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WT/TPR/S/207/Rev.

1 Trade Policy Review


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IV. TRADE POLICIES BY SECTOR

(1) INTRODUCTION

1. The agricultural sector is supported by various measures, including an average tariff higher
than that for the economy as a whole, direct payments and marketing and price control programmes.
Utilization of the quota for chicken is low, the published WTO import quota for rice is less than the
volume bound and sugar can be imported only to the extent necessary to cover a shortfall in domestic
production.

2. The Government has taken a number of steps in order to overcome the crisis in the electricity
sector, but the consumption of certain types of energy continues to be highly subsidized. The import
of biofuels is prohibited unless there is a shortfall in domestic production, and some of the incentives
for renewable energy generation are conditional on the use of domestic inputs. Manufacturing
includes a domestic market-oriented sector and another which operates under the free-zone regime
and accounts for the majority of exports.

3. The Dominican Republic has made specific commitments in 60 of the 160 sectors covered by
the GATS. There are no restrictions on foreign investment in telecommunications, except in the case
of public broadcasting services. Foreign companies may set up in the banking sector, but the
insurance legislation prohibits insurance companies from countries where Dominican companies
cannot operate from doing business in the Dominican market. In air traffic, the Dominican Republic
offers the fifth freedom in most of its bilateral agreements; cabotage airline companies must be under
the "effective control" of Dominican nationals. In practice, foreign vessels may provide cabotage
maritime transport services. There are no limitations on foreign capital participation in ports and
airports. The Dominican Republic imposes various restrictions on the exercise of professions by
foreigners in certain areas of accountancy, legal services, and architecture and engineering. Investors
in certain tourism projects are given tax incentives on condition that they employ Dominican
professionals.

(2) AGRICULTURAL SECTOR

(i) General characteristics

4. The relative importance of the agricultural sector has declined since 2002. The sector is
supported through several measures, including an average tariff that is higher than that applicable to
the economy as a whole, direct payments and marketing and price control programmes. The volume
of chicken imported has been well below the volume bound at the WTO, while from 2005 to 2007 the
quota for rice imports at the WTO quota rate was less than the volume bound. Sugar can only be
imported if there is a shortfall in domestic production.

5. The real value added of the agricultural sector, including forestry and fishing, increased at an
annual average rate of about 3 per cent between 2002 and 2007. 1 However, the sector's share of GDP
fell from 8.8 per cent to 7.7 per cent during the same period. Livestock farming, forestry and fishing
account for 55 per cent of the value added and crop farming for the rest. About 13 per cent of the
economically active population works in the agricultural sector.

1
On line information from the Central Bank of the Dominican Republic, "Economic statistics: real
sector". Viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real.
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6. In 2007, agricultural production was valued at approximately RD$81,162 million (about


US$2,454 million). The main agricultural products include rice, coffee, bananas, sugar cane and
tomatoes. The main livestock farming activities are the production of beef, dairy products, and
chicken meat and eggs.

(ii) Support policy and indicators

7. The Ministry of Agriculture is responsible for policy formulation and direction in the
agricultural sector. According to the authorities, since 2003 agricultural policy has been aimed at
strengthening the domestic agricultural market by encouraging the production of strategic crops with
a view to expanding exports and meeting domestic demand. Moreover, programmes have been
implemented to enable producers to incorporate technological innovations in their crops, and the
formation of "clusters" is being promoted to increase the sector's efficiency and competitiveness.

8. The World Bank notes that the Dominican Republic's agricultural policies are discouraging
the development of crops with export potential (for example, tomatoes) by providing greater support
for crops that fail to offer the Dominican Republic any comparative advantage, including rice, garlic
and beans.2 It also notes that the policies have increased the cost of the food basket for consumers.
The authorities point out that in addition to directing agricultural policy towards strengthening the
domestic agricultural market they have implemented policy measures to prevent the high prices of
agricultural products on the international market from being passed on to domestic consumers.

9. The Dominican Republic's latest notification concerning domestic support relates to 2007. 3 In
that year domestic support amounted to RD$1,820.5 million (approximately US$55 million); the
Dominican Republic classified this amount as exempt from the WTO reduction commitment as it fell
within the green box. During the period 2002-2006, annual average domestic support was about
RD$1,446 million (approximately US$44 million in 2007).4 The Dominican Republic classified all
the domestic support notified during this period as falling within the green box.

10. Public expenditure on the agricultural sector totalled RD$6,284.1 million in 2007, as
compared with RD$4,037.7 million in 2002 (about US$190 and 122 million, respectively).5
However, as a proportion of total public expenditure during the same period agricultural public
expenditure declined, from about 5.5 per cent to 2.4 per cent.

(iii) Policy instruments

(a) Border measures

11. The average MFN tariff rate applied to agriculture (ISIC definition) was 10.7 per cent in
2008, slightly more than three percentage points higher than the average for the manufacturing sector
(Section (4) and Chapter III(2)(iv)).

12. Since the conclusion of the Uruguay Round, the Dominican Republic has renegotiated its
Schedule of Commitments under Article XXVIII of the GATT 1994 with respect to several
agricultural products. Within the context of this renegotiation, the Dominican Republic agreed to
grant tariff quotas for imports of chicken meat, maize (corn), dry beans, garlic, onions, powdered
2
World Bank (2005b).
3
WTO document G/AG/N/DOM/15 of 21 May 2008.
4
WTO documents G/AG/N/DOM/9 and G/AG/N/DOM/8/Rev.1, both of 25 October 2004.
5
Law No. 200-01 approving the Budget and Public Expenditure Law for 2002, of 26 December 2001,
and Law No. 3-07 approving the Budget and Public Expenditure Law for 2007 and its Addendum, of
8 January 2007.
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milk, rice and sugar.6 The Dominican Republic undertook to apply these quotas in their final form as
from 2004. Its latest notification concerning imports of products subject to tariff quotas relates to
2007.7 Its notification concerning the administration of tariff quotas relates to 2000.8

13. The average MFN tariff applied to products subject to tariff quotas is about 80 per cent
(out-of-quota) and 20 per cent (in-quota). During the period 2004-2007, annual average volumes
imported at in-quota tariff rates exceeded WTO bound volumes for almost all products (Table IV.1).
Chicken meat is an exception to the rule: since 2004 the volume of in-quota imports has amounted to
between 0.2 and 13 per cent of the bound volume. According to the authorities, this is due to the high
level of domestic chicken production.

14. The administration of tariff quotas, except for sugar, is the responsibility of the Agricultural
Imports Commission, which is composed of the Ministries of Agriculture and Industry and Trade, the
Administrative Secretary of the President's Office and the Director-General of Customs.9 Decree
No. 505-99 provides for the use of the "simultaneous examination method" for determining access to
quotas.10 This method consists in assigning the in-quota volume proportionally to importers who
submit an application not later than two months before the commencement of imports of the product
in question.

15. In December of each year, the Agricultural Imports Commission must publish the date of
commencement of imports of products subject to tariff quotas in a national newspaper.11 The
authorities have pointed out that they publish this information both in a national newspaper and on the
Ministry of Agriculture's Internet site. Although Decree No. 505-99 requires importers to provide a
bond enforceable if the volume assigned to the importer does not arrive in the Dominican Republic
within a specified period, the authorities note that this measure is not being implemented. In-quota
import volumes assigned are not transferable. The Agricultural Imports Commission must publish
details of the awarding of import volumes for each product subject to a tariff quota in a national
newspaper.12

16. Once tariff quotas have been assigned, the Agricultural Imports Commission issues the
corresponding import certificates through the Directorate of Agricultural and Livestock Promotion of
the Ministry of Agriculture.13 Resolution No. 24/2006 of the Minister of Agriculture, issued in
November 2006, prohibits the Agricultural Imports Commission from "granting or refusing import
licences on the basis of sanitary or phytosanitary concerns, domestic purchase requirements or
discretionary criteria".14

6
WTO document G/MA/TAR/RS/54 of 3 November 1998.
7
WTO document G/AG/N/DOM/14 of 21 May 2008.
8
WTO document G/AG/N/DOM/6 of 4 February 2002.
9
Decree No. 603-06 of 7 December 2006, Article 1.
10
Decree No. 505-99 ("Regulation for regulating imports of agricultural headings under the technical
rectification of Schedule XXIII of the Dominican Republic at the World Trade Organization") of
24 November 1999, Article 5.
11
Ibid., Article 6.
12
Ibid., Article 9.
13
Ibid., Article 11.
14
Resolution No. 24/2006 of the Minister of Agriculture, of 22 November 2006, Article V.
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Table IV.1
Products included in MFN tariff quotas, 2007
Applied MFN tariff Bound tariff Average Trading
rate (%) rate (%) utilization partners
Product and HS07 Bound quota
rate (%) with
heading volumea
2004-07b reserved
In-quota Out-of-quota In-quota Out-of-quota access
Chicken meat
(0207.1100, 0207.1200, 25 99 25 99 11,500 5.1 MFN
0207.1410, 0207.1491,
0207.1492)c
Powdered milk European
(0402.1010, 0402.1090, Union
0402.2110, 0402.2190, (70%)
0402.2910, 0402.2990) New
20 56 20 56 32,000 89.1 Zealand
(15%)
and
others
(15%)
Onions
0703.1000 25 97 25 97 3,750 152.2 MFN
Garlic
0703.2000 25 99 25 99 4,500 131.6 MFN
Beans
(0713.3100, 0713.3200, 25 89 25 89 18,000 128.0 MFN
0713.3300)
Maize (corn)
(1005.1000, 0 40 5 40 1,091,000 97.2 MFN
1005.9000)c
Rice 17,810 216.3 MFN
1006.1000 14 99 20 99
1006.2000 20 99 20 99
Sugar 30,000 157.1 MFN
1701.1100 14 85 20 85
1701.1200, 1701.9100, 20 85 20 85
1701.9900

a Tonnes.
b The utilization rate is the actual import volume divided by the bound import quota.
c WTO Secretariat estimates, the Secretariat had no information from the authorities concerning the corresponding HS07 headings.

Source: WTO documents G/MA/TAR/RS/54 of 3 November 1998, G/AG/N/DOM/11 of 16 January 2006, and
G/AG/N/DOM/14 of 21 May 2008, and information provided by the authorities.

17. Article 13 of Decree No. 505-99 authorizes the Agricultural Imports Commission "in cases of
crisis, scarcity or a shortfall in domestic production" to increase the maximum level established for
tariff quotas and, moreover, empowers it to determine "the cases in which such an increase in quotas
need not be accompanied by a corresponding increase in tariffs".15 The authorities have pointed out
that Decree No. 505-99 does not limit out-of-quota imports, but establishes criteria for extending
in-quota treatment beyond the WTO bound volumes.

18. During the period 2005-2007, the quotas available for importing rice at the WTO in-quota
tariff rate, published by the Ministry of Agriculture, were below the WTO bound volume. The quota
in question represented between 86 per cent and 93 per cent of the bound volume of 17,810 tonnes.

15
Article 13.
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19. The Instituto Azucarero Dominicano – INAZUCAR (Dominican Sugar Institute) is


responsible for administering the tariff quota for sugar.16 According to INAZUCAR, all sugar imports
are conditional upon the existence of a shortfall in domestic production. INAZUCAR calculates this
shortfall by taking into account domestic production and consumption and the preferential access
offered by the United States to Dominican Republic sugar. The in-quota tariff rate is applied to
authorized sugar imports.

20. The Dominican Republic applies tariff quotas to imports of agricultural products from some
of its preferential partners. Decree No. 534-06 governs the administration of the tariff quotas applied
under the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR).17
The authorities have indicated that the volumes imported in-quota at in-quota tariff rates established
by the CAFTA-DR are additional to the WTO bound volumes.

21. The Dominican Republic has not reserved the right to apply the special agricultural safeguard
for which the WTO Agreement on Agriculture provides.

22. Since May 2004, exports of cocoa beans and cocoa bean products have been subject to a
"solidarity tax" of RD$4 per kilo (approximately US$117 per tonne). This measure was agreed by the
National Cocoa Commission chaired by the Minister of Agriculture. 18 The amount falls to RD$0.50
per kilo when the producer price in the local market is less than RD$1,000 per 50 kilos. Up to
September 2006, customs was requiring the exporter to produce a single export form bearing a
National Cocoa Commission stamp certifying that the solidarity tax had been paid. Customs is no
longer imposing this requirement.

(b) Other measures

23. The Dominican Republic has notified the WTO that it did not grant any export subsidies for
agricultural products during the period 2001-2006.19

24. Under the Pledge Programme, rice, bean, garlic and milk producers can obtain an interest-free
loan equivalent to 70 per cent of the value of the produce they deposit in specified warehouses. 20 The
State pays the costs of storage, including insurance. The producers are responsible for selling the
produce stored. According to the authorities, the sums allocated to this programme amounted to
RD$2,200 million (US$72.9 million) in 2005 and RD$3,800 million (US$114.6 million) in 2006.

25. The World Bank notes that the Pledge Programme represents "a substantial subsidy" for
producers, since it "makes it possible to sustain the price [of the products covered by the programme]
over time".21 It adds that the programme helps processors who use rice, beans, garlic and milk as
inputs to "partially finance their stocks of raw materials". The authorities have pointed out that the
programme forms part of agricultural marketing policy and constitutes a support service with a
minimum effect on production and trade. Furthermore, two of the programme's objectives are to
ensure that stocks are sufficient to achieve food security and to promote the development of areas
dedicated to the crops in question.

16
Decree No. 751-00 of 11 September 2000.
17
Decree No. 534-06 of 15 November 2006.
18
Fourth resolution adopted at the meeting of the National Cocoa Commission on Tuesday
25 May 2004.
19
WTO documents G/AG/N/DOM/12 of 24 January 2006 and G/AG/N/DOM/13 of 4 January 2008.
20
The programme is based on the Ministry of Agriculture's Provisional Resolution No. 31-05 of
2 June 2005.
21
World Bank (2005b).
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26. Within the framework of the Programme of Direct Support for Livestock Farmers, since
November 2007 these farmers have received RD$3 for every litre of milk they produce (about
US$0.09 in 2007).22 In 2007, a total of RD$13 million (about US$393,000) was disbursed under this
programme. The State also supports agricultural production by distributing seed, providing
mechanized soil preparation services and maintaining irrigation systems.

27. Although the National Price Stabilization Institute is authorized to "regulate" the prices of
agricultural products, the authorities have indicated that in mid-2008 the Institute itself was not fixing
the price of any product.23 The National Rice Commission fixes the price at which rice is purchased
from the rice producer and the National Council for the Promotion of the Dairy Industry that at which
milk is purchased from the milk producer. The Ministry of Agriculture is a member of both the
National Rice Commission and the National Council for the Promotion of the Dairy Industry.
INAZUCAR fixes the maximum selling price for sugar in its marketing stages.24 The authorities have
pointed out that the Government occasionally acts as a witness or mediator in price negotiations
between the producers and the processors of certain products, including chicken, eggs and tomatoes.

28. Sugar production (both for domestic consumption and for export) is determined annually by
decree.25 The decree also determines the portion that each mill can export under the tariff quota
applied to sugar imports by the United States. INAZUCAR does not intervene in the marketing of
sugar in the domestic market.

29. Credit for the sector increased at an annual average rate of 18.4 per cent between 2001
and 2006. During this same period, sector credit averaged RD$3,108 million (about US$94 million
in 2007).26 In 2006, about 36 per cent was earmarked for rice and 10 per cent for bovine cattle. The
poultry, coffee, garlic and bean sectors each received between 3 and 4 per cent of the total. In 2006,
half the loan portfolio (some RD$4,911 million or US$148.1 million) was provided by the
Banco Agrícola, a state-owned institution, and 45 per cent by the commercial and full-service banks.
In 2006, Banco Agrícola's average lending rate was 14 per cent as compared with 17.4 per cent for the
full-service banks.27

30. The Dominican Agricultural and Forestry Research Institute is the main public agricultural
research establishment. Agricultural research policy formulation is the responsibility of the National
Council for Agricultural and Forestry Research. This body provides financing for scientific and
technological capacity building in public and private institutions. Between 2002 and 2007, annual
public expenditure on agricultural research averaged RD$220.1 million (some US$6.7 million in
2007).28

22
This programme is based on the Ministry of Agriculture's Provisional Resolution No. 28-2007 of
18 December 2007.
23
Law No. 526 establishing the Price Stabilization Institute, of 11 December 1969, Article 2.
24
Law No. 619 of 16 February 1965, and Resolution of the Dominican Sugar Institute No. 01-2006 of
24 October 2006.
25
See, for example, Decree No. 570-06 providing for the 2007 sugar harvest, from domestic sugar
mills, to include the entire calendar year, of 21 November 2006.
26
Ministry of Agriculture (2007).
27
The source of the Banco Agrícola rate is the Ministry of Agriculture (2007). For full-service
banking, the source is the simple average of the nominal lending rate in December 2006 taken from on line
information from the Central Bank of the Dominican Republic, "Economic statistics: monetary and financial
sector" (viewed at: http://www.bancentral. gov.do/estadisticas.asp?a=Sector_Monetario _y_Financiero).
28
WTO documents G/AG/N/DOM/15 of 21 May 2008, G/AG/N/DOM/10 of 16 January 2006,
G/AG/N/DOM/9 of 25 October 2004, and G/AG/N/DOM/8/Rev.1 of 25 October 2004.
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31. The requirement to pack coffee for export in bags of domestic origin was abolished with the
entry into force of Regulation No. 819-02.29

(3) ENERGY

32. There is still a crisis in the electricity sector and overcoming it constitutes one of the major
challenges facing the Dominican Republic. Under a plan to ensure the sector's recovery, steps have
been taken to reduce the pilfering of electricity and the State is trying to renegotiate disadvantageous
contracts concluded between the distribution companies and the generators. However, the
consumption of certain types of energy is still highly subsidized, and this has undermined both
government finances and the rational use of energy. In 2007, a law was enacted in an effort to
increase domestic production of energy from alternative sources by giving a number of incentives,
some of them dependent upon the use of national inputs. The legislation prohibits the import of
biofuels if there is no shortfall in domestic production and foreign State-owned companies may not
participate in the exploration or exploitation of hydrocarbon deposits.

(i) Electricity

(a) General characteristics and performance of the sector

33. At the end of 2006, the Dominican Republic's electricity generating system had
approximately 3,390 MW of installed capacity.30 Of this total, 14 per cent consisted of hydroelectric
and the rest of thermal power plants. At the same time, estimated maximum demand amounted to
2,026 MW.

34. In 2006, net energy generated totalled approximately 10,710 GWh.31 During the period
2001-2006 it grew at an annual average rate of 2.6 per cent. It is estimated that about 16 per cent of
the total demand for energy was not met in 2006.32 The authorities aim to reduce this percentage
gradually, until it reaches 5 per cent in 2012.33 In 2006, the average price at which electricity was sold
to the end user was US$0.1982, one of the highest in the Americas.34

35. The sector consists of three distribution companies (Edenorte, Edesur and Edeeste), one
transmission company and 15 generating companies. Two of the three distributors were nationalized
in September 2003. Half of the capital and effective control of the three distribution companies had
been private since 1999.35 The transmission company is State-owned. The generators are private,
semi-public or State-owned. About 54 per cent of the installed capacity is owned by private
companies, 32 per cent by companies with private and public capital and the rest by State-owned
enterprises. In 2007, the distribution companies bought approximately 97 per cent of the energy
under contract with the generators; the rest was obtained on the electricity market.36

29
Regulation No. 819-02 on the harvesting, processing, grading, export and manufacture of coffee, of
14 October 2002, Article 21.
30
On line information from the Superintendencia de Electricidad – SIE (Superintendency of
Electricity), "Statistics". Viewed at: http://www.sie.gov.do/estadisticas.php.
31
Idem.
32
Information provided by the authorities in connection with this Review.
33
Comisión Nacional de Energía – CNE (National Energy Commission), Corporación Dominicana de
Empresas Eléctricas Estatales – CDEEE (Dominican Corporation of State-owned Electricity Companies), and
SIE (2006).
34
Idem.
35
See WTO (2002).
36
Information provided by the authorities.
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36. The electricity sector is still immersed in a severe crisis, mainly due to the problems facing
the distributors (Box IV.1). Transfers from the State to the sector totalled US$504 million in 2007.37
Approximately 40 per cent went to finance the cash deficit of the distribution companies; 22 per cent
was earmarked for the subsidy that the Government grants under the blackout reduction programme to
the inhabitants of areas considered poor; and the rest was used to absorb the increase in oil prices and
finance investment in the distribution system. At the beginning of 2008, it was estimated that State
transfers to the sector would amount to US$1,050 million in the course of the year. When he
addressed Congress in February 2008, the President of the Republic declared that one of the main
challenges facing the country was solving the problems of the electricity sector.38

37. The situation in the sector seems to have stabilized since 2006.39 For example, the proportion
of energy that the distributors bought but did not charge for, because of technical faults and theft,
decreased from 39 per cent in 2005 and 2006 to 34 per cent in 2007.40 Various indicators relating to
interruptions in service improved in 2007.41

38. The comprehensive plan for the electricity sector, prepared at the request of the President of
the Republic by various institutions in the sector, defines an action plan aimed at: achieving the
"financial self-sustainability" of the sector; reducing energy prices for the end user; ensuring the
adoption of best management practices and approved standards of quality and service; promoting the
efficient and rational use of energy, the exploitation of renewable resources and the protection of the
environment; and improving the conditions for attracting investment.42 One of the plan's
recommendations is to strengthen the provisions for preventing and combating the theft of electricity.
It also recommends the renegotiation of certain contracts between the distribution companies and the
generators. In November 2005, the Government set up the Contract Renegotiation Commission.43
According to the decree establishing the Commission, the contracts in question "suffer from
distortions clearly prejudicial to the best interests of the Dominican State [with the result] that the
operations of the electricity subsector are economically non-viable". According to the authorities, one
contract was renegotiated in 2007.

37
Ministry of the Economy, Planning and Development (2008).
38
On line information from the Office of the President of the Dominican Republic, "Speech delivered
by His Excellency the President of the Republic, Doctor Leonel Fernández, on 27 February 2008". Viewed at:
http://www.presidencia.gob.do/app/pre_discursos.aspx.
39
USAID (undated).
40
Information provided by the authorities in connection with this Review.
41
Ministry of the Economy, Planning and Development (2008).
42
CNE, CDEEE and SIE (2006).
43
Decree No. 621 of 14 November 2005. See also on line information from the CDEEE, "Speech by
Radhamés Segura, Executive Vice-President of the Corporation, on the renegotiation of electricity sector
contracts". Viewed at: www.cdeee.gov.do/index.php?option=com_docman&task=doc_download&gid=7.
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Box IV.1: Characteristics of the electricity sector, January 2008

The factors affecting the performance of the electricity sector identified in the Sector Plan for the period
2006-2012 include:

• the losses of the distribution companies and their low investment capability;
• the high prices paid by the distribution companies to the generators (US$0.1283 per kWh in 2006);
• the long terms of the contracts between the generation and distribution companies;
• the high level of dependence on the use of oil for generating electricity;
• the difficulty in targeting State subsidies exclusively at people on low incomes;
• the general reluctance to pay for electricity and the inability of the distribution companies to
suspend service to customers who do not pay;
• the inadequate resources of the institutions responsible for the sector;
• the limited coordination capacity of the State electricity companies; and
• the limited capacity for transporting electricity between north and south.

Source: CNE, CDEEE and SIE (2006), Comprehensive plan for the electricity sector in the Dominican
Republic: period 2006-2012, September. Viewed at: http://www.cdeee.gov.do/index.php.

(b) Legal and institutional framework

39. Policy formulation rests with the CNE, whose board is composed of the Ministers of Industry
and Trade; the Economy, Planning and Development; Finance; Agriculture; and Environment and
Natural Resources; and the Governor of the Central Bank and the Director of the Dominican
Telecommunications Institute.44 The supervision and inspection of the electricity sector is the
responsibility of the SIE.45 There is a coordinating body responsible for coordinating the operation of
the generation, transmission, distribution and marketing facilities.46

40. Law No. 125-01 prohibits the private ownership and operation of hydroelectric or
transmission companies.47 However, it allows the State to make with private parties "the financial
arrangements necessary to finance, build or temporarily administer any transmission or hydroelectric
generation project".48 Moreover, hydroelectric plants of 5 MW or less may be privately owned.49

41. Companies in the sector must be dedicated exclusively to generation, transmission or


distribution and marketing.50 However, the distribution companies Edenorte, Edesur and Edeeste may
own generating plants provided that the generating capacity of each plant does not exceed 15 per cent
of the maximum demand on the system. The authorities have pointed out that as at mid-2008, no
private generating enterprise was linked to any of the distribution companies.

42. The generation, distribution and transmission of electricity generally require a concession. 51
The requirements for obtaining a concession are set out in the Implementing Regulations of the
General Law on Electricity.52 Distribution service concessionaires have the exclusive right to supply
44
General Law on Electricity No. 125-01 of 26 July 2001, Article 12.
45
Ibid., Article 24.
46
Ibid., Article 38.
47
Ibid., Article 41, paragraph IV.
48
Ibid., Article 131.
49
Law No. 57-07 on encouraging the development of renewable sources of energy and their special
regimes, of 7 May 2007, Article 5, paragraph II.
50
Law No. 125-01, Article 11.
51
Ibid., Article 41, paragraph II.
52
Ibid., Articles 62 et seq.
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the users subject to regulated prices in each concession zone.53 According to the authorities, since
2001 about 20 concessions have been granted for electricity generation and no application has been
rejected.

43. The SIE is authorized to place ceilings on the prices that distribution companies apply to users
with an installed capacity of less than 1.3 MW in 2008 ("regulated" or "public service" users). The
supply of electricity to regulated users accounts for about 92 per cent of the total electricity supply.

44. Law No. 186-07, promulgated in August 2007, defines those acts which constitute "electricity
fraud" and lays down the corresponding penalties for the purpose of combating the theft of
electricity.54 The International Monetary Fund points out that this initiative is an important step
towards improving the financial situation of the sector.55

45. Generating companies with an installed capacity of 15 MW or more may purchase fuel
without paying hydrocarbon tax,56 as may companies that generate their own electricity, provided that
at least half the energy they generate is fed into the national grid.

(ii) Other energy

46. The Dominican Republic meets its primary energy demand mainly with imported oil. In
2007, it imported 50 million barrels of oil equivalent; the value of its imports of oil and oil products
amounted to US$3,300 million, which represented 32 per cent of imports and 8 per cent of GDP. 57
There are no proven reserves of oil in the Dominican Republic.58

47. Each month the Dominican Republic can purchase on credit 50,000 barrels of oil a day under
the Petrocaribe Energy Cooperation Agreement signed with the Bolivarian Republic of Venezuela in
September 2005. It also purchases oil from Mexico and Venezuela under the San José Accord.59

48. The largest refinery in the Dominican Republic, the Refinería Dominicana de Petróleo, is
owned by the State and a foreign company. In November 2007, the President of the Republic
announced that the State would buy the part that the foreign company had previously put up for sale
in order to become the sole owner.60 The President has stated that this measure would enable the
Dominican Republic to import all the oil due to it under the Petrocaribe Agreement.

49. Private companies must conclude a contract with the Government to explore and exploit
hydrocarbon deposits.61 These contracts must be approved by Congress. The law prohibits the State
from granting hydrocarbons exploration and exploitation rights to "foreign governments and
sovereign entities" and their participation as "partners, associates or shareholders" of a person with

53
Ibid., Article 53.
54
Law No. 186-07 of 6 August 2007 introducing amendments to the General Law on Electricity
No. 125-01 of 26 June 2001, Article 6.
55
IMF (2008).
56
Decree No. 176-04 of 5 March 2004.
57
Ministry of the Economy, Planning and Development (2008).
58
On line information from the United States Energy Information Administration, "World Proved
Reserves of Oil and Natural Gas, Most Recent Estimates", of 9 January 2007. Viewed at:
http://www.eia.doe.gov/emeu/international/reserves.html.
59
See WTO (2002).
60
On line information from the Office of the President of the Republic, Speech on energy saving and
efficiency, 15 November 2007. Viewed at: http://www.presidencia.gob.do/app/pre_discursos.aspx.
61
Law No. 4532-56 (Petroleum), Article 1.
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exploration or exploitation rights.62 Other foreign persons may obtain hydrocarbons exploration and
exploitation rights if they undertake "exclusively to respect … the jurisdiction of the courts and the
legislation of the Dominican Republic".63 In mid-2008, Congress was considering changes in the
sector's legal framework.

50. The Ministry of Industry and Trade fixes the consumer prices and trading margins for
hydrocarbons.64 The Ministry determines the prices weekly as a function of international oil prices
and the exchange rate.

51. Law No. 112-00 requires the State to subsidize liquefied petroleum gas (LPG) "for domestic
use".65 Up to 2004, the subsidy was granted to all LPG users. Decree No. 1068-04 abolished the
subsidy for industrial users, hotels and restaurants and "any other user [that purchases gas] in
containers larger than 100 pounds or 22.5 gallons".66 During the period 2004-2007, the annual
expenditure resulting from the LPG subsidy averaged RD$5,706 million (approximately
US$173 million in 2007). Since the end of 2007 the State has subsidized one million gallons of diesel
per month for vehicles that transport passengers, food and building materials. 67 In February 2008, the
Ministry of Industry and Trade announced the extension of this subsidy. 68 According to the
authorities, the expenditure resulting from this subsidy amounts to about US$611 million.

52. Law No. 57-07, promulgated in May 2007, offers incentives for "increasing national energy
diversity as regards self-sufficiency in the strategic inputs constituted by alternative fuels and
energy".69 Producers of biofuels and energy from renewable sources may import equipment free of
duties and taxes.70 Their income from the sale of energy is exempt from income tax for 10 years. 71
The income from the sale of equipment of domestic origin for producing biofuels or energy from
renewable sources is also exempt from income tax. For equipment to be regarded as of domestic
origin 35 per cent or more of its value added must be of domestic origin.

53. Law No. 57-07 requires biofuels to be blended with fossil fuels for road transport vehicles in
the proportions defined by the CNE. Producers must obtain a production quota for supplying the
domestic biofuel market. The CNE is the body authorized to distribute these quotas and is required to
give preference to producers that use domestic raw materials. 72 Biofuels may be imported "if
domestic production is insufficient to ensure that an adequate service is provided".73 Biofuels may be
exported "insofar as the domestic supply of such fuels is guaranteed".74

62
Ibid., Article 4.
63
Idem.
64
Law No. 112-00.
65
Ibid., Article 1, paragraph I.
66
Decree No. 1068-04 of 30 August 2004 providing for the elimination of the subsidy on liquefied
petroleum gas (LPG) for use by industry, hotels and restaurants and any other user of containers larger than
100 pounds, Article 1.
67
Decree No. 677-07.
68
On line information from the Ministry of Industry and Trade, "SEIC News: government extends
subsidy to diesel", 20 February 2008. Viewed at: http://www.seic.gov.do/Lists/Noticias%20SEIC/
DispForm.aspx?ID=33.
69
Law No. 57-07, Article 3.
70
Ibid., Article 9.
71
Ibid., Article 10.
72
Decree No. 202-08, Article 234.
73
Law No. 57-07, Article 22.
74
Decree No. 202-08, Article 227, paragraph II.
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(4) MANUFACTURING

54. The manufacturing sector is characterized by a very marked duality. It comprises a domestic
market-oriented sector and another sector that operates under the free zone regime and, inasmuch as it
sells most of its output abroad, is still the leading exporter of goods from the Dominican Republic.
Even though some sectors that operate in free zones have turned in a dynamic performance
since 2001, textiles and clothing, which remain dominant, have found it difficult to adjust to a more
competitive global environment. Moreover, poor integration between free zone operators and the rest
of the economy has been an obstacle to the development of an efficient industrial base.

(i) Sector outside the free zone regime

55. In the manufacturing sector that operates outside the free zone regime real value added
increased at an annual average rate of 4.3 per cent between 2001 and 2007 (Table IV.2). However,
the sector's contribution to GDP shrank from 21.5 per cent to 19.7 per cent during the same period,
thus continuing the declining trend noted in the Secretariat report prepared for the Dominican
Republic's previous trade policy review. The main activity is the production of beverages and tobacco
products.
Table IV.2
Value added in the manufacturing sector (excluding free zones), 2001-2007
2001 2002 2003 2004 2005 2006 2007
Total:
in millions of 1991 RD$ 48,148.9 50,944. 51,272. 51,904. 55,862. 59,072. 61,915.9
6 4 7 2 9
as a percentage of GDP 21.5 21.5 21.7 21.6 21.3 20.4 19.7
As a percentage of the total:
Milling industry products 1.2 1.1 0.9 0.9 0.9 0.9 0.9
Sugar 3.3 2.6 2.6 2.7 2.3 2.2 2.1
Beverages and tobacco products 14.0 13.7 14.3 14.1 14.6 13.9 12.4
Oil refinery products 2.2 2.1 1.6 1.5 1.4 1.3 1.0
Other manufacturing industries 79.3 80.4 80.5 80.7 80.8 81.6 83.5

Source: Information on line from the Central Bank of the Dominican Republic, "Economic statistics: real sector". Viewed
at: http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real.

56. The policy seeks to achieve "greater diversification of domestic industry, industrial
concatenation…and link-up with international markets".75 Under Law No. 392-07 the Industrial
Promotion Corporation is replaced by the Centro de Desarrollo y Competitividad – PROINDUSTRIA
(Development and Competitiveness Centre) as the public entity responsible for promoting industrial
competitiveness.

57. The sector receives support through tariffs and incentives (Chapter III(2)(iv) and (4)).

(ii) Free zones

58. The free zone regime comprises assistance for companies that operate under that regime,
mainly through tax concessions, some of which may include export subsidies (Chapter III(3)(iv)).
The Ministry of Finance calculates the values of the concessions granted in 2008 under the free zone
regime at RD$10,160 million (some US$307 million).76

75
Law No. 392-07 on competitiveness and industrial innovation, of 4 December 2007.
76
Draft Budget and Law on Public Expenditure 2008. Viewed at: http://www.stp.gov.do/
presupuestos/libro_2008/libro_2008.html.
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59. In the context of the Dominican Republic's previous trade policy review, Members agreed
that the free zone regime had performed an important role in promoting exports.77 However,
Members noted that the regime was creating structural distortions that might undermine the prospects
for future growth.

60. The value added in the free zones represents about one fifth of the value added in the
manufacturing sector operating outside them (Table IV.3). However, the free zones make a
significant contribution to exports. Moreover, they have attracted considerable amounts of foreign
investment. At the end of 2007, there were 53 free zones with 526 enterprises employing about
128,000 people. Free zone exports amounted to about US$4,679 million in 2006, approximately
71 per cent of total exports of goods from the Dominican Republic.78
Table IV.3
Principal indicators relating to free zones, 2001-2007
2001 2002 2003 2004 2005 2006 2007
Number of free zones 51 53 54 58 57 56 53
Number of enterprises 512 520 531 569 556 555 526
Number of employees 175,078 170,833 173,367 189,853 154,781 148,411 128,000
Value added:
in millions of 1991 RD$ 11,119.2 11,237.2 11,476.8 12,357.6 12,474.1 11,482.0 10,338.3
as a percentage of GDP 5.0 4.7 4.8 5.2 4.8 4.0 3.3
Imports (in millions of US$) 2,826.4 2,600.3 2,530.9 2,519.9 2,503.1 2,615.1 2,528.2
Exports:
in millions of US$ 4,481.6 4,317.3 4,406.8 4,685.2 4,749.6 4,678.8 4,562.9
as a percentage of the free zone total:
Textiles and clothing 51.6 51.6 49.8 45.3 40.1 37.1 30.0
Footwear 6.2 4.7 4.6 5.0 6.6 5.9 5.8
Electronic products 10.2 11.6 13.1 13.5 14.7 14.9 16.6
Tobacco products 7.3 7.0 6.5 6.6 7.0 7.8 8.6
Medical and pharmaceutical products 6.8 7.4 7.3 6.2 6.0 6.3 7.4
Jewellery 8.9 10.1 10.6 12.8 12.7 13.4 14.5
Other products 9.0 7.7 8.1 10.7 12.8 14.7 17.2
As a percentage of total goods exports 84.9 83.6 80.6 78.9 77.3 70.8 63.0

Source: WTO Secretariat, on the basis of data provided by the authorities.

61. The total accumulated investment of enterprises established in free zones amounts to
US$2,472 million.79 About two thirds is foreign capital. The main foreign investor is the
United States, with 47 per cent of total accumulated investment.

62. Several sectors that operate in the free zones have performed strongly since 2001, including
jewellery, electrical and telecommunications equipment and medical instruments. On the other hand,
the textile and clothing sector, which in 2006 accounted for 53 per cent of value added, 35 per cent of
exports and 54 per cent of employment in the free zones, has contracted. Although it remains
dominant, between 2001 and 2006 real value added in this sector declined by 13 per cent,
employment by 35 per cent and exports by 30 per cent. The share of made-up clothing from the

77
WTO (2002).
78
Data provided by the Central Bank of the Dominican Republic.
79
National Council for Export Free Zones (2006).
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Page 87

Dominican Republic in the United States, its main market, fell from 4 per cent in 2000 to 2.1 per cent
in 2006.80

63. It is estimated that labour productivity in the textile and clothing sector, measured as value
added per employee, increased at an annual average rate of 6.5 per cent between 2001 and 2006, as
compared with 4 per cent in the free zones as a whole.81 To a large extent, this may reflect the
adjustments made in response to the increased international competition that resulted from the
elimination of the quantitative import restrictions maintained under the Agreement on Textiles and
Clothing.

64. The Dominican Republic's free zone regime appears to have contributed to a limited extent to
domestic industrial development. The proportion of inputs from companies that operate outside the
free zone regime in free zone exports does not show any clear trend during the last decade, having
oscillated between 8 and 12 per cent.82 A survey of 32 enterprises operating in the free zones revealed
that they purchased 16 per cent of their inputs on the domestic market.83

(5) SERVICES

(i) Multilateral and preferential commitments

65. The Dominican Republic undertook specific commitments in 60 of the 160 sectors covered by
the General Agreement on Trade in Services (GATS) (Table AIV.1). It also signed the Protocols to
the GATS on financial services and telecommunications. There is a noticeable difference between its
multilateral commitments and the legal regime applied, which is much more open as a result of the
major reforms in various sectors adopted in recent years. The Dominican Republic could make its
legal regime even more secure and stable by extending its multilateral commitments into excluded
sectors and modifying its current commitments so as more closely to reflect the regime applied. The
expansion of its multilateral commitments would also narrow the broad gap that has opened up
between these commitments and the obligations assumed under the Dominican Republic-Central
America-United States Free Trade Agreement (DR-CAFTA).

66. The horizontal WTO commitments include requirements for the authorization and registration
of foreign investment and limitations on the remittance of profits abroad. There are also prohibitions
on the acquisition of land located on the coast or more than 5,000 m 2 in area, unless authorized by the
President. Not more than 20 per cent of employees may be foreign nationals.

67. Within the context of the Doha Round negotiations on services, the Dominican Republic
submitted an initial offer in October 2004 and a revised one in January 2005.

68. Within the DR-CAFTA framework, the Dominican Republic has undertaken broad
commitments on trade in services. The free-trade agreements with the members of the
Central American Common Market (CACM) and the Caribbean Community (CARICOM) contain
provisions on trade in services. However, these provisions are not being applied, since the parties
have not defined the respective conditions and limitations.
80
Ministry of the Economy, Planning and Development (2007).
81
Calculations by the WTO Secretariat using data contained in on line information from the Central
Bank of the Dominican Republic, "Economic statistics: real sector" (viewed at:
http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real) and Ministry of the Economy, Planning and
Development (2007).
82
WTO Secretariat calculations. The difference between free zone net exports and value added was
used as an indicator of domestic procurement.
83
OTF Group (2007).
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69. Services accounted for about 52 per cent of GDP in 2007, about 3 percentage points more
than in 2001.84 The increase in the contribution of services to GDP partly reflects the dynamic
performance of the communications sector. Some 60 per cent of the economically active population
works in the services sector.85 The Dominican Republic has recorded a growing surplus in its balance
of trade in services (see Chapter I).

(ii) Telecommunications

70. The telecommunications sector is one of the most dynamic in the Dominican economy.
Driven by the recent economic recovery and large investment flows, the sector has grown strongly in
the last five years and is contributing about 14 per cent to GDP. This vigorous growth has been
achieved within the context of serious efforts to modernize the sector's regulatory framework.

(a) General characteristics

71. Since the Dominican Republic's last trade policy review, the telecommunications market has
undergone rapid expansion. During the period 2002-2007, the sector's value added grew at an annual
average rate of 19.8 per cent, while its contribution to total GDP increased from 8.0 per cent to
13.7 per cent.86 The telecommunications sector is also one of the Dominican Republic's main
recipients of foreign direct investment (FDI). From January 2004 to June 2008, the
telecommunications sector received FDI flows amounting to approximately US$1,500 million.87

72. Between 2002 and 2007, the total number of telephone lines (fixed and mobile) rose from
2.6 to 6.4 million, with a total teledensity (number of lines per 100 inhabitants) of 65.8 per cent at the
end of 2007 (the index stood at 28.9 per cent in 2002). The marked expansion of the telephony
market is due to the boom in mobile lines, the number of which increased at an annual average rate of
22.7 per cent during the period 2002-2007, to reach 5.5 million. During the same period, mobile
teledensity rose from 18.8 per cent to 56.5 per cent (the average for Latin America is 66 per cent).
For its part, the number of fixed lines fell from 908,957 in 2002 to 906,485 in 2007, due to the
replacement of fixed lines by mobile ones.88 Fixed teledensity in 2007 was 9.3 per cent, which is
below the Latin American average (17 per cent).

73. Like mobile telephony, the Internet access services market has expanded rapidly in recent
years. The number of Internet accounts has more than tripled, rising from 82,518 in 2002 to 264,284
in 2007, which led to an increase in the Internet penetration index from 6.9 per cent to 17.2 per cent in
the period 2002-2007.89 Within this market, broadband Internet accounts (mainly ADSL) have
increased sharply and account for 54 per cent of all Internet accounts. During the period 2002-2007,

84
The Central Bank data on services do not cover construction. On line information from the Central
Bank of the Dominican Republic: "Economic statistics: real sector". Viewed at:
http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real. Services do not include construction.
85
On line information from the Dominican Central Bank, "Economic statistics: labour market".
Viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Mercado_de_Trabajo.
86
The data relate to the "communications" sector which includes voice telephone services;
packet-switched data transmission services; telegraph services; facsimile services; private leased circuit
services; connection and interconnection services; paging services; and maritime and air-ground mobile
telecommunications services, as well as radio and television cable services; sound and images transmission
services, on a fee or contract basis; other communications services. Information from the Central Bank of the
Dominican Republic, viewed on line at: http://www. bancentral.gov.do/.
87
Data provided by INDOTEL. Do not include investment in television and sound broadcasting.
88
INDOTEL data. Viewed at: http://www.indotel.gob.do.
89
Idem.
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the total number of Internet users increased from 621,719 to about 1.7 million. Nevertheless, access
to Internet accounts in rural areas is still limited to 1 per cent of households.90

74. According to the authorities, increased competition in the Dominican telecommunications


market has led to a trend towards a reduction in mobile telephony and Internet service tariffs.
However, the reduction has not been on the scale that might have been expected given the dynamism
of the sector, and Dominican tariffs are still relatively high compared with those of other countries in
the region.

75. In June 2008, 37 concessions for final telecommunications services, 32 for providing local
fixed telephony, 8 for mobile telephony, 36 for national and international long distance, 97 for cable
television and 20 for Internet access had been granted, but not all of these concessions were in
operation.91 The chief operator in the telecommunications market is Claro-Codetel, owned by
América Móvil (Mexico) since 2006, which accounts for about 77 per cent of the fixed telephony
market, 49 per cent of the mobile market and 78 per cent of Internet accounts. 92 Other major
operators are TRICOM (Dominican Republic), Viva (Trilogy Partners, United States) and
Orange Dominica (France Telecom). The economic recovery has encouraged the telecommunications
companies to invest in new services such as wireless broadband, Internet telephony and
third-generation mobile telephony.93 The State does not participate in the provision of
telecommunications services.

(b) Legal and institutional framework

76. The legal framework for the Dominican telecommunications sector mainly comprises the
General Law on Telecommunications (Law No. 153-98) of May 1998 and a series of standards and
regulations issued by the Instituto Dominicano de Telecommunicaciones – INDOTEL (Dominican
Telecommunications Institute).94

77. INDOTEL, established by Law No. 153-98 as a regulatory body with functional,
jurisdictional and financial autonomy, is mandated to ensure sustainable, fair and effective
competition in the provision of telecommunications services. Its functions include the promotion of
investment in the sector, the supervision of service providers, the management of the frequency
spectrum, and dispute settlement. INDOTEL is financed from the income derived from use of the
public radio-frequency domain and by a portion of the Contribution to Telecommunications
Development (CDT), a 2-per cent levy applied to the end user of telecommunications services.

90
Idem.
91
Idem.
92
Idem.
93
Viewed at: http://totel.com.au/dominican-republic-telecommunications-research.asp.
94
The most important recent regulations include (number of the resolution in parentheses): General
Regulation on the Telephone Service (105-07); Regulation on Service Tariffs and Costs (093-06); Regulation
on Separate Accounting (228-06); Regulation on Number Portability (156-06); Regulation on Free and Fair
Competition for the Telecommunications Sector (022-059); Regulation on Concessions, Special Registrations
and Licences for Providing Telecommunications Services in the Dominican Republic (129-04); General
Regulation on the Use of the Radio-Frequency Spectrum (128-04); General Regulation on Interconnection for
Public Telecommunications Services Networks (042-02); Regulation on the Settlement of Disputes between
Users and Providers of Telecommunications Services (124-05); Regulation on the Telecommunications
Development Fund (17-01 and 040-03); Regulation on Cable Broadcasting (160-05); Regulation on the
Frequency-Modulated Sound Broadcasting Service (045-02, 093-02 and 073-04); Regulation on the
Amplitude-Modulated Sound Broadcasting Service (046-02 and 094-02); and the Regulation on the
Contribution to Telecommunications Development (98-01, 086-04 and 180-04). Viewed at:
http://www.indotel.gob.do.
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78. INDOTEL is also responsible for administering the Fondo de Desarrollo de las
Telecommunicaciones – FDT (Telecommunications Development Fund), which was set up to finance
telecommunications projects in low-income areas with funds from the CDT. In 2007, FDT resources
amounted to RD$759 million (about US$23 million).

79. Law No. 153-98 applies to telecommunications carrier services, final services or tele-services,
value-added services and broadcasting services. The objectives of the Law include reaffirming the
principle of universal service, including free access to public telecommunications networks and
services under conditions of transparency and non-discrimination, promoting the provision of quality
telecommunications services and competitive prices, guaranteeing the right of users to choose the
service provider that suits them best, together with freedom of provision on the part of concession
holders, and promoting free competition.

80. Law No. 153-98 leaves public telecommunications service providers free to set consumer
prices. Nevertheless, INDOTEL can intervene in price setting if it determines that the conditions are
not such as to ensure effective and sustainable competition, on the basis of the Regulation on Free and
Fair Competition for the Telecommunications Sector and the Regulation on Service Tariffs and Costs.
Interconnection charges are agreed freely among concession holders, as are the tariffs for international
services. If the parties fail to agree, INDOTEL can intervene in the setting of these charges in
accordance with the General Regulation on Interconnection for Public Telecommunications Service
Networks. The operators of public telecommunications networks must allow other service providers
to interconnect to those networks.

81. In 2003, INDOTEL was called upon to intervene owing to lack of agreement on
interconnection contracts between four of the main telecommunications concession holders. After
INDOTEL had issued a resolution establishing preliminary interconnection conditions, the companies
in question arrived at bilateral agreements which the regulatory body found to be in conformity with
the legislation.95 INDOTEL has not formally investigated any possible abuse of a dominant position.

82. Under Law No. 153-98 and the Regulation on Concessions, Special Registrations and
Licences for Providing Telecommunications Services, providing third parties with most of these
services requires a concession granted by INDOTEL. This concession is awarded by competitive
bidding in those cases in which a licence for the use of frequencies allocated to public
telecommunications services is required. A licence from INDOTEL is needed to use the public
radio-frequency domain. Companies must be established on Dominican territory in order to obtain
the corresponding concessions and licences. There are no restrictions on the source of capital, except
in the case of public broadcasting services for which control of the company (at least 51 per cent of
the shares) must be in Dominican hands. For the provision of some services, such as public value
added services and private telecommunications services, a concession is not required, merely
registration with INDOTEL.

83. The Regulation on Separate Accounting requires companies to maintain cost accounting for
each public telecommunications service offered on the market and to submit this information
regularly to INDOTEL, which then uses it as an analytical basis for preventing possible
cross-subsidization and the offering of services at below cost prices. The Regulation on Number
Portability, which will enter into force in 2009, seeks to remove the barriers to the entry of new

95
The issues included network access charges (including the incoming international long-distance
access charge), the interconnection of national Internet nodes, the access codes for prepaid services and the cost
of acquiring pre-existing bidirectional facilities. See INDOTEL Resolutions No. 023-03 (25 February 2003)
and No. 051-03 (30 April 2003).
WT/TPR/S/207/Rev.1 Trade Policy Review
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competitors and guarantee the right of users to choose the service provider that suits them best. The
Dominican Republic will be one of the first Latin American countries to apply number portability.

84. Network unbundling is provided for in the Dominican legislation, under which service
providers so requested must permit the shared use of subscriber loops or sub-loops which are an
essential facility for public telecommunications services, other than the fixed-telephony service.
Moreover, companies must make essential-facility subscriber loops fully available in areas in which
they are the sole fixed-telephony service provider.96 In actual fact, INDOTEL has not found it
necessary to order unbundling.

85. Within the framework of the WTO Negotiating Group on Basic Telecommunications,
the Dominican Republic has signed the Fourth Protocol to the GATS, which was ratified with the
promulgation of Law No. 153-98. In its Schedule of Commitments, the Dominican Republic
accepted the commercial presence of foreign telecommunications service providers, on condition that
they establish legal residence in Dominican territory and obtain an INDOTEL concession. 97 National
treatment remains unbound and there are no specific commitments for modes 1 and 2. Moreover, it
has incorporated in its Schedule the Reference Paper on Telecommunications, undertaking to prevent
the main providers of telecommunications services from engaging in anticompetitive practices and
guaranteeing interconnection to public telecommunications networks under non-discriminatory
conditions.

(iii) Financial services

(a) General considerations

86. The banking sector has recovered from the acute crisis of 2003-2004. The prudential
indicators have shown a marked improvement, largely because of the strengthening of the supervisory
regime since the Dominican Republic's last Review. However, the financial margin and the cost of
credit are still high. Foreign companies may set up in the banking sector. The insurance law, on the
other hand, does not allow insurance companies from countries where Dominican companies cannot
operate to conduct business in the Dominican Republic. Moreover, there is a ban on the cross-border
supply and consumption abroad of various kinds of insurance, including for the transport of import
cargoes, and foreign insurance companies are not allowed to set up in the Dominican Republic
through a branch (sucursal). The latter restriction should be abolished in 2011 under the DR-CAFTA
framework.

87. Real value added in the financial sector grew at an annual average rate of about 9 per cent
between 2001 and 2007.98 The sector's contribution to GDP increased from 2.9 per cent to 3.4 per
cent during the period. The sector employs about 2 per cent of the economically active population.99

88. The Dominican Republic ratified the Fifth Protocol to the GATS in June 2003, but its
multilateral commitments on financial services are limited (Table AIV.1). The participation of
foreign investment in the capital of the companies that provide the majority of the services in its
96
General Regulation on Interconnection for Public Telecommunications Services Networks (Board of
Directors Resolution No. 042-02 of 7 June 2002, as amended by Resolution No. 052-02 of 18 July 2002).
Viewed at: http://www.indotel.gob.do.
97
WTO documents S/GBT/W/1/Add.30 and GATS/SC/28/Suppl.2, of 12 February and 11 April 1997,
respectively.
98
On line information from the Central Bank of the Dominican Republic, "Economic statistics: real
sector". Viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real.
99
On line information from the Central Bank of the Dominican Republic, "Economic statistics: labour
market". Viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Mercado_de_Trabajo.
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Schedule of Commitments is limited to 49 per cent. Moreover, for some deposit services, the
establishment of financial institutions is subject to evidence of economic necessity. The preferential
commitments on financial services within the DR-CAFTA framework are relatively extensive. As in
other parts of the services sector, the regime applied to financial services by the Dominican Republic
and the obligations assumed under the DR-CAFTA are more liberal than the regime bound at the
WTO.

(b) Banking services

89. At the end of 2007, the sector's assets accounted for 53 per cent of GDP, about 10 percentage
points less than at the end of 2002.100 Approximately 82 per cent belong to 13 "full-service" banks,
13 per cent to 17 savings and loan associations and the rest to 88 other financial intermediation
institutions, including 36 finance companies and 23 savings and credit banks. 101 Approximately
26 per cent of the assets of the financial system are concentrated in one State-owned bank
(Banreservas) and about 9 per cent in the three foreign-owned banks.

90. Between 2003 and 2004 the sector passed through a severe crisis which was marked by the
failure of one of the main banks and contributed to the serious difficulties that affected the economy
in general (Chapter I). According to the Minister of the Economy, Planning and Development
"ineffective regulation and prudential supervision was a determining factor that led… to fraud and the
crisis".102 The IMF points out that since the crisis the Dominican Republic has significantly
strengthened its banking supervision regime and that the full implementation of risk-based
supervision is its main challenge in this area.103

91. The sector has recovered from the effects of the crisis. However, in 2007 the banks' interest
spread was almost nine percentage points and the weighted average nominal lending rate rose to
15.7 per cent.104 According to the authorities, the large spread is the result of the banking sector's high
operating costs and minimum reserve requirements; they have also acknowledged that it could in part
reflect the relatively low levels of competition in the sector.

92. Payments made by cheque and electronic transfers of funds are subject to a selective
consumption tax of 0.15 per cent.105 Payments of interest on loans contracted with foreign credit
institutions are subject to a tax of 10 per cent.106

93. The Dominican Republic is assessing a draft law to create a "financial free zone" through
which financial services would be offered to non-resident natural persons and legal persons with their
head offices abroad.

100
Information provided by the authorities for the purposes of this Review.
101
The legislation defines full-service banks as "entities that can take instant-access, demand or current
account deposits from the public and carry out all types of operations, including within the general catalogue of
activities established in…this Law". Law No. 183-02 of 21 November 2002 approving the Monetary and
Financial Law, Article 36.
102
Montás, J. T. (undated).
103
IMF (2008).
104
The interest spread was calculated from the difference between the weighted nominal lending and
borrowing rates of the full-service banks. See on line information from the Central Bank of the Dominican
Republic, "Economic statistics: monetary and financial sector". Viewed at: http://www.bancentral.gov.do/
estadisticas.asp?a=Sector_ Monetario_y_Financiero.
105
Law No. 11-92 approving the Tax Code of the Dominican Republic, Article 382.
106
Ibid., Article 306.
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94. Policy formulation in the banking sector is the responsibility of the Monetary Board,
consisting of the Governor of the Central Bank, the Minister of Finance, the Superintendent of Banks
and six other members appointed by the President of the Republic for renewable two-year periods. 107
The Superintendency of Banks is the supervisory authority and in performing this function may issue
regulations.108 The Central Bank is responsible for payment system "oversight and final
settlement".109

95. Since its last Review, the Dominican Republic has introduced major reforms in the sector's
legal framework. In November 2002, the General Banking Law of 1965 was replaced by the
Monetary and Financial Law.110 Likewise, various regulations have been adopted to strengthen
oversight, including rules on asset evaluation, capital adequacy, loans to related parties, consolidated
oversight, market and liquidity risks, publication of financial statements, risk concentration and
corporate governance. The authorities note that these rules reflect international best practice.

96. Full-service banks and non-financial enterprises established in the Dominican Republic can
obtain loans from foreign banks or make deposits in those banks.111 Cross-border capital flows are not
subject to authorization or registration requirements. Banks without a commercial presence in the
Dominican Republic may not promote their products.

97. Foreign banks may establish subsidiaries, branches (sucursales) and representative offices in
the Dominican Republic.112 The capital and reserves that foreign banks assign to their branches in
compliance with the regulations must be held in the Dominican Republic. 113 The minimum amount
required to open a subsidiary or branch of a full-service bank at the end of 2007 was RD$163 million
(about US$4.9 million); this applies to both foreign-capital and domestic-capital banks.

98. The legislation does not restrict foreign capital participation in banks. The acquisition of
more than 30 per cent of the paid-up capital of a bank by domestic or foreign investors is subject to
authorization by the Monetary Board.114 The acquisition by investors of between 3 and 30 per cent of
the paid-up capital of a bank depends on the Superintendency of Banks having "no objection".115 The
legislation does not specify any time limit for the regulator to object. According to the authorities,
since 2002 there have been seven applications for the authorization of share transfers from foreign
investors. Of these three were approved and four rejected for non-compliance with the regulations.
Investments amounting to less than 3 per cent of a bank's paid-up capital must be notified to the
Superintendency of Banks.

99. The legislation does not place any restriction on the number of banks operating in the
domestic market. The Superintendency of Banks must authorize the opening and closing of branch
offices (agencias), irrespective of the source of the capital of the bank to which they belong. 116 The
services which banks may offer are set out in Law No. 183-02 and do not vary with the source of their
107
Law No. 183-02, Articles 9-11.
108
Ibid., Article 19.
109
Ibid., Article 15.
110
Law No. 183-02.
111
Article 36 of Law No. 183-02 defines full-service banks as "those entities that can take
instant-access, demand or current account deposits from the public and carry out all types of operations,
including within the general catalogue of activities established in Article 40 of this Law".
112
Law No. 183-02, Article 39. The Law uses the term "filial" to refer to subsidiaries.
113
Ibid., Article 38.
114
Regulation on the opening and operation of financial intermediation institutions and representative
offices, Articles 14 and 31.
115
Ibid., Article 15.
116
Law No. 183-02, Article 35.
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capital.117 In general, banks require the authorization of the Superintendency of Banks to obtain
liquidity in the domestic securities market.118

100. The authorization of the Monetary Board is needed to operate a bank. The Monetary Board
must first consult the Superintendency of Banks.119 The criteria for evaluating applications for
authorization are laid down in the Regulation on the opening and operation of financial intermediation
institutions and representative offices.120 These criteria are similar for domestic and foreign
investors, except that the authorities must satisfy themselves that the subsidiaries or branches
(sucursales) of the foreign banks have received the authorization of the parent company and its
supervisory body to set up in the Dominican Republic. Likewise, the authorities must verify that the
Superintendency of Banks has, or can sign, a cooperation and information exchange agreement with
the parent company's regulatory body. The legislation does not specify a maximum period for the
Monetary Board to rule on an application for authorization. According to the authorities, two
applications from foreign banks have been received since Law No. 183-02 came into force and both
were approved.

101. Full-service banks may invest up to 20 per cent of their paid-up capital in "support and related
services entities".121 They may also invest up to 10 per cent of their paid-up capital in non-financial
enterprises, including insurance companies, provided that the bank does not become the owner of
more than 10 per cent of the paid-up capital of the non-financial enterprise. They may not invest
more than 20 per cent of their paid-up capital in foreign financial entities, including their branches
(sucursales) or representative offices.

102. The deposits of banks established in the Dominican Republic, irrespective of the source of
their capital, are guaranteed up to RD$500,000 (about US$15,120).122 However, the authorities have
pointed out that if there were a systemic risk, the deposits would be totally guaranteed. The banks are
free to determine interest rates and the charges for their services, although they are required to publish
them.

(c) Insurance services

103. The sector's assets amounted to about RD$20,368.1 million in 2007 (some US$616 million),
equivalent to 1.5 per cent of GDP.123 Life insurance premiums amounted to about
RD$2,056.4 million in 2007 (US$62.2 million), and general insurance premiums to
RD$17,056.2 million (US$515.7 million). There are 35 insurance companies operating in the
Dominican Republic, of which 29 are domestic-capital and the rest foreign-capital institutions.

104. The Ministry of Finance is responsible for formulating insurance sector policy.124 The
Superintendency of Insurance is the supervisory body and in the course of performing this function
may issue regulations.125 In September 2002, the Dominican Republic reformed the legal framework
through Law No. 146-02.

117
Articles 40, 42 and 43.
118
Law No. 183-02, Article 44.
119
Ibid., Article 35.
120
Article 21.
121
Law No. 183-02, Article 41.
122
Article 64.
123
Data provided by the authorities.
124
On line information from the Ministry of Finance, "Functions and powers". Viewed at:
http://www.finanzas.gov.do/la_institucion/funtions.html.
125
Law No. 146-02 of 9 September 2002 on insurance and bonds, Article 235.
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105. Under Article 21 of Law No. 146-02, authorization to operate in the Dominican Republic may
not be granted to insurance or reinsurance companies "owned by companies organized in accordance
with the laws of other countries in which Dominican companies are not allowed to operate".

106. Law No. 146-02 prohibits the cross-border supply or consumption abroad of certain
categories of insurance, including: life and health; property situated in the Dominican Republic;
ships' hulls, aircraft and motor vehicles licensed in the Dominican Republic; and the transport of
import cargo.126 Foreign reinsurance companies may offer their services without needing to be
established in the Dominican Republic, provided that they have authorization from the
Superintendency of Insurance.127 The requirements for obtaining authorization are set out in
Law No. 146-02, which also specifies a period of 30 days for the Superintendency to rule on an
application.128 According to the authorities, there are 59 reinsurance companies which, although not
established in the Dominican Republic, have received authorization to offer their services.

107. Foreign insurance companies may set up subsidiaries in the Dominican Republic, but not
branches (sucursales).129 All insurance companies established in the Dominican Republic must be set
up in the form of a joint-stock or public limited company. Under the Free Trade Agreement between
the Dominican Republic, Central America and the United States, the Dominican Republic has
undertaken to permit the establishment of branches of foreign insurance companies by March 2011 at
the latest. Within the context of this Review, the authorities have indicated that the possibility of
establishing branches would be extended to all foreign enterprises.

108. The legislation does not restrict the participation of foreign capital in insurance companies,
nor does it impose limits on the number of insurance companies that may operate in the Dominican
Republic, or on the number of branch offices (agencias). The legislation does not differentiate
between the kinds of services that domestic- and foreign-capital insurance companies may offer. The
same company may offer general and personal insurance.130

109. To operate an insurance company it is necessary to obtain the authorization of the


Superintendency of Insurance.131 The requirements for obtaining authorization are set out in
Law No. 146-02 and do not vary with the source of the capital, except that the foreign company's
regulatory body must certify that "it is organized and operates in accordance with the law and is
authorized to carry out the operations corresponding to the branches of insurance mentioned in its
application".132 Likewise, foreign insurance companies must have operated in their jurisdiction of
origin for more than five years. According to the authorities, none of the applications for
authorization received has been rejected.

110. Law No. 146-02 leaves insurance companies free to set their premiums. 133 However, it
requires the formulation of minimum technical parameters that allow the Superintendency of
Insurance to evaluate the premiums.134 According to the authorities, these parameters have not been
defined. Civil liability insurance is compulsory for "motor vehicles and trailers". 135 The premiums

126
Article 6.
127
Law No. 146-02, Article 23.
128
Articles 23 and 24.
129
Law No. 146-02, Article 13.
130
The forms of insurance covered by each category are specified in Article 10 of Law No. 146-02.
131
Law No. 146-02, Articles 12 and 13.
132
Ibid., Article13.
133
Article 89.
134
Article 91.
135
Law No. 146-02, Article 112.
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that may be charged by companies that sell such insurance are contained in a resolution of the
Superintendency of Insurance.136

(iv) Air transport and airports

111. The Dominican Republic updated the legal framework for the air transport sector in 2006.
There are 31 bilateral air transport instruments which generally grant, in addition to other basic
freedoms, the right to carry passengers between the counterparty country and a third country on
flights originating in the Dominican Republic (fifth freedom). Cabotage is reserved for companies
which have a minimum of 51 per cent domestic capital and are under the "effective control" of
Dominicans; foreign participation in Dominican companies that provide international services is
restricted to 65 per cent. The legislation does not impose any limitations on the foreign ownership of
public airports or on their operation by foreign enterprises.

112. In 2007, some 6.7 million passengers were carried on scheduled flights and 2.3 million on
charter flights.137 The Dominican Republic does not maintain a register of the volume of cargo
transported by air.

113. The airports of Santo Domingo (Las Américas) and Punta Cana handle about 75 per cent of
the passengers carried on scheduled flights. The main airports for charter flights are Punta Cana and
Puerto Plata. The main airports for freight are Las Américas and Santiago. Aerodom (Aeropuertos
Dominicanos Siglo XXI, S.A.) operates six international airports, including Las Américas, under a
25-year "build-operate-transfer" concession. Aerodom is a consortium with foreign participation
controlled by Dominican investors; a subsidiary of Vancouver International Airport Authority
operates all Aerodom's airports under an operation and administration agreement. The State extended
the term of Aerodom's concession from 20 to 25 years in 2001. The other three international airports,
including Punta Cana, are in private Dominican ownership.

114. In mid-2008, there were three domestic airlines certified to provide an international air
transport service. Eight domestic airlines have certificates to offer a cabotage air service.

115. The World Bank has pointed out that the charges that users of the Dominican Republic's
airports have to contend with are relatively high.138 On the other hand, the same study notes that air
transport costs appear to be lower than in several other countries of the Americas.

116. Within the framework of its multilateral commitments, the Dominican Republic has
undertaken not to impose limitations on cross-border supply, consumption abroad or investment with
respect to maintenance and repair services for transport equipment, including aircraft (Table AIV.1).

117. The Dominican Republic updated the sector's legal and institutional framework by enacting
Law No. 491-06, in force since the end of 2006.139 The Law created the Instituto Dominicano de
Aviation Civil – IDAC (Dominican Civil Aviation Institute) and updated safety standards. The
formulation of air transport policy is the responsibility of the Civil Aviation Board, which consists of
various government entities and representatives of the private sector. 140 The IDAC is an autonomous
public body entrusted with the supervision of the sector.141
136
Superintendency of Insurance Resolution No. 010-2002 of 26 December 2002.
137
On line information from the Dominican Civil Aviation Institute, "Aviation statistics". Viewed at:
http://www.idac.gov.do/estadisticas/estadisticas.html.
138
World Bank (2005b).
139
Law No. 491-06 on Civil Aviation.
140
Ibid., Article 205.
141
Ibid., Article 26.
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118. Companies established abroad can provide international air transport services in the
Dominican Republic under the corresponding international agreements. In the absence of an
agreement, the provision of international air transport services is subject to the "principle of fair
reciprocity"142, unless the Civil Aviation Board considers that special circumstances prevail.143

119. The Dominican Republic has signed 31 air transport instruments with: Antigua and Barbuda,
Argentina, Austria, Belgium, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, El Salvador,
France, Germany, Guatemala, Haiti, Hungary, Israel, Italy, Jamaica, Mexico, Netherlands,
Netherlands Antilles, Panama, Portugal, Russia, Spain, Trinidad and Tobago, United Arab Emirates,
United Kingdom, United States and the Bolivarian Republic of Venezuela. It has also signed the Air
Transport Agreement between the Member and Associate Member States of the Association of
Caribbean States. From the standpoint of passenger traffic volume, the most significant bilateral
agreement is that between the Dominican Republic and the United States.

120. All the bilateral instruments signed by the Dominican Republic establish the third and fourth
freedoms, in accordance with the Chicago Convention of 1944, and most also establish the
fifth-freedom passenger traffic right. According to the authorities, the Dominican Republic has
granted sixth-freedom passenger traffic and seventh-freedom freight traffic rights to Chile, Colombia
and Mexico. The authorities note that in almost all the bilateral instruments the refusal clause is based
on the criterion of majority ownership and effective control.144 Moreover, they have indicated that
most of the instruments do not limit the volume of traffic, the frequency of the service or the type of
aircraft that the airlines can use.

121. Cabotage air transport (eighth-freedom traffic right) is reserved for companies that meet the
following requirements: at least 51 per cent of their capital belongs to Dominican nationals; their
head office is situated in the Dominican Republic; and at least 35 per cent of their board of directors
and two thirds of their "executive personnel" are Dominican nationals.145 Moreover, the companies
must maintain "effective control" of their fleet and their air crews must be Dominican. 146 However,
they may employ foreign technical experts if there are no duly qualified Dominican nationals but only
for the time needed to train the latter.147 Domestic companies that only offer international air transport
services must meet the same essential requirements as the providers of cabotage services, except that
foreign participation in their capital may be as much as 65 per cent.148

122. Foreign companies must obtain an operating licence issued by the Civil Aviation Board.149
These licences are granted for specified routes. Applicants must show that they have the
authorization of their country's aviation authorities to operate the corresponding international service
and that their State of origin is prepared to afford reciprocal treatment to Dominican companies.
Applicants must be domiciled in the Dominican Republic and appoint an agent to represent them.
Operating licences are non-transferable and are granted for renewable periods of up to ten years.
According to the authorities, 49 operating licences have been granted since 2001 and none has been
refused.

142
Ibid., Article 218.
143
See, for example, Articles 221 and 235 of Law No. 491-06.
144
The term "refusal" encompasses the criteria that determine the revocation of authorizations to
exploit traffic rights.
145
Law No. 491-06, Articles 237 and 239.
146
Ibid., Article 120.
147
Ibid., Article 121.
148
Ibid., Article 237.
149
Ibid., Article 240.
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123. The legislation does not impose any limitations on the number of providers of computerized
reservation systems, or on the number of travel agencies which the providers of these systems may
service. Providers of computerized reservation systems do not need to be established in the
Dominican Republic to offer their services. Foreign airlines may promote and sell their products in
the Dominican Republic, provided that they have an operating licence from the Civil Aviation Board.
There are no restrictions on the number of sales outlets.

124. According to the authorities, Dominican-registered aircraft may be maintained in a foreign


workshop, provided that the workshop has a certificate issued by the civil aviation authority of a
Member State of the International Civil Aviation Organization and recognized or authenticated by the
IDAC. The requirements for workshops located abroad are listed in the Dominican Aviation
Regulations.150

125. The legislation does not impose any limitations on foreign ownership of public airports or on
their operation by foreigners. Nor does it limit foreign supply of passenger and aircraft ground
support services.

(v) Maritime transport and ports

126. Maritime transport plays an essential role in the Dominican Republic's international trade.
Although the supply of cabotage maritime transport services is, in principle, restricted to
Dominican-registered vessels, foreign vessels may provide such services on a provisional basis. The
legislation provides for a discount on certain tariffs relating to port services for Dominican-flag
vessels. There are no limitations on foreign capital participation in port operation.

127. Approximately 90 per cent of the Dominican Republic's foreign trade volume is transported
by sea. In 2007, the volume of cargo handled by Dominican ports amounted to 23.6 million tonnes.151
That same year, about 385,000 passengers arrived in the Dominican Republic by sea.

128. The Dominican Republic has 14 main ports. The ports of Caucedo and Río Haina, both in the
neighbourhood of Santo Domingo, handle 72 per cent of the total cargo volume.152 Most container
traffic passes through Caucedo. The main passenger ports are La Romana, Samaná and
Santo Domingo. The ports of Caucedo and La Romana are privately owned; the other five have been
granted on concession to private companies. Most of the providers of maritime transport support
services are private companies, some with foreign capital.

129. According to the authorities, the Dominican Republic applies the International Ship and Port
Facility Security Code. The port of Caucedo participates in the Container Security Initiative (CSI),
which is administered by the United States Customs and Border Protection Service, and in the
Business Alliance for Secure Commerce, a private initiative aimed at promoting trade security.

130. The Dominican Republic does not have a national merchant fleet. The authorities have said
that they have no figures on maritime transport costs in the Dominican Republic.

131. The Dominican Republic has not undertaken any commitments with respect to maritime
transport under the GATS (Table AIV.1).153

150
Dominican Aviation Regulations (No. 145), Section 145.51.
151
Information provided by the authorities.
152
On line information from the Dominican Port Authority, "Statistics". Viewed at:
http://www.apordom.gov.do/estadistica.pdf.
153
WTO document GATS/SC/28 of 15 April 1994.
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132. The Autoridad Portuaria Dominicana – APORDOM (Dominican Port Authority) implements
port policy and is authorized to put out ports on concession to private companies. It supervises the
operation of ports that have been put out on concession and operates the rest. 154 The
Dominican Republic's National Systemic Competitiveness Plan recommends that the APORDOM
functions be reformed so as to involve only supervision of the port system.155

133. The legislation does not restrict the number of providers of scheduled or non-scheduled
international maritime transport services in the Dominican Republic. Companies providing
international maritime transport services that are not domiciled in the Dominican Republic must
appoint a shipping agent to represent them. There are no institutional cargo allocation systems.

134. Cabotage maritime transport services are reserved for Dominican-flag vessels.156 However, if
the service cannot be provided by a Dominican-flag vessel, the Admiralty may order the provisional
registration of a foreign-flag vessel under the Dominican flag to enable it to provide that service. No
limits are imposed on the participation of foreign capital in Dominican-flag vessels. The owners of
these vessels must be established in the Dominican Republic.

135. The tariffs for international maritime transport services are not subject to government
approval. The Dominican Republic has no provisions on maritime conferences.

136. Law No. 70 authorizes APORDOM to grant concessions for the operation of ports and the
supply of port services.157 The legislation does not impose any restrictions on the participation of
foreign capital in concession-holding companies. Law No. 3003 prohibits foreign-flag vessels from
carrying out "towing, passenger transport and loading or unloading operations within the ports". 158
The authorities note that, in practice, as there is no national merchant fleet, foreign vessels can
provide these services.

137. The Government fixes the fees for port services. Dominican-flag vessels that carry out
loading or unloading operations receive a 50 per cent discount on fees for the "use of port facilities or
demurrage service".159 Moreover, Dominican-flag vessels are exempt from berthing charges.160

(vi) Professional services

(a) General considerations

138. In the Dominican Republic, to practise in any profession considered to involve risk, both
Dominican and foreign professionals must obtain a permit (exequátur) granted by presidential decree;
professionals holding foreign diplomas must have them accredited in order to be able to practise in the
Dominican Republic. Foreign architects and engineers hired to exercise their professions temporarily
in the Dominican Republic are not subject to these requirements; nor do foreign lawyers with a
licence from a jurisdiction that allows Dominican lawyers to practise need to have their diploma
endorsed. Other restrictions are imposed on the exercise of professions by foreigners in certain areas
of accountancy, legal services, and engineering and architecture.

154
Law No. 70 of 17 December 1970 establishing the Dominican Port Authority, Article 4.
155
National Competitiveness Council (undated).
156
Law No. 3003 of 12 July 1951 on the port and coastal police, Article 56.
157
Law No. 70, Article 8.
158
Article 56.
159
Decree No. 612-05 of 2 November 2005.
160
Decree No. 519-02 of 5 July 2002, Article 3, paragraph IV.
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139. Within the framework of the GATS, the Dominican Republic has undertaken commitments
with respect to various categories of professional services, including: legal advisory, financial
auditing, tax preparation and review, management consulting, architectural and engineering, and
advertising services (Table AIV.1). The services disciplines of the DR-CAFTA cover professional
services.

140. There are nine professional bodies established by law: Colegio de Abogados (College of
Lawyers); Colegio Dominicano de Ingenieros, Arquitectos y Agrimensores (Dominican College of
Engineers, Architects and Surveyors); Colegio de Psicólogos (College of Psychologists); Colegio
Médico Dominicano (Dominican Medical Association); Colegio de Profesionales de Laboratorios
Clínicos (College of Clinical Laboratory Professionals); Colegio de Periodistas (College of
Journalists); Colegio de Notarios (College of Notaries); Colegio Dominicano de Contadores
Públicos Autorizados (Dominican College of Certified Public Accountants); and Colegio
Dominicano de Médicos Veterinarios (Dominican College of Veterinarians). The professional bodies
oversee the exercise of their respective professions and, in general, have disciplinary powers.

141. Both Dominicans and foreigners may exercise a profession only if they hold an exequátur
granted by presidential decree.161 Law No. 111 of 1942 stipulates that this requirement extends to "all
the professions that require a university diploma".162 The authorities have indicated that, in practice,
an exequátur is required to exercise professions that involve risk, for example, engineering, law, and
the professions relating to health and the financial sector. The procedure and the requirements for
obtaining an exequátur are publicly available.163 The body responsible for processing applications
varies with the course of studies followed.

142. Professionals with foreign academic credentials must have them revalidated in order to
practise in the Dominican Republic. The Universidad Autónoma de Santo Domingo – UASD
(Autonomous University of Santo Domingo) is the institution through which the State exercises its
revalidation prerogative. The requirements for revalidating foreign diplomas are set out in the
Regulation on revalidation, recognition of diplomas and accreditation of studies.164 The UASD is
authorized to revalidate foreign diplomas without further testing in the case of applicants who have
graduated from universities that grant reciprocal treatment to Dominicans under conventions signed
by the Dominican Republic.165 Article 13 of the Regulation establishes the time frame for processing
revalidations. According to the authorities, the UASD receives about 50 applications for the
revalidation of foreign diplomas every year, mainly in the fields of medicine and law.

143. Foreign professionals must obtain a "business work visa" or "NM1 visa" to practise in the
Dominican Republic. The requirements for obtaining a visa are publicly available. 166 One of the
requirements is for a contract of employment for a minimum of one year with a firm established in the
Dominican Republic. Visas are valid for one year and may be renewed.

161
Law No. 111 of 3 November 1942 on the professional exequátur, Article 1.
162
Idem.
163
On line information from the Ministry of Higher Education, Science and Technology, "Services for
citizens: exequátur decree". Viewed at: http://www.seescyt.gov.do/baseconocimiento/Lists/Services%20de%
20SEESCyT%20al%20Ciudadano/DispForm.aspx?ID=4&Source=http://wss3.seescyt.gov.do/
legalizaciondoc/default.aspx.
164
University Council Resolution No. 2005-250 of 25 August 2005.
165
Regulation on revalidation, recognition of diplomas and accreditation of studies, Article 9.
166
On line information from the Ministry of Foreign Affairs, "Consular and immigration requirements".
Viewed at: http://www.serex.gov.do/default.aspx.
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144. In general, in companies established in the Dominican Republic, 80 per cent of the employees
who do not perform management or administrative functions must be Dominican citizens. 167 The
salaries of Dominican employees must account for at least 80 per cent of the wage bill, excluding the
salaries of employees who perform technical, executive or managerial functions.168

(b) Accountancy

145. Professionals must obtain an exequátur to practise as a certified public accountant.169


Article 9 of Law No. 633 of 1944 stipulates that in order to obtain an exequátur as a certified public
accountant it is necessary to hold Dominican nationality.

(c) Legal services

146. Foreign professionals may not offer notary services or legal services relating to the judicial
function or appearance before the courts of the Dominican Republic.170 Foreign professionals may
provide other legal services on condition that they are members of the Colegio de Abogados.171
Professionals with foreign diplomas must have them revalidated in order to become members of the
Colegio de Abogados, unless the jurisdiction under which they are licensed allows Dominican lawyers
to practise under an agreement with the Dominican Republic.172

(d) Architecture and engineering

147. Professionals must register their diplomas with the Colegio Dominicano de Ingenieros,
Arquitectos y Agrimensores – CODIA (Dominican Association of Engineers, Architects and
Surveyors) in order to practise as architects or engineers.173 Foreign professionals may register their
diplomas with the CODIA only if they are licensed under a jurisdiction that allows Dominican
architects and engineers to practise.174

148. Subject to CODIA authorization, professionals with foreign academic credentials hired by
firms established in the Dominican Republic may practise temporarily without requiring an
exequátur, revalidating their diplomas or registering the latter with the CODIA.175

149. The practice of chemical engineering is subject to additional requirements. 176 The
Dominican Republic maintains restrictions on the participation of foreign professionals in certain
tourism projects (see Section (5)(vii) below).

167
Labour Code, Articles 135 and 138.
168
Ibid., Article 136.
169
Law No. 633 of 16 June 1944 on certified public accountants, Article 8.
170
Law No. 821 of 21 November 1927, Article 73, which stipulates that no-one may be appointed to
perform any judicial function in the Republic unless he or she is a Dominican citizen, of statutory age, of good
repute and in full enjoyment of his or her civil rights; and Law No. 301 of 3 February 1983 on the notary
service, Article 5.
171
Law No. 91 of 3 February 1983 instituting the Colegio de Abogados of the Republic, Article 4.
172
Idem.
173
Law No. 6200 of 22 February 1963 on the exercise of engineering, architecture, surveying and
related professions, Articles 2 and 17.
174
Ibid., Article 17.
175
Ibid., Article 18.
176
See, for example, Annex I "Services/Investment Non-Conforming Measures" of the DR-CAFTA.
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(vii) Tourism

150. Tourism performs a vital function in generating jobs and hard currency and attracting foreign
investment. The sector has recovered from the slowdown in the early part of the decade. There is no
limit on foreign investment. In principle, no licences are issued to foreign tourist guides and casino
employees must be Dominican citizens. Foreign travel agencies and tour operators may not provide
cross-border services unless they have a local agent. Investors in certain tourism projects are given
various tax incentives such as exemption from import taxes and income tax and must employ
Dominican professionals. The cost of these incentives to the Treasury will amount to
RD$1,066 million (some US$32.2 million) in 2008.

151. The tourism sector accounts for about 7 per cent of GDP and employs approximately 6 per
cent of the economically active population.177 The sector's main indicators have recovered from the
effects of various adverse external factors that were influential at the beginning of the decade
(Table IV.4). During the same period, the sector received approximately 22 per cent of net FDI flows
into the Dominican Republic.178 About 32 per cent of foreign tourists come from the United States,
followed by Canada (17 per cent), France and Spain (8 per cent each). Although the State owns some
hotels, its participation in the provision of lodging services is very limited.

152. Under the GATS, the Dominican Republic committed itself to not imposing limitations on
foreign investment in hotel and restaurant services or on cross-border supply and foreign investment
in motor vehicle rental services (Table AIV.1). Foreign investment in travel agency, tour operator
and tourist guide services is guaranteed market access but not national treatment; full commitments
have been undertaken with regard to the cross-border supply of such services.
Table IV.4
Tourism sector indicators, 2001-2007
2001 2002 2003 2004 2005 2006 2007
Number of international tourist arrivals
(thousands) 2,882 2,811 3,282 3,450 3,691 3,965 3,980
Non-resident foreigners (thousands) 2,395 2,309 2,759 2,873 3,088 3,342 3,398
Non-resident Dominicans (thousands) 487 502 524 578 603 623 581
Hotel capacity (units) 54,034 54,730 56,378 58,932 59,870 63,206 66,231
Table IV.4 (cont'd)
2001 2002 2003 2004 2005 2006 2007
Occupancy rate (%) 66.3 62.8 72.7 74.2 73.9 73.0 72.2
Foreign exchange generated (millions of US$) 2,798 2,730 3,128 3,152 3,518 3.792 3,972
Contribution to GDPa (%) 6.7 6.6 7.5 7.6 7.6 7.2 6.9

a Contribution of hotels, bars and restaurants.

Source: On line information from the Central Bank of the Dominican Republic: "Economic statistics" (viewed at:
http://www.bancentral.gov.do), and information provided by the authorities.

177
The contribution of the tourism sector to GDP and employment was estimated on the basis of data
on the hotel, bar and restaurant sector. On line information from the Central Bank of the Dominican Republic,
"Economic statistics: real sector" (viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Real)
and "Economic statistics: labour market" (viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=
Mercado_de_Trabajo).
178
On line information from the Central Bank of the Dominican Republic, "Economic statistics:
external sector". Viewed at: http://www.bancentral.gov.do/estadisticas.asp?a=Sector_Externo.
WT/TPR/S/207/Rev.1 Trade Policy Review
Page 103

153. Sector policy is formulated by the executive branch179 and implemented by the Ministry of
Tourism. Congress is considering replacing the Executive Committee for Tourist Area Infrastructure
by the National Institute for Tourism Development and creating an Institute for Tourism Promotion
and Image. Part of the strategy for the sector consists in "moving away from the enclave tourism
model … characterized by a relative inability to entrain the domestic economy and poor community
integration, towards one that is competitive and sustainable, with a view to making tourism the future
engine of the Dominican economy, capable of boosting the entire capacity for integration of all the
stakeholders in the global value chain".180 There is also a national strategic plan for the development
of ecotourism.

154. The legislation does not impose limitations on foreign investment in the tourism sector.
Travel agencies and tour operators established abroad must have a local agent to provide services in
the Dominican Republic.181 Tourist guides that provide services in the Dominican Republic must hold
a licence issued by the Ministry of Tourism.182 Licences may be issued to foreign guides "only in
exceptional cases", for example, if there are no Dominican guides who speak the language of a tour
party.183 Casino and bingo employees must be Dominican citizens.184 Drivers who transport tourists
by road must be residents of the Dominican Republic.185

155. Law No. 158-01 offers tax incentives to investors in tourism projects located in "low-growth
areas" (polos de escaso desarrollo) and "new poles in high-potential provinces and localities".186 The
Law provides for exemption from duties and other taxes resulting from the importation of products
needed to launch a project and various other national and municipal taxes, such as those relating to the
constitution of company capital and capital increases, the transfer of property rights, and
construction.187 It also establishes exemption from income tax and allows companies engaged in
activities other than tourism to deduct their investment in a tourism project from their net taxable
income.188

156. Architectural plans and "preliminary engineering details" submitted in connection with an
application to claim benefits under the Law must have been drawn up by Dominican professionals.189
Foreign professionals wishing to participate in the development of tourism projects that receive
benefits must do so through a firm established in the Dominican Republic.

157. The Ministry of Finance estimates that the value of tax concessions granted to the tourism
sector will amount to RD$1,066 million (about US$32.2 million) in 2008.190

179
Law No. 84 amending Law No. 541 of 31 December 1969 on the organization of tourism in the
Dominican Republic.
180
National Competitiveness Council (undated).
181
Law No. 541 on the organization of tourism, Article 18.
182
Ibid., Article 22.
183
Ibid., Article 23.
184
Decree No. 6273 authorizing the establishment of casinos, bingo games and fruit machines,
Article 2.
185
Regulation No. 817-03 on tourist road passenger transport, Article 11.
186
Law No. 158-01 of 9 October 2001 establishing the Law on the promotion of tourism development
for low-growth areas and new poles in high potential provinces and localities and creating the Official Tourism
Promotion Fund.
187
Ibid., Article 4.
188
Article 6, paragraph II.
189
Law No. 158-01, Article 14.
190
Ministry of Finance (2007).
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