2000 was good year for free zones: The director of the National Council of Export Free Zones, Janette Dominguez, said that 2000 was a good year for the free zone sector in the DR. She said that last year while the number of free zone industries in operation declined 0.6%, several of the 481 businesses in operation announced major expansions which resulted in more jobs. She said the free zones generated 14.7% more in hard currency for the Dominican economy, up from US$887.3 million in 1999 to US$1,018 million in 2000. Of the free zone operations, 52% are textile operations, 12% services, 6% tobacco plants and 4% footwear companies. In 2000, eight new free zone parks were approved, calling for a RD$331 million investment and the creation of 38,000 new jobs.
As of year's end 2000, there were 46 industrial free zone parks in operation. Several others are under construction in 1998. Some 490 businesses operated in free zones as of December 2000, providing employment for over 194,000 people. Free zone exports to the United States surpassed US$4.7 billion in 2000, up from US$4,331 billion in 1999. It is important to note that free zone exports make up 80% of total Dominican exports. Free zone industries manufacture apparel, footwear, electronics, sporting goods, pharmaceuticals and furniture, among other goods. Others provide data entry and telemarketing services.
The production is either subcontracted by foreign companies while world renown brands have established their own operations here primarily to take advantage of the proximity to the United States.
Of the free zone operations, 52% are textile operations, 12% services, 6% tobacco plants and 4% footwear companies. In 2000, eight new free zone parks were approved, calling for a RD$331 million investment and the creation of 38,000 new jobs.
Apparel continues to lead in total production of Dominican industrial free zones. The Dominican Republic was the seventh largest supplier of textiles to the United States after Mexico, Hong Kong,Taiwan, Indonesia and South Korea in 2001 at the end of 2001. The DR seeks to compete on total quality, speed, flexibility price. The DR is a beneficiary of the textile parity bill, as of October 2000. The bill enables the quota-free export of goods assembled using US materials. The DR exported more than US$1.9 billion in apparel to the US in 2001.
After 30 years experience in the apparel industry, Dominican free zones are focusing on more elaborate garments and industry verticalization taking advantage of a skilled work force. Furthermore, every day more Dominican free zones are offering clients complete full-package service, not just assembly. Companies are providing the design, fabric, automated cutting, embroidery, knitting, dyeing, finishing and laundering of the product, and all types of supplies such as packing boxes to labels or sewing thread. The DR has lost millions in contracts requiring non-skilled apparel workers, given the lower cost of the labor force in Honduras and Nicaragua. The DR today has the second highest labor costs of apparel manufacturing centers in Central America and the Caribbean, only surpassed by Costa Rica.
The apparel free zone sector was expected to grow 30% in 2001, adding another 30,000 jobs in the first year of the textile parity bill, but the slowdown of the US economy, worsened by the 11 September events, has led forecasters to revise downwards the predictions.
While apparel industry continues strong, the free industry's survival and growth is dependent on the continued diversification of its industries, a trend that is now apparent in the free zone sector, especially in the companies that are now being installed. In the past 80% of the companies were in the textile sector. This is changing.
Today assembly operations have been increasingly starting up to produce cigars, electronic components, medical instruments, pharmaceuticals, electrical products, food products, plastics, jewelry, luggage, metal mechanics and handicrafts. The free zone services sector is also growing with telemarketing, web-related services, warehousing services increasing. Furthermore, several companies that have been operating in Dominican free zones are expanding their operations, which shows the trust of the investors in the investment, social and political climate of the nation.
The Dominican Republic will export more than 350 million cigars to Europe and the US this year. This is a hefty increase over last year’s export total of 200 million cigars. Most of the leading exporting companies are located in free zones. The leading exporters are La Tabacalera, Fuentes, General Cigars, Swdeck Match, Tabacalera Industrial del Norte, La Cidav, Okey Cigars, Tabantilla, Puro de Villa Gonzalez, Flor Dominicana, La Aurora, Tabacalera Nacional Dominicana and Caribbean Cigars.
The Dominican Center for the Promotion of Exports (Cedopex) reports that cigar sales generated US$21.9 million last year.
Dominican companies outside of free zones are integrating with the free zone operations. This factor, in addition to the increase in the diversity of industries, is expected to be the base of continued growth of the free zone industry.
Central Bank statistics show that the sector contributed US$1,000 million to the Central Bank reserves for payment of personnel and services, up 15% compared to 1999. Free zone purchases on the local market are more than US$300 million a year.
The Dominican Republic offers Special Free Zone Status to exporters whose production must be located outside of the existing zones. Ship-repairing, agribusiness and other firms take advantage of these special provisions.
Outside of free zones, products manufactured for export are beer and rum, canned and processed fruits and vegetables, and cocoa butter. Major non-food export items include clothing, leather purses, chemical fertilizers, furniture and dry batteries.