Dominican Republic
Executive Summary
The Dominican Republic is an upper middle-income country and the second largest economy in the Caribbean. In 2018, the Dominican GDP grew an estimated 7 percent, the highest growth rate in the Western Hemisphere. Foreign direct investment (FDI) plays a prominent role in the Dominican economy. U.S. FDI (stock) was USD 2.1 billion in 2017, an increase from USD 1.2 billion in 2016. Total FDI flows (inward) declined nearly 30 percent in 2018, according to the Central Bank. The tourism, real estate, telecommunications, free trade zones, mining, and financing sectors are the largest FDI recipients. Historically, the United States has been the largest investor, followed by Canada, Brazil, and Spain.
The Central America Free Trade Agreement-Dominican Republic (CAFTA-DR) increased bilateral trade between the United States and the Dominican Republic from USD 9.9 billion in 2006 to USD 14.3 billion in 2018. Observers credit the agreement with increasing competition, improving the rule of law, and expanding access to quality products in the Dominican Republic. CAFTA-DR includes protections for foreign investors, including mechanisms for dispute resolution.
Despite a relatively stable macroeconomic situation, U.S. investors have reported to continuously face numerous systemic problems in the Dominican Republic. Foreign investors 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. Businesses have noted that weak land tenure laws and government expropriations without due compensation continue to be a problem. The public perceives administrative and judicial decision-making at times as inconsistent, nontransparent, and overly time-consuming. Dominican authorities have carried out some efforts aimed at improving fiscal transparency. Nevertheless, corruption and poor implementation of existing laws are widely discussed as key investor grievances.
The Dominican government in 2017 was the subject of a large corruption scandal, sparking public protests and calls for institutional change. U.S. companies say the government’s slow response to this scandal has contributed to a culture of perceived impunity for corrupt public officials. 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.
The investment climate in the coming years will largely depend on whether the government demonstrates the political will to implement reforms necessary to promote competitiveness and transparency, rein in expanding public debt, and bring corrupt public officials to justice.
Table 1: Key Metrics and Rankings
| Measure | Year | Index/Rank | Website Address |
| TI Corruption Perceptions Index | 2018 | 129 of 180 | http://www.transparency.org/research/cpi/overview |
| World Bank’s Doing Business Report | 2019 | 102 of 190 | http://www.doingbusiness.org/en/rankings |
| Global Innovation Index | 2018 | 87 of 126 | https://www.globalinnovationindex.org/analysis-indicator |
| U.S. FDI in partner country ($M USD, stock positions) | 2017 | $2.1 billion | http://www.bea.gov/international/factsheet/ |
| World Bank GNI per capita | 2018 | $6,630 | http://data.worldbank.org/indicator/NY.GNP.PCAP.CD |
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Dominican government promotes inward FDI and has established formal programs to attract it, including the 2017 launch of the “ProDominicana” program. The legal framework supports foreign investment. Article 221 of the Constitution declares that foreign investment shall receive the same treatment as domestic investment. Foreign Investment Law (No. 16-95) states that unlimited foreign investment is permitted in all sectors, with a few exceptions for hazardous materials or materials linked to national security. The Dominican Republic provides tax incentives to investment in tourism, renewable energy, film production, Haiti-Dominican Republic border development, and the industrial sector. The Dominican Republic is also a signatory of CAFTA-DR, which mandates non-discriminatory treatment, free transferability of funds, protection against expropriation, and procedures for the resolution of investment disputes.
The Export and Investment Center of the Dominican Republic (CEI-RD) offers assistance for prospective foreign investors, including assistance with business registration and identification of investment opportunities. The National Council of Free Trade Zones for Export (CNZFE) offers assistance to foreign companies looking to invest in the free trade zones.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no general (statutory, de facto, or otherwise) limits on foreign ownership or control. According to Law No. 98-03 and Regulation 214-04, an interested foreign investor must file an application form at the offices of CEI-RD within 180 calendar days from the date on which the foreign investment took place. CEI-RD will then evaluate the application and issue the corresponding Certificate of Registration within 15 working days.
In order to set up a business in a free trade zone, a formal request must be made to the CNZFE, the entity responsible for issuing the operating licenses needed to a free zone company or operator. CNZFE assesses the application and determines its feasibility. For more information on the procedure to apply for an operating license, visit the website of the CNZFE at http://www.cnzfe.gov.do .
The Dominican Republic does not maintain a formalized investment screening and approval mechanism for inbound foreign investment.
Other Investment Policy Reviews
The Organization for Economic Cooperation and Development (OECD) has not conducted an investment policy review of the Dominican Republic. The United Nations Conference on Trade and Development (UNCTAD) published an investment policy review in 2009. The World Trade Organization (WTO) published a trade policy review in 2015.
- UNCTAD – https://unctad.org/en/pages/PublicationArchive.aspx?publicationid=6343
- WTO – https://www.wto.org/english/tratop_e/tpr_e/s319_e.pdf
Business Facilitation
According to the World Bank’s 2018 Doing Business report, starting a limited liability company (Sociedad de responsibilidad limitada or SRL) in the Dominican Republic is a seven-step process, which requires 16.5 days. SRL registration steps include (1) verifying the availability of the company name with the National Office of Industrial Property (ONAPI); (2) purchasing the company name with ONAPI; (3) paying the incorporation tax with the National Internal Revenue Agency (DGII); (4) registering the company with the Chamber of Commerce and obtaining a tax identification number (RNC); (5) filing for the national taxpayer registry and applying for fiscal receipts at DGII; (6) registering local employees with the Ministry of Labor; and (7) registering employees at the Social Security Office.
The Dominican Republic has a single-window registration website for SRL registration (https://www.formalizate.gob.do/ ) that offers a one-stop shop for registration needs. Foreign companies may use the registration website. However, this electronic method of registration is not widely used in practice and consultation with a local lawyer is advisable for company registrations.
The Ministry of Industry and Commerce (MIC) leads the Dominican Republic’s assistance and registration program for micro, small, and medium-sized enterprises (PYMES). The PYMES program, a partnership between the MIC and the National Competitiveness Council, offers technical assistance to majority Dominican-owned micro, small, and medium companies. According to the Law no. 187-17, micro enterprises are those with 10 employees or less, the small enterprises are defined as those with 11 to 50 employees, and medium enterprises employ 51 to 150 employees.
Outward Investment
There are no legal or government restrictions on domestic investment abroad, although outbound foreign investment is significantly lower than inbound investment. The largest recipient of Dominican outward investment is the United States.
9. Corruption
The Dominican Republic has a legal framework that includes laws, regulations and criminal penalties to combat corruption. Foreign investors, however, indicate that corruption and official impunity are endemic in the security forces, government, and private sector. Many companies complain of the often ineffectiveness in enforcing existing laws. Some report that corruption and the need for reform are an openly and widely discussed public grievance. The 2018 Transparency International Corruption Perception Index ranked the Dominican Republic 129th out of 180 countries assessed. The World Economic Forum’s 2018 Global Competitiveness report ranked the Dominican Republic as 113 of 140 countries for incidence of corruption. U.S. businesses operating in the Dominican Republic often need to take extensive measures to ensure compliance with the Foreign Corrupt Practices Act.
In December 2016, high-level public officials in the Dominican Republic were among those implicated in the far-reaching corruption scandal involving Brazilian construction giant Odebrecht. In a plea agreement with the United States Department of Justice, Odebrecht admitted to paying more than USD 92 million in kickbacks to Dominican officials to secure public works contracts. U.S. companies say the government’s slow response to this scandal contributes to a culture of perceived impunity for high-level government officials, which fuels widespread acceptance and tolerance of corruption at all levels.
Civil society is engaged in anti-corruption campaigns. Several non-governmental organizations are particularly active in transparency and anti-corruption, notably the Foundation for Institutionalization and Justice (FINJUS), Citizen Participation (Participación Ciudadana), and the Dominican Alliance Against Corruption (ADOCCO).
UN Anticorruption Convention, OECD Convention on Combatting Bribery
The Dominican Republic signed and ratified the UN Anticorruption Convention. The Dominican Republic is not a party to the OECD Convention on Combating Bribery.
Resources to Report Corruption
Contact for government agency responsible for combating corruption:
Procuraduría Especializada contra la Corrupción Administrativa (PEPCA)
Calle Hipólito Herrera Billini esq. Calle Juan B. Pérez
Centro de los Heroes, Santo Domingo, República Dominicana
Telephone: (809) 533-3522
Fax: (809) 533-4098
Email: info@pepca.pgr.gob.do
Government service for filing complaints and denunciations:
Linea 311
Phone: 311 (from inside the country)
Website: http://www.311.gob.do/
Contact for “watchdog” organization that monitors corruption:
Participación Ciudadana
Phone: 809 685 6200
Fax: 809 685 6631
Email: info@pciudadana.org
11. Labor Policies and Practices
An ample labor supply is available, although there is a scarcity of skilled workers and technical supervisors. Some labor shortages exist in professions requiring lengthy education or technical certification. According to 2016 World Bank data, the Dominican labor force consists of approximately 5 million workers. The labor force participation rate is 67 percent; 70 percent of the labor force works in services, 18 percent in industry, and 13 percent in agriculture. The labor force is divided roughly 50-50 between the formal and informal sectors of the economy. In 2018, unemployment and underemployment was approximately 16 percent. A 2017 survey by the National Statistics Office and UN Population Fund found that of the 334,092 Haitians age 10 or older living in the country, 67 percent were working in the formal and informal sectors of the economy.
The Dominican Labor Code establishes policies and procedures for many aspects of employer-employee relationships, ranging from hours of work and overtime and vacation pay to severance pay, causes for termination, and union registration. The code applies equally to migrant workers, however, many irregular Haitian laborers and Dominicans of Haitian descent working in the construction and agricultural industries do not exercise their rights due to fear of being fired or deported. The law requires that at least 80 percent of non-management workers of a company be Dominican nationals. Exemptions and waivers are available and regularly granted. The law provides for severance payments, which are due upon layoffs or firing without just cause. The amount due is prorated based on length of employment.
Although the Labor code provides for freedom to form unions and bargain collectively, it places several restrictions on these rights, which the International Labor Organization (ILO) considers excessive. For example, it restricts trade union rights by requiring unions to represent 51 percent of the workers in an enterprise to bargain collectively. In addition, the law prohibits strikes until mandatory mediation requirements have been met. Formal requirements for a strike to be legal also include the support of an absolute majority of all company workers for the strike, written notification to the Ministry of Labor, and a 10-day waiting period following notification before proceeding with the strike. Government workers and essential public service personnel may not strike.
The law prohibits dismissal of employees for trade union membership or union activities. In practice, however, some report that the law is inconsistently enforced. The majority of companies resist collective negotiating practices and union activities. Companies reportedly fire workers for union activity and blacklist trade unionists, among other anti-union practices. Workers frequently have to sign documents pledging to abstain from participating in union activities. Companies also create and support company-backed unions. Formal strikes occur but are not common.
The law establishes a system of labor courts for dealing with disputes. The process is often long, with cases pending for several years. One exception is workplace injury cases, which typically conclude quickly – and often in the worker’s favor. Both workers and companies report that mediation facilitated by the Ministry of Labor was the most rapid and effective method for resolving worker-company disputes.
Many of the major manufacturers in free trade zones have voluntary codes of conduct that include worker rights protection clauses generally aligned with the ILO Declaration on Fundamental Principles and Rights at Work; however, workers are not always aware of such codes or the principles they contain. The Ministry of Labor monitors labor abuses, health, and safety standards in all worksites where an employer-employee relationship exists. Labor inspectors can request remediation for violations, and if remediation is not undertaken, can refer offending employers to the public prosecutor for sanctions.