Doing Business in the Free Zones of the Dominican Republic

National Free Zones Council of the Dominican Republic

The Free Zones in the Dominican Republic Our Country

Capital Santo Domingo

Official Language Spanish

Area 48,442 Km2

Population 9.9 Million

GDP (millions) US$ 64,053.4

GDP per Capita US$ 6,480.9

Currency Dominican Peso

Time Zone UCT -4

• A Free Zone is: “A geographic area of the country under special customs and tax controls, in which enterprises will be licensed to devote their production of goods or services to foreign markets through the granting of incentives to stimulate their development”.

• The Industrial Free Zones program began its development in 1969, attracting foreign direct investment projects to the country during the last 45 years.

• Today, the Dominican Republic has one of the most dynamic and successful industrial free zone programs in America.

The Free Zones in the Dominican Republic Brief History

The Free Zones in the Dominican Republic Social and Economic Results (2014)

• Jobs: 153,342 + 300,000 indirect jobs

• Industrial Parks: 60

• Exports: US$ 5,242.9 million 55% of DR total exports

• FDI: US$ 3,630 million

• Operating companies: 614 located

in 27 of 32 provinces.

+ 34.7 %

+ 32.6%

+ 12.1%

Growth 2009-2014

+ 25.5%

+ 35.2 %

5

The Free Zones in the Dominican Republic International Positioning of Free Zones Products and Services

1,451 Product lines exported in 2014

136 Countries in 5 continents

National Free Zones Council of the Dominican Republic

The Free Zones in the Dominican Republic International Positioning of Free Zones Products and Services

Why the Free Zones in the Dominican Republic?

Source: Marsh-Maplecroft Political Risk 2014

• 50 years of continued democracy, peace, and institutional development.

• Among developing

countries with lower political risk, according to Marsh-Maplecroft 2014 Report.

Why the Dominican Republic? Political and Economic Stability

GDP (Millions of US$)

Why the Dominican Republic? Political and Economic Stability – GDP and FDI.

Expansion of 213% in 2004-2014 Source: ECLAC

Inward FDI in the Central America and Caribbean Region 2004-2014

-

10.000

20.000

30.000

40.000

50.000

60.000

70.000

First Rate Telecommunications and Internet Services 18 Telecom providers; 9.2 million mobiles telephones; 4 million Internet users.

World class national and international academic centers. More than 5,000 high schools and a considerable number of billingual schools.

Tourism and Gastronomy. On a global basis, Country Brand Index ranked the Dominican Republic 6th in “resorts and lodging options” and 15th in natural beauty.

Entertainment for the Whole Family. Broad diversity of social clubs, sports, culture, and fine arts.

Why Dominican Republic? Living Environment

Flexible Rules of Origin established in Free Trade Agreements (FTA)

Why the Dominican Republic? Favorable Legal Framework and Incentives –Market Access

Preferential Access to 1.01 Billion Consumers

Preferential Market Access

Preferential Markets Population (in millions)

USA (FTA) 313.9

European Union (FTA) 507.9

Caribbean Community (FTA) 16.7

Central America (FTA) 37.9

Switzerland (GSP) 7.8

Norway (GSP) 5.01

Japan (GSP) 127.6

Law 8-90 provides all free zone companies with 100% exemption on the payment of the following national/local taxes:

• Corporate Income Tax;

• Sales Tax;

• Tariff and Import Duties;

•Construction, Loans, and Real State

Property Transfer Tax;

• Export and Re-Export Tax;

• Property, Assets and Patent Tax;

• Local Taxes;

Why the Dominican Republic? Favorable Legal Framework and Incentives– Free Zone Law

Other Free Zone Law benefits include:

•Simplified customs procedures, with a special Customs Deputy Director for Free Zone operations.

•Free Zone Training Program: The National Institute for Technical Training (INFOTEP), provides special funds and an operative structure for assisting firms with training programs, in coordination with units located directly in Free Zone Parks.

Another important legal framework is Law 56-07 declaring textile, apparel, leather and footwear local industries as a national priority

• Labor Force: 4.9 Million

• Unemployment rate: 14.5%

• 47% of the population is under 24 years old.

• “It is estimated by some industry players that approximately 20% of residents have a good understanding of English”. Nearshore Americas 2013

Source: CIA World Factbook

Why the Dominican Republic? Availability of Young Qualified Human Resources

Why the Dominican Republic? Availability of Young Qualified Human Resources

Education First ranks the Dominican Republic 1st in change in the English Proficiency Index (EPI) score, and 2nd overall in Latin America

Average Hourly Wage for Manufacturing in the Free Zones of the Dominican Republic (Data in US Dollars)

Why the Dominican Republic? Competitive Labor Cost

• Wages have been notably stable, evidencing an accumulated growth of 20% in the last 7 years, and a yearly average growth of 3.3%.

• This is especially relevant when compared to other countries like China, where average hourly wage in manufacturing is growing annually above 15%.

• Business friendly unions.

Source: National Free Zones Council, 2015

1,06

1,14

1,11 1,15

1,22 1,28

1,29

0

0,2

0,4

0,6

0,8

1

1,2

1,4

2008 2009 2010 2011 2012 2013 2014

Why the Dominican Republic? Strategic Location and Market Proximity - Regional Hub

• UCT-4; one hour difference with EST (US East Coast), but same Time Zone from March to November.

• The DR receives approximately eighty (80) weekly ships, with direct routes to North and Central America, Europe, The Caribbean, Asia and South America.

•More than sixty (60) daily flights, with strong connectivity to North and Central America.

Approximate flight durations: • Miami: 1:50 hours; • New York: 3:00 hours; • Panama: 2:00 hours; • Frankfurt: 9:00 hours.

Average Transit Time to the US East Coast from Selected Countries (In Days, by Ocean)

35

32

1413

35

38

0

5

10

15

20

25

30

35

40

Dom. Rep. Guatemala China El Salvador Nicaragua Vietnam Indonesia

Global competitiveness Report 2013-2014 ranked the Dominican Republic second in Quality of Ports and Air Transport Infrastructure within the Mexico and Central America Region.

• Eleven (11) ports with excellent facilities and container terminals ready for post panamax ships.

• Nine (9) International Airports. • Modern network of roads integrated by more than 19,000 kilometers.

• 60 Free Zone Industrial Parks offering world class facilities, services and competitive prices.

Why the Dominican Republic? Modern Infrastructure

Transport Infrastructure Map in the Dominican Republic

• The National Free Zones Council of the Dominican Republic (CNZFE) is the government (public-private) regulatory agency in charge of promoting, evaluating, and assisting all free zones in the country, and has done so for over 30 years.

• CNZFE, provides first-level attention to current and potential investors, with a direct link to the Office of the President of the Dominican Republic.

• Proven track record for Inter-agency coordination in all matters affecting free zone investments and operations.

• “The Dominican Republic has institutions that emulate a “Broad-band System”. One example is the National Free Zones Council, which maintains a constant dialogue with operating companies and potential investors, identifying barriers to investment and the requirements of public goods necessary for productivity improvements, while demanding for different government agencies troubleshooting and the provision of identified public inputs” The Center for International Development (CID) at Harvard University.-

Why the Dominican Republic? Government Support at the Highest Level

Business Opportunities for German Companies

Medical and Pharmaceutical

Products

Textiles and Apparel

Electrical Products and Electronic Components

Logistics

Opportunities by sub-sector… Trade and Investments opportunities

Indicative Potential Trade 70 product lines that could represent exports to Germany of approximately US$ 3.7 billion. Main products include:

• Pharmaceutical preparations • Cocoa • Footwear covering ankles • Circuit breakers

Potential Investments 82 product lines currently exported by Germany to the USA facing tariffs up to 18%. Main products include:

• Parts and accessories of optical appliances • Luggage, travel bags • Medical Instruments • Tools (screwdrivers, etc.)

Luisa Fernández Durán, Executive Director

l.fernandez@cnzfe.gob.do

Silvia Cochón, Promotion Manager

s.cochon@cnzfe.gob.do

Yarisol López, Promotion Coordinator

y.lopez@cnzfe.gob.do

Ebell De Castro, Economic Analysis and Competitiveness

e.castro@cnzfe.gob.do

Calle Leopoldo Navarro No. 61, Edificio San Rafael, 5to. Piso

Santo Domingo, República Dominicana

+1 (809) 686-8077