World Bank tells DR to keep free zones
A new World Bank report suggests the adoption of a series of government policies designed to strengthen free trade zones in the Dominican Republic as a path toward sustainable and inclusive economic growth, and as an effective means to attract direct foreign investment and generate better-qualified and better-paid jobs.
The World Bank has released the November 2016 special report on present and future perspectives in the Dominican Republic with recommendations for enhancing the ability of these Special Economic Zones (SEZs) to support sustainable and inclusive economic growth in the Dominican Republic. Among the recommendations, is the promotion of domestic linkages between the tax free export industries and national industries.
“The Dominican Republic is one of the global pioneers in the use of free-trade zones. This report identifies the three main challenges on the path to a more competitive and inclusive sector: the impact of the productive transformation of free-trade-zone in job creation; the level of attraction for competitive international providers; and the level of linkages with domestic companies,” said Cecile Fruman, Director of the World Bank’s Global Trade and Competitiveness Practice.
The report “Free-Trade Zones in the Dominican Republic: Policy Considerations for a More Competitive and Inclusive Sector” underscores that, currently, free-trade zones generate 140 thousand direct jobs, most of them low-skilled ones. Because of this, and in view of the growth of more sophisticated industries requiring a more skilled workforce, priority should be placed on the development of support programs for labor adjustment, as well as improving workers’ capacity, with a particular focus on women.
“Free-Trade Zones in the Dominican Republic have been and continue to act as growth engines for the country. To support inclusive growth the consolidation of this model depends essentially on facilitating the transfer of knowledge and technology between free-trade zones companies and the rest of the economy,” said Alessandro Legrottaglie, World Bank representative in the country. “This report complements the Policy Notes published by the World Bank Group in supporting government efforts to achieve a sustainable and more inclusive growth by expanding economic and social opportunities for all Dominicans.”
The report highlights that starting in 2009, a modest recovery in activities has been observed in these zones. However, in the last decade a growing dependency on imported inputs can be seen. Simultaneously, the resurgence of more sophisticated manufacturing processes has resulted in more complex value chains, increasing the amount of production stages present in the country. Currently, the creation and optimization of backward linkages among local companies present in free-trade zones is one of the priority issues.
“Competitiveness is a priority for the country. The IFC believes that SMEs are key for development, as they are the main generator of jobs and a great potential for growth. It is important to improve their capacity in order to incorporate them into free trade zone production chains, therefore boosting competitiveness and the development of the local economy,” said Guillermo Villanueva, IFC chief in the country.
The country has moved forward through the implementation of pilot programs aimed at increasing productive linkages since 2015. At the same time, an agreement has been established with six public and private institutions that will work on designing policies to connect local companies with the ones located in free-trade zones. These efforts are on the right track and must be continued and strengthened. In the medium term, a rigorous impact evaluation of backward linkages programs should be implemented.
Category: DR News |