Dominican Republic guide 2016: Foreign direct investment

Rob Dwyer
Published on:

Drawing in the region’s FDI flows.

Foreign direct investment is on the rise in the Dominican Republic, while ambitious cross-border partnerships with Haiti provide further cause for optimism.

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Attracting inward investment to the Dominican Republic is crucial if president Danilo Medina is to fulfil his objectives for economic growth, job creation and the expansion of the country’s middle class.

Jean Alain Rodriguez is executive director of the Centre for Export and Investment of the Dominican Republic (CEI-RD). The organisation has a broad remit and it is one that Rodriguez has made even wider. He argues that the key to attracting foreign capital to the country is to cut through red tape and bureaucratic challenges.

"We offer a one-stop-shop for foreign companies," he says. "We work with foreign companies to help them in all aspects of establishing operations in the Dominican Republic, from locating land to identifying potential partners and suppliers for their business. We help with permits and regulators. We act as their day-to-day contact and liaise internally within government, between departments, so that instead of companies having to deal with 12 to 15 different ministries they simply work with us."

Rodriguez says the approach is paying off. FDI has increased by 8.3% since 2012 – during a time of volatility in emerging markets in general and the region specifically. The country now attracts 37% of all FDI in the Caribbean and that has driven recent GDP growth rates of around 7%.

"We have improved the business climate of the country by focusing on achieving a simpler, more efficient and secure process and at the same time guaranteeing high levels of transparency and confidence for investors," says Rodriguez.

As well as logistical support in establishing operations, the government also provides a range of tax incentives to attract inward investment. Manufacturing is tax-free in designated National Free Zones and this policy has attracted world-class brands to the country. There are also tax incentives for targeted industries (including textiles, tourism, film and renewable energy), as well as incentives for foreign nationals accompanying their businesses and residing in the country.

Jean Alain Rodriguez
Jean Alain Rodriguez,  
secretary of state,  
executive director of CEI - RD

However, Rodriguez says one of the biggest draws is the geographical location of the country. It is perfectly located for near-shoring operations to the US. Internet retail has made the speed of shipment of goods more important and the Dominican Republic is two days from the US east coast for freight and eight days to Europe. The development of the soon-to-be-enlarged Panama Canal is also a positive.

The growth in FDI has been distributed throughout the economy – 63% of the 614 companies registered in the free zones are foreign companies. There have also been some high-profile, large investments. In ports, DP World has invested in a cargo terminal in Punta Caucedo, while Carnival invested $85 million in a passenger terminal that opened last year. The leisure industry has seen the Hard Rock Hotel open its first Caribbean resort in Punta Cana – the success of which has led the parent company RCD to plan another hotel in Santo Domingo. In 2014, JW Marriott also opened its first Caribbean hotel. Barrick Gold Corporation opened a mine that now generates significant government revenues. Investments by Altice and America Movil in the telecommunications sector show that the economy can also attract the world’s leading technology companies.

The Dominican Republic is also creating a call centre industry. Teleperformance established operations on the island in 2012 and today employs 1,200 people in Santo Domingo and has plans to create 750 jobs in La Romana. 

Not all the investment facilitated by the CEI-RD is foreign. The organization has worked with AES Dominicana to develop a natural gas energy plant. The island relies on oil imports for energy generation and the cost of energy has worked against the country in terms of competitive advantage. However, with a natural gas and two coal-powered power stations due to come online producing a combined 720 megawatts, as well as initiatives to improve transmission, energy costs are set to fall. Rodriguez says the shift into heavier manufacturing is already taking place: "We are starting to be competitive in energy costs," he says. "Walmart recently located a large plastic fusion plant in the Las Americas Free Zone because energy prices are falling. If they keep going down we expect to see automotive industries, not just parts, but the whole process. We want to produce and assemble."