The new president of the Dominican Association of Free Zones, Arturo Peguero, believes the country needs to increase its efforts to diversify the manufacturing base in Dominican factories. Nevertheless, he said, this is a catch-22 situation, as non-apparel industries require more highly-skilled employees, but are less labor-intensive at a time when one of the government?s priorities is the creation of jobs. ?The government needs aggressive policies to attract not 45 new companies, but 150 non-traditional free zone industries in order to compensate for their being less labor-intensive,? he says in an interview with El Caribe newspaper.
To contribute to this goal, Peguero acknowledged that Adozona would be setting up a unit to promote the installation of those companies and offering them logistical support to reduce their costs. Peguero also said that one of the aims of his presidency is to create a unit specialized in consulting, marketing and information, to stimulate non-apparel industries to open operations in the DR.
In an interview in El Caribe?s Sunday edition, he explained that since 98% of Dominican free zone exports are shipped to the United States, the DR was directly affected by the market lull following the events of 11 September 2001. He said the growth of Mexico as a manufacturing center, whose exports leaped from US$1 billion to US$7 billion since NAFTA was passed, has also affected the DR. Peguero said that, according to government statistics in 2001, the country lost more than 15,000 jobs in the free zones, and in 2002, 5,000 more jobs were lost.
The good news is that there are indications since the last semester of 2002 that the demand for Dominican production is picking up at a significant pace. Peguero says that early results for January and February show that contract volume is returning to that of the year 2000, evidencing a strong recovery. ?The challenge now is to grow,? he said.
The Inter American Development Bank is funding a US$120,000 study on the vertical integration of apparel industries and on how to improve the competitiveness of free zone industries, as part of the broader National Competitiveness Plan.
Peguero says that the Iraq war did not affect contracts, but that the prices contractors are willing to pay had been dropping, given the competition of Central American manufacturers, who offer marginally lower prices. Peguero also says the DR needs to compete with Andean Pact countries that have been awarded trade benefits similar to those granted to the Caribbean and Central America by the United States.
Indeed, the greater challenges ahead are envisioned to come from Asia and from the mid-term elimination of duty-free status for free zone industries in 2009.