A new report out by the World Bank suggests a series of policies to strengthen free zones in the Dominican Republic as a vehicle for sustainable and inclusive economic growth, and their use to attract direct foreign investment and encourage the creation of better paying and higher qualified jobs.
“The Dominican Republic is one of the pioneers in the use of free zones globally. This diagnosis identifies three main challenges for a more competitive and inclusive sector: the impact of the productive transformation of free zones on job creation; the degree of attraction to competitive international suppliers, and the level of productive chain with domestic companies,” stated Cecile Fruman, director of the Global Practice of Trade and Competitiveness for the World Bank.
The report of “Free Zones in the Dominican Republic: policy considerations for a more competitive and inclusive sector” underscores the fact that the country´s free zones currently generate 140,000 direct jobs, mostly unskilled labor. Therefore, given the growth of more sophisticated industries that demand more highly qualified labor, it must prioritize the development of assistance programs for labor adjustment, and improve workers´ skills, particularly those of women.
“Free Zones in the Dominican Republic have been and continue to be an engine of development for the country. The consolidation of this model to support inclusive growth depends crucially on the facilities of knowledge and technology transmission between free zone companies and the rest of the economy,” says Alessandro Legrottaglie, the World Bank representative in the country. “This report compliments the Policy Notes published by the World Bank Group in support of the Government´s efforts to achieve sustained and more inclusive growth through the expansion of economic and social opportunities for all Dominicans.”
The report highlights the fact that starting in 2009 there has been a certain recuperation in activity in the zones. Nevertheless, during the last decade a growing depending on imported goods has been observed; simultaneously there has been a surge in more sophisticated manufacturing processes as a result of more complex value chains, increasing the number of production stages generated in the country. The creation and potentialization of productive chains between local companies and the free zones is one of today´s priority topics.
“Competitiveness is a priority for the country. The IFC considers Pymes to be fundamental for development, as they are the main generators of jobs and have great growth potential. It´s important to improve their capacity in order to integrate them into the Free Zones´ production chains, encouraging competitiveness and the development of the local economy,” says Guillermo Villanueva, IFC head in this country.
Since 2015 the country has been advancing through the implementation of pilot programs to increase productive chains. At the same time, an agreement has been established with 6 public and private institutions that will work on designing policies to connect local companies with free zone companies. These efforts are headed in the right direction, and must continue and should be strengthened. In the medium term, it´s advisable to install a rigorous program to evaluate the impact of productive chain programs.