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Dominican Republic

Executive Summary

Foreign direct investment (FDI) plays an important role for the Dominican economy, and the Dominican Republic is one of the main recipients of FDI in the Caribbean and Central America. The government actively courts FDI with generous tax exemptions and other incentives to attract businesses to the country. Historically, the tourism, real estate, telecommunications, free trade zones, mining, and financing sectors are the largest FDI recipients. In January 2020, the government announced a special incentive plan to promote high-quality investment in tourism and infrastructure in the southwest region and, in February 2020, it passed a Public Private Partnership law to catalyze private sector-led economic growth.

Besides financial incentives, the country’s membership in the Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) is one of the greatest advantages for foreign investors. Observers credit the agreement with increasing competition, strengthening rule of law, and expanding access to quality products in the Dominican Republic. The United States remains the single largest investor in the Dominican Republic. CAFTA-DR includes protections for member state foreign investors, including mechanisms for dispute resolution.

Despite the negative macroeconomic impacts of the pandemic, international indicators of the Dominican Republic’s competitiveness and transparency held steady. Foreign investors report numerous systemic problems in the Dominican Republic and cite a lack of clear, standardized rules by which to compete and a lack of enforcement of existing rules. Complaints include allegations of widespread corruption; requests for bribes; delays in government payments; weak intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial and administrative processes, and non-standard procedures in customs valuation and classification of imports. Weak land tenure laws and government expropriations without due compensation continue to be a problem. The public perceives administrative and judicial decision-making to be inconsistent, opaque, and overly time-consuming. Corruption and poor implementation of existing laws are widely discussed as key investor grievances.

U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act. Many U.S. firms and investors have expressed concerns that corruption in the government, including in the judiciary, continues to constrain successful investment in the Dominican Republic.

In August 2020, President Luis Abinader became the 54th President of the Dominican Republic, presiding over the first change in power in 16 years. Taking office with bold promises to rein in corruption, the government quickly arrested a slew of high-level officials from the previous administration implicated in corruption—people who under prior governments would have been considered untouchable. It remains to be seen whether Abinader will deliver on more complex commitments, such as institutional reforms to advance transparency or long-delayed electricity sector reform.

The Dominican Republic, an upper middle-income country, contracted by 6.7 percent in 2020 and concluded the year with a 7.7 percent deficit thanks to the pandemic. The IMF and World Bank project growth for 2021 at 4.0-4.8 percent.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 137 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 115 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 90 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $2,604 https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=207&UUID=8544e377-fb53-42fe-a16e-01c425113446 
World Bank GNI per capita 2019 $8,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

Russia

Executive Summary

The Russian Federation remained in 28th place out of 190 economies in the World Bank’s Doing Business 2020 Report, reflecting modest incremental improvements in the regulatory environment in prior years. The World Bank paused the publication of the Doing Business 2021 report to assess a number of irregularities that have been reported, therefore no updates since last report are available. However, fundamental structural problems in Russia’s governance of the economy continue to stifle foreign direct investment throughout Russia. In particular, Russia’s judicial system remains heavily biased in favor of the state, leaving investors with little recourse in legal disputes with the government. Despite on-going anticorruption efforts, high levels of corruption among government officials compound this risk.

Throughout 2020, a prominent U.S. investor, who was arrested in February 2019 over a commercial dispute, remained under modified house arrest.  Moreover, Russia’s import substitution program gives local producers advantages over foreign competitors that do not meet localization requirements. Finally, Russia’s actions since 2014 have resulted in EU and U.S. sanctions – restricting business activities and increasing costs.

U.S. investors must ensure full compliance with U.S. sanctions, including sanctions against Russia in response to its invasion of Ukraine, election interference, other malicious cyber activities, human rights abuses, use of chemical weapons, weapons proliferation, illicit trade with North Korea, support to Syria and Venezuela, and other malign activities. Information on the U.S. sanctions program is available at the U.S. Treasury’s website: https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx . U.S. investors can utilize the “Consolidated Screening List” search tool to check sanctions and control lists from the Departments of Treasury, State, and Commerce: https://www.export.gov/csl-search .

Russia’s Strategic Sectors Law (SSL) established an approval process for foreign investments resulting in a controlling stake in one of Russia’s 46 “strategic sectors.” The law applies to foreign states, international organizations, and their subsidiaries, as well as to “non-disclosing investors” (i.e., investors not disclosing information about beneficiaries, beneficial owners, and controlling persons).

Since 2015, the Russian government has had an incentive program for foreign investors called Special Investment Contracts (SPICs). These contracts, managed by the Ministry of Industry and Trade, allow foreign companies to participate in Russia’s import substitution programs by providing access to certain subsidies to foreign producers who establish local production. In August 2019, the Russian government introduced “SPIC-2.0,” which incentivizes long-term private investment in high-technology projects and technology transfer in manufacturing.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 129 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019* 28 of 190 http://www.doingbusiness.org/en/rankings * last year’s ranking due to the WB putting a pause on issuing the 2021 DB Report
Global Innovation Index 2020 47 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $14,439 https://www.bea.gov/international/di1usdbal 
World Bank GNI per capita 2019 $11,260 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 
Investment Climate Statements
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