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.
|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|