is utility-scale generation, which creates an additional line of business for parks
by becoming a renewable energy supplier to the grid through a purchasing power
agreement (PPA) with distribution companies. As the largest carbon emitter in the
Caribbean and Central America region with 29 metric ton carbon dioxide (MtCO2) as
of 2021,
165
of which the industrial sector constitutes 11.3 percent
166
(equivalent to 40
percent of Costa Rica’s and a third of Panama’s total emissions), PVRSs also enable the
sector to converge toward carbon neutrality.
However, the approval processes related to larger projects in the renewable energy
space remain burdensome. Projects are considered utility-scale beyond 1.5 megawatts
(MW) and must exhaust long approval processes, which include obtaining definitive
concessions that enable generators to commercialize produced energy. Reducing
these hurdles can unleash investment potential in solar capacity, including rooftops.
Streamlining the approval process of projects can reduce uncertainty among developers
and lower transaction costs, by standardizing project documentation and creating
ex ante environmental and social de-risking solutions for projects. Similarly, battery
storage systems require regulatory frameworks that provide clarity about the cost-
benefit of incorporating batteries. A key concern expressed by market players is the
lack of clarity regarding remuneration schemes for the technology. Authorities must
undertake optimization dispatch analysis, determine ancillary versus energy services
role and compensation schemes of battery storage, and defining optimal configuration
and sizing.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
The potential of installing PVRS in existing and greenfield industrial parks could
reach more than US$300 million in investment in the next five years. Potential
installed capacity of existing industrial parks in the DR is approximately 400MW.
167
Under a more targeted approach, focusing on the 10 largest existing industrial parks,
which represent nearly half of the available 45 million square feet of industrial
buildings in the country, installed capacity under a high-adoption scenario could
reach 230MW,
168
which represents approximately US$253 million in investment.
169
Of
these 230MW, 50MW are currently being developed as Parque Solar Zonaxol. This
project consists of PVRS installation on Corporación Zona Franca de Santiago, the
largest industrial park of the country, which created a special purpose vehicle (SPV)
(Zonaxol) and co-invest alongside other private investors while seeking to sign a PPA
with EDENORTE. Moreover, under a low-adoption scenario, where only Santiago,
San Pedro de Macoris, La Vega, PIISA, and Las Américas install PVRSs,
170
capacity
would total approximately 164 MW and US$181 million in investment, which is
slightly under the amount of solar rooftop capacity added between 2011 and 2020 in
the entire country.
171
Moreover, should half of the estimated 8.3 million ft
2
needed to
meet nearshoring demand under include PVRSs, 46 MW of additional PVRSs would
be developed in the next four to five years requiring US$50 million in investment.
Investors can use a renewable energy service company (RESCO) model to
operationalize investments in PVRSs on eco-industrial parks. Under a RESCO
model, the RESCO is the owner of the PVRS assets and operations, responsible for
development and for securing financing for the project. In cases where the project does
not wish to operate in the spot market, the RESCO must negotiate a PPA with an o-
taker (energy distribution company or bilateral party). The RESCO pays a monthly
rent for rooftop utilization to the rooftop owner (for cases where rent contracts provide
tenants with the use of rooftops) or directly uses the rooftops when the RESCO is also
the owner of the rooftops.
Debt funds can participate in the financing by channeling capital of institutional
investors, thus becoming an alternative source to banks’ financing. Debt funds are a
possible vehicle for institutional investors to channel capital to PVRS in the form of
loans. Unlike REITs (see opportunity 1), which must invest always in real estate assets,
debt funds can extend loans to any type of project regardless of the sector to which
they belong. An additional advantage of debt funds—shared with REITs—is that
they do have professional teams making investment decisions, providing the financial
expertise that institutional investors usually don’t have.
Table 4.9 lists recommendations for eco-industrial parks.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . RECOMMENDATIONS TO DEVELOP THE ECOINDUSTRIAL PARK MARKET
ECO-INDUSTRIAL PARKS
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Improve
access to
serviced
industrial land
• Identify the most suitable and strategic land within Santo Domingo 2050 for EIP
development, and related infrastructure investments, through land use and territorial
plans.
• Map the land available for industrial park development or expansion in existing parks
(public and private) and provide the information publicly on the website of the CNZFE.
• Consider PPP-based development of available industrial land owned or currently
managed by ProIndustria.
• Consider a legal process that would allow ProIndustria to hire private management
that can help convert these spaces into eco-industrial parks.
Short term MEPyD
CNZF and
ProIndustria
ProIndustria
ProIndustria
Elaborate comprehensive regional and municipal land use plans, foreseeing land for
industrial development based on market demand analysis, connectivity, proximity to
residential areas, and protection of environmental resources.
Medium
term
MEPyD
Leverage
financial
markets
for the
development
of greenfield
EIPs or the
retrofitting of
brownfields
• Clarify the status and, if necessary, codify a regulatory framework of REITs in the DR
to allow capital mobilization of institutional investors.
• Modify the mandate of public sector trusts fund to mobilize capital markets (via equity
and debt).
• Promote green finance (such as lines of credit) to support developers and operators
aiming to retrofit brownfield industrial parks and strengthen their resilience (such as
through investments to achieve EDGE or BRI certification).
• Promote the creation of debt funds long-term finance to developers aiming to launch
greenfield EIPs.
Short term SIPEN
SIMV
BCRD
MEPyDMF
Explore the possibility of creating a REIT and capitalize it with public and private
resources to invest in EIPs.
Medium
term
SIMV
MICM
Fiduciaria Reservas
Introduce
reforms on EIP
regulation
• Develop a national strategy for eco-industrial parks and consider integrating a EIP
certification scheme.
• Strengthen institutional support to industrial park operators to adopt EIP approaches
(such as industrial symbiosis).
• Integrate EIP requirements into the development and operation of public-private
developed industrial parks.
Short term MIC
CNFZE
ADOZONA
Improve building codes associated with green buildings and develop institutional support
that promotes green building certification.
Medium
term
MICM
Note: BCRD: Central Bank of the Dominican Republic; CNC: National Council for Competitiveness; MEPyD: Ministry of Economy, Planning and Development; MICM:
Ministry of Industry, Commerce, and SMEs; ProIndustria: National Center for Industrial Development and Competitiveness; SIMV: Superintendency of Capital
Markets; SIPEN: Superintendency of Pension Funds.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
. AGRILOGISTICS
Agri-logistics Context
Logistics Endowments
This sector assessment focuses on agri-logistics, in particular, because of the key
role it can play in driving climate-smart agricultural development, and it highlights
constraints and investment opportunities in three markets for fruit produce. Strategic
investments and reforms in logistics can help leverage a key endowment of the DR—
its pivotal position between the US and Caribbean markets—to increase the overall
competitiveness of tradable sectors. The development of this sector can also help
leverage the country’s geographic position to create a hub for logistics services in the
Caribbean.
Foreign investment in logistics in the Dominican Republic is rising. While transport
accounts for only 1 percent of the cumulative 2010–20 foreign direct investment in
the country, it reached its highest level in the past 10 years despite the pandemic,
amounting to US$92 million in 2020.
172
Logistics represents the fifth most relevant
sector in greenfield FDI investments; according to a recent OECD study, it accounted
for 10 percent of total greenfield FDI in 2014, up from 6.5 percent in 2010. FDI in
logistics is dominated by two main players: the United Arab Emirates (55 percent) and
the Unites States (40 percent).
Private sector firms in the logistics sector are highly coordinated and maintain
an active policy dialogue with authorities through various associations. With the
support of the IDB, the National Observatory of Logistics and Cargo Transportation
(Observatorio Nacional de Logística y Transporte de Carga) conducted a survey
to understand the characteristics of the sector and received 186 firm responses.
173
The survey revealed that, in terms of level of service tertiarization, logistics firms
are heavily concentrated in the first and second party logistics–model segments of
the sector (1PL, with 38.5 percent, and 2PL, with 35.7 percent). The more complex
segments (3PL and 4PL, the specialized logistics companies that provide services to
users of a chain) represent only 25 percent. The sector is organized in professional
associations that are quite active. They include the Freight Forwarders Association, the
National Private Enterprise Council (CONEP), the American Chamber of Commerce,
and the Logistics Cluster. The Logistics Cluster, a chapter within the Dominican
Association of Free Zones (ADOZONA), was created in 2015 as a coordinating
entity of the sector with the participation of 22 firms. The cluster is tasked with the
elaboration of initiatives that strengthen the sector’s growth, focusing on four pillars:
(a) promoting educational oerings aligned with the sector’s needs, (b) identifying new
opportunities within the sector, (c) diagnosing sector constraints that hinder cost and
time reductions, and (d) leveraging the country’s logistics advantages to attract foreign
and local investment in the sector.
174
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Authorities have made strides toward improving the institutional framework of
logistics. The National Institute of Terrestrial Transport was created in 2017 to
regulate taris and competition in the cargo transport market. In 2021, the DGA
launched a 24-hour dispatch program as part of a public agenda aimed at achieving
zero bureaucracy and increasing eciency in institutional processes. The goal of the
program is to ensure the merchandise departs within 24 hours of an order. In 2012,
the DR launched the Authorized Economic Operator program which authorizes
importers, exporters, and customs agents to accelerate the dispatch of merchandise and
reduce redundant inspection and verification. Moreover, presidential decree 262-15
created the Logistics Centers as a way to reduce time and costs in logistics activities
and promote the emergence of the DR as a logistics hub.
A variety of perishable products are produced and exported from the Dominican
Republic, and improving the quality of logistics would greatly enhance the value-
added and competitiveness of the agriculture sector. For example, the Dominican
Republic is the world’s second largest avocado producer, yet exports are a fraction of
production destined for local markets. Increased exports to higher-value markets could
significantly raise farmers’ incomes. High-quality agri-logistics are critical to accessing
these markets by expanding the services needed and decreasing their cost. Distribution
logistics and cold chain management are among the key hindrances for export
competitiveness of perishable and semiperishable Dominican products. The assessment
will identify the most promising opportunities for the sector.
Most Dominican companies concur that a fundamental objective of public and
private management should be enhancing road infrastructure for land transportation,
according to the findings of the National Logistics Report (2021).
175
This is of utmost
importance for the fruit industry, given the widespread locations of production,
export facilities, and tourist destinations. The primary fruit production zones are
predominantly situated in the southwest and south of the country for mango, the
northwest for plantain, the southwest for avocado, and the eastern (Monte Plata)
and central regions for pineapple. The principal seaports and airports for exports
are located in Santo Domingo and Punta Cana. And cities such as Santo Domingo,
Punta Cana, Puerto Plata, La Romana, Samaná, and Santiago de los Caballeros serve
as critical areas for tourism and local consumption. The distances between these
logistics points range from 8.5 linear kilometers to 573 linear kilometers, with a higher
concentration of infrastructure in the areas surrounding Santo Domingo. (See figure
4.12 and box 4.10.)
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
FIGURE . LOGISTICS MAP OF THE DOMINICAN REPUBLIC
Source: National Logistics Observatory (Observatorio Nacional De Logistica Y Transporte De Carga De La República
Dominicana), “Reporte Nacional de Logística: Apoyo a la implementación del Plan Nacional de Logística de Cargas (PNLOG)
2020–2032,” 2021.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . SUMMARY OF LOGISTICS INFRASTRUCTURE AND CAPABILITIES IN THE DR
1 The main infrastructure is integrated by 12
commercial ports, 8 international airports (7
currently operating), 6 domestic aerodromes,
and 4 border points. In the decade from 2001 to
2011, significant investments were made in the
expansion and modernization of port and airport
infrastructure (including Puerto Caucedo, Santo
Domingo Airport, and Punta Cana Airport).
Investments amounted to approximately
US$400 million (IFC data portal).
2 About 80 percent of international trade
is maritime, but seaport trade is heavily
unbalanced geographically and in terms of
trade flows. While the country’s seaport system
includes 13 ports, 54 percent of transhipment
trac (70 percent of tonnage) is handled by only
two ports (Haina and Caucedo), significantly
tilting activities toward the country’s south
ports. Of total port trac, 70 percent is for
imports, 16 percent is for transhipments, and
only 14 percent is for exports.
3 The national maritime fleet is composed by
38 merchant shipping vessels with a total
capacity of 68,000 deadweight tons (dwt) and
an average port throughput of 68,000 dwt and
1,979,465 twenty-foot equivalent units (TEUs).
4 The road system has a total length of 19,705 km.
The transport network’s main arteries run from
the northwest to the southeast, connecting
Santo Domingo, the main ports and airports,
and economic centers. Overall, 47 percent of
roads are paved. The average age of the motor
freight fleet is 21 years.
5 In 2022, 86 industrial zones were formally in
operation under the Special Economic Zones
(SEZ) regime in the DR, in addition to several
non-SEZ and non-exporting industrial parks
managed by Proindustriab Industrial parks
using the SEZ regime increased by 75 percent in
number and 62 percent in area since 2010
6 Foreign Direct Investment in logistics-related
sectors (transport, Special Economic Zones, and
Telecom) sums up 21 percent of total FDI.
Sources: National Logistics Observatory (Observatorio Nacional De Logistica Y Transporte De Carga De La República Dominicana),
“Reporte Nacional de Logística: Apoyo a la implementación del Plan Nacional de Logística de Cargas (PNLOG) 2020–2032,” 2021;
Scope of the Agri-logistics Sector Assessment
The agri-logistics sector in the Dominican Republic can be defined as the system of
services that allows the flow from the sources of origin of agricultural production
to consumers. This Country Private Sector Diagnostic (CPSD) provides an in-depth
assessment of the agri-logistics sector in the Dominican Republic and its role in
accessing the three main markets: international buyers, the hospitality industry, and
local wholesale markets and supermarkets. The diagnostic includes the processes and
agents linked to the agri-logistic activities described in figure 4.13. The analysis focuses
on logistics activities, not the agriculture production part of the value chain.
FIGURE . MAIN AGRILOGISTICS ACTIVITIES COVERED BY THIS CPSD
Post-
harvesting and
gathering
Short freight
transportation
Warehousing/
Storage
management
Cold Chain/
Long freight
transportation
Packaging /
Processing
Port freight /
Air freight
Transparency
and Traceability
technologies
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
This assessment includes a description of the main global trends in the three identified
agricultural markets and their corresponding implications for agri-logistics agents and
processes, which tend to point more strongly toward shortcomings in “soft” logistics
rather than transport and infrastructure per se. The agri-logistics value chain, with
its constraints and opportunities, diers depending on the end market. The analysis
then identifies a series of concrete growth opportunities in the DR agri-logistics sector.
Contrasting those opportunities with the current situation, the team identified a set
of constraints and gaps for every value chain, recommended a corresponding series
of reforms, and highlighted private sector investment opportunities. The report ends
with a summary of policy recommendations the DR government can implement in
the coming years to unleash private sector investment and growth in the agri-logistics
sector over a three- to five-year horizon.
The diagnosis focuses on fruits because of their relevance within the agriculture
sector, their growth opportunities in local and global markets, and especially the need
to gather more information on the needed agri-logistics activities to place them in
the main markets. The assessment presents a general overview of tropical fruits in the
Dominican Republic and the organic production of the main ones (avocado, pineapple,
mango, and banana), and outlines figures and opportunities for cocoa and dairy
products. (See boxes 4.10 and 4.11.)
Agriculture: Sector Size and Performance
The agricultural sector has been a keystone of the Dominican Republic’s economy and
currently represents 5.7 percent of the country’s GDP.
176
Nevertheless, most producers
are smallholders: about 71 percent of producers cultivate farms smaller than 4 hectares.
A large part of production is dedicated to crop activities (63 percent), followed by
livestock activities (20 percent), and a combination of both activities (17 percent).
177
Currently, agricultural exports from the DR to all markets represent around 18
percent of the country’s total merchandise exports (about US$2 billion per year). The
leading agricultural exports include cocoa, bananas and plantains, and avocados.
Additionally, thanks to a more flexible and open trading system (that is, entry into the
Central America–Dominican Republic Free Trade Agreement), the country has made
progress in phasing out most taris on fruits and vegetables and has also improved its
sanitary and phytosanitary measures.
178
After almost a decade of growth, Dominican tropical fruits have seen a decline in
harvesting area and production, while increasing in export value over the last two
years (figure 4.14). Growth will lie in continuing to improve access to higher value add
markets rather than increasing production. The following fruits represent 90 percent
of exported products in the category “08 Edible fruit and nuts,” and therefore, this
assessment was largely based on their production and export data: bananas, avocados,
mangoes, pineapples, oranges, lemons, papayas, melons, coconuts, watermelons, and
other locally grown fruits such as fresh tamarinds, cashew nuts, jackfruit, lychees,
sapodillo plums, passion fruit, and carambola. As figure 4.14 shows, the value of fruit
exports has increased over the last decade, with higher growth for mangoes and more
volatile growth for bananas.
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . FRUITS SECTOR OVERVIEW IN THE DR
Fresh fruits sector in the DR (2021):
• Harvested area: 214,293 hectares
• Production: 4.8 million tons
• Exports value: US$335 million (Exports are
concentrated in a few countries and products;
tropical fruits are destined for the United States
(27 percent), the United Kingdom (16 percent),
the Netherlands (11 percent), and Belgium (8
percent).
• The DR exports mostly agricultural commodities;
however, 8.7 percent of agricultural land is
dedicated to organic production. The DR is the
world’s largest producer of organic cocoa and
organic bananas.
Sources: Food and Agriculture Organization (FAO), 2022, https://www.fao.org/faostat/en/#data/QCL; TRADEMAP, 2022,https://www.trademap.org/
Index.aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c.
FIGURE . FRESH FRUITS PRODUCTION AND EXPORTS BANANAS, AVOCADOS, MANGOES,
PINEAPPLES, AMONG OTHERS
a. Fruit Production (000) tons
Sources: FAOSTAT, FAOSTAT Food and Agriculture Data, 2022; TRADEMAP, Trade statistics for international business
development 2022.
b. Exports (value US$) Dominican Republic
THOUSANDS
THOUSANDS
,
,
,
,
,
,
,
BANANAS
AVOCADOS
MANGOES
PINEAPPLES
FRESH TAMARINDS, CASHEW APPLES, JACKFRUIT, LYCHEES,
SAPODILLO PLUMS, PASSION FRUIT, CARAMBOLA
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Avocado production in the Dominican Republic has gradually increased over the
decades such that it has become the fifth largest global producer and a relevant player
for international markets, especially the United States. The global avocado farming
area reached 858,152 hectares (ha) in 2021, with the DR share representing 4.4
percent (37,468 ha). The world’s main avocado producers are Mexico, Colombia, Peru,
Indonesia, and the Dominican Republic. As for domestic production, in 2021, the DR
produced 643,388 tons
179
and exported 56,456 tons (representing 9 percent of total
production in 2021); the value of the exports was USD$77,986,000, up 15 percent
compared to 2020, making the DR the ninth largest exporter in the world. The main
buyer was the United States, followed by the Netherlands, Spain, the United Kingdom,
and Curaçao.
180
In the DR, there are two avocado harvesting seasons every year;
the first runs from June to August/September for the Criollo, Simmonds, and Booth
varieties; the second runs from September/October to February/March for the Hass
variety, which is mainly marketed in Europe.
181
Pineapple production has traditionally been destined for local consumption; the
Dominican Republic is still a small player at the international level; however,
producers are working to have adequate volume to reach the EU market.
182
In 2021,
the total area devoted to farming pineapple worldwide reached 1,046,712 ha, of which
the DR represents 0.73 percent (7,641 ha). The main pineapple producers are Costa
Rica, Indonesia, the Philippines, Brazil, and China.
183
In 2021, 580,048 tons were
produced domestically, while 6,805 tons were exported (representing 1 percent of total
production in 2021); the value of exports was USD$5,076,000, a 15 percent decrease
compared to 2020. The main export markets were Israel, Curaçao, the United States,
Italy, and Spain.
184
The most demanded varieties of pineapple in the DR are MD2 (70
percent), Cayena Lisa (20 percent) and Pan de Azucar (5 percent).
185
Regarding mango production, the Dominican Republic is still a small player at the
international level; however, in markets like the United States and Spain, it has grown
by 120 percent and 73 percent, respectively, in the past 5 years. The leading mango
producers are India, China, Indonesia, Pakistan, and Mexico. In 2021, 54,426 tons
were produced in the DR
186
and 20,694 tons were exported (representing 38 percent
of total production). Exports amounted to USD$22,670,000, up 3 percent over 2020
to markets like the Netherlands, the United States, the United Kingdom, Spain, and
France.
187
The local mango varieties include Banilejo, Cachimán, Colón, Mariposa,
Fabrico, Yamaguí; new varieties were also introduced, such as Palmer, Haden, Irwin,
Kent, Keiit, Glenn, Carrie, Tommy Atkins, Springfields, and Sensación.
188
The mango
sector in the DR is known for its excellent quality and extraordinary flavor. Sales of
this fruit have been growing and expanding internationally, not only in the United
States and Europe, but also in Asia and Russia.
102
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The Dominican Republic is currently a relevant banana producer, especially organic
varieties. Its production is destined for both domestic and international markets, and it
is 13th among banana (organic + traditional) exporting countries. In 2021, the global
banana farming area reached 5,336,862 hectares, of which the DR contributed 0.5
percent (29,296 ha). Main banana producers include India, China, Indonesia, Brazil,
and Ecuador.
189
Domestic production in 2021 totaled 1,262,834 tons, and 357,802
tons were exported (representing 28 percent of total production); exports amounted to
USD$218,096,000, growing 32 percent compared to 2020. The main export markets
were the Netherlands, the United Kingdom, Germany, Sweden, and Belgium.
190
The
most widely used variety is the Cavendish, included among the group known as
“Media mata” which produces medium-size bunches. The Gross Michell variety was
used massively in previous commercial plantations.
191
Cocoa market in the DR (2021)
Dominican cocoa is among the best in the
world and one of the 15 countries* in the
select group of gourmets cocoa producers.
192
There are two types: Sanchez (unfermented)
accounts for 70 percent of Dominican exports
and is the preferred type in the United States;
Hispaniola (fermented) is preferred by European
markets.
193
In 2021, the world farmed over 11.5
million hectares of cocoa, and the DR contributed
1.1 percent (131,251 ha). Côte d'Ivoire, Ghana,
Indonesia, Brazil, and Ecuador are the world's
leading cocoa producers.
194
The DR produced 70,631 tons in 2021 and
exported 70,704 tons (this includes reexports
of production from Haiti) to markets such
as the Netherlands, the United Kingdom,
Germany, Sweden, and Belgium.
195
The volume
of production (figure B4.11.1) has declined since
2017; however, the value of exports has increased.
According to the CONACADO association (a union
of cocoa cooperatives in the DR), in the past
four years, the sector has been hit by the various
droughts that have aected the country and the
drop in prices due to the COVID-19 pandemic.
196
FIGURE B.. COCOA PRODUCTION
Source: FAOSTAT, 2022.
The cocoa industry and its logistics are well-
developed in the DR; however, there are
opportunities for further investment and
growth, especially in first-mile logistics. The
investment opportunities identified point to gaps
in collection and fermentation centers in rural
areas, as well as the use of polypropylene sacks that
can be replaced with more sustainable packaging
materials.
*In 2019, the Dominican Republic was included
in the select group of 15 countries recognized as
producers of gourmet cocoa. Since 2005, the
country has had an international certificate that
catalogs it as the best organic cocoa worldwide
(Ministry of Agriculture).
BOX . COCOA AND DAIRY MARKET OVERVIEW IN THE DR
Production Volume (000) tons
103
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Major Public Policies That Impact the Sector
Traditional agriculture has evolved considerably since the early 1980s; recent
strategies from the Ministries of Agriculture and Economy, Planning, and
Development have been oriented toward sustainable production and food security. The
National Development Strategy (NDS) 2010–2030 (Ley Orgánica No. 1-12) and its
corresponding regulatory decree (Decreto 134-14) are led by the Ministry of Economy,
Planning, and Development (MEPyD). This strategy defines the guiding principles to
support the agricultural sector and prioritizes export promotion and food security
outlined in the Strategic Agricultural Development Plan.
198
The Strategic Agricultural Development Plan was built around three main objectives:
(1) increasing productivity and competitiveness,
(2) promoting agricultural exports, and
(3) strengthening self-suciency.
Dairy market in the DR
Exports of raw milk are aimed at other
Caribbean countries such as Curaçao,
Bonaire, Aruba, Puerto Rico, and the French
and English islands. Dairy exports from the DR
focus on three products with integrated logistics:
whole powdered milk, whole liquid milk, and
ultra-high temperature (UHT) milk (which does
not require a cold chain for its transportation).
The country’s milk production has remained
stable (figure B4.11.2); however, exports of liquid
milk and UHT milk have increased since 2020,
with whole liquid milk reporting the highest value
(between UHT milk and whole powdered milk) at
US$412,000 in September 2022.
197
FIGURE B.. DAIRY PRODUCTION
Source: DIGEGA, 2022.
This sector presents relevant vertical
integration that allows the main companies
to control costs, quality, and availability of
materials and products. This means big players
have their own facilities, transportation, and
collection centers. However, according to the
Ministry of Public Health, currently, associations
of small producers (around 1,600 farmers) lack
collection and cold storage infrastructure.
Sources: Ministry of Agriculture. 2020. Cacao orgánico RD recibe premio mundial chocolate. https://agricultura.gob.do/noticia/
chocolate-organico-rd-recibe-premio-mundial/;
Milk production (in mill of liters)
SEPT
. . . .
104
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
The Public Sector Plurennial National Plan, led by the MEPyD, complements the
Strategic Agricultural Development Plan; it provides guidelines for improving the
quality of local production and its export penetration by fostering innovation (for
example, promoting sustainable production, as the Dominican Republic already has 8.7
percent of agricultural land dedicated to organic production, second only to Uruguay
in Latin America and the Caribbean). Nevertheless, the Dominican Republic does not
invest enough in agriculture research and development (R&D); in 2018, expenditures in
R&D as a share of agricultural value-added in the country were around 0.19 percent,
below top-performing agri-food exporters and other countries in the region, such as
Chile (2.41 percent), Brazil (1.82 percent), and Costa Rica (1.1 percent).
199
Key Constraints to the Development of Agri-logistics
The Dominican Republic faces great challenges to consolidate its logistics
infrastructure. According to the latest World Bank’s Logistics Performance Index
(LPI) measurements, the Dominican Republic has remained average for Latin
America and the Caribbean. However, in the most recent edition available (2023), the
country score declined from 2.68 to 2.6 (out of 5); the DR has worsened its results
in this survey in variables such as timeliness of delivery, international shipments, and
tracking and tracing. However, it has improved its performance in infrastructure
and customs.
200
Mexico and Panama are the most important competitors for the
Dominican Republic, and both countries are twice as ecient as the DR in the LPI.
(See figures 4.15 and 4.16.)
Weaknesses in cold chain management are among the key hinderances for export
competitiveness in semiperishable and perishable Dominican products.
201
A myriad
of factors aects the agriculture subsystem of logistics. First, the deterioration of
tertiary and secondary road networks increases the cost of access to agriculture
production regions. Second, legacy deficiencies in ground transportation services—
such as low-quality equipment and a lack of compliance with delivery times—aect
the quality of delivered agriculture products. Third, consolidation centers are scarce,
and ports and airports have insucient or inadequate cold warehousing. Fourth,
from a public standpoint, intrusive and untimely customs inspection practices aect
product integrity. Fifth, while some cold chain components are advanced individually,
the interaction and connectivity among them is weak. Last, capabilities related to the
trackability throughout the entire chain, particularly with trucking units, is weak.
105
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Source: World Bank, Logistics Performance Index, 2023.
In terms of transportation infrastructure, the main gaps for agri-logistics in the
DR are related to secondary and tertiary roads. The quality of roads in the DR
is high relative to regional counterparts and has improved steadily in the past
few years mainly driven by investments in primary road corridors.
202
However,
secondary and tertiary networks represent 72 percent of all roads in the DR, and
they are in precarious condition, making access to production nodes (especially
agriculture) limited and costly. Additionally, primary roads with access to main
centers of consumption and production are aected by congestion; and while the
recent construction of circumventing highways has improved the situation, transport
operators complain that the toll costs of these new highways are high, resulting in
a full transfer of the price burden to end consumers. For the 2020–40 horizon, the
transportation infrastructure investment needed to achieve basic levels of services was
estimated to be US$6.3 billion, of which 98 percent corresponds to roads. Improving
the quality of the road infrastructure would require an investment of US$8.2 billion.
The air transportation infrastructure can also benefit from infrastructure
improvements as well as regulatory upgrading. The DR has nine international
airports, six of which are administered by the private sector through concessions, and
three are private. According to the National Infrastructure Plan, the air transport
sector needs to modernize airport infrastructure (especially for cargo) and update
regulations to clarify functions and responsibilities among entities and to improve
operations control. Worth noting are recent private sector initiatives to improve
logistics operations in the country. In November 2020, Santo Domingo’s Las Americas
airport—run by Aerodom through a concession—ocially opened the doors of its
new cargo terminal, with a 6,800-square-meter warehouse that brings together in a
single space all the players and services in the freight transport chain. Also, Grupo
Punta Cana, in partnership with DP World, announced plans to launch “Punta Cana
Hub” within the next 36 months, which will include a logistics center to facilitate the
transport of cargo to South and North America and to Europe.
FIGURE . THE DR'S LOGISTICS PERFORMANCE INDEX
Dominican Republic, Logistics Performance Index, 2023
FIGURE . COMPARISON OF AGGREGATED LOGISTICS
PERFORMANCE INDEX
Logistics Performance Index (0-5, 5 best)
.
.
.
.
.
.
.
DOMINICAN
REPUBLIC
COSTA RICA
CHILE
CROATIA
LITHUANIA
PANAMA
URUGUAY
Logistics competence
and quality
LPI
Customs
Infrastructure
International Shipments
Timeliness
Tracking and
tracing
2.6
2.6
2.6
2.7
2.4
3.1
2.4
106
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Competition and market demand issues in the ground transportation services sector
constitute a major drag on the DR’s logistics performance. The trucking market is
dominated by the trucking union FENATRADO, which engages in uncompetitive
price setting for shipments—16 percent higher than the average for the region.
203
Political economy aspects have subdued authorities’ capacity to eliminate cartel-like
practices in this sector since the union represents one of the largest constituencies in
the country. A second factor explaining high transportation costs is empty returns
in shipping trips. For example, exports to Haiti are transported on trucks, and
Dominican imports from the Haitian market are negligible; so virtually all trucks
return empty from the border. Third is the age of the truck fleet: 60 percent of the
fleet predates the year 2000, and 38 percent were fabricated between 2001 and 2016.
This poses risks to the quality of certain products, particularly given the scarcity of
refrigerated trucks, and aects reliability related to shipping times.
Additionally, the private sector companies involved in logistics lack a strong focus
on sustainability. According to the national logistics report from the Logistics
Observatory and the IDB, 64.0 percent of companies in the Dominican Republic
do not measure any sustainability indicators in environmental terms, and only 36.0
percent have implemented some form of sustainability monitoring.
204
Additionally,
58.1 percent of the companies are unaware of information or data related to measuring
the carbon footprint indicator.
The agriculture sector in the Dominican Republic is predominantly characterized
by informal practices. Even in cases where agricultural units have a certain level of
formality, the study revealed that 99 percent of the producers interviewed in FAO and
UN migration research reported engaging in verbal and informal hiring practices.
205
This trend persisted even though 7 percent of the surveyed agricultural units were
formally registered and 14 percent were part of a cooperative. These findings highlight
the prevalence of informal contractual arrangements within the sector, indicating a
lack of formalization and reliance on informal agreements.
However, the country has started to address these issues, by strengthening its
institutional framework and regulations for promoting responsible and sustainable
agriculture. The National Council for Sustainable Development and the National
Institute of Agricultural and Forestry Research both promote sustainable production.
Law No. 64-00 on Environment and Natural Resources drives the operation of these
institutions; it establishes the legal framework for environmental protection, including
regulations related to sustainable agriculture practices and the conservation of natural
resources. It also promotes biodiversity and the sustainable use of land and water.
The DR has also enacted legislation specifically related to the logistics sector,
primarily focusing on infrastructure and foreign trade processes. One notable
example is Law No. 63-17, developed with the support of the IDB, which addresses
cargo transportation. In 2015, the country implemented decree 262-15, known as the
Regulation of Logistics Centers and Logistics Operating Companies; it set out the legal
framework for creating and operating logistics centers within the Dominican Republic.
As a result, the Dominican Republic Logistics Cluster was formed to enhance the
quality of human resources, promote logistics centers, reduce transportation times and
costs, and position the country as a key logistics hub in the Caribbean.
107
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Lastly, in 2021, the country reformed its customs legislation, aiming to enhance the
customs process. The DGA’s the “dispatch in 24 hours” strategy seeks to improve
the eciency of customs procedures, as the country’s supply chain has experienced a
decline in performance in recent years. The analysis conducted by the National Freight
Logistics Observatory using the World Bank’s Logistics Performance Index revealed
a significant 5.67 percent decrease in the score attributed to customer dissatisfaction
with the punctuality of deliveries, tracking and tracing of shipments, and the
eectiveness of customs clearance procedures.
206
From the private sector perspective,
there are still opportunities to improve customs and noncustoms procedures and
facilitate foreign trade.
Agri-logistics Opportunities
The identified opportunities to improve the competitiveness of the agri-logistics
sector in the Dominican Republic amount to US$100 million. The opportunities are
distributed in a series of projects in first-mile infrastructure (cold chain facilities,
storage centers, and transportation assets), technological solutions, packaging services,
IV range processing,
207
cold storage in ports, and specialized last-mile transportation.
208
Increases in the supply of cold chain and collection centers, as well as more
sophisticated logistics services, must include more sustainable, resilient, and cleaner
energy facilities. The Global Cold Chain Alliance has stated that new cold chain
storage projects in Latin America should be designed with sustainability certifications
(for example, EDGE and LEED), implement clean energy, and use environmentally
friendly refrigerant technologies. The World Food Logistics Organization is supporting
a new USDA “Trade Safe” project that expands cold chain training and consultations
from packhouses and airports to improve eciencies via education and investment
for a broader group of cold chain stakeholders.
209
This section presents the main
global trends in the three main markets, describes the value chains in the Dominican
Republic, and also describes the investment opportunities identified, providing some
specific examples of infrastructures and investment projects. (See table 4.10.)
TABLE . PRESENTATION OF OPPORTUNITIES
MAIN AGRILOGISTICS
MARKETS
CONTEXT IN TERMS
OF SPECIFIC OPPORTUNITIES
International markets
(Market 1)
• Global trends
• Local value chain
structure and
constraints
1. Increase capacity of cold chain storage and rural collection centers.
2. Local packaging and manufacturing (boxing, strapping, pallets).
3. Increase sophistication of agri-logistics services provided, using data analysis and
technological solutions.
Hospitality Industry
(Market 2)
1. Specialized agri-logistics for companies supplying the hospitality industry.
2. Minimally processed food (IV range production).
Local Retailers (Market 3) 1. Ensure quality of agri-logistics services all along the chain from farm to retailer.
2. Cold chain facility for the wholesale market.
3. Specialized transport from farms or collection centers to supermarkets, wholesale
markets, and grocery stores.
108
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Market 1: Agri-logistics for International Markets
Global Trends
High-value-added fresh fruits for international markets need to guarantee the cold
chain and traceability while reducing their environmental footprint. Key facts
concerning this market are these: (a) Global revenues in the fresh fruits segment
amount to US$622.80 billion in 2022. (b) The market is expected to grow annually by
5.79 percent (compound annual growth rate, 2022–27). (c) The fresh fruits segment
is expected to grow 2.9 percent in volume in 2023.
210
Main fresh products trends at a
global level are as follows:
• Growth in consumption of healthy foods: In 2022, the global health and wellness
food market was valued at US$841 billion and projected to increase to US$1 trillion
by 2026.
211
Proactive health-minded buying has been a main consumer trend related
to COVID-19 according to Nielsen.
• Growth of environmentally responsible consumption: In 2021, about 44 percent
of global consumers were more likely to buy products with a clear commitment to
sustainability, according to a global consumer survey.
212
The European Commission
embraced a new agreement around an EU regulation on deforestation-free supply
chains. The new law will ensure that key goods placed on this market will no
longer contribute to deforestation and forest degradation, since the EU is a major
economy and consumer of these commodities.
213
This includes concerns about the
environmental eects of shipping, since the International Maritime Organization
estimates that carbon dioxide emissions from shipping were equal to 2.89 percent of
the total global anthropogenic CO2 emissions for that year.
214
• New regional and global competitors have emerged in the fresh fruits segment, for
example, Curaçao, Trinidad and Tobago, and Italy. These new competitors are close
to the main consumption areas (United States, United Kingdom, European Union).
215
• Agri-logistics implications include the high relevance of maintaining the cold chain
during handling, transport, and storage of fruits; preserving the healthy benefits; and
avoiding negative environmental footprints. Also key to this process is implementing
traceability and transparency solutions to help buyers and consumers make
informed choices while minimizing food waste. Improving storage management
and information flow becomes necessary to reduce the distribution of poor-quality
food. It is recommended not to store fruits in break bulk; fruits should be packed for
export, precooled, and then stored in cold storage facilities.
The global average per capita consumption in the fresh fruits segment is expected to
reach 32.1 kilograms (kg) in 2022.
216
The top 10 fruits exported globally are bananas,
grapes, apples, avocados, oranges, cranberries, tamarinds and others, cherries,
peaches, and mangoes consumed by markets such as the United States, Spain, the
Netherlands, Mexico, Chile, China, Thailand, Vietnam, Türkiye, Peru, and Italy.
217
109
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
The US, UK, and European markets have great import potential. The global fresh
fruits market is expected to grow annually by 5.79 percent (compound annual growth
rate, 2022–27) The United States is one of the DR’s main markets for fresh fruit,
gradually increasing its yearly per capita consumption from 101 pounds in 2000 to
about 116.86 pounds in 2021.
218
Europe. with more than 530 million consumers,
accounts for 43 percent of the global trade value of fresh fruit and vegetables (more
than US$73 billion).
219
The Dominican Ministry of Agriculture arms that the
country is capable of exporting about US$2,000 million a year in tropical fruits to
Europe, the United States, Japan, and other markets, but currently it exports less than
a quarter of that amount.
220
Therefore, the first market opportunity corresponds to
the global trend related to health and nutrition as well as a deficit of fresh and organic
fruits. (See box 4.12.)
BOX . AGRILOGISTICS VALUE CHAIN STRUCTURE IN THE DR FOR INTERNATIONAL MARKETS:
MAIN CONSTRAINTS AND CHALLENGES
Fruits
And Dairy
Production
Post-
Harvesting And
Gathering
Short Freight
Transportation
Warehousing
Packaging/
Processing
Port Freight/
Air Freight
International
Buyers
Some of the constraints and challenges observed in the agri-logistics value chain for international markets
are the following:
• Postharvesting and gathering: The
deterioration of tertiary and secondary road
networks leads to increases in costs and decreases
in quality; congestion on primary roads and
new highways tolls also increase costs. Lack
of methods and equipment for the control of
temperature and humidity variables aect fruit
quality control. Other challenges include a lack
of postharvest heat-removal facilities near
farms, few options for temperature-controlled
logistics (TCL) warehouses (especially upstream),
inconsistent refrigerated transportation from
farm to packing houses, and uneven maintenance
of existing cold chain infrastructure (TraSa
Program)
• Short freight transportation: Congestion
and road safety constitute important factors
undermining the ecient movement of goods
between cities. Short supply chains resulting from
the geography of the country discourage the use
of refrigeration and cold chain management.
• Warehousing: Exporters and consolidators of
fruit cargo have some storage and cold storage
capacity; however, gaps in some parts of the
value chain aect the quality of the products. This
constraint is further accentuated due to the high
electricity consumption derived from cold chain
equipment and the country’s high electricity prices
(see section 3.3, Energy and electricity). Among
the 300 consolidation centers spread around the
country, many (mostly small and medium-size)
do not have cold chain capacity. The architectural
design of the consolidation centers does not fully
comply with food safety standards. That is, most
of the centers do not have elevated floors to avoid
contamination from ground surface sources.
• Packaging and processing: Food packaging
companies do not adequately manage technical
product information, which prevents both
international buyers and producers from
improving their processes. DR packaging inputs
are expensive in comparison to competitors
due the small number of suppliers. Most key
110
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Specific Private Sector Investment Opportunities
Investment Opportunity #1: Increase Capacity of Cold Chain Storage and Rural
Collection Centers
There are around 300 fruit packaging companies and associations in the country that
could invest in increasing cold chain capacity. According to the Agricultural Trade
Agreements Oce in the Ministry of Agriculture, this group of companies has some
experience trading in international markets; additionally, 92 providers belong to the
Association of Cargo Agents and Logistics Operators, which means they have access to
information on global logistics trends for the agribusiness sector.
221
FDI is also arriving
in the country to fill this gap. A good example is Emergent Cold, a company that is
investing US$ 40 million in a new temperature-controlled storage facility located in
Puerto Caucedo. This investment will generate new storage capacity for 8,000 pallet
positions, and is following the EDGE Advanced standards focused on sustainability
and resource eciency.
222
Exports of fresh fruits to sophisticated markets must comply with international
standards for packaging, cold chain, and quality/sustainability certifications. The
value of exports of fresh fruits has experienced great volatility throughout the past
decade, explained mainly by the banana exports. However, the overall downward
trends were oset by the continuous growth of mango exports. In all cases there is
consensus that there is potential for growth and diversification in international markets
with sophisticated requirements. Tables 4.11, 4.12, and 4.13 lay out specific examples
of investments for various products (subsectors) and actors in the agri-logistic chain.
packaging materials are imported. Regarding
human capital, there is a shortage of candidates
with adequate logistics skills to fill the increased
demand (69 percent of respondents to a
World Bank survey say there is low or very low
availability of qualified candidates for operative
level positions).
• Port and air freight: There are some gaps in the
last-mile cold chain (during inspections or when
transferring the fruit to the aircraft or vessel).
Intrusive and untimely customs inspection
practices aect product integrity. Better
phytosanitary controls are required.
• Contract enforcement: Producers often
establish informal agreements with exporters
in the agri-logistics value chain for fruit exports.
Formal contracts are not commonly used in
commercial relationships. However, this lack
of legal agreements can ultimately aect the
trust and reliability of the export operation. Fruit
packers and exporters are compelled to seek
last-minute suppliers, disregarding high-quality
product standards. According to the Dominican
Logistics Cluster, this practice highlights the need
for improved agreements between producers and
exporters to ensure consistent product quality
and foster a stronger foundation of trust in the
overall operation.
Sources: OECD, 2020; Observatorio Nacional de Logístaica y Transporte de Carga de la República Dominicana, 2021.
Note: In the representation of the value chains, the green color represents the productive sector (agriculture), the orange links represent
the agri-logistic services, and the blue color represents the customers.
111
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
TABLE . EXAMPLES OF COLD CHAIN STORAGE AND COLLECTION OPPORTUNITIES
SUBSECTOR
OR PROCESS INVESTMENT OPPORTUNITY MAGNITUDE OR TECHNICAL DESCRIPTION
Pineapple Small collection center and cold chain facility in
Monte Plata province
• Cold storage at 10°C
• Precooling and packing capability
• More than 400 pineapple growers in the province of Monte Plata are
associated in a cooperative.
Mango Cold storage facility in Bani
• Optimum storage at around 10°C (ripe mango can be stored at 8°C)
• Precooling and packing capability
Avocado Three facilities for collecting and cold storage
One infrastructure for packaging
• Storage temperature of 5°C to 13°C
• medium-size, 500–700 square meters
• For packaging: 1,500–2,000 square meters (it would also serve as an
operations center for exports)
• Location: Circunvalación Santo Domingo – Carretera AZUA-BANI
Banana Collection center in the northern DR • Services needed: cutting, washing, and transportation to the south
for export in refrigerated containers
Airports Refrigerated transport from warehouse to
aircrafts
• At least 10 refrigerated trucks for airports (based on Aerodom
calculation)
Seaports Cold room at ports for loading and inspection of
refrigerated containers
Container yard near the Port of Manzanillo, to
serve products such as bananas, avocados, and
pineapples
• Container yard: near the Port Manzanillo to expedite exports and
ensure equipment availability to support increasing export volumes;
to improve shipping spaces for perishables in general
• Individual approaches to identify modernization or expansion needs
Source: Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES, AERODOM, CONACADO, OTCA, Ministerio de
Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS, CEDAF, Programa TraSa, Clúster Nacional de Aguacate, ASOPROPIMOPL
Investment Opportunity #2: Develop Local Packaging and Manufacturing
Capacity
The cost of packaging supplies (such as boxing, strapping, and pallets) is significantly
higher in the DR than in other countries in the region due to lack of competition.
According to the association of exporters and sectoral associations of fruit producers,
packaging suppliers in the DR mainly focus on companies located in the SEZs; for
other exporters, access to packaging inputs is more expensive. Based on this constraint
and to move toward a more responsible value chain, there is an opportunity to develop
a sustainable packaging supply.
223
112
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . PACKAGING BUSINESS OPPORTUNITY
SUBSECTOR
OR PROCESS INVESTMENT OPPORTUNITY
MAGNITUDE OR TECHNICAL
DESCRIPTION
Fruits Local production of main packaging supply
to create domestic competition
Identified constraint: No competitive
domestic packaging supply
• Supplies: pallets and cardboard
boxes for fruits, wrapping material
for bananas and avocados
Source: Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES,
AERODOM, CONACADO, OTCA, Ministerio de Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS, CEDAF, Programa
TraSa, Clúster Nacional de Aguacate, ASOPROPIMOPL
Investment Opportunity #3: Increase Sophistication of Agri-logistics Services with
Data Analysis and Technological Solutions
To improve traceability and transparency along the complete value chain, agri-
logistics agents could use artificial intelligence, algorithms, or machine learning
for more ecient product tracking. One area to consider is first-mile logistics with
cold chain capacity—cooling at the first mile of distribution is an opportunity for
improving the quality of fresh fruits, minimizing losses, and increasing exports to
greater, more sophisticated markets.
Market 2: Agri-logistics for the Hospitality Industry
Global Trends
The hospitality industry demands minimally processed fresh fruits, a better shelf life,
and high-quality products. (See box 4.14, constraints and challenges.) The hospitality
industry plays an important role in advancing toward a transparent and sustainable
food system. The importance of this sector was shown in 2021 when international
tourists’ average expenditure was US$1,391.
224
Global tourism grew by 4 percent in
2021 (415 million tourists compared to 400 million in 2020). However, international
tourist arrivals (overnight visitors) remained 72 percent lower than in 2019 (1.5
billion), the year before the pandemic.
225
The DR is the fourth-most-visited destination
in Latin America and the main destination for tourism in the Caribbean.
226
The main
fresh product trends for the hospitality industry at a global level are as follows:
• Reducing waste: Since customers are becoming more environmentally responsible,
reducing waste is considered a positive guest experience in hotels and restaurants.
Food waste represents 33 percent of the total hospitality industry’s waste.
227
• Minimally processed food: Healthy eating habits boost the consumption of
unprocessed foods, including food categories such as whole grains, fresh
fruits, salads, lean meats, milk, and yogurt. Sixty-six percent of millennials are
incorporating plant-based foods into their daily diet.
228
• Locally sourced and seasonal fruits: Food transport, packaging, and processing make
up 6 percent of CO2 emissions from rich countries. Locally sourced and seasonal
food means lower environmental footprints.
229
113
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
The main implication for agri-logistics actors is the need to provide traceability to
consumers and hospitality buyers. Food packaging companies must optimize their
communication with all parties in the food supply chain. This means accurate and
real-time data to ensure food safety. Food packaging companies can incorporate
new logistics services to develop unprocessed and/or minimally processed foods.
Distributors and food packaging companies can also promote sustainable practices in
the hospitality industry by improving the tracking of fruit and other food waste. (See
box 4.13.)
BOX . EXAMPLES OF TRANSPARENCY AND TRACEABILITY SOLUTIONS
There is an opportunity for logistic services
and technology companies to develop
solutions aimed at increasing product
traceability and providing transparent
information on good practices of production
and farming. The Center for Agricultural and
Forestry Development, in partnership with
the Dominican company Cefanet, developed a
traceability solution that allows georeferencing
and quality parameter control, impacting 64
agricultural companies within the framework of
the Export Quality Program (funded by the US
Department of Agriculture). Another institutional
project in this area comes from the Dominican
Association of Exporters and the Institute of
Technical Standards of Costa Rica; together they
developed “Export Check Up,” a tool to improve
market access by evaluating a series of aspects
related to transparency in sustainability, human
rights, and organic certifications, among others.
Logistics companies can add value for their
customers by incorporating technological
solutions that improve product traceability.
Some logistics service companies have developed
technological solutions and applications that
allow them to support their customers eorts to
provide better traceability of products. According
to logistics companies, the average investment
for technological developments ranges between
US$25,000 and US$35,000.
Source: Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES, AERODOM,
CONACADO, OTCA, Ministerio de Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS, CEDAF, Programa TraSa, Clúster Nacional de
Aguacate, ASOPROPIMOPL
114
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . AGRILOGISTICS VALUE CHAIN FOR THE HOSPITALITY INDUSTRY IN THE DR: MAIN
CONSTRAINTS AND CHALLENGES
Fruits
And Dairy
Production
Post-
Harvesting And
Gathering
Short Freight
Transportation
Warehousing
Packaging/
Distribution
Hospitality
Industry
Consumer/
International
Tourists
The main constraints and challenges observed in this value chain are the following:
• Postharvesting and -gathering: The lack of
rural accessibility in the agri-logistics value
chain for export represents a significant
obstacle to balanced territorial development.
Without reliable and ecient transportation
infrastructure, farmers in rural areas may
struggle to get their products to market,
which can limit their opportunities for growth
and economic development. In addition to
transportation infrastructure, another challenge
in the agri-logistics value chain is the lack of
postharvest heat-removal facilities near farms.
Properly cooling harvested products is critical
to maintaining their quality and extending their
shelf life; but without access to such facilities,
farmers may struggle to preserve their crops.
Furthermore, there are few options for TCL
warehouses, particularly upstream in the agri-
logistics value chain. This can make it dicult
to store and transport temperature-sensitive
products, such as fresh fruits and vegetables, and
can result in significant spoilage and waste.
• Short freight transportation: Concentrated
traditional transport service providers with
strong bargaining power increase the cost of
transportation, especially aecting domestic
markets (the hospitality sector in this case).
Low-quality equipment and noncompliance
with delivery schedules aect the quality of
delivered agriculture products. Congestion and
road safety undermine the ecient movement
of goods between cities. Short supply chains
resulting from the geography of the country
discourage the use of refrigeration and cold chain
management.
• Warehousing: The hospitality industry’s
suppliers do not have enough cold chain capacity.
Most of the intermediaries between producers
and hotels do not have specialized fruit storage
and preservation services.
• Packaging and distribution: There is a lack of
IV range production capacity and technology.
Packaging inputs are expensive in comparison
to competitors due to the small number of
suppliers. Most key packaging materials are
imported.
• Consumers: There is a scarcity of high-quality
local products and underdeveloped logistics
automation processes.
Sources: OECD, 2020; OTCA, 2022 (interview with Victor Rodríguez); Ministry of Tourism, 2021.
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
In the Dominican Republic, tourism has rebounded faster than in the rest of the world
(figure 4.15). In 2021, international visitors in the DR spent over US$5 billion, 75 percent
more than in 2020. However, that number was still 35 percent below what was recorded
in 2019.
230
Tourists arriving in the Dominican Republic in 2021 came mainly from the
United States, Puerto Rico, Colombia, Ukraine, Spain, Germany, France, Argentina,
Canada, and Russia.
231
In 2021, globally, the average international tourist spent
US$1.391,
232
whereas in the Dominican Republic, foreign tourists spent US$1,104.66
per trip—an average of US$140.9 per night (with average trips of 7.8 nights).
233
FIGURE . INTERNATIONAL TOURISM, DOMINICAN REPUBLIC AND GLOBAL
Source: UN World Tourism Organization, 2022.
Overall, tourism is a growing sector in the DR. The highest performers are hotels,
bars, and restaurants, with a year-on-year growth rate of 39.3 percent.
234
According to
the DR Central Bank, the country’s economy expanded by around 6.1 percent in the
first quarter of 2022. The Tourism Promotion Council approved 119 new projects in
2021: 38 hotels, 34 real estate projects, and 14 projects that combine both activities.
According to the Central Bank, in 2019, the number of rooms available was 83,041,
so the new projects will boost this capacity by 24.7 percent.
235
A relevant opportunity
in the agri-logistics sector is for high-standard suppliers to provide fresh fruits, ready
to eat, to hotels and restaurants with sensitivity to local products and varieties and
attention to quality and compliance.
The local agricultural sector already supplies 85 percent of the total fresh primary
products required by the tourism industry.
236
In 2017, the Dominican Republic’s
tourism industry spent over US$490 million on food and beverage consumption, with
tourism accounting for 8 percent of the country’s total food consumption.
237
MILLIONS OF ARRIVALS IN DOMINICAN REPUBLIC
MILLIONS OF ARRIVALS IN THE WORLD
,
,
,
,
DOMINICAN REPUBLIC
GLOBAL
116
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Specific Private Sector Investment Opportunities
Investment Opportunity #4: Agri-logistics Opportunities in the DR for the
Hospitality Industry
Agri-logistics companies should focus on developing first-mile logistics, packaging,
and transformation according to hospitality industry standards (minimally processed),
to guarantee quality and transparency throughout the value chain. Table 4.13
describes two major opportunities: to develop specialized agri-logistics for companies
supplying the tourism sector and to provide low-processed food, also known as IV
range production. In keeping with these opportunities, the Trade Safe program points
out that food processing operations, such as juice processing, bottling, modified
atmosphere packaging technology, and services, as well as other light value-adding
activities can be alternatives for suppliers to the hotel sector in the country.
238
TABLE . EXAMPLES OF HOSPITALITY INDUSTRY OPPORTUNITIES
SUBSECTOR OR
PROCESS
INVESTMENT
OPPORTUNITY MAGNITUDE OR TECHNICAL DESCRIPTION
Specialized
agri-logistics
for companies
supplying the
hospitality
industry
On-demand planning
and daily transport
with cold chain
capacity of ready-
to-eat small batches
of locally sourced
products
To be successful, the dierent players of the value chain need to be able to supply year-round,
with a certain level of production to guarantee prices, as well as a large variety (especially
local varieties) with last-mile, fast cold logistics. Nowadays, fruit distribution to hotels is done
without programming the demand or proper information flow between producers and hotels.
This creates an opportunity for specialized suppliers.
239
Hospitality Industry fruit demand will
be around 371,380 tons in 2023.
240
According to the DR Association of Hotels and Tourism, in
the next two to three years, hotel capacity will increase by 6,000 rooms. In the MERCADOM
wholesale center, there are around 10 hotel suppliers that can be developed, generating more
specialized oerings, with sustainable practices, such as order scheduling, to avoid waste and
promote reusable packaging and containers.
241
Minimally
processed
foods (IV range
production)
Extension of fruit
packaging companies
to minimally processed
practices and methods
(IV range) for ready-
to-eat products such
as peeled fruit, juice,
smoothies, sauces,
cold soaps, to supply
hotels, restaurants,
and cafes
Minimal processing methods do not substantially change the nutritional content of the food, but
they do preserve its natural flavor, generating less waste while becoming a convenient solution
for the hospitality sector.
242
(See figure 4.16 for examples of possible agri-logistic activities) The
IV range processing activities for fruits are currently carried out internally in hotels, but they can
be externalized and covered by fruit distributors in the Agri-logistics value chain.
243
FIGURE 4.16 . IV RANGE PROCESESS
Cleaning
and
removing
parts
Grinding,
Cutting
Refrigeration,
Fementation,
Pasteurization
Vacuum-
packaging
Hospitality
Industry
Tourist/final
consumer
117
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Market 3: Agri-logistics for Local Retailers
The per capita consumption of fresh-fruit and milk in the Dominican Republic
is higher than the world average; however, product quality remains a challenge.
In 2020, while global per capita consumption of fresh fruits reached 67.95 kg per
person per year
244
, the production for local consumption or industrial processing
totaled 4.1 million tons.
245
Dominica (the Caribbean island) has the largest per capita
consumption of fruit in North America and the Caribbean at 396 kg per person per
year, followed by the Dominican Republic at 324 kg; Saint Vincent and the Grenadines
is third, at 151 kg.
246
The DR produces about 80 percent of the food it consumes;
247
therefore, as a middle-
income country, the demand for quality fruit has increased. The DR has a population
of 11 million consumers. It has the 10th largest economy in Latin America and the
largest in the Caribbean region open for commercial trade,
248
which makes it a relevant
market in the region. Most Dominican supermarkets are integrated into the national
organization of commercial companies, which notes that supermarkets often use
multiple nonspecialized intermediaries to purchase locally produced fruit; nevertheless,
recently, a small group of supermarkets have traded directly with producers,
establishing good logistics practices.
249
MERCADOM manages the main wholesale
market in the country, supplying many stores, retailers, and other establishments such
as restaurants and hotels. It is a central hub for food distribution and supply, making it
an essential player in the supply chain.
Global Trends
Supermarkets demand well-presented fresh fruits and vegetables all year round, with
adequate sanitary conditions and local varieties of seasonal fruits and vegetables.
The fresh products department is usually one of the main selling points for consumers
when selecting a supermarket or grocery store. In 2021, fresh fruit sales represented
over 48 percent of all product sales in the United States, making it one of the most
profitable fresh foods categories.
250
The quality of the store’s fresh food is a major
issue; according to a report from Fruit Logistica, consumers are choosing their
supermarket based on the freshness and quality of the store’s fresh food, with emphasis
on the fresh fruits and vegetables section.
251
Supermarkets look for uniformity and consistency in all features (size, ripeness, sugar
level, oil level), seasonal and desired products, and unique or dierentiated varieties
of crops. Farmers, in response, must follow a rigorous plan and implement it both
when growing and postharvest. They need to be able to meet buyers’ demands year-
round. To meet the demands of modern consumers concerned about health, retailers
need to embrace the quality of the store’s fresh foods and the use of online platforms.
The global food and grocery retail market is projected to reach US$14.78 trillion by
2030, showing a compound annual growth rate of 3.0 percent.
252
In 2021, the world
consumed 528,505 million tons of fruits (mainly fresh).
253
With the rise of online
retail, the fruit and vegetable market will likely grow significantly over the next 10–15
years, reaching around 7 percent growth globally by 2030.
254
118
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
BOX . AGRILOGISTICS VALUE CHAIN FOR LOCAL RETAILERS IN THE DOMINICAN REPUBLIC:
MAIN CONSTRAINTS AND CHALLENGES
Fruits And Dairy
Production
Collecting and
short freight
transportation
Wholesale/Public
food markets
Warehousing/
Distribution
Local retailers
supply
Local
Consumer
Some of the constraints and challenges observed in this value chain are the following:
• Collecting and Gathering: The lack of
postharvest heat-removal facilities near farms
and few options for TCL warehouses (especially
upstream) create inconsistent refrigerated
transportation from farms to packing houses
and interrupt the cold chain process (Trade Safe
Program).
• Short freight transportation: Concentrated
traditional transport service providers with
strong bargaining power increase the cost of
transportation, especially aecting domestic
markets (wholesalers, and supermarkets).
• Warehousing and distribution: Distributors
usually do not have cold chain capacity.
• Packaging for local retailers: Obsolete
packaging equipment and technology to meet
the needs of supermarkets, groceries, and other
retailers remains a challenge. Packaging inputs
are expensive in comparison to competitors
due to the small number of suppliers. Most key
packaging materials are imported.
• Local consumer: logistics automation processes
are underdeveloped and take-up of omnichannel
sales is low. Supermarkets' bargaining power
leads in some cases to inconvenient payment
periods (60–90 days).
Sources: Oce of Agricultural Trade Agreements (OTCA),(Interview Viktor Rodríguez), 2022; Ministry of Tourism, 2021; International Trade
Administration, 2022.
The central implication for the agri-logistics value chain is the necessity to improve
times from farm to the table while helping local producers plan their crops and
harvest, increasing the quality of fruits and other locally sourced foods. Automation in
the retail industry will help control the performance of the products and evaluate their
compliance with the product information provided to buyers, while developing models
for Internet sales and distribution or platforms that connect actors along the value
chain. Automation will enable better planning of production and logistics processes by
providing more information to stakeholders (farmers, logistics service providers, and
traditional and modern channel retailers). (See box 4.15.)
119
KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
Specific Private Sector Investment Opportunities
Investment Opportunity #5: Agri-logistics Opportunities in the DR for Local
Retailers: Ensuring Quality All along the Chain from Farm to Retailer
Agents involved in agri-logistics have the opportunity to oer services that increase
fruit quality by helping local producers plan their production. (See table 4.14.)
Likewise, they can connect producers with supermarkets and other retailers while
generating information of interest to end consumers (product origin, nutritional
information, benefits, and so on). Currently, some supermarkets in the DR have
development programs for local fruit and vegetable suppliers that provide support to
farmers to increase the quality and level of supply.
255
(See box 4.16.)
As already mentioned, the DR produces about 80 percent of the food it consumes, and
the demand for quality fruit has increased. The DR’s 11 million consumers and 10th
largest economy in Latin America make it a relevant market in the region. Although
supermarkets often use multiple nonspecialized intermediaries to purchase locally
produced fruit, more recently some supermarkets have begun to trade directly with
producers, establishing good logistics practices.
256
(See figure 4.18.)
BOX . FROM FARM TO SUPERMARKET: AGRILOGISTICS GOOD PRACTICES EXAMPLE
Through partnerships between supermarkets and farmers, logistical activities such as selection and
packing are carried out directly on the farms, using materials supplied by the supermarkets as part of pilot
projects with a small number of farmers. According to the supermarket association, these supermarkets
use fewer intermediaries; pay their suppliers in a shorter time than average; and are focused on precooling,
transportation, and storage practices that preserve fruit quality.
FIGURE . ALLIANCES TO IMPROVE LOGISTICS BETWEEN FARMERS AND SUPERMARKETS
Small farmers
Selection and
packaging at the
production site
Freight transport
coordinated by
supermarkets
Supermarkets
Source: National Organization of Commercial Companies (ONEC), Oce of Agricultural Trade Agreements (OTCA).
120
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
TABLE . EXAMPLES OF FARM TO WHOLESALE MARKET AND SUPERMARKET OPPORTUNITIES
SUBSECTOR OR PROCESS INVESTMENT OPPORTUNITY MAGNITUDE OR TECHNICAL DESCRIPTION
Cold chain for wholesale
market
Cold chain facility for the wholesale market • Location: MERCADOM (629 retailers)
• Area: 60,000 square meters of cold chain needed
• Potential investment: US$60 million (based on current
investment proposal from MERCADOM)
Transportation for
supermarkets and
wholesale markets
Specialized transport from farms or
collection centers to supermarkets,
wholesale markets, and grocery stores
• Reference investment: US$466,931 to purchase seven
specialized trucks to transport food from production areas to
Santo Domingo
Recommendations
The value chains face a series of cross-cutting constraints for the three agri-logistics
businesses, focused on first-mile storage and cold chain constraints. These specific
challenges are reflected in weak tracking capacity throughout the chain, particularly
with trucking units; inadequate skills and training in the logistics labor market (at
all levels, including operators and management); the need for investment in electric
grid infrastructure to improve cold chain logistics; underdeveloped transportation
infrastructure, evidenced in low connectivity with provinces and low density and quality
of roads within the provinces, especially in the southern border provinces; broken cold
chains in high-volume production areas; and gaps in cold storage capacity.
257
The following recommendations are meant to address some of these constraints, help
accelerate private sector growth, and improve agri-logistics processes in the country.
The first group of recommendations aims to close infrastructure and services gaps. The
second group of recommendations addresses some of the governance or coordination
failures identified. (See table 4.15.)
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KEY PRIVATE SECTOR INVESTMENT OPPORTUNITIES TO GROW MARKETS
TABLE . AGRILOGISTICS RECOMMENDATIONS
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
Closing the
infrastructure
and services gap
Adopt multiple measures related to improving last-mile logistics:
• Structure investment projects (for example, obtain concessionary loans or blended
finance) to build or upgrade
– cold chain capabilities in ports and airports, by modernizing vehicle fleets,
expanding refrigerated container capacity (in the north), and building cold storage
for cargo and container inspection processes (in the south).
– cold chain facilities for the whole sale market.
Adopt multiple measures related to improving first-mile logistics and
collection capacity services:
• Create an infrastructure debt fund (for example, coordinated by local financial
institutions and with the support of international financial institutions) or dedicated
lines of credit to finance (or facilitate access to finance) with a particular focus on SMEs
facing limited access to credit:
– Increase the capacity of cold chain storage (for mango, banana, pineapple, and
avocado) and rural collection centers (for pineapple, avocado, cocoa, dairy).
– Increase the sophistication of agri-logistics services provided, by using data
analysis and technological solutions.
Note that financing programs for cold chain facilities should review the results of ongoing
initiatives such as the TraSa program.
Short term MAG
MIC
MEPyD
ProDom
MOPC
Domestic banks
airports and
ports operators
MAG
MICM
MEPyD
Addressing
market and
governance
constraints
Adopt multiple measures to facilitate the export process and reduce storage
times at ports and airports:
• Improve communication with stakeholders regarding the operation and benefits
of the Single Window for Foreign Trade (VUCE) through informative campaigns and
outreach to producers’ and exporters’ associations.
• Implement an integrated, simultaneous inspection system at ports and airports, to
allow joint, coordinated, and concurrent action by the control authorities involved in
the supervision and control of foreign trade operations at inspection sites for select
noncustoms procedures and regulations (for example, phytosanitary reviews, sectoral
statistical requirements from MAG and antidrug inspections). Ensure interoperability
with the VUCE.
Shor t term DGA
MAG
DNCD
MICM
• Develop and implement a comprehensive intervention program to
improve food safety, focused on improving the handling and quality practices and
infrastructure of wholesale centers and food distributors for the tourism sector and
supermarkets.
Short term MICM
MAG
MSP
• Promote Productive Alliances* and/or facilitate public-private dialogues
between agri-logistics agents, on the one hand, and tourism operators, on
the other, to address information asymmetries and improve alignment.
Focus on specific quality requirements, delivery times, product delivery conditions,
seasonality of production, and so on. These alliances help improve the quality of final
products and the development of agri-logistic processes.
Short term MIC
MAG
JAD
MITUR
• Redefine MERCADOM's strategy to reinforce its role as a supplier to other
businesses (business to business, or B2B), rather than business to consumer (B2C).
The Ministry of Agriculture can develop guidelines for MERCADOM to specialize in
distributing to retailers, supermarkets, and hospitality suppliers. This can help it
transform into a specialized space for fruit processing, such as IV range production, or
for the development of agri-logistic activities such as packing and storage.
Short term MAG
MERCADOM
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DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
POLICY AREA SPECIFIC ACTIONS TIMELINE LEAD ACTORS
• Carry out supplier development programs, with a financing component, for
packaging in the DR. Encourage local companies to produce the necessary inputs
for the packaging of agricultural products, especially using sustainable materials for
cardboard boxes, pallets, and sacks, among others.
Short term MICM
Banco Agricola
Domestic banks
MAG
• Facilitate access to equipment and technology adoption loans that allow
fruit packing companies and fruit suppliers, particularly SMEs, access to hotels to scale
their capacity and add value to minimally processed food by acquiring cutting, peeling,
and packaging equipment, among other technologies.
Short term MICM
Banco Agrícola
BanReservas
• Promote formalization and strengthening of agri-logistics partnerships
through mechanisms such as Productive Alliances. Such Programs foster formal
contractual frameworks and collaboration between producers, food packaging
companies, sectoral associations, and other exports agents, providing legal support,
strengthening quality control systems, and oering financial assistance to improve
the overall eciency and reliability of the agri-logistics exports process.
Short term MAG
MICM
Logistics Cluster
JAD
Note: Banco Agrícola: Agriculture Bank; DGA: General Directorate of Customs; DNCD: National Narcotics Control Directorate; INFOTEP: National Institute of
Technical Training; JAD: Dominican Agribusiness Board; MAG: Ministry of Agriculture; MEPyD: Ministry of Economy, Planning, and Development; MERCADOM:
Dominican Agriculture Supply Market; MICM: Ministry of Industry, Commerce, and SMEs; MITUR: Ministry of Tourism; MOPC: Ministry of Public Works and
Communications.
*Productive Alliances are an approach introduced by the World Bank in the early 2000s in Latin America and the Caribbean. Productive Alliances connect a group
of smallholder producers, one or more buyers, and the public sector through a business plan, which describes the capital and services needs of the producers and
proposes improvements that would allow them to upgrade their production capacities and skills to strengthen their linkage with the market (that is, the buyers),
through productive investments, technical assistance, and business development.
123
APPENDIX
APPENDIX A: HISTORY OF SPECIAL FISCAL REGIMES IN THE
DOMINICAN REPUBLIC
The Dominican Republic has been promoting export-oriented industries through
dierent types of special regimes since the late 1960s. The initial special regimes were
focused on physical location and access to industrial real estate and were formed
around geographic areas with concentrated industrial activity to provide spatial
solutions for externalities related to manufacturing. The first Industrial Park
258
was
established by the Gulf and Western Corporation in 1969. The second was created in
1972 in the province of San Pedro de Macorís and was sponsored by the government
through the Industrial Development Corporation, a decentralized entity of the state,
which oversaw its administration and operation. The Industrial Free Zone of Santiago
was created shortly after and structured as a nonprofit corporation managed by the
region’s top businesspeople. Dominican Industrial Parks quickly became among
the most competitive in the region, as domestic operators managed them well and
established their reputation with the United States and other international firms
involved in oshore manufacturing. The boom in the demand for industrial space
continued through the late 1980s, when the DR installed the most industrial real estate
in the Caribbean and Central American region.
At the outset, industrial park development did not benefit from a supportive financial
sector given its small size and limited capabilities. Dominican banks had small balance
sheets, which allowed them to provide only short-term financing, while developers
required medium to long-term financing. Consequently, Industrial Parks had to be
financed through larger than usual equity contributions, cash flow from large advance
rental payments required from tenants, or bilateral development credit. To fill that
gap, the World Bank and the Government of Japan supported the DR to expand
industrial real-estate capacity with a US$30 million loan in the 1990s. Additional
issues constraining industrial park development included poor supply of electricity, an
uncompetitive trucking industry, port congestion and pilferage, and acute scarcity of
middle management skills—most of which persist even if to a lesser extent.
In the 1990s, fiscal regimes were expanded to include not only access to industrial real
estate, but also access to streamlined and simplified regulatory procedures, such as
licensing, permitting, or tax incentives and exemptions. The new regimes were referred
to as Special Economic Zones (SEZ) and grew in number after the United States
assigned a specific import quota of clothing and textiles to the Dominican Republic
under the MFA. The preferential market access, combined with the investment and
tax incentives provided by the government to SEZs, led to the proliferation of garment
manufacturers in SEZs, most of which employed low-skilled labor. The MFA expired
in 2005, but a series of policy actions helped facilitate the gradual recovery and
diversification of SEZs into more sophisticated sectors, such as footwear, surgical
equipment, electrical products, and pharmaceuticals. Policy reforms included the
signing of the CAFTA-DR agreement in 2007, the accession of the DR to the Economic
Partnership Agreement between the Caribbean and the European Union in 2008,
and the reforms of the SEZ regime, which included the elimination of export share
124
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
requirements (ESR) for firms in priority sectors (leather, textiles, and apparel) and the
extension of some fiscal incentives to non-SEZ firms in these sectors, making them
no longer conditional on physical location. In 2011, the incentives conditioned on
export performance were fully eliminated for all SEZ firms, regardless of their sector
of operation, in accordance with the compromises signed under the CAFTA-DR free
trade agreement.
As of 2021, 79 industrial parks were formally in operation under the SEZ fiscal
regime, compared to 48 in 2010. The parks are managed by ProIndustria, a public
agency dedicated to the promotion of manufacturing.
259
Half of the Industrial Parks
under the special fiscal regimes are in the Northern Region, 24 percent in the National
District and Santo Domingo Province, and the rest are in the south and east of the
country. The construction of Industrial Parks has steadily increased since 2000,
growing 3.5 percent annually, closely mirroring real GDP growth over the same
period. Industrial real estate reached approximately 46 million sq feet in 2021, an
11 million sq feet increase since 2010. Over the same period, the occupation rate of
Industrial Parks under the SEZ fiscal regime increased from 84 to 93 percent. Seventy-
six percent of industrial real estate is privately owned, 20 percent is owned by the
government, with the remainder operating under mixed public-private administration.
Currently, firms in SEZ regimes continue to enjoy a variety of duty-free and fiscal
exemptions, such as full corporate tax exemptions; full exemption from local VAT or
tax on assets; and exemptions from any import and export taxes and taris. Many
SEZs are classified as non-regulated areas for the purchase of electricity, which allows
users to sign power-purchase agreements directly with electricity generating firms and
benefit from lower prices than those available to companies located outside SEZs.
Regulatory transparency and clear communication of objective criteria to obtain a
license to establish a firm inside an SEZs are left wanting and may limit the access of
new operators to SEZs and the corresponding regulatory advantages.
Other tax incentives schemes that coexist in parallel to SEZs target tourism, local
manufacturing (PROINDUSTRIA), and border zones. Tourism is a key source of
foreign exchange and jobs in the DR. The development of tourism benefited from
the enactment of law 158-01, which provided tax incentives to both existing and
new tourism areas. Similarly, the country introduced new incentives in the Law
for Industrial Innovation and Competitiveness (PROINDUSTRIA), which aimed
to enhance the competitiveness of the industrial sector by improving its legal and
institutional framework, promoting diversification and production linkages through
industrial parks, and enhancing ties with global markets. These incentives were
introduced in a decade that was also marked by several tax relief and tax increase
laws. Lastly, in 2001, a new tax-relief scheme was implemented specifically for the
Special Zone for Border Development, consisting of the five provinces bordering
Haiti and two adjacent ones due to their high levels of poverty and lagging economic
development Unlike other schemes, this prioritizes economic activity in the region
irrespective of the sector.
Over the years, the addition of fiscal regimes did not always lead to the replacement of
earlier ones or prompt their review and reform. This contributes to the fragmentation
discussed in section 3.1.
125
APPENDICES
APPENDIX B: MAPPING OF INVESTMENT INCENTIVES
IN THE DOMINICAN REPUBLIC AND COMPARATOR
COUNTRIES
Investment incentives are measurable economic benefits that governments grant with
the aim of directing investment towards certain productive sectors or regions or
influencing the nature of such investments. These benefits can be tax-related, such as
exemptions, reductions in tax rates, deductions, tax credits, accelerated depreciation,
etc., or non-tax related, such as grants, loans, rebates, or provision of goods and
services or payments in kind, to support the development of businesses or improve
their competitiveness. Location incentives aim to influence investor decisions on
where to locate (thus attracting investment to a country or region), while behavioral
incentives aim to induce investors to engage in certain activities or behaviors
(thus encouraging employment, forming links with local suppliers, adopting green
technologies).
The key elements of the design and implementation of cost-eective and well-targeted
incentives include defining the policy objective, focusing on the marginal investor,
linking incentives to policy objectives and instruments, and rigorously monitoring
and evaluating. International good practices suggest that incentives should be clearly
included in the law, ideally the Tax Code or related legislation; managed in an agile
manner and with minimal discretion; designed with clear and objective eligibility
criteria; monitored in terms of fiscal expenditure, with results included as part of the
annual budget; centrally inventoried; and systemically monitored and evaluated to
assess whether the schemes are eective in achieving the stated objectives.
Comparative analysis of public information on investment incentives available in
Ecuador, Panama, Costa Rica, the Dominican Republic, Mexico, and Colombia
shows that 75 percent of the tax incentives available in 2022 were exemptions and
reduced tax rates (figure B.1). The Dominican Republic is in line with other developing
countries and with the countries analyzed in this section with 81 percent of tax
incentives composed of exemptions and reduced tax rates, while tax credits and
accelerated depreciation represent 4 percent each of the total (figure B.2).
FIGURE B. FISCAL INCENTIVES BY TYPE OF INCENTIVE IN
THE SIX COUNTRIES
FIGURE B. DISTRIBUTION BY TYPE OF INCENTIVE IN EACH
COUNTRY
Source: Prepared by the World Bank team. Calculations based on data from
6 countries (Mexico, Costa Rica, Dominican Republic, Colombia, Ecuador
and Panama).
EXEMPTION REDUCED TAX ACCELERATED DEPRECIATION
FISCAL CREDIT DEDUCTION REMBOURSEMENT
FISCAL STABILITY
EXEMPTION
REDUCED RATE
NONTAX INCENTIVES
FISCAL CREDIT
COSTA RISCA
COLOMBIA
ECUADOR
MEXICO
DOMINICAN
REPUBLIC
PANAMA
%
%
%
%
%
%
NUMBER OF INCENTIVES
59%
19%
17%
5%
10
2
2
1
5
2 1
2
4
11
2
3
6
5
1
3
7
9
5
3 3
2
1
8
5
126
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
Most incentives in the six countries are sector-specific (figure B.3) and national (figure
B.4), except in Colombia, where 84 incentives are subnational compared to 29 that
are national. In the Dominican Republic, 34 incentives are national, and 18 incentives
are subnational.
FIGURE B. TOTAL INCENTIVES BY TYPE OF SECTOR FIGURE B. TOTAL INCENTIVES BY LOCATION
NATIONAL SUBNATIONAL
By sector in the Dominican Republic, the manufacturing sector is the main
beneficiary, receiving 21 percent of incentives, while the tourism sector and hotels,
despite their importance to the country’s economy, receive only 16 percent (figure B.5).
Agriculture, despite being an important source of resource generation, does not seem
to receive any specific incentives.
FIGURE B. FISCAL INCENTIVES PER SECTOR IN THE DOMINICAN REPUBLIC
COSTA RICA
DOMINICAN
REPUBLIC
ECUADOR
MEXICO
PANAMA
COLOMBIA
29%
21%
15%
9%
8%
8%
6%
2%
2%
NUMBER OF INCENTIVES
17
18
3
3
27
84
78
22
Textiles and
leathers/Textiles
Turism
Hotels
Renewable/
alternative energy
Preservation of
goods for transport
Cinematographic and
audiovisual works
Raw materials and
packaging
Manufacturing industry
General
General
Specific
127
APPENDICES
FIGURE B. FREE ZONE INCENTIVES BY TYPE OF INCENTIVE FIGURE B. TOTAL INCENTIVES IN FREE ZONES
Most incentives within free zones constitute exemptions (59 percent) or reduced taxes
(19 percent) (figure B.6). Among the six countries, the Dominican Republic is second,
after Colombia, with 12 incentives available within the free zones (figure B.7).
COSTA RICA
DOMINICAN
REPUBLIC
PANAMA
COLOMBIA
MEXICO
NUMBER OF INCENTIVES
59
19
17
5
Exemption
Reduced Tax
Fiscal
Incentives
Fiscal Credit
128
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
APPENDIX C: GOVERNMENT MEASURES TO SUPPORT THE
PRIVATE SECTOR AMID THE COVID PANDEMIC
Tax measures introduced by the government to support the private sector as
COVID-19 lockdown measures caused revenue headwinds included filing/payment
deadline extensions, deductible options for corporate income tax, and an exemption
of certain penalties for custom duties. Employment measures included partial salary
subsidies in companies with economic diculties and income support for independent
workers. Economic stimulus measures included selective debt service moratoriums
and rollovers, lower monetary policy rate to encourage a general decrease in interest
rates in the financial system through the monetary policy transmission mechanism,
and liquidity and solvency provision measures to the financial system. While the
policy response was crucial to speed up the recovery and avoid excessive bankruptcies,
the size of the fiscal stimulus (relative to GDP) was smaller than in many other LAC
economies (figure C.1).
FIGURE C.. ADDITIONAL SPENDING AND FORGONE REVENUE, % OF GDP
Source: IMF and National authorities. Note: Estimates as of September 27, 2021. Percent of GDP is based on October 2021
World Economic Outlook unless otherwise stated
CHILE PERU BRAZIL ARGENTINA COLOMBIA DOMINICAN
REPUBLIC
GUATEMALA MEXICO
• 4.2
129
APPENDICES
The Banco Central de la República Dominicana (BCRD, the central bank) reacted
decisively with interest rate cuts and ample liquidity provision that supported credit
and economic activity. The main interest rate was reduced from 4.5 percent to 3
percent at the onset of the pandemic, along with other key rates, such as the 1-day
REPO facility rate, the overnight deposit rate, and the legal reserve ratio for banks.
The Central Bank also relaxed financial institutions’ prudential regulations by freezing
debtor ratings, capping required provisions, and facilitating loan restructuring, and
created a guarantee and financing fund to benefit MSMEs. The accommodative
monetary and financial policies fostered by the Central Bank provided liquidity
facilities to the financial system of about 5 percent of GDP to bolster credit growth,
and allowed the private sector (namely, commerce, manufacturing, agriculture,
construction, and tourism) to resume capital expenditure projects and launch new ones
towards the second half of 2021.
The DR’s tourism sector rebounded quickly due to targeted measures in local tourism
hubs and the easing of entry rules. Lockdown measures and the halting of tourist
arrivals hit the sector heavily during 2020. However, in early 2021, the government
supported the vaccination of most tourism sector workers to make the country safer
for tourists and attract foreign visitors. The government also lifted travel restrictions
for incoming visitors and oered free medical insurance for tourists staying at certain
hotels, and a robust testing policy. These measures have allowed the country to remain
one of the Caribbean's most attractive destinations, as travel restrictions eased globally
and vaccinations rates increased in major source markets, but the measures have also
drawn criticism domestically as more stringent testing and vaccination rules are in
place for residents compared to tourists. At the time of writing this document, the
government had lifted all COVID-19 related restrictions.
As COVID-19 recedes and the economic recovery continues, pandemic-related support
is either expiring or being phased out. The program to support workers who were
furloughed (Fondo de Asistencia Solidaria al Empleado, FASE) was phased out in April
2021, while social transfers under the Supérate program (previously denominated
“Progresando con Solidaridad”) have been scaled down but remain above pre-pandemic
levels as the target population increased and new subsidies to food were established.
Sources: IMF 2021 Article IV, WBG Dominican Republic CPF 2022–2027, KPMG COVID-19 Global Tax Developments Summary,
The Economist EIU.
130
NOTES
1 Central Bank of The Dominican Republic - External Sector Statistics; ProDominicana
2 World Bank World Development Indicators dataset.
3 CPSD team calculations based on, World Bank World Development Indicators dataset.
4 As measured by those living on less than $2.15 a day (2017 purchasing power parity).
5 Based on data from the World Bank World Development Indicators (WDI)
6 For more details, see H. Winkler and M. Montenegro, Dominican Republic Jobs Diagnostic (Washington, DC:
World Bank, 2021).
7 CPSD team calculations based on Ministry of Finance Public Credit statistics and Central Bank Real Sector
statistics.
8 World Bank World Development Indicators dataset.
9 PSD team calculations based on data from Harvard Growth Lab’s Atlas of Economic Complexity data.
10 While FDI is important for economic growth, not all FDI is the same. One way to dierentiate is by an
investor’s motivations using a framework established by British economist John Dunning that describes
four types: (a) natural resource-seeking investment, (b) market-seeking investment; (c) strategic asset-
seeking investment; and (d) eciency-seeking investment. Eciency-seeking FDI is particularly important
for countries looking to integrate into the global economy and move up the value chain. See Cecile Fruman,
“Why Does Eciency-Seeking FDI Matter?,” World Bank blog, February 5, 2016, https://blogs.worldbank.org/
psd/why-does-eciency-seeking-fdi-matter.
11
Central Bank of the Dominican Republic - external sector statistics.
12 CPSD team calculation bases on UNCTAD-EORA database and World Bank World Development Indicators.
13 CPSD team calculation based on Consejo Nacional de Zonas Francas Exportadoras, Tesorería de Seguridad
Social.
14
CPSD team calculations using information from the General Directorate of Customs (DGA).
15 CPSD team calculations using information from the General Directorate of Customs (DGA).
16 CPSD team calculations, Central Bank of the Dominican Republic, external sector statistics.
17 CPSD team calculations based on Central Bank of the Dominican Republic external sector statistics.
18 Portal de Servicios del Gobierno Dominicano, https://www.gob.do.
19
Transparency International, Corruption Perception Index, https://www.transparency.org/en/cpi/2022/
index/dom.
20
World Bank, Worldwide Governance Indicators, https://info.worldbank.org/governance/wgi/.
21
World Economic Forum, Global Competitiveness Index, https://www.weforum.org/reports/global-
competitiveness-report-2019/.
22
World Bank Group. Dominican Republic—Country Economic Memorandum: Sustaining Economic Growth
(Washington, DC: World Bank, 2023).
23
Ministry of Energy and Mines, electricity sector performance indicators.
24 World Bank, Dominican Republic—Country Economic Memorandum.
25
Central Bank of the Dominican Republic - External Sector statistics.
26 CPSD team calculation, based on Central Bank of the Dominican Republic, Consejo Nacional de Zonas
Francas.
27
Central Bank of the Dominican Republic, external sector statistics.
28 CPSD team calculations using information from the General Directorate of Customs (DGA).
29 Consejo Nacional de Zonas Francas, Statistics Report, 2022
30 CPSD team calculations based on CNZFE data on historic occupied industrial shell space, IDB projections
(US$1.58 billion), and assuming DR can capture its current share of global export of the McKinsey nearshoring
estimates (US$ 2.7 billion). Projections assume the current exported value per square foot (US$191 per square
foot) will remain constant and use the nearshoring estimates of additional export flows generated from
nearshoring to construct the projected occupied shell space required to host additional manufacturing
activity. IDB estimates can be found in the June 7, 2022, news release at https://www.iadb.org/en/news/
nearshoring-can-add-annual-78-bln-exports-latin-america-and-caribbeanInter-American Development
Bank – 2021 and McKinsey estimates are in Susan Lund et al., Risk, Resilience and Rebalancing in Global
Value Chains (McKinsey, 2020).
31
CPSD team calculations, based on Central Bank of the Dominican Republic external sector statistics.
32 CPSD team, based on IFC's Building Resilience Tool analysis
33 OECD (Organisation for Economic Co-Operation and Development), “Production Transformation Policy
Review of the Dominican Republic: Preserving Growth, Achieving Resilience, 2020, https://www.oecd-
ilibrary.org/sites/1201cfea-en/index.html?itemId=/content/publication/1201cfea-en.
131
NOTES
34 Gross domestic product (GDP) per capita in 2019 stood at US$8,282 (in current dollars), equivalent to
US$18,413 when adjusted by purchasing power parity. Source: World Bank World Development Indicators
database.
35
World Bank Poverty Team calculations using Central Bank of the Dominican Republic ENCFT data.
36 World Bank, Dominican Republic: Gearing Up for a More Ecient Tax System—An Assessment of Tax Eciency, a Cost-
Benefit Analysis of Tax Expenditures, and an Exploration of Labor Informality and Its Tax Implications (Washington,
DC, World Bank (2017), https://openknowledge.worldbank.org/entities/publication/908e72-2d48-5942-
b557-5b314be9ade7.
37
“Concept Note for Dominican Republic Country Climate and Development Report” (internal document,
World Bank, Washington, DC, 2022).
38
For more information, see https://gain.nd.edu/our-work/country-index/rankings/.
39
For more information, visit the IMF climate data website here: https://climatedata.imf.org/pages/go-
indicators.
40
World Travel and Tourism Council, 2019.
41 “Concept Note for Dominican Republic Country Climate and Development Report.”
42 “Concept Note for Dominican Republic Country Climate and Development Report.”
43 Reynaldo Payano-Almanzar and Joselín Rodriguez, “Meteorological, Agricultural and Hydrological Drought
in the Dominican Republic: A Review,” Current World Environment 13, no. 1 (2018): 124, doi:10.12944/CWE.13.1.12.
44
“Concept Note for Dominican Republic Country Climate and Development Report.”
45 Comisión ODS, Hoja de ruta como acelerador de la Agenda 2030—Producción y consumo sostenible, 2020, https://
mepyd.gob.do/publicaciones/Hoja-de-ruta-produccioon-y-consumo-sostenible.
46
F-gasses are fluorinated greenhouse gases often used as substitutes for ozone-depleting substances in
a variety of industrial applications: refrigeration and air-conditioning (HFCs), electronics, cosmetics, and
pharmaceuticals (PFCs), and as insulation gases in high-voltage switchgear (SF6). See https://ec.europa.
eu/clima/eu-action/fluorinated-greenhouse-gases_en. See also Climate Watch data, 2018 (latest available),
https://www.climatewatchdata.org/.
47
Based on 2022 GDP data from the Central Bank of the Dominican Republic. The tourism share is not
significantly distant from the prepandemic average (7.7 percent).
48
Based on data from the Central Bank of the Dominican Republic.
49 Mainly the special economic and free trade zones regime established by Law 8-90 of January 1990.
50 World Bank. Dominican Republic - Country Economic Memorandum: Sustaining Economic Growth (Washington,
DC: World Bank, 2023).
51
Fernando Botelho and Vladimir Ponczek, “Segmentation in the Brazilian Labor Market,” Economic Development
and Cultural Change 59, no. 2 (2011); Olivier Bargain and Prudence Kwenda, “The Informal Sector Wage Gap:
New Evidence Using Quantile Estimations on Panel Data,” Economic Development and Cultural Change
63, no. 1 (2014); John Ariza and Gabriel Montes-Rojas, “Labor Income Inequality and the Informal Sector in
Colombian Cities,” Cuadernos de Economia Magazine 36, no. 72 (2017).
52
According to Central Bank of the Dominican Republic data.
53 Hernan Winkler and Miriam Montenegro, “Dominican Republic Jobs Diagnostic,” (Job Series 28, World Bank,
Washington, DC, 2021).
54
Galina Hale and Mingzhi Xu, “FDI Eects on the Labor Market of Host Countries” (Working Paper 2016-25,
Federal Reserve Bank of San Francisco, September 2016).
55
The surge in gold exports was largely driven by Pueblo Viejo, a mine that started commercial production in
2012.
56
Jose Daniel Reyes et al., Special Economic Zones in the Dominican Republic: Policy Considerations for a More
Competitive and Inclusive Sector (Washington, DC: World Bank, 2017).
57
Source: Dirección General de Aduanas 2022 export data.
58 IMF (International Monetary Fund), World Economic Outlook (Washington, DC: IMF, 2023).
59
IFC, “Nearshoring Analytical Report: Central America, Colombia, and Mexico,” 2022.
60 World Bank, Paving the Way for Prosperous Cities and Territories: Urbanization and Territorial Review of the
Dominican Republic (Washington, DC, 2022).
61
See the government website, Portal de Servicios del Gobierno Dominicano, https://www.gob.do.
62
Juan Labraga, Elka Scheker, and Pavel Isa Contreras, República Dominicana: Promover las Exportaciones para
mejorar la Calidad de Vida: Análisis de los mecanismos, instituciones y mejores prácticas para promover las exportaciones
y atraer la inversión extranjera directa (Washington, DC: IDB, 2017).
63
See Transparency International’s Corruption Perception Index, https://www.transparency.org/en/cpi/2022/
index/dom.
64
See Worldwide Governance Indicators, https://info.worldbank.org/governance/wgi/.
65
World Economic Forum, Global Competitiveness Report 2019, https://www.weforum.org/reports/global-
competitiveness-report-2019/.
66
See the United Nations’ E-Government Survey 2022, https://publicadministration.un.org/egovkb/en-us/.
132
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
67 These institutions are National Council of Free Export Zones (Consejo Nacional de Zonas Francas de
Exportación; CNZFE); Ministry of Finance (Ministerio de Hacienda); General Directorate of Internal Revenue
(Dirección General de Impuestos Internos; DGII); General Directorate of Customs (Dirección General de
Aduanas; DGA); Ministry of Environment and Natural Resources (Ministerio de Medio Ambiente y Recursos
Naturales; MARENA); and Ministry of Health (Ministerio de Salud Pública; MSP).
68
Law 8-90 on the Promotion of SEZ from 1990 (and its bylaw) establishes the CNZFE’s nature, competences,
structure, and administration, including how the CNZFE evaluates and authorizes companies’ requests
to operate within the SEZ regime. The CNZFE comprises dierent institutions from the public and private
sectors (led by the MICM, and including ProDominicana, Dominican Association for Export, among others).
CNZFE’s decisions are voted and approved by simple majority.
69
Rodrigo Azuero et al., “Productivity, Misallocation, and Special Tax Regimes in the Dominican Republic” (IDB
Working Paper 1050, Inter-American Development Bank, Washington, DC, 2019).
70
World Bank. Building a Better Future Together: Dominican Republic Policy Notes (Washington, DC: World Bank
Group, 2016). For example, most of the FDI enterprises located in SEZs import 70 percent of their inputs,
compared with 49 percent in the Caribbean, 58 percent in Central America, and 43 percent in South America
and Mexico.
71
Jose Daniel Reyes et al., Special Economic Zones in the Dominican Republic: Policy Considerations for a More
Competitive and Inclusive Sector (Washington, DC: World Bank, 2017).
72
M. Ferantino et al. Special Economic Zones, Global Value Chains, and the Degree of Domestic Linkages in the
Dominican Republic (Washington, DC: World Bank Group, 2017).
73
The team will work closely with the Education GP to finalize this section in the final CPSD report and will
provide punctual recommendations on how to address skills shortages in specific sectors based on inputs
from consulted firms.
74
World Bank. The Human Capital Project (Washington, DC: World Bank, 2018), https://openknowledge.
worldbank.org/handle/10986/30498.
75
World Bank Group. Dominican Republic—Country Economic Memorandum: Sustaining Economic Growth
(Washington, DC: World Bank, 2023).
76
Dominican Republic—Country Economic Memorandum.
77
World Bank. Dominican Republic Country Gender Scorecard (Washington, DC, 2021), https://documents1.
worldbank.org/curated/en/993591645707379790/pdf/Dominican-Republic-Country-Gender-Scorecard.pdf.
78
World Bank. Country Gender Scorecard.
79
World Economic Forum and Deloitte. Bridging the Skills and Innovation Gap to Boost Productivity in Latin
America (Geneva, 2015), https://www2.deloitte.com/content/dam/Deloitte/cr/Documents/finance/201501-
Competitiveness_Lab_Latin_America_final.pdf.
80
Dominican Republic—Country Economic Memorandum.
81
Dominican Republic—Country Economic Memorandum.
82
Dominican Republic, Ministerio de Industria, Comercio y Mipymes, Estudio De Necesidades De Talento Para
Apoyar El Crecimiento Del Sector De Dispositivos Médicos, 2019.
83
United States Agency for International Development, Estudio del Mercado Laboral in Republica Dominicana,
2020.
84
World Bank, “Dominican Republic: Assessment of Logistics Skills, Competencies, and Training” (World Bank,
Washington, DC, 2023.
85
World Bank, “Dominican Republic: Assessment of Logistics Skills, Competencies, and Training.”
86 Dominican Republic—Country Economic Memorandum.
87
National Bureau of Statistics, National Survey for the Detection of Skills and Qualifications Needs in Employment
(ENDHACE) (2020).
88
World Bank, “Dominican Republic: Assessment of Logistics Skills, Competencies, and Training.”
89 World Bank gender statistics are taken from the UNESCO Institute for Statistics. See http://uis.unesco.org/.
90
IMF, World Mobility and Domestic Production Networks (Working Paper, IMF, Washington, DC, 2020.)
91
The average customer on the public power grid experienced 18 interruptions and 22 blackout hours per
month in 2020, far above the averages of regional peers such as Panama and Costa Rica. See https://sie.
gob.do/sobre-nosotros/departamentos/estadisticas-direccion-regulacion/.
92
Dominican Republic—Country Economic Memorandum.
93
The market consists of separate generation, transmission, and distribution companies.
94 Organismo Coordinador del Sistema Eléctrico Nacional Interconectado de la República Dominicana (OC),
“Informe Mensual de Operación Real,” Diciembre 2022. See https://www.oc.do/Informes/Operaci%C3%B3n-
del-SENI/An%C3%A1lisis-Operativo.
95
The SENI consists of transmission lines of 69 kilovolts (kV), 138 kV, 230 kV and 345 kV that connect Santo
Domingo to the north, west, and east of the country. See https://tinyurl.com/449248r8.
96
Some small local networks are either cooperatives or under private ownership (for example, Consorcio
Energético Puna Cana Macao; CEPM) in the eastern region of the country).
97
Created after the breakup of the formerly state-owned Dominican Electricity Corporation in the 1999, the
EDEs were initially privatized but later sold back to the government; EDE Norte and EDE Sur were acquired
in 2003 and EDE Este in 2009, making the government the sole administrator of the EDEs.
133
NOTES
98 Ministry of Energy and Mines, “Informe de Desempeño” (2022).
99 Because the World Bank Energy DPL presents recommendations to address this issue, the CPSD does not
elaborate on this dimension to avoid redundancy.
100
World Bank Energy Development Policy Loan Project Appraisal Document (2023).
101 Comisión Nacional de Energia (CNE) and International Renewable Energy Agency (IRENA),
REmap 2030—A Renewable Energy Roadmap (2017). See https://www.cne.gob.do/wp-content/
uploads/2018/01/2820172920ESP20REmap20RD202030.pdf.
102
“Distributed energy” refers to generally small-scale resources installed close to energy consumption sites—
connected to the distribution grid—and includes various technologies, such as solar panels, energy storage,
and electric vehicles.
103
IFC calculations using a four-stage approach to develop the country analysis, with all spatial processing
performed using ArcGIS and the Spatial Analyst extension, creating a detailed screening criteria relative to
technical and environmental and social (E&S) constraints to exclude certain sites, then “scored” the remaining
(non-excluded) sites based on a series of technical factors that impact each site’s attractiveness for wind
development (such as wind resource, distance to grid, access). This served to identify the commercial wind
potential of the country.
104
AdvaMed, Medical Devices Industry Facts, 2022. https://www.advamed.org/medical-device-industry-
facts/.
105
P. Bamber and G. Gere, “Costa Rica in the Medical Devices Global Value Chain: Opportunities for Upgrading”
(Durham, NC: Duke University, Center on Globalization, Governance & Competitiveness. August 2013).
106
See https://hbr.org/2022/11/the-global-population-is-aging-is-your-business-prepared.
107
See https://www.unhcr.org/us/media/unhcr-global-trends-2018.
108
See https://www.sciencedirect.com/science/article/abs/pii/S0954349X19301973.
109
See https://www.imf.org/en/News/Articles/2015/09/28/04/52/mcs062216.
110
See https://www.weforum.org/agenda/2015/08/how-income-influences-our-healthcare-decisions/.
111
See https://apps.who.int/iris/bitstream/handle/10665/330357/WHO-HIS-HGF-HF-WorkingPaper-19.4-eng.
pdf?ua=1.
112
World Health Organization, Preventive Care, 2021, retrieved from https://www.who.int/health-topics/
preventive-care#tab=tab_1.
113
Centers for Disease Control and Prevention, Preventive Health Care, 2021, retrieved from https://www.cdc.
gov/prevention/index.html.
114
National Center for Chronic Disease Prevention and Health Promotion, “About Chronic Diseases,” 2021,
retrieved from https://www.cdc.gov/chronicdisease/about/index.htm.
115
See https://dspace.mit.edu/handle/1721.1/39576.
116
See https://www.medtechdive.com/trendline/medtech-trends-outlook-2023/309/.
117
See https://www.mckinsey.com/industries/life-sciences/our-insights/how-the-medtech-industry-can-
capture-value-from-digital-health.
118
T. Marti, “Desarrollo de Encadenamientos Productivos para el Clúster de Dispositivos Médicos de la República
Dominicana,” 2016; T. Marti, “Fomento de los Vínculos entre la Industria Local y Empresas de Zonas Francas
de Componentes Médicos,” Reporte Preliminar de Resultados, 2021, and companies’ interviews.
119
Banco Central de la República Dominicana.
120 CNZFE, 2021.
121 Gary Gere, Stacey Frederick, and Penny Bamber, “Diverse Paths of Upgrading in High-Tech Manufacturing:
Costa Rica in the Electronics and Medical Devices Global Value Chains,” Transnational Corporations Journal 26,
no. 1, 2019.
122
Gere et al., “Diverse Paths.”
123 In 2016, 16.7 percent of inputs were locally purchased manufactured goods while 21.3 percent of inputs
were sourced from free zones. Of the locally sourced goods, 6.5 percent (the largest proportion) were of
the category “wood, paper & cardboard products,” while 3.6 percent represented the “editing, recording,
printing” category. The next largest category of inputs came from “other manufacturing industries” at
3.4 percent, and no other category exceeded 1.5 percent. Source: Marti, “Fomento de los Vínculos entre la
Industria Local y Empresas de Zonas Francas de Componentes Médicos.”
124
Marti, “Fomento de los Vínculos entre la Industria Local y Empresas de Zonas Francas de Componentes
Médicos.”
125
T. Marti, “Estudio Necesidades de Talento Sector Dipositivos Médicos: Perfil Actual de Talento,” 2019.
126 Marti, “Estudio Necesidades de Talento Sector Dipositivos Médicos.”
127 See https://www.fortunebusinessinsights.com/u-s-medical-devices-market-107009.
128
See https://www.grandviewresearch.com/industry-analysis/medical-disposables-market.
129
Marti, “Fomento de los Vínculos entre la Industria Local y Empresas de Zonas Francas de Componentes
Médicos.”
130
Marti, “Fomento de los Vínculos entre la Industria Local y Empresas de Zonas Francas de Componentes
Médicos.”
134
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
131 For example, apart from those MNCs that arrange the provision of these services internally (within their
international group, if not within the local manufacturing facility), there is only one company—Cosmed
Group—that provides contract sterilization services. In addition, these two articles discuss the market: U.S.
International Trade Association, “Medical Devices Market in the Dominion Republic,” June 26, 2019, https://
www.trade.gov/knowledge-product/medical-devices-market-dominican-republic, and L. Vásquez-García
et al., “Analysis of the Supply Chain of Medical Devices in the Dominican Republic,” Journal of Medical Systems,
May 2020, DOI: 10.1007/s10916-020-01587-9.
132
Blair Lapres, “The Cluster Competitiveness Group 2020: Report on Cluster Potential and Strategies:
Medicine, Pharmaceutical, and Biotechnology” (World Bank, Washington, DC, 2020).
133
Market Research Future, “Healthcare BPO Market,” 2021, https://www.marketresearchfuture.com/reports/
healthcare-bpo-market-1335.
134
See American Association of Medical Colleges (AAMC), https://www.aamc.org/news-insights/press-
releases/new-findings-confirm-predictions-physician-shortage.
135
Capitation is a payment arrangement for health care services in which an entity (such as a physician or
group of physicians) receives a risk-adjusted amount of money for each person attributed to it, per period of
time, regardless of the volume of services that person seeks. Remote patient monitoring systems are used
for chronic patients to reduce the amount of services (that is, hospital visits).
136
Organisation for Economic Co-operation and Development (OECD), “Production Transformation Policy
Review of the Dominican Republic,” 2020.
137
UNCTAD, World Investment Report 2019: Special Economic Zones, https://unctad.org/system/files/ocial-
document/wir2019_en.pdf.
138
See UNCTAD, World Investment Report 2019: Special Economic Zones for a recent and comprehensive
overview of these debates and the available evidence.
139
World Bank, Dominican Republic—Country Economic Memorandum: Sustaining Economic Growth (English)
(Washington, DC: World Bank, 2023).
140
Tensie Whelan et al., “ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence
from 1,000 plus Studies Published between 2015-2020” (New York University Stern School of Management,
2021), https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU-RAM_ESG-Paper_2021%20
Rev_0.pdf.
141
IFC, “Green Buildings: A Financial and Policy Blueprint for Emerging Markets,” 2019.
142 World Bank, “Circular Economy in Industrial Parks: Technologies for Competitiveness” (World Bank,
Washington, DC, 2021).
143
Analytica, “Zonas Francas: Oportunidades Para Todos,” 2021.
144 PROCOMER, “Impacto del Régimen de Zona Franca en Costa Rica 2014-2018,” 2019, https://www.procomer.
com/noticia/segun-estudio-del-sector-comercio-exterior-aportes-de-zonas-francas-impulsan-desarrollo-
del-pais/.
145
Analytica, “Zonas Francas: Oportunidades Para Todos.”
146 World Bank, Dominican Republic—Country Economic Memorandum.
147
Eduardo Ereno Blanchet et al., Paving the Way for Prosperous Cities and Territories: Urbanization and Territorial
Review of the Dominican Republic (English) (Washington, DC: World Bank, 2022).
148
The AIIB is a multilateral development bank established in 2015 with the aim of promoting economic
development in Asia through infrastructure projects. One of its core areas of focus is financing industrial
parks, which it sees as crucial for the region's economic growth. To achieve this goal, the AIIB oers long-
term loans with competitive interest rates, as well as technical assistance and advisory services to help
ensure the projects are successful. See https://www.aiib.org/en/index.html.
149
BNDES oers loans with maturities of up to 30 years, which can help reduce the risk of financing such
projects. The bank also provides other forms of support, including technical assistance and equity financing.
150
Superintendencia de Bancos, SIMBAD, available at https://simbad.sb.gob.do/.
151
Monetary and Financial law Number 183-02, Article 47 (a). According to the Central Bank’s resolution number
5 of December 19th of 2016 this limit can be increased to 20 percent if admissible guarantees are provided
152
Junta Monetaria, Prudential norms of capital adequacy, art. 21, 2004.
153 Junta Monetaria, Prudential norms of capital adequacy, art. 21, 2004.
154 IFC, “Central America, Colombia, and Mexico Nearshoring Analytical Report,” 2022.
155 CPSD team calculations based on Susan Lund et al., Risk, Resilience and Rebalancing in Global Value Chains
(McKinsey, 2020) global nearshoring estimates of US$4.4 trillion and assumption that the DR can capture
its current share of global export (0.06 percent) of these flows.
156
CPSD team calculations based on short- and medium-term nearshoring flows for the Dominican Republic
estimated by the IDB suggest approximately US$1.6 billion. See the IDB news release, June 7, 2022, at https://
www.iadb.org/en/news/nearshoring-can-add-annual-78-bln-exports-latin-america-and-caribbeanInter-
American Development Bank – 2021.
157
Based on the current SEZ export-to-industrial areas ratio of US$191 per square feet.
158 The CNZF does not dispose of a breakdown by sector of the areas but has indicated that the majority of the
3.3 million square feet dedicated to manufacturing corresponds to the tobacco sector.
135
NOTES
159 Legislation establishing REITs does not exist in the Dominican Republic. For a fund to be classified as a REIT,
following the US practices, it would have to be highly liquid, invest the vast majority of its assets (over 75
percent) in real estate, pay almost all of its income (over 80 percent) in dividends, and have a large number
(over a hundred) of shareholders, have tax advantages as transparent entities, among many other features.
160
ADOSAFI – March 2023
161 With inputs from experts and one sample industrial park, a detailed analysis of eciency measures was
calculated using IFC’s EDGE application. The tool evaluated the factory shell’s operational dynamics
(number of shifts, days in operation per year), size (in square meters, number of floors), type of fuel used
(electricity, diesel for generators), facilities available (oce spaces, restrooms, kitchenette/food prep,
storage, packaging, receiving and shipping, mechanical and electrical, and parking), installed technologies
(HVAC systems for heating, ventilation and cooling), materials used for the construction of walls, windows
and floors, and the extent to which these were properly insulated to typically ensure higher eciencies.
162
CBRE Research.
163 Ministry of Energy and Mines.
164 Hub de Energía America Latina y el Caribe.
165 Country Emissions database of the Global Carbon Atlas.
166 Boletín de Estadísticas Ambientales 2021, Ministry of Economy - ONE, https://www.one.gob.do/media/
sqydclxa/bolet%C3%ADn-de-estadisticas-ambientales-2021-no2.pdf.
167
Rodriguez, Alfonso, Interview. Conducted by Energía Estratégica, 2022.
168 National Renewable Energy Laboratory, “Rooftop Solar Photovoltaic Tehcnical Potential in the United
States: A Detailed Assessment, 2016.”
169
IFC Dominican Republic Market information of Solar Projects – US$ 1.1 million/MW for development costs on
average, 2022.
170
Santiago, PIISA, Las Americas, San Pedro, and La Vega, which amount to 17.2 million square feet, of which
Santiago has already committed to installing 50MWs.
171
178MW, according to the National Energy Plan (CNE), 2022.
172 Central Bank of the Dominican Republic, External Accounts database, 2022.
173 Primer Reporte Nacional de Logística (IDB and Consejo Nacional de Competitividad, 2021).
174
As part of the CPSD’s consultation process, the team interviewed the head of the cluster and noted the
constraints and initiatives they identified, which coincide with the ones reflected in the PNLOG.
175
National Logistics Observatory (Observatorio Nacional de Logistica y Transporte de Carga de la República
Dominicana). 2021. Reporte Nacional de Logística. Apoyo a la implementación del Plan Nacional de Logística
de Cargas (PNLOG) 2020–2032. https://onltrd.org.do/herramientas/documentos/.
176
World Bank, 2021. https://datos.bancomundial.org/indicador/NV.AGR.TOTL.ZS?locations=DO.
177
OECD, 2020. Production Transformation Policy Review of the Dominican Republic: Preserving Growth,
Achieving Resilience. https://www.oecd-ilibrary.org/sites/1201cfea-en/index.html?itemId=/content/
publication/1201cfea-en.
178
USAID, 2022. Exporting Quality Program Final Evaluation. https://pdf.usaid.gov/pdf_docs/PA00Z7VZ.pdf.
179
FAO, 2022. https://www.fao.org/faostat/en/#data/QCL.
180
Trademap, 2022. https://www.trademap.org/Index.
aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c.
181
ProDominicana, 2018 – Centro de Exportación e Inversión de la República Dominicana (CeiRD). Perfiles de
productos. https://prodominicana.gob.do/RepositorioDocumentos?Folder=Documentos_de_interés.
182
USAID, 2022. Exporting Quality Program Final Evaluation. https://pdf.usaid.gov/pdf_docs/PA00Z7VZ.pdf.
183
FAO, 2022. https://www.fao.org/faostat/en/#data/QCL.
184
Trademap, 2022. https://www.trademap.org/Country_SelProductCountry.
aspx?nvpm=1%7c214%7c%7c%7c%7c080430%7c%7c%7c6%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c%7c1.
185
ProDominicana, 2018 – Centro de Exportación e Inversión de la República Dominicana (CeiRD). Perfiles de
productos. https://prodominicana.gob.do/RepositorioDocumentos?Folder=Documentos_de_interés.
186
FAO, 2022. https://www.fao.org/faostat/en/#data/QCL.
187
Trademap, 2022. https://www.trademap.org/Country_SelProductCountry.
aspx?nvpm=1%7c214%7c%7c%7c%7c080430%7c%7c%7c6%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c%7c1.
188
ProDominicana, 2018 – Centro de Exportación e Inversión de la República Dominicana (CeiRD). Perfiles de
productos. https://prodominicana.gob.do/RepositorioDocumentos?Folder=Documentos_de_interés.
189
FAO, 2022. https://www.fao.org/faostat/en/#data/QCL.
190
Trademap, 2022. https://www.trademap.org/Country_SelProductCountry.
aspx?nvpm=1%7c214%7c%7c%7c%7c080430%7c%7c%7c6%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c%7c1.
191
ProDominicana, 2018 – Centro de Exportación e Inversión de la República Dominicana (CeiRD). Perfiles de
productos. https://prodominicana.gob.do/RepositorioDocumentos?Folder=Documentos_de_interés.
192
Ministry of Agriculture, 2020. Cacao orgánico RD recibe premio mundial chocolate. https://agricultura.gob.
do/noticia/chocolate-organico-rd-recibe-premio-mundial/.
136
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
193 Barcelo, 2022. La ruta del cacao Dominicano. https://www.barcelo.com/pinandtravel/es/ruta-del-cacao-
en-republica-dominicana/.
194
FAO, 2022. https://www.fao.org/faostat/en/#data/QCL.
195
Trademap, 2022. https://www.trademap.org/Country_SelProductCountry.
aspx?nvpm=1%7c214%7c%7c%7c%7c080430%7c%7c%7c6%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c%7c1.
196
Diario Libre, 2020. Sector cacao dominicana golpeado por la sequía y el COVID-19. https://www.diariolibre.
com/economia/sector-cacao-dominicano-golpeado-por-la-sequia-y-el-covid-19-EO19425032.
197
DIGEGA, 2022. https://datos.gob.do/id/organization/881e0777-c7b0-42af-a9e6-a2cc06abd435?groups=eco
nomia&organization=direccion-general-de-ganaderia-digega.
198
Ministry of Economy, Planning and Development, 2012. Estrategia Nacional de Desarrollo 2030. https://
mepyd.gob.do/estrategia-nacional-de-desarrollo-2030/.
199
OECD (Organisation for Economic Co-Operation and Development), “Production Transformation Policy
Review of the Dominican Republic: Preserving Growth, Achieving Resilience, 2020, https://www.oecd-
ilibrary.org/sites/1201cfea-en/index.html?itemId=/content/publication/1201cfea-en.
200
World Bank, 2023. World Bank’s Logistics Performance Index. https://lpi.worldbank.org/sites/default/
files/2023-04/LPI_2023_report_with_layout.pdf.
201
Inter-American Development Bank. Plan Nacional de Logística de Cargas República Dominicana.
202
Global Competitiveness Report, various years.
203 IDB, Plan Nacional de Logística de Cargas República Dominicana.
204
National Logistics Observatory (Observatorio Nacional de Logistica y Transporte de Carga de la República
Dominicana). 2021. Reporte Nacional de Logística. Apoyo a la implementación del Plan Nacional de Logística
de Cargas (PNLOG) 2020–2032. https://onltrd.org.do/herramientas/documentos/.
205
FAO (Food and Agriculture Organization), ONU Migration and INMRD (National Migration Institute),
“Descriptive Exploratory Study on the Labor Market in the Agricultural Sector and Its Need for Foreign
Labor,” 2021, https://kmhub.iom.int/sites/default/files/2022-11/web_estudio-descriptivo-explorativo-sobre-
mercado-laboral-mj_0%20%281%29.pdf.
206
National Logistics Observatory (Observatorio Nacional de Logistica y Transporte de Carga de la República
Dominicana). 2021. Reporte Nacional de Logística. Apoyo a la implementación del Plan Nacional de Logística
de Cargas (PNLOG) 2020–2032. https://onltrd.org.do/herramientas/documentos/.
207
According to Harvard University, IV range (that is, minimally processed) foods are those that have been only
slightly altered for the primary purpose of preservation without changing their nutritional content.
208
For further details, see the table indicating the size of each investment project mapped that is included in
the background paper on agri-logistics developed for this CPSD. (World Bank 2023).
209
GCCA, “Cold Chain Development,” Cold Facts (July-August 2021): 30.
210
Statista, 2022. Fresh Fruits – Worldwide. https://www.statista.com/outlook/cmo/food/fruits-nuts/fresh-
fruits/worldwide#revenue.
211
Statista, 2022. Health and wellness food market value worldwide in 2020 to 2026. https://www.statista.
com/statistics/502267/global-health-and-wellness-food-market-value/.
212
Statista, 2022. Health and wellness food market value worldwide in 2020 to 2026. https://www.statista.
com/statistics/502267/global-health-and-wellness-food-market-value/.
213
European Commission, “Green Deal: EU Agrees Law to Fight Global Deforestation and Forest Degradation
Driven by EU Production and Consumption,” 2022, https://ec.europa.eu/commission/presscorner/detail/en/
ip_22_7444.
214
IMO (International Maritime Association), “Fourth Greenhouse Gas Study,” 2020, https://www.imo.org/en/
OurWork/Environment/Pages/Fourth-IMO-Greenhouse-Gas-Study-2020.aspx.
215
Trademap, 2022. https://www.trademap.org/Index.
aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c.
216
Statista, 2022. Fresh Fruits – Worldwide. https://www.statista.com/outlook/cmo/food/fruits-nuts/fresh-
fruits/worldwide#revenue.
217
Trademap, 2022. https://www.trademap.org/Index.
aspx?nvpm=1%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c%7c.
218
Statista, 2022. Per capita consumption of fresh fruit in the United States from 2000 to 2021. https://www.
statista.com/statistics/257127/per-capita-consumption-of-fresh-fruit-in-the-us.
219
CBI, 2022. What is the demand for fresh fruit and vegetables on the European market?. https://www.cbi.eu/
market-information/fresh-fruit-vegetables/what-demand.
220
OTCA, 2017. Republica Dominicana en condiciones de exportar US$2 mil MM en frutas. https://otca.gob.do/
rd-en-condiciones-exportar-us2-mil-mm-en-frutas/.
221
National Logistics Observatory (Observatorio Nacional de Logistica y Transporte de Carga de la República
Dominicana). 2021. Reporte Nacional de Logística. Apoyo a la implementación del Plan Nacional de Logística
de Cargas (PNLOG) 2020–2032. https://onltrd.org.do/herramientas/documentos/.
222
DP World, 2022. DP World y Emergent Cold Latin America dan primer picazo para construcción de almacén
de temperatura controlada. https://www.dpworld.com/en/caucedo/news/latest-news/emergent-cold.
137
NOTES
223 Competitiveness based on Interview with Viktor Rodriguez from OCTA.
224 Statista, 2022. El turismo en el mundo. https://es.statista.com/temas/3612/el-turismo-en-el-
mundo/#dossierKeyfigures.
225
UNWTO, 2022. Tourism grows 4% in 2021 but remains far below pre-pandemic levels. https://www.unwto.
org/news/tourism-grows-4-in-2021-but-remains-far-below-pre-pandemic-levels#:~:text=Global%20
tourism%20experienced%20a%204,to%20preliminary%20estimates%20by%20UNWTO.
226
UNWTO, 2022. https://www.unwto.org/es/datos-turismo/resultados-turisticos-globales-regionals.
227
Amicarelli et al, 2021. Food waste in hospitality and food services: A systematic literature review and framework
development approach. https://www.sciencedirect.com/science/article/pii/S0959652620329061.
228
Forbes, 2021. More Than 50% Of Millennials Trying To Incorporate Plant-Based Foods Into Their Diet. https://
www.forbes.com/sites/bridgetshirvell/2019/09/09/more-than-50-of-millennials-trying-to-incorporate-
plant-based-foods-into-their-diet/?sh=746e05305ebf.
229
52 Climate Actions, 2022. Eat Local, Seasonal Food. https://www.52climateactions.com/eat-local-seasonal-
food/ful.
230
UNWTO, 2022. https://www.unwto.org/es/datos-turismo/resultados-turisticos-globales-regionals.
231
Ministry of Tourism, 2021. País ha recibido más de un millón de turistas. https://www.mitur.gob.do/noticias/
eeuu-pr-y-colombia-encabezan-lista-de-paises-emisores-de-turistas-a-rd/p.
232
Statista, 2022. El turismo en el mundo. https://es.statista.com/temas/3612/el-turismo-en-el-
mundo/#dossierKeyfigures.
233
Banco Central de la República Dominicana, 2022. ¿Cuánto gasta un turista en la República Dominicana?.
https://www.revistamercado.do/turismo/cuanto-gasta-un-turista-en-rd#:~:text=Entre%20abril%20y%20
junio%20de,los%20encantos%20de%20República%20Dominicana.
234
Bloomberg, 2022. Economía dominicana crece 6,4%: hoteles, bares y restaurantes con mayor dinamismo.
https://www.bloomberglinea.com/2022/05/04/economia-dominicana-crece-64-hoteles-bares-y-
restaurantes-con-mayor-dinamismo/.
235
Ministry of Tourism, 2020. CONFOTUR aprueba nuevos proyectos que sumarán 20 mil habitaciones; un
aumento del 24.7% de la oferta. https://www.mitur.gob.do/uncategorized/confotur-aprueba-nuevos-
proyectos-sumaran-20-mil-habitaciones-aumento-oferta/.
236
OECD (Organisation for Economic Co-Operation and Development), “Production Transformation Policy
Review of the Dominican Republic: Preserving Growth, Achieving Resilience, 2020, https://www.oecd-
ilibrary.org/sites/1201cfea-en/index.html?itemId=/content/publication/1201cfea-en.
237
Competitiveness based on Interview with Viktor Rodriguez from OCTA.
238 TraSa, 2022. Investment feasibility study information memorandum. IESC, TraSa.
239 Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES,
AERODOM, CONACADO, OTCA, Ministerio de Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS,
CEDAF, Programa TraSa, Clúster Nacional de Aguacate, ASOPROPIMOPL.
240
Competitiveness based on FAO, 2022 and Trademap 2022.
241 Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES,
AERODOM, CONACADO, OTCA, Ministerio de Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS,
CEDAF, Programa TraSa, Clúster Nacional de Aguacate, ASOPROPIMOPL.
242
Ministry of Tourism, 2020. CONFOTUR aprueba nuevos proyectos que sumarán 20 mil habitaciones; un
aumento del 24.7% de la oferta. https://www.mitur.gob.do/uncategorized/confotur-aprueba-nuevos-
proyectos-sumaran-20-mil-habitaciones-aumento-oferta/.
243
Competitiveness based on Interviews with key actors from agri-logistics sector: ADOEXPO, ASONAHORES,
AERODOM, CONACADO, OTCA, Ministerio de Agricultura, Puerto Rio Haina, MERCADOM, DIGEMAPS,
CEDAF, Programa TraSa, Clúster Nacional de Aguacate, ASOPROPIMOPL.
244
Research and Markets, 2022. Food & Grocery Retail Market Size, Share & Trends Analysis Report by
Product (Food Cupboard, Beverages), by Distribution Channel (Supermarkets & Hypermarkets, Online),
by Region (APAC, Europe), and Segment Forecasts, 2022-2030. https://www.researchandmarkets.com/
reports/4613444/food-and-grocery-retail-market-size-share-and.
245
Competitiveness based on FAO, 2022 and Trademap 2022.
246 Landgeist, 2022. Fruit consumption in North America. https://landgeist.com/2022/11/28/fruit-consumption-
in-north-america/#:~:text=The%20biggest%20consumers%20of%20fruit,is%20third%2C%20with%20
151%20kg.
247
Ministry of Tourism, 2021. República Dominicana concluirá el 2021 con una llegada de pasajeros de 5 millones,
estima el Banco Central. https://www.mitur.gob.do/noticias/republica-dominicana-concluira-el-2021-con-
una-llegada-de-pasajeros-de-5-millones-estima-el-banco-central/.
248
International Trade Administration, 2022. Dominican Republic – Country Commercial Guide. https://www.
trade.gov/country-commercial-guides/dominican-republic-market-overview.
249
Competitiveness based on Interview with Viktor Rodriguez from OCTA.
250 Statista, 2022. Fresh fruit in retail - statistics & facts. https://www.statista.com/topics/1458/fresh-fruit-in-
retail/#topicOverview.
251
Logistica, 2018. Disruption in fruit and vegetable Distribution. https://www.fruitlogistica.com/FRUIT-
LOGISTICA/Downloads-Alle-Sprachen/Fruit-Logistica-Trend-Report-2018.pdf.
138
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
252 Banco Central de la República Dominicana, 2022. ¿Cuánto gasta un turista en la República Dominicana?.
https://www.revistamercado.do/turismo/cuanto-gasta-un-turista-en-rd#:~:text=Entre%20abril%20y%20
junio%20de,los%20encantos%20de%20República%20Dominicana.
253
Research and Markets, 2022. Food & Grocery Retail Market Size, Share & Trends Analysis Report by
Product (Food Cupboard, Beverages), by Distribution Channel (Supermarkets & Hypermarkets, Online),
by Region (APAC, Europe), and Segment Forecasts, 2022-2030. https://www.researchandmarkets.com/
reports/4613444/food-and-grocery-retail-market-size-share-and.
254
Agraria.pe, 2021. Consumo mundial de frutas y hortalizas crecerá 4.6% y 3.5% respectivamente en los
próximos 5 años. https://agraria.pe/noticias/consumo-mundial-de-frutas-y-hortalizas-crecera-4-6-y-3-5-
res-26490.
255
Competitiveness based on Interview with Viktor Rodriguez from OCTA.
256 Competitiveness based on Interview with Viktor Rodriguez from OCTA.
257 World Bank, 2022. Dominican Republic Infrastructure Sector Assessment Program (InfraSAP).
258 For definitions and dierences between industrial parks, Special Economic Zones, and Eco-Industrial Parks,
please see Box 3 in the Private Context section of the main CPSD report.
259
The team does not dispose of enough information about these parks, which tend to be less occupied and
less well serviced than the SEZ zones. The team will use the missions and the sector assessment to include
these within the scope of the report and related recommendations.
139
DOMINICAN REPUBLIC COUNTRY PRIVATE SECTOR DIAGNOSTIC
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Washington, D.C. 20433 U.S.A.
CONTACTS
Jade Salhab
David Jose Corcino Paulino
Luiz Felipe Almeida
ifc.org
