DR: 2010 Investment Climate Statement

UNCLAS SANTO DOMINGO 000124

SIPDIS

E.O. 12958: N/A
TAGS: EINV ECON EFIN ELAB PGOV OPIC KTDB USTR DR
SUBJECT: DR: 2010 Investment Climate Statement

OVERVIEW OF FOREIGN INVESTMENT CLIMATE




1. While the Dominican government welcomes foreign investment,
significant systemic problems can make investing in the country a
risky undertaking. Foreign investors cite a lack of clear,
standardized rules by which to compete and a lack of enforcement of
existing rules. Complaints have included corruption, requests for
bribes, delays in government payments, failure of the Dominican
government or of Dominican private sector entities to honor
contracts, disregard for Dominican court rulings, and non-standard
procedures in Customs valuation of imported goods. In 2009, the
Dominican Republic rose from 102 to 99 among the 180 countries
included in the Corruption Perceptions Index published by the
international non-governmental organization Transparency
International. The Heritage Foundation's Economic Freedom Index
considers it "mostly unfree" in terms of global economic freedom,
ranking it 88 out of 179 countries.




2. Under the Foreign Investment Law (No. 16-95),unlimited foreign
investment is permitted in all sectors, with the exception of the
disposal and storage of toxic, hazardous or radioactive waste not
produced in the country; activities negatively impacting public
health and the environment; and the production of materials and
equipment directly linked to national security unless authorized by
the President. There are no limits on foreign control of firms or
screening of foreign investment in the open sectors. In practice,
improvements in assisting foreign investors wanting to invest in
the Dominican Republic have been made, especially by the Center for
Exports and Investment in the Dominican Republic (CEI-RD). A
partial privatization of state-owned enterprises (SOEs) carried out
in the late 1990s resulted in foreign investors purchasing shares
and obtaining management control of formerly SOEs engaged in
activities such as electricity generation, airport management and
milling sugarcane.




3. In 2008, foreign direct investment flows into the Dominican
Republic totaled USD 2.885 billion according to the Central Bank of
the Dominican Republic.




4. Recent worldwide index rankings for the Dominican Republic
include:



2009 TI Corruption: 99/180

2009 Heritage Economic Freedom: 88/179

2010 World Bank Doing Business: 86/183

FY 09 MCC Government Effectiveness: -.08 (median 0.00)

FY 09 MCC Rule of Law: -.08 (median 0.00)

FY 09 MCC Control of Corruption: -.2 (median 0.00)

FY 09 MCC Fiscal Policy: -2.4 (median -.6)

FY 09 MCC Trade Policy: 73.0 (median 75.6)

FY 09 MCC Regulatory Quality: 0.00 (median 0.00)

FY 09 MCC Business Start Up: .965 (median .962)

FY 09 MCC Land Rights and Access: .703 (median .729)

FY 09 MCC Natural Resource Management: 88.38 (median 84.41)



CONVERSION AND TRANSFER POLICIES




5. The Dominican exchange system is a market with free
convertibility of the peso. The economic agents perform their
transactions of foreign currencies under the conditions freely
negotiated by them.


6. The Central Bank uses an average of the exchange rates reported
by the foreign exchange market and financial intermediaries to set
the rate for its own operations. Importers may obtain foreign
currency directly from commercial banks and exchange agents.




7. The Central Bank participates in this market in pursuit of
monetary policy objectives, buying or selling currencies and
performing any other operation in the market. Some industries,
particularly those operating in free trade zones (zonas francas),
complain that the Dominican authorities carry out operations
through the Central Bank and the government-owned Banco de Reservas
that result in an overvalued peso, penalizing export sectors and
the tourism sector.




8. Resolutions 64-06 and 106-06, issued by the Dominican Civil
Aviation Board, require all airlines serving the Dominican market
to pay nearly all local taxes in U.S. dollars as opposed to local
currency for both entry and exit of each passenger. Some airlines
have considered challenging this requirement in the courts, but the
fines for failure to comply are punitive and compel the airlines to
comply until the courts decide otherwise.



EXPROPRIATION AND COMPENSATION




9. There are approximately 20 outstanding disputes with the
Dominican government concerning unpaid government contracts or
expropriated property and businesses. Property claims make up the
majority of expropriation cases. Most but not all confiscations
have been used for purposes of infrastructure or commercial
development. In some cases, claims have remained unresolved for
many years. Investors and lenders have typically not received
prompt or adequate payment for their losses and payment has been
difficult to obtain even in cases in which a Dominican court has
ordered compensation or the government has recognized a claim. In
one case, the Dominican Supreme Court in 1970 ordered the
government to compensate a U.S. family whose land and businesses
had been expropriated. The Dominican government compensated owners
only for the expropriated land but to date has not offered
compensation for the businesses. In other cases, lengthy delays in
compensation payments have been blamed on errors committed by
government-contracted property assessors, slow processes to correct
land title errors, and other technical procedures.




10. The past four Dominican administrations have expropriated fewer
properties than their predecessors and have generally paid
compensation in those cases. Discussions of the U.S.-Dominican
Trade and Investment Council meetings in October 2002 prompted the
Dominican government to establish procedures under a 1999 law to
issue bonds to settle claims against the Dominican government
dating from before August 16, 1996, including claims for
expropriated property.




11. In 2005, with assistance from the U.S. Agency for International
Development (USAID),the Dominican government identified and
analyzed 248 expropriation cases; most (65.5 percent) were resolved
by paying claimants with bonds or by dismissing the claim.
However, as noted above, a number of U.S. claims against the
Dominican Republic remain.



DISPUTE SETTLEMENT




12. On October 23, 2007, Decree No. 610-07 placed DICOEX - the
Directorate of Foreign Commerce of the Secretariat of State for
Industry and Commerce - in charge of commercial dispute settlement,
including disputes related to the Investment Chapter of CAFTA-DR.
Currently, quite a few U.S. investors, ranging from large firms to
private individuals, have disputes with the Dominican government
and parastatal firms involving payments, expropriations, or
contractual obligations. Both free trade zone companies and

non-free-trade-zone companies have problems with dispute
resolution. U.S. firms indicate that corruption on all levels -
business, government, and judicial - in the Dominican Republic
impedes their access to justice so as to defend their interests.




13. In April 2002, the Dominican Republic associated itself with
the International Center for the Settlement of Investment Disputes
("ICSID," also known as the "Washington Convention"). In August of
the same year the country implemented the New York Convention on
Recognition and Enforcement of Foreign Arbitral Awards (the "New
York Convention"). The New York Convention provides courts a
mechanism with which to enforce international arbitral awards.



PERFORMANCE REQUIREMENTS/INCENTIVES




14. Foreign investors receive no special investment incentives and
no other types of favored treatment, except in the area of
renewable energy (see below). There are no requirements for
investors to export a defined percentage of their production. A
law is currently pending in the Dominican Congress to eliminate the
requirement that free trade zones export at least 80 percent of
their output.




15. Foreign companies are unrestricted in their access to foreign
exchange. There are no requirements that foreign equity be reduced
over time or that technology be transferred according to defined
terms. The government imposes no conditions on foreign investors
concerning location, local ownership, local content, or export
requirements.




16. The Dominican labor code establishes that 80 percent of the
labor force of a foreign or national company, including free trade
zone companies, be composed of Dominican nationals (although the
management or administrative staff of a foreign company is exempt
from this regulation). The Foreign Investment Law (No. 16-95)
provides that contracts licensing patents or trademarks, leases of
machinery and equipment, and contracts for provision of technical
know-how must be registered with the Directorate of Foreign
Investment of the Central Bank.




17. The Renewable Energy Incentives Law (No. 57-07),which entered
into force in June 2008, provides an array of incentives to
business developing renewable energy technologies. This law was
passed as part of the Dominican government's efforts to invigorate
the local production of renewable energy as well as renewable
energy manufactured products. The incentives include a 100 percent
exemption from taxation on imported inputs (equipment and
materials) and a 10-year exemption from all taxation on profits up
to, but not beyond, the year 2020.



RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT




18. The Dominican Constitution guarantees the freedom to own
private property and to establish businesses. The Foreign
Investment Law (No. 16-95) provides foreign investors the same
rights to own property as are guaranteed by the Constitution to
Dominican investors. Public enterprises are not given preference
over private enterprises. An area of concern, however, is the
legitimacy of property titles. In 2006, the Inter-American
Development Bank approved a USD 10 million loan to help the
Dominican Supreme Court modernize its property title registration
process.



PROTECTION OF PROPERTY RIGHTS




19. The Dominican Republic has laws with sanctions adequate to
protect copyrights and has improved the regulatory framework for

patent and trademark protection, but United States industry
representatives continue to cite a lack of enforcement of
intellectual property rights (IPR) as a major concern. The
government committed in a side letter to CAFTA-DR to take measures
to halt television broadcast piracy and agreed to report on its
efforts in this regard in a quarterly report to the Office of the
U.S. Trade Representative (USTR). The Dominican authorities have
delivered these quarterly reports since January 2005. The Embassy
has noted improved coordination in this regard among various
government agencies including the Secretariat of Industry and
Commerce, the Attorney General's Office, the Patent Office and the
Copyright Office. In 2005, the authorities advised cable
television operators of their legal responsibilities regarding
copyright and secured a formal agreement with the operators'
association in August 2005. Since that time authorities have seized
equipment from various operators found to be infringing the laws.
The authorities temporarily closed down several broadcasters found
to be violating the law.




20. To fulfill CAFTA-DR requirements, the Dominican Congress passed
legislation in November 2006 to strengthen the IPR protection
regime by criminalizing end-user piracy and requiring authorities
to seize, forfeit, and destroy counterfeit and pirated goods as
well as the equipment used to produce them. CAFTA-DR mandates both
statutory and actual damages for copyright and trademark
infringement, and requires measures to help ensure that monetary
damages can be awarded even when it is difficult to assign a
monetary value to the infringement.



TRANSPARENCY OF THE REGULATORY SYSTEM




21. In recent years the Dominican government has carried out a
major reform effort aimed at improving the transparency and
effectiveness of laws affecting competition. Nonetheless, efforts
to establish the rule of law in many sectors of the economy have
been impeded or in some cases soundly defeated by special
interests. For example, in 2008, the Government refused to enforce
a court ruling to halt an illegal blockade of a U.S. business by
disgruntled ex-contractors. Many investors, both Dominican and
foreign, consider that influence through political contacts will
predominate over formal systems of regulation.




22. On December 3, 2002, the Financial and Monetary Law (No.
183-02) created a new regulatory regime for the monetary and
financial system. One of its provisions allowed for foreign
ownership of national financial institutions. The agreement
negotiated with the International Monetary Fund (IMF) in 2003 and
2004 required additional regulation and improved supervision of the
banking sector, and authorities have required banks to improve
capital ratios in order to meet international standards.




23. On December 4, 2007, the Competitiveness and Industrial
Innovation Law (No. 392-07) established a framework to promote the
development of the manufacturing sector by streamlining the customs
regime for qualifying companies. Many of these benefits had
previously only been enjoyed by companies within the free trade
zones. The legislation also changed the former Industrial
Promotion Corporation (CFI) into the new Center for Industrial
Development and Competitiveness (Proindustria).



EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT




24. During a period of strong GDP growth and largely successful
economic reform in the 1990s, Dominican authorities failed to
detect years of large-scale fraud and mismanagement at the
privately-owned Banco Intercontinental (Baninter),the country's
third largest bank. The failure of Baninter and two other banks in
2003 cost the government in excess of USD 3 billion, severely
destabilized the country's finances and shook business confidence.
The failures and their consequences brought about a crisis of
devaluation, inflation and economic hardship. Upon taking office
in August 2004, Leonel Fernandez's administration formulated with
the International Monetary Fund a comprehensive program aimed at

addressing the weaknesses in macroeconomic policies and in a wide
range of structural areas. Business confidence gradually returned,
but effects of the 2003-2004 economic crisis linger; however, those
reforms enabled the Dominican banking sector to avoid severe
difficulties during the international financial crisis of 2009.




25. In the wake of the global economic and financial crisis, the
Executive Board of the IMF approved on November 9, 2009, a USD 1.7
billion Standby Agreement (SBA) with the Dominican Republic. The
28-month program seeks to assist the government in pursuing
short-term counter-cyclical polices, strengthen medium-term
sustainability, reduce vulnerabilities, and set the foundation for
eventual recovery. The country had successfully implemented a USD
665 million SBA approved in 2005 that helped the DR recover from
its 2003 banking crisis.




26. The Dominican securities market, the Bolsa de Valores de Santo
Domingo, opened on December 12, 1991, and mostly handles offerings
of commercial paper. In 2009, the Bolsa de Valores handled more
than USD 768 million worth of transactions, with USD 116.5 million
in the primary and USD 651.9 million in the secondary market. It
is supervised by the Superintendency of Securities (SIV),which
approves all public securities offerings.




27. The private sector has access to a variety of credit
instruments. Foreign investors are able to obtain credit on the
local market but tend to prefer less expensive offshore sources.
The Central Bank regularly issues certificates of deposit, using an
auction process to determine interest rates and maturities.



COMPETITION FROM STATE-OWNED ENTERPRISES (SOEs)




28. SOEs in general do not have a significant presence in the
economy, with most functions performed by privately-held firms.
One notable exception is in the energy sector, where private
companies only operate in the electrical generation phase of the
process, with the government handling the transmission and
distribution. Distribution had been previously privatized, but,
due to the serious problems in that sector (including lack of
payment),the government once again took over the distribution
function.



CORPORATE SOCIAL RESPONSIBILITY




29. Although in general there is not an entrenched culture of
corporate social responsibility (CSR) on the part of local firms,
large foreign companies do normally have an active CSR program, as
do a number of the larger local business groups. The majority of
local firms do not follow OECD principles regarding CSR, but the
firms that do are viewed favorably (especially when their CSR
programs are effectively publicized).



POLITICAL VIOLENCE




30. There have been occasional spontaneous outbreaks of protest in
some of the poorer areas of the Dominican Republic over spiraling
electricity costs, rising gas and food prices, corruption, and
lengthy rolling blackouts throughout the country. Occasional labor
protests have been peaceful, but security forces routinely have
used excessive force to disperse protesters.



CORRUPTION




31. The Dominican Republic has a legal framework that includes
laws, regulations and penalties that ought to permit the effective

combating of corruption. However, corruption remains an endemic
problem in the security forces, civilian government and in the
private sector. Corruption and the need for reform efforts are
openly and widely discussed - a 2008 Gallup poll found 82 percent
of Dominicans think the country is corrupt or very corrupt, but the
incidence of people reporting requests for bribes by officials is
about average for countries of the Latin America region. A
respected Dominican non-governmental organization supported by
USAID-sponsored research in 2004 established that, during the
previous 20 years, only one sitting government official had been
convicted of corruption. That individual was released after
serving only six months of the sentence. This study is being
updated and will include information on the economic costs of
corruption. The Prosecutor General's office reports that, of 78
denunciations of corruption it received between January 2008 and
August 2009, eleven (or 14 percent) reached trial during 2008-2009.
The prosecution service noted that the low figure was because most
complaints were "not well founded, sometimes only concern public
rumor and do not have sufficient probative elements." The
judiciary has dealt administratively with judges deemed corrupt,
but no known prosecutions of corrupt judges have taken place.




32. Although in July 2008 the Supreme Court upheld convictions
related to the fraud-based 2003 collapse of the "Baninter" bank,
President Fernandez pardoned, in December 2008, a convicted former
Baninter vice president as well as four persons convicted in the
2004-2005 RENOVE case involving fraud in the handling of government
subsidies for the purchase of public buses. Most members of the
Pardons Commission resigned in protest against the pardons. In
December 2009, the President pardoned another individual convicted
in the RENOVE case.




33. As noted, lack of enforcement is the primary problem. No data
are available to assess whether corruption disproportionately
affects foreign firms, but probably more Dominicans than Americans
must deal with it. At the same time, corruption is widely
recognized as a form of protectionism, inasmuch as it can give an
"insider" an undue advantage over outsiders (either foreign or
domestic). Over 25 percent of Dominicans consider corruption to be
an impediment to development, according to the 2008 Gallup poll.




34. The Dominican Congress ratified the UN Convention against
Corruption on October 26, 2006. The UN Convention has a broader
scope on corruption than do other agreements; it includes
provisions regarding money laundering, obstruction of justice,
private sector corruption, and asset recovery. As for regional
initiatives, the Dominican Republic has signed the Inter-American
Convention against Corruption (IACAC),but there was no reported
progress in implementing the recommendations produced by the
peer-review mechanism established under the IACAC. The Dominican
Republic is not a party to the 1992 Inter-American Convention on
Mutual Assistance in Criminal Matters.




35. The 2009 World Economic Forum's Global Competitiveness Index
rated the Dominican Republic 133 out of 133 as regards "favoritism
in the discharge of public duties," 127 out of 133 as regards
"deviation of government funds," 132 of 133 regarding "squandering
of public expenditures," and 130 of 133 in terms of levels of
confidence in the police. An October 2009 survey by NGO watch-dog
Participacion Ciudadana found that many key government institutions
are not complying with the country's equivalent of a
freedom-of-information law, while media reported that none of the
country's 23 political parties comply with the law as regards their
finances and expenditures.




36. Giving or accepting a bribe is a criminal act. Article 177 of
the Criminal Code provides that: "An official or public employee
from the administrative, municipal, or judicial sphere who, in
exchange for a gift or promise, provides his office for the
commission of an action that, while lawful, is not covered by his
salary, shall be punished by the loss of his civil rights and a
fine of twice the monetary value of the gift, reward, or promise;
in no case, however, may the fine be less than fifty pesos or the
custodial term set by Article 33 of this Code be shorter than six
months, and the imposition of the prison term shall in all cases be
obligatory. These same penalties shall apply to public employees,
officials, and officers who, in exchange for gifts or promises,

fail to perform any due or legal act inherent to their positions.
The same punishments shall apply to any arbiter or expert,
appointed by either the court or the parties at trial, who accepts
offers or promises, or receives gifts or other considerations, in
exchange for giving a decision or opinion that favors one of the
parties." Article 178 of the Criminal Code provides that: "If the
exaction or bribery is associated with a criminal act punishable by
penalties higher than those set out in the previous article, the
harsher penalties shall invariably apply to the guilty." Article
181 of the Criminal Code provides that: "A judge in criminal
proceedings who accepts a bribe and thereby favors or harms the
accused shall be punished by prison with labor and by the fine
established in Article 177." Article 2 of the Bribery in Commerce
and Investments Law (No. 448-06) provides that: "Any public
official or person performing public functions who requests or
accepts, either directly or indirectly, any item of monetary value
as a favor, promise, or benefit, for himself or for another, in
exchange for performing or omitting to perform an action related to
the exercise of his public functions in matters affecting domestic
or international trade or investments shall be considered to have
accepted a bribe and, as such, shall be punished by a term of
prison with labor of between three and ten years and fined an
amount equal to twice the benefits received, requested, or
promised, said fine in no instance amounting to less than fifty
times the minimum wage."




37. Both CAFTA-DR and the UNAC, ratified by the country, mandate
that the country criminalize bribery (offer/request). Article 3 of
the Bribery in Commerce and Investments Law (No. 448-06) provides
that: "Any individual or corporate body that intentionally offers,
promises, or provides, either directly or indirectly, a public
official or person performing public functions in the Dominican
Republic with any item of monetary value or other gain as a favor,
promise, or benefit, for himself or for another person, in exchange
for the commission or omission by that official of any action
related to the performance of his public functions, in matters
affecting domestic or international trade or investments, shall be
considered to have given a domestic bribe."




38. Several government bodies have a role in fighting corruption,
including the Prosecution Service's National Directorate to
Prosecute Administrative Corruption, the legislative branch's Court
of Accounts (a GAO-like entity),and the Central Bank. Another key
institution is the National Ethics and Anti-Corruption Commission,
established by President Fernandez in 2005. However, the
Commission is little known and under-utilized by the general
public.




39. Several NGOs work to combat corruption, especially through
better transparency. These include: the Foundation for
Institutionalization and Justice (FINJUS) and Participacion
Ciudadana.



BILATERAL INVESTMENT AGREEMENTS




40. On September 6, 2005, the Dominican Congress ratified the Free
Trade Agreement with the United States and five Central American
countries (CAFTA-DR). Implementation occurred on March 1, 2007.
The Dominican Republic has bilateral investment treaties with
Chile, Ecuador, France, and Spain; bilateral trade agreements with
several Central American countries (CARICOM); and a partial trade
agreement with Panama. However, these do not provide the level of
protection to investors generally offered by U.S. bilateral
investment treaties. An agreement for the exchange of tax
information between the United States and Dominican Republic has
been in effect since 1989.




41. In 2007, the Dominican government started negotiating bilateral
agreements with Canada and Mexico. The Dominican government also
signed an Economic Partnership Agreement with the European Union as
part of CARICOM in December 2007 that entered into force in 2008.



OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS


42. The Overseas Private Investment Corporation has been active in
the Dominican Republic with both insurance and loan programs and
continues to support private enterprises working in the DR. The
Dominican government is a party to the Multilateral Investment
Guarantee Agency (MIGA) Agreement.



LABOR




43. The Dominican Constitution provides the right of workers to
strike and the right of private sector employers to lock out
workers. The Dominican Labor Code, which became law in June 1992,
is a comprehensive piece of legislation that establishes policies
and procedures for many aspects of employer-employee relationships,
ranging from hours of work and overtime and vacation pay to
severance pay, causes for termination, and union registration. The
Labor Code requires that 80 percent of non-management workers of a
company be Dominican nationals and the remaining percentage be
composed of foreign nationals.




44. The Labor Code establishes a standard work period of 8 hours
per day and 44 hours per week and stipulates that all workers are
entitled to 36 hours of uninterrupted rest each week. The law
provides for premium pay for overtime, which was mandatory at some
firms in the free trade zones. An ample labor supply is available,
although there is a scarcity of skilled workers and technical
supervisors. Some labor shortages exist in professions requiring
lengthy education or technical certification. Most employers have
found the local work force competent, trainable, and cooperative.
Foreign employers are not singled out when labor complaints are
made. Organized labor represented an estimated 8 percent of the
work force. The Labor Code specifies that 20 or more workers in a
company may form a union. Before a union may officially call a
strike, however, it must have the support of an absolute majority
of all company workers, unionized or not; it must have previously
attempted to resolve the conflict through mediation; it must have
provided written notification to the Ministry of Labor of the
intent to strike; and it must have waited 10 days from that
notification before striking. In part due to these stringent
requirements, brief work stoppages are more common than lengthy
strikes.




45. Collective bargaining is legal and may take place in firms in
which a union has gained the support of an absolute majority of the
workers. Few companies have collective bargaining pacts. The
Labor Code stipulates that workers cannot be dismissed because of
trade union membership or union activities; however, in practice,
it appears that some firms have fired workers associated with union
activities. The law does not provide for the reinstatement of
workers dismissed on account of their union activities. The
Dominican labor code establishes a system of labor courts for
dealing with disputes. While cases did make their way through the
labor courts, the process was often long and cases remained pending
for several years. Both workers and companies reported that
mediation facilitated by the Secretariat of Labor was the most
effective method for resolving worker-company disputes.




46. Many of the major manufacturers in the free trade zones have
voluntary codes of conduct that include worker rights protection
clauses generally aligned with the International Labor Organization
(ILO) Declaration on Fundamental Principles and Rights at Work.
Workers are not always aware of such codes or the principles they
contain.



FREE TRADE ZONES/FREE PORTS




47. The Dominican Republic's free trade zones (FTZs) are regulated
by the Promotion of Free Zones Law (No. 8-90),which provides for
100 percent exemption from all taxes, duties, charges and fees
affecting production and export activities in the zones. These
incentives are for 20 years for zones located near the

Dominican-Haitian border and 15 years for those located throughout
the rest of the country. This legislation is managed by the Free
Trade Zone National Council (CNZFE),a joint private
sector/government body with discretionary authority to extend the
time limits on these incentives.




48. Foreign currency flows from the free trade zones are handled
via the free foreign exchange market. Foreign and Dominican firms
are afforded the same investment opportunities both by law and in
practice. The CNZFE's Annual Statistical Report for 2008 noted a
Free Zone Sector with a total of 48 free zone parks (down from 53
the previous year) and 525 operating companies (down from 526). Of
those companies, over 47 percent are from the United States
(including Puerto Rico). Other significant investment was made by
companies registered in South Korea, Spain, and the Netherlands.
In general, firms operating in the free trade zones experience
fewer bureaucratic and legal problems than do firms operating
outside the zones. In 2008, free zone exports totaled USD 4.54
billion, compared to USD 4.52 billion in 2007. The exports from
the FTZs comprise 65 percent of all exports from the DR.




49. The FTZ sector experienced a loss of 2.7 percent of jobs in
2008 over 2007. The expiration of the Multi-Fiber Arrangement, the
progressive increase in local production costs, including
electricity, transportation and even customs costs, and an
overvalued currency are some of the major factors affecting the
free zone companies' profitability. Exporters/investors seeking
further information from the CNZFE may contact:



Consejo Nacional de Zonas Francas

Leopoldo Navarro No. 61

Edif. San Rafael, piso no. 5

Santo Domingo, Dominican Republic

Phone: (809) 686-8077

Fax: (809) 686-8079 and 688-0236

Web-site Address: http://www.cnzfe.gov.do



FOREIGN DIRECT INVESTMENT STATISTICS




50. Foreign direct investment (FDI) in the last few years has been
largely concentrated in trade, tourism, telecommunications, real
estate development, and electricity. The Dominican government has
made a concerted effort to attract new investment, taking advantage
of the new foreign investment law and of the country's natural and
human resources. The decision in the late 1990s to privatize or
"capitalize" ailing state enterprises (electricity, airport
management, and sugar) attracted substantial foreign capital to
these sectors.



2008 FDI data

Source: Preliminary data from the Central Bank of the Dominican
Republic

- - - - - - - - - - - - - - - - - - -

FDI Stocks: USD 11,154.8 million

FDI Stock /GDP: 6.3 percent

FDI Net Flows: USD 2,884.7 million



*Information provided by the Central Bank of the Dominican
Republic. Basis year has been revised from 1946 (used in the last
ICS report) to 2006 (used in this current report).

2008 FDI flows by Source Country (in millions of U.S. dollars)

Source: Preliminary data from the Central Bank of the Dominican
Republic

- - - - - - - - - - - - - - - - - - -

United Kingdom: 600.7

Mexico: 559.6

Canada: 587.1

United States: 497.4

Spain: 190.0

Chile: 53.7

Switzerland: 43.5

Italy: 4.8

France: -2.3

Holland: -16.9

Grand Cayman: -48.2

Others: 415.3

- - - - - - - - - - - - - - - - - - -

Total: 2,884.7





2008 FDI flows by Sector (in millions of U.S. dollars)

Source: Preliminary data from the Central Bank of the Dominican
Republic

- - - - - - - - - - - - - - - - - - -

Trade: 703.6

Real Estate: 656.0

Transportation: 350

Mining: 299.6

Telecommunications: 283.1

Finance: 237.3

Tourism: 236.9

Free Trade Zones: 66.5

Electricity: 51.7

- - - - - - - - - - - - - - - - -

Total: 2,884
Lambert