UNCTAD commends economic modernization, diversification efforts; calls for upgraded infrastructure, national system of investment promotion.
Geneva, 5 May 2009 - The open policies initiated since the mid-1990s, the ongoing modernization of the investment framework, and the quality of the labour force have all contributed to a strong performance in attracting foreign direct investment (FDI) and in diversifying the economy of the Dominican Republic, UNCTAD´s Secretary-General said today during presentation of an UNCTAD-developed Investment Policy Review (IPR) of the country.
"The experience of the Dominican Republic clearly shows that, within the right framework, FDI can foster development, integration into the world economy and poverty reduction," said Secretary-General Supachai Panitchpakdi as the IPR was unveiled before UNCTAD´s Investment, Enterprise and Development Commission.
Temístocles Montás, Minister of Economy, Planning and Development of the Dominican Republic, termed the review "a fundamental reference work to guide the actions of our government." He said the country has striven in recent decades to be "dynamic, transparent, and open," and that recommendations in the IPR match a government understanding that it is important "to focus on our productive capacities in a competitive global market."
Eddy Martinez Manzueta, Minister and Director of the Centre for Exports and Investment (CEI-RD) of the Dominican Republic, told the meeting that FDI inflows had increased by an average of 4% per year over the past four years, reaching a record US$2.8 billion in 2008. He added that the government has worked closely with UNCTAD since 2005 to improve the investment climate. Great progress has been made in using FDI to diversify the economy away from traditional agricultural exports towards such activities as telecommunications, e-tourism, and the manufacture of products ranging from electronic components to auto parts, he said.
UNCTAD carries out Investment Policy Reviews at the request of developing-country Governments. Now completed for 26 countries, UNCTAD´s IPRs provide an objective evaluation of the policy, regulatory and institutional frameworks for FDI in beneficiary countries, with the objective of attracting increased FDI and maximizing the benefits from it.
A follow-up review is performed five years after an IPR is completed to assess how recommendations have been implemented and to determine the impact of new policies on FDI flows.
The event also featured the active participation of UNCTAD´s member States and representatives of the international private sector as the IPR´s key findings and recommendations were reviewed. Speakers congratulated the Government for the reforms already undertaken and called for further action to improve implementation of the IPR.
UNCTAD stresses in the IPR that the Government´s vision of leading an economic transformation towards high-value-added manufacturing and services requires a change in policy approach. In particular, investment attraction will have to evolve from one based on abundance of a relatively low-cost labour supply and generous fiscal incentives to one based on the excellence of the investment climate and the quality of the country´s infrastructure. The report recommends a number of concrete policy reforms in such areas as the FDI-specific regulations and competition and fiscal regimes.
The IPR encourages the Dominican Republic to adopt a new investment law to reflect the good treatment of foreign investors in practice. The government also needs to strengthen the country´s investment-promotion efforts. UNCTAD thus recommends the establishment of a "national system of investment promotion" whereby a strengthened CEI-RD and all other agencies involved in promoting investment coordinate their activities through a network of service-level agreements and report to a Minister of Investment.
The delegation from the Dominican Republic pointed out that several recommendations in the report have already been implemented with the assistance of UNCTAD. These include revision of key investment legislation and agreements; modernization and rationalization of the institutional framework for FDI promotion; improvements in FDI-related data collection; and the introduction of a competition law and competition agency. The high-level representative of the Government also called on the donor community to assist the country in implementing further technical assistance in such areas as dispute prevention policies, reform of the fiscal regime, and the launching of linkages to better integrate foreign investors and local small and medium-sized enterprises.