Competitiveness in DR
Contrasts and Paradoxes in the Local Economy

Dominican Republic economy is one of the few cases of success economic performance in Latin America and the Caribbean towards the end of the 20th century, according to a study titled "Harvard Initiative for the Dominican Republic."

During the introduction of the author of the study, Dr. Joaquín Vial, who on Tuesday, the 11th gave a lecture at the invitation of the Global Foundation for Democracy and Development (FUNGLODE), the institution's president, Mr. Leonel Fernández, stressed the importance of the portion of the analysis titled "how competitive the Dominican Republic is."

Fernández explained that this work came to be as a result of an agreement between FUNGLODE and the Center for the International Development at Harvard University, back then headed by the economist and professor, Jeffrey Sachs.

The study's preliminary draft made by Vial, who used to work for CID and at present, is a member of Columbia's Earth Institution in New York pointed out that if the second half of the last century is taken into account, the Dominican Republic shows an average 2.3%, a considerable figure in such a long time horizon.

In fact, the document adds, among 128 countries, Dominican Republic ranks 38 in growth, being overpassed marginally in the region only by Brazil and Trinidad and Tobago.

Even more interesting is the fact that a more rapid growth tends to be more focused towards the end of the period, which evidently constitutes a basis to be optimistic about the future of the nation.

The study indicates that growth has been driven particularly by free zone exports, and the Dominican Republic economy is one of the most protected of the hemisphere.

Contrasts and Paradoxes

Tourism and the industry show great dynamism for the period; however the greater volume of jobs concentrates around agriculture.

Free zones and tax incentives to selective sectors are plentiful; however, the state apparatus evidences deficiencies in the delivery of certain public services and goods, which in other equally developed countries are normal.

Capital flows easily towards new investments in more dynamic sectors, while the local financial system has been severely repressed.

Vial found that precisely those elements and paradoxes are that the ones that call for the review of the sources of the Dominican competitiveness to make a judgment on the challenges, and to keep and improve the nation's economic performance in the new century.

In its findings, the study shows that Dominican Republic has well profited from its natural resources, proximity to the United States, climate, natural surroundings, and landscapes to build one of the most vigorous economies in the region.

The country, according to Vial, chose a selective international way of insertion, by promoting the manufacturing investment in free zones, and keeping the rest of the economy under a protective system face to outside competition.

Market Imbalances

Work continues ensuring that there are few doubts with respect to the success of such strategy in the past; however, the assessment shows that strong imbalances have originated in various fronts along the way.

On one hand, a great gap exists between the development of the technological and productive capacity among sectors integrated into the international economy and those isolated from it as a result of competitiveness, a segregation that also extends to the area of access and the cost of financing.

Such differences are a serious barrier that prevents free zones and tourism from remaining competitive, while establishing links with the rest of the Dominican economy.

Findings also show a growing gap between income levels and the sophistication of the economic system, on one hand, and the operation of institutions and regulating frameworks of the economic activities, on the other.

The same is perceived virtually in all institutional areas relevant to the future economic development.

Of all aspects comprised in the study, this seems to be a greater hurdle to the continuance of the Dominican developmental process. It is particularly troublesome given than key sectors such as free zones and the textile industry face very important future adjustments deriving from changes in the international legal and economic rearrangement, and the agreements of the Ronda de Uruguay, which full effectiveness has been postponed, will at a certain point begin to be applicable.

"Our diagnosis", said Dr. Vial, "also identifies severe deficiencies in the field of the capacity to capture and absorb new knowledge and technology, which could turn into a hurdle in the future to diversify the economy and generate competitive advantages consistent with better salaries and life quality overall.

Nevertheless, in the short run, coverage deficiencies and the quality of the educational system are the most concerning issues, which are already having an effect on the capacity of current Dominican enterprises.

In spite of all of the above described difficulties, the Dominican Republic possesses big reserves to face such challenges: its excellent economic performance over the last decade has given it access to international credit markets, macroeconomic imbalances are nonexistent, and a streamlined and dynamic business sector, which knows how to successfully compete in demanding international markets, has been built.

Write your comments and send them to: frederic@funglode.org

SANTO DOMINGO, DOMINICAN REPUBLIC, FEBRUARY 12, 2003.