The Dominican Republic has a population of over 9 million, and is a middle-income country, with the largest economy of Central America and the Caribbean. It occupies the eastern part of the island of Hispaniola, which it shares with Haiti.
Advances
After the financial crisis of 2003, which caused a recession in the Dominican economy, with a GDP growth of barely -0.3 percent and over 27 percent inflation, the economic growth of the country has resurged. In 2008, GDP growth was 5.3 percent and a 0.5 percent is projected for 2009.
The government’s macro-economic stabilization plan since 2007 has caused inflation to be reduced to the single-digit range; inflation was reduced to 7.4 por ciento in 2007 and to 8.3 in 2008. The foreign currency exchange rate stabilized at RD$33/1$US, with lower interest rates and greater international reserves. The country enjoys a growing and stable economy, with per capita GDP of US$4,797.8 (2008), which denotes a relatively high purchasing power for Latin America.
The Dominican Republic - Central America - United States Free Trade Agreement (DR-CAFTA) became effective in March 2007. This treaty provides allied nations with the advantage of having permanent and totally free access to the United States market, whereby it seeks to attract more investors to the region.
While in October 2007, the tropical storms Noel and Olga caused serious damage to the infrastructure in many zones of the country, leaving over 80,000 persons as refugees, the tourism sector suffered no significant damages and other dynamic sectors such as communications and construction have maintained good performance.
In May 2008 Leonel Fernández was re-elected President of the Republic for the 2008-2012 term. This will be the third non-consecutive term of President Fernández who has pushed forward a series of technological advances and reforms, among which is included the finalization of the country’s first underground metro.
According to the 2010 Doing Business Report the Dominican Republic improved its global ranking on overall ease of doing business from 102 to 86 among 183 economies. According to this study findings, the country strengthened investors protections with a new company law-making, becoming the runner-up global reformer in this area. Challenges
Even while the prospects for the Dominican Republic to maintain sustained GDP growth and macro-economic stability are good, the food crisis and high petroleum prices will translate into inflation higher than expected. To this must be added the consequences of the damage to agriculture caused by the tropical storms Noel and Olga at the end of 2007.
On the other hand, there are factors which put the future growth at risk. The Dominican economy is closely tied to the United States and the economic slowdown of that country could retard the growth of the Dominican Republic given the possibility of lesser demand for export, a drop in direct foreign investments and less remittances.
The administration of President Fernández faces a great challenge in advancing the reforms in the public sector demanded by the citizenry and which are essential to reduce the risk of economic volatility, improve the efficiency and quality of public services and to share out the benefits of growth in a more equitable fashion. In like manner, it is necessary to face the agenda of the country’s institutional and governance reforms. The issue of electricity, the increase in drug trafficking, violence and organized crime represent additional challenges for the Dominican Republic. Assistance of the World Bank to the Dominican Republic
The current portfolio of assistance in the Dominican Republic consists of nine active loans for a total of US$258.2 million, of which US$63.8 million has been disbursed. The loans are: Water and Sanitation in Tourist Areas, Technical assistance for the Electric Sector (US$7.3 million), Electricity Distribution Rehabilitation Project (US$42 million), Emergency Recovery and Disaster Management (US$80 million), Early Childhood Education (US$42 million), Health Reform Support (US$30 million), Youth Development (US$25 million), Social Sectors Investment Program (US$19.4 million) and Technical Assistance for the Financial Sector (US$12.5 million). The Dominican Government also receives and executes six grants for a total of US$4.6 million: Implementation of Access to Public Information (US$527 thousand), Assistance to the Office of Prevention of Corruption in Public Administration (US$320 thousand), Enhancement of Food (US$1.8 million), and US$500 thousand for the preparation of the Project for Rural Community Development and US$1 million for Avian Influenza Prevention Control. A US$408 thousand technical assistance was approved in July 2009 for support to DR Congressional oversight. Recently, the Bank has expanded its financial and technical assistance to the country in the sectors of management of and recovery from disasters, social protection and water and sanitation. It also works with the authorities for the publication of several economic reports among which are included an economic memorandum (CEM) on the island of Hispaniola (Dominican Republic and Haiti) and nine Policy Notes on development sectors.
At the end of 2008, the Bank worked along with the Government and Dominican society in the preparation of a new Country Partnership Strategy (CPS) for the 2010-2013 period. The Bank also plans to support the country via two projects for Rural Development and Health Sector Reform 2, one additional financing for social protection programs, and two new operations before the end of 2009 for direct budget support to the DR government for policy and institutional reforms aimed at achieving specific development results.
The International Finance Corporation (IFC), is the institution of the World Bank Group which promotes the private sector sustainable development through investments, technical advice and funds mobilization. In the Dominican Republic the total IFC financing granted in 2000-2008, was US$535 million, which includes US$175 million in syndications. The investments of IFC in the country are diversified in the sectors of health, telecommunications, construction, tourism, energy, agro-industry, ports, airports, manufacturing and finance. The strategy of the IFC for the Dominican Republic seeks to support private sector projects that contribute towards driving economic growth, jobs creation, social and environmental development and the country's international competitiveness. The Multilateral Investment Guarantee Agency (MIGA), another agency of the World Bank Group, supports several industries in the country via three guarantee contracts for a gross amount of US$135 million. In 2006, MIGA issued insurance for US$108 million dollars for the construction of the Santo Domingo-Samaná toll road, which has been in operation since June 2008 and has reduced the time for traveling to this important tourism spot from five to two hours. At the end of 2008, President Fernandez introduced for approval in the DR Senate the contract for the extension of this road, which would entail an investment of US$160.6 million. Achievements of the projects financed by the World Bank in the Dominican Republic
Telecommunications
The Project for the Reform of the Telecommunications Sector for US$12.3 million, which concluded in 2006, helped to establish the Dominican Telecommunications Institute (Instituto Dominicano de Telecomunicaciones - INDOTEL) and to provide better quality and coverage. Since the creation of INDOTEL in the year 2000, the number of telephone lines per 100 inhabitants has doubled and private investment in this sector grew to US$1.500 million. The Dominican Republic has increased telecommunications services in rural zones, implementing initiatives towards electronic government and has improved social and educational services through communications and information technology. INDOTEL has trained people and digital files and processes.
Currently, the country has a broad and modern telecommunications infrastructure which supports the private sector and contributes to the government’s efforts towards development. The Fund for the Financing of Development Projects (Fondo para la Financiación de Proyectos de Desarrollo - FDT) in the Dominican Republic has successfully invested in projects for public telephones, tele-medicine and education, and community tele-centers, among others, to advance towards universal access and to develop social investments in education and health.
Environmental Audits
In August 2008, 13 environmental energy auditors were graduated and certified in the country, through the Loan for Technical Assistance to the Electric Sector (US$7.3 million).
In response to the reiterated requests from the energy sector and the wishes of the country to face up to the inefficiencies of the sector and to help the environment via the promotion of the cleanest technologies, in 2005 the National Energy Commission (Comisión Nacional de Energía - CNE) and the Ministry of Environment and Natural Resources (Secretaria de Estado de Medio Ambiente y Recursos Naturales - SEMRARN) signed a mutual cooperation agreement. The principal goal of this agreement is the implementation of a new environmental strategy based on the active participation of the private sector, via the preparation of certified environmental auditors.
The auditors are responsible for verifying the adherence to existing environmental regulations by energy companies and certifying that they are subject to the approved plans for environmental management defined in the environmental license.
National Strategy in Response to HIV/AIDS
The Project for the Prevention and Control of HIV/AIDS in the Dominican Republic (US$25 million) closed in mid 2008. This project has contributed substantially to the development and implementation of a new National Strategy to respond to the epidemic and a global system of Monitoring and Evaluation to measure the progress in the objectives and goals of said strategy in a broadly participatory process. The project complemented funds from the government and other institutions, which allowed the strengthening and expansion of the interventions of prevention and care. An example of the results of this project is the increase in access for persons who need anti-retroviral therapy, which currently reaches 7,500 persons (85% of the goal of the project). Youth Development
In April 2006, the World Bank, along with the European Union, the private sector and the donor community, sponsored the First Development Fair 2006 “Young people: Let’s Innovate and Grow!” in the Dominican Republic. Over 200 organizations of civil society and some 10,000 youths from the whole country participated in the two-day forum, with the sponsorship of 15 institutions. The main objective of Development Fair 2006 was to identify and finance creative ideas proposed by the young people, which had the potential of delivering concrete results and expanding. The 21 winning projects received a total of US$400,000 in donations to implement innovative proposals in job eligibility, micro-businesses, awareness about HIV/AIDS, and sustainable tourism among other topics. The projects, which culminated in August 2008, resulted in permanent employment for some 80 young people from disadvantaged backgrounds and the opportunity for training of over 150 young people of both sexes from the whole country, improving their social and economic conditions.
CONTACT
Alejandra De La Paz
Tel. 809-566-6815, Ext. 256
Fax 809-566-7189
E-mail: adelapaz@worldbank.org
For more information on World Bank assistance to Dominican Republic, including lending breakdown and project reports, see:
Country Assistance Strategy 2005-2009 (CAS)
DR Lending Summary
List of all Projects
Updated September 2009
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