Dominican Republic and Haiti: Country Studies

Dominican Republic and Haiti: Country Studies
dramatic increase in the demand for Dominican cigars; the
Dominican Republic is the leading supplier to the United
States, where cigar smoking was on the rise in the late 1990s.
Free-Zone Manufacturing
No economic process was more dynamic in the Dominican
Republic during the 1980s than the rapid growth of free zones.
Although the government established the legal framework for
free zones in 1955, it was not until 1969 that the Gulf and Western
Corporation opened the country's first such zone in La
Romana. Free-zone development, which had progressed modestly
in the 1970s, accelerated rapidly during the 1980s as a
result of domestic incentives, such as Free-Zone Law 145 of
1983 and the United States CBI of 1984. Free-Zone Law 145, a
special provision of the Industrial Incentive Law, offered liberal
incentives for free-zone investment, including total exemption
from import duties, income taxes, and other taxes for up to
twenty years. By the close of the 1980s, the results of free-zone
development were dramatically clear. From 1985 to 1989, the
number of free zones had more than doubled, from six to fifteen;
employment had jumped from 36,000 to nearly 100,000.
The number of companies operating in free zones had
increased from 146 to more than 220.
The trend was similar in the 1990s. Industrial free zones
numbered thirty-three by the end of 1995 and employed
approximately 165,000 workers in 469 companies. Those numbers
remained at the same level at the end of 1996, but the
number of firms operating in free zones stood at 434. The drop
was attributed to keen competition from Mexico over United
States markets. However, more than sixty applications for the
establishment of new free-zone companies were approved in
1997. Although free-zone manufacturing contributes little to
the country's GDP (3.4 percent in 1996 and 3.5 percent in
1997), it employs a significant portion of the industrial labor
force (165,000 and 172,000 out of some 500,000 in 1996 and
1997, respectively). Moreover, free-zone manufacturing has
been the major element in the growth of manufacturing since
the last half of 1997 and grew by 8.3 percent in the first half of
1998. These factors may explain the creation within the Secretariat
of State for Industry and Commerce of a special office for
the development of free zones, the National Council for Free
Zones (Consejo Nacional de Zonas Francas—CNZF). Also,
free-zone exports generate badly needed foreign exchange:
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