Sunday, December 10, 2023

What is the key factor behind the rise of free zones?

The high incidence in the economic recovery and the sustained growth that the free zones have registered position this sector as one of the main pillars of the Dominican economy. This 2022 is projected as its best year in terms of growth, investment, job creation and foreign exchange, as reflected in data from the most recent impact study by Analytica, presented within the framework of the celebration of the National Free Zones Day .

This report indicates that in 2021 exports of goods from free zones reached US$7,180 million, with growth of 15% and 22%, compared to 2019 and 2020, respectively, which represents 7.6% of GDP.

According to the Ministry of Industry, Commerce and MSMEs (MICM), it is important to highlight that, considering the entire value chain, the free zone sector would return to the Dominican economy at the end of 2022, 14 times what the State invests.

These figures demonstrate the substantial contribution of this sector to the macroeconomic stability of the Dominican Republic in the last decade and mainly during the pandemic. In fact, the trend registered in the first quarter of 2022 reflected that total exports of goods and services from free zones exceeded US$10,000 million, generated net foreign exchange close to US$1,700 million and had a 9.3% GDP growth.

The Central Bank presents a similar scenario in its report on the Dominican economy in June, where it indicates that, during the first half of 2022, the free zones had an interannual growth of 8.6% in the real value added of this sector, associated with the increase in the external demand that is reflected in the exports of goods under this regime. These reached an accumulated amount of US$3,958.5 million in January-June and a variation of 14.6% compared to the same period in 2021.

But what has been the key to the sustained growth of free zones? Analyzing its behavior in the last 10 years, it can be affirmed that the diversification and incorporation of industrial activities and services have been fundamental in this process.

In 2021 there were 734 registered free zone companies, of which 567 were industrial and 167 services. All of them generated 403,318 direct and indirect jobs. We are talking about a sector that supports its world leadership in the manufacture of textile and tobacco products, as well as chemical products, jewelry, medical products, electrical appliances, port services, business support (BPO), contact centers, among others.

Referring to the Contact Center subsector, it plays a preponderant role within the Dominican free zones: its progressive increase in terms of accumulated investment (US$352.1 million at the end of 2021), jobs generated (they went from having 12,578 direct jobs in 2012 to 27,698 in the first half of 2022) and the increase in the number of companies operating (from 56 in 2012 to 93 in June 2022) are an irrefutable sign of its contribution to national economic development.

According to data from the National Council of Free Trade Zones (CNZFE), the salaries of Contact Centers rank second within the monthly average of free zones with RD$29,542. This remuneration implies a better quality of life and access to decent jobs for workers.

This is why, as a country, we must continue betting on promoting the continuity of the growth of free zones and increasing competitiveness. And what do we need for this? Greater technification and increase the fluency of the English language in the collaborators of the sector.

In addition, there is a more latent commitment: it is necessary to unite the wills of all sectors to modify the Labor Code and prioritize the use of more flexible schemes such as teleworking, which allows for a more effective reconciliation of personal and work life. The Dominican Republic can take advantage of this opportunity and position itself as a more attractive country for companies seeking to operate under this modality.

There is no doubt that consolidating the leadership of the free zones in international markets will attract a greater injection of capital, generation of jobs and foreign exchange to a sector that remains a constant generator of national economic development. The country strategy should focus on that objective.


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