VII. INVESTMENT CLIMATE (A) INVESTMENT PRACTICES FOREIGN INVESTMENT IN THE DOMINICAN REPUBLIC FALLS INTO TWO MAIN CATEGORIES: FREE TRADE ZONE INVESTMENT AND NON-ZONE INVESTMENT. THE INFORMATION PROVIDED BELOW APPLIES TO INVESTMENTS OUTSIDE THE FREE TRADE ZONES (EXCEPT WHERE NOTED). THE SITUATION IN THE FREE TRADE ZONES IS DESCRIBED IN PARAGRAPH (E). A1) OPENNESS TO FOREIGN INVESTMENT THE GOVERNMENT OFFICIALLY WELCOMES FOREIGN INVESTMENT AND HAS ENACTED LEGISLATION TO ENCOURAGE AND FACILITATE INVESTMENT. NEVERTHELESS, SIGNIFICANT DE JURE AND DE FACTO BARRIERS TO FOREIGN INVESTMENT CONTINUE TO EXIST. APPLICATION AND SCREENING PROCESS: THE DOMINICAN REPUBLIC'S FOREIGN INVESTMENT LAW (LAW 861, PASSED IN 1978 AND AMENDED IN 1983) REQUIRES THAT ALL PROPOSED NEW FOREIGN INVESTMENT (WITH THE EXCEPTION OF FREE TRADE ZONE INVESTMENT) MUST FIRST BE APPLIED FOR IN WRITING TO THE DIRECTORATE OF FOREIGN INVESTMENT. THE APPLICATION MUST COMPLY WITH THE PROVISIONS SET FORTH IN THE DIRECTORATE'S INTERNAL REGULATIONS AND APPROVAL TAKES BETWEEN 60 -90 DAYS, ONCE THE APPLICATION IS SUBMITTED. THE DIRECTORATE'S APPROVAL CONFERS ON THE OWNER OF A FOREIGN DIRECT INVESTMENT A LIMITED RIGHT TO REMIT PROFITS AND TO REPATRIATE CAPITAL ABROAD. THE APPROVAL MUST BE REGISTERED WITH THE CENTRAL BANK WITHIN ONE YEAR OF THE DATE OF THE DIRECTORATE'S RESOLUTION OF APPROVAL. THE VALUE OF THE DIRECT FOREIGN INVESTMENT MAY BE REGISTERED IN ANY CURRENCY THAT IS FREELY CONVERTIBLE (E.G., DOLLARS, DEUTSCHE MARKS, ETC.). LAW 861 PERMITS 100% OWNERSHIP BY FOREIGN INVESTORS, SUBJECT TO THE FOLLOWING RESTRICTIONS. THE FOREIGN INVESTMENT DIRECTORATE MAY NOT AUTHORIZE NEW FOREIGN INVESTMENT IN PUBLIC UTILITIES, POSTAL SERVICES, TELECOMMUNICATIONS, EXPLOITATION OF RADIOACTIVE MATERIALS, OR IN THE SHARES OR PROPERTY RIGHTS OF DOMESTIC INVESTORS (EXCEPT WHEN THE ACQUISITION OF SHARES OR PROPERTY RIGHTS WOULD, IN THE DIRECTORATE'S OPINION, FORESTALL IMMINENT BANKRUPTCY). THE DIRECTORATE PERMITS MIXED (DOMESTIC AND FOREIGN) INVESTMENT IN AGRICULTURE, POULTRY AND CATTLE, FISHING, BANKS AND OTHER FINANCIAL ENTITIES AND IN THE INSURANCE BUSINESS. SECTORS RESERVED FOR DOMESTIC INVESTMENT INCLUDE NATIONAL DEFENSE AND SECURITY, PUBLICITY, BROADCASTING, PUBLISHING, INTERNAL SURFACE AND AIR TRANSPORT (EXCEPT FREIGHT DIRECTLY RELATED TO IMPORT/EXPORT) AND FOREST EXPLOITATION. THE DOMINICAN MINING LAW PROVIDES THAT ALL MINERAL RESOURCES FOUND IN THE SOIL AND SUBSOIL (INCLUDING UNDERWATER) BELONG TO THE STATE. THE MINING LEGISLATION AND PRESIDENTIAL DECREE NUMBER 13-87 REGULATE PROCEDURES FOR EXPLORATION AND EXPLOITATION OF MINERALS. OIL AND RADIOACTIVE MATERIALS ARE NOT INCLUDED IN THE MINING LEGISLATION, BUT ACTIVITIES IN THESE AREAS ARE SUBJECT TO CONTRACT WITH THE DOMINICAN GOVERNMENT ON A CASE-BY-CASE BASIS. ANTICIPATED NEW ENERGY SECTOR LEGISLATION SHOULD OPEN THE DOMESTIC ENERGY MARKET TO FOREIGN INVESTMENT IN ELECTRICITY GENERATION AND MARKETING. THE DOMINICAN GOVERNMENT IS THE MONOPOLY IMPORTER OF SOME BULK AGRICULTURAL ITEMS, SUCH AS WHEAT, RICE AND BEANS. PRIVATE INVESTORS (BOTH DOMESTIC AND FOREIGN) MUST OBTAIN A LICENSE TO IMPORT OTHER NON-PROCESSED AGRICULTURAL GOODS. PROCESSED AGRICULTURAL GOODS MAY BE IMPORTED WITHOUT RESTRICTION OR PRECONDITION. THE DOMINICAN REPUBLIC'S SOLE REFINERY (JOINTLY OWNED BY THE DOMINICAN GOVERNMENT AND SHELL OIL) HAS A MONOPOLY ON IMPORTATION OF CRUDE OIL. HOWEVER, PETROLEUM BY-PRODUCTS CAN BE IMPORTED WITHOUT RESTRICTION. THE DOMINICAN GOVERNMENT HAS UNDER REVIEW A DRAFT LAW TO MODIFY AND MAKE LESS RESTRICTIVE FOREIGN INVESTMENT LAW 861. THE DRAFT LAW WOULD ELIMINATE CUMBERSOME REGISTRATION AND APPROVAL PROCEDURES, ESSENTIALLY GIVING FOREIGN INVESTORS NATIONAL TREATMENT, BUT THERE ARE EXCEPTIONS AND LOOPHOLES THAT MIGHT RESULT IN DIFFERENT APPLICATIONS. THE FINAL LAW, IF PASSED, WILL PROBABLY BE VERY DIFFERENT FROM THE DRAFT. POLICIES FOR ACQUISITIONS, TAKEOVERS AND REINVESTMENT BY FOREIGN ENTERPRISES: FOR COMPANIES REGISTERED AS FOREIGN INVESTMENTS, THE ACQUISITION OF SHARES AND PROPERTY RIGHTS IN DOMINICAN COMPANIES IS RESTRICTED. A DOMINICAN COMPANY BEING CONSIDERED FOR TAKEOVER BY FOREIGN INVESTORS MAY NOT BE A PUBLIC SERVICE ENTERPRISE OR A UTILITY AND IT MUST HAVE FIRST BEEN OFFERED THROUGH A PREFERENTIAL PURCHASE OPTION TO DOMINICAN INVESTORS. THE DIRECTORATE OF FOREIGN INVESTMENT MUST DETERMINE WHETHER THE TARGET COMPANY "IS IMPORTANT" TO THE NATIONAL ECONOMY. IF IT IS, THE DIRECTORATE MAY AUTHORIZE ACQUISITION OR TAKEOVER BY FOREIGN INVESTORS. FOREIGN-OWNED BUSINESSES MAY EXCHANGE PESOS FOR HARD CURRENCY AND REMIT THEIR PROFITS ABROAD, PROVIDED THE REMITTANCES DO NOT EXCEED 25 PERCENT OF THE VALUE OF THEIR REGISTERED CAPITAL PER YEAR. PROFIT REMITTANCES THROUGH THE COMMERCIAL BANKING SYSTEM REQUIRE NOTIFICATION TO THE CENTRAL BANK AND TAKE UP TO 72 HOURS TO COMPLETE. REMAINING PROFITS MUST BE REGISTERED WITH THE DIRECTORATE OF FOREIGN INVESTMENT, WHICH REQUIRES THAT: (1) REINVESTMENTS CAN ONLY BE MADE IN FOREIGN EXCHANGE EARNING ENTERPRISES, AGRIBUSINESS, TOURISM, IMPORT SUBSTITUTION INDUSTRIES (PROVIDED THAT THE GOODS TO BE PRODUCED HAVE 30% DOMESTIC VALUE ADDED), OR IN SECURITIES, BONDS OR LOANS INTENDED TO FINANCE THESE SECTORS; AND, (2) ALL THE STOCK OF THE FOREIGN ENTERPRISE MUST BE NOMINAL, NOT BEARER SHARES. BOTH FOREIGN AND DOMESTIC INVESTORS MAY EXPERIENCE CHANGES TO THE LAWS OR RULES THAT WERE IN EFFECT WHEN THE INVESTMENT WAS ORIGINALLY MADE. WHILE NOT DISCRIMINATORY, THESE CHANGES MAY NONETHELESS CAUSE SOME FOREIGN INVESTORS TO FEEL A DISADVANTAGE, SINCE DOMESTIC INVESTORS KNOW THE SYSTEM BETTER AND MAY HAVE PERSONAL CONTACTS OR POLITICAL CONNECTIONS THAT CAN BE OF ASSISTANCE IN OVERCOMING DIFFICULTIES. IN GENERAL, COMPANIES OPERATING IN THE FREE TRADE ZONES EXPERIENCE FEWER PROBLEMS WITH SUCH CHANGES. INVESTMENT INCENTIVES: IN SEPTEMBER 1990, THE DOMINICAN GOVERNMENT BEGAN A MAJOR REFORM OF ITS TAX AND CUSTOMS LAWS WHICH ELIMINATED MANY KINDS OF TAX INCENTIVES FOR DOMESTIC AND FOREIGN INVESTMENT (THE REGULATIONS GOVERNING INCENTIVES FOR FREE TRADE ZONE WERE NOT AFFECTED). BOTH DOMESTIC AND FOREIGN IMPORTERS COMPLAIN THAT CUSTOMS CLEARANCE IS SLOW AND THAT OVER-INVOICING IS USED BY CUSTOMS TO INCREASE GOVERNMENT TAX REVENUES. WITH THE ASSISTANCE OF THE UNDP AND A TEAM FROM HARVARD UNIVERSITY, THE CUSTOMS SERVICE HAS IMPLEMENTED A COMPUTERIZED VALUATION SYSTEM. CUSTOMS' INTERPRETATION OF WHAT ARE AND ARE NOT EXONERATED ITEMS PROVOKES MANY COMPLAINTS. CERTAIN IMPORTED GOODS WHICH ARE OSTENSIBLY EXONERATED FROM DUTIES, ARE FREQUENTLY DELAYED BY CUSTOMS. THIS REQUIRES IMPORTERS TO SPEND MORE TIME AND MONEY IN THE CLEARANCE OF THESE ITEMS. BOTH FREE TRADE ZONE AND NON-FREE TRADE ZONE COMPANIES ARE AFFECTED BY THESE PROBLEMS; ALTHOUGH FREE TRADE ZONE INTERMEDIATE GOODS ENTER DUTY FREE, THEY STILL MUST PASS THROUGH THE CUSTOMS SYSTEM. CUSTOMS CLEARANCE PROCEDURES SOMETIMES CAUSE FIRMS UNWILLING TO "NEGOTIATE" A FEE WITH CUSTOMS INSPECTORS TO HAVE THEIR MERCHANDISE HELD UP FOR AS LONG AS A YEAR. CERTAIN PRACTICES TO GAIN FASTER CUSTOMS CLEARANCE CONTINUE TO PUT SOME U.S. FIRMS AT A COMPETITIVE DISADVANTAGE IN THE DOMINICAN MARKET, SINCE U.S. FIRMS MUST COMPLY WITH THE PROVISIONS OF THE U.S. FOREIGN CORRUPT PRACTICES ACT. TARIFFS ON MOST PRODUCTS FALL WITHIN A 5-35% RANGE. THE GODR IMPOSES A 5-60% SELECTIVE CONSUMPTION TAX ON "NON- ESSENTIAL" IMPORTS SUCH AS HOME APPLIANCES, ALCOHOL, PERFUMES, JEWELRY, AUTOMOBILES AND AUTO PARTS. THE DOMINICAN REPUBLIC IS ONE OF THE FEW COUNTRIES WHICH CONTINUES TO REQUIRE A CONSULAR INVOICE AND "LEGALIZATION" OF DOCUMENTS, WHICH MUST BE PERFORMED BY A DOMINICAN CONSULATE IN THE UNITED STATES. THE DOMINICAN GOVERNMENT IS REPORTEDLY CONSIDERING THE ELIMINATION OF THIS PROCEDURE. A2) TRANSFER POLICIES: RECENT REFORMS HAVE CREATED A MARKET-BASED EXCHANGE RATE SYSTEM FOR MOST COMMERCIAL BANKING TRANSACTIONS. THE CENTRAL BANK HAS USED THIS SAME MARKET-DETERMINED RATE OF EXCHANGE, WITH SOME MINOR EXCEPTIONS. THE REFORMS ALSO PERMIT IMPORTERS TO OBTAIN HARD CURRENCY DIRECTLY FROM COMMERCIAL BANKS, INSTEAD OF ONLY FROM THE CENTRAL BANK. ONE RESULT OF THIS MARKET-BASED SYSTEM IS THAT THERE IS CURRENTLY NO QUEUING FOR FOREIGN EXCHANGE. HOWEVER, BY LAW, THE CENTRAL BANK MUST RECEIVE ALL DOLLARS RESULTING FROM EXPORTS OF GOODS MANUFACTURED BY NON-FREE TRADE ZONE COMPANIES. CAPITAL GAINS MAY BE REMITTED, BUT ONLY UP TO 2% OF REGISTERED CAPITAL ANNUALLY AND, CUMULATIVELY, ONLY UP TO 20% OF THE ORIGINAL INVESTMENT. CAPITAL INVESTMENTS MAY BE LIQUIDATED AND REPATRIATED, BUT ONLY IF THEY ARE REGISTERED INVESTMENTS AND ONLY UPON THE SALE OR LIQUIDATION OF THE ENTERPRISE (THESE RESTRICTIONS DO NOT APPLY TO FREE TRADE ZONE COMPANIES). ROYALTIES ARE PAID AS A PERCENTAGE OF TOTAL SALES. ALL CONTRACTS THAT PROVIDE ROYALTY PAYMENTS MUST FIRST BE APPROVED BY THE FOREIGN INVESTMENT DIRECTORATE. A3) EXPROPRIATION AND COMPENSATION: DOMINICAN EXPROPRIATION STANDARDS SEEM TO BE AT VARIANCE WITH INTERNATIONAL NORMS. SEVERAL FOREIGN INVESTORS HAVE OUTSTANDING DISPUTES WITH THE DOMINICAN GOVERNMENT CONCERNING EXPROPRIATED PROPERTY. EVEN WHEN COMPENSATION HAS BEEN ORDERED, INVESTORS AND LENDERS OFTEN HAVE NOT RECEIVED PROMPT OR ADEQUATE PAYMENT. A4) DISPUTE SETTLEMENT: ALL DR CRIMINAL AND CIVIL LEGISLATION IS BASED ON THE FRENCH SYSTEM (NAPOLEONIC CODE). THE DOMINICAN REPUBLIC ALSO FOLLOWS THE "CALVO DOCTRINE," UNDER WHICH COMMERCIAL DISPUTES MUST BE SETTLED IN THE COURTS OF THE TERRITORY IN WHICH THEY OCCUR. BOTH FREE TRADE ZONE AND NON-FREE TRADE ZONE COMPANIES FACE DISPUTE RESOLUTION PROBLEMS IN THE DOMINICAN REPUBLIC. ALTHOUGH SOME FOREIGN FIRMS HAVE HAD SUCCESS HERE, SUCH SUCCESS IS RARE AND U.S. FIRMS BOUND BY THE FOREIGN CORRUPT PRACTICES ACT HAVE PARTICULAR DIFFICULTY ACCESSING JUSTICE WITHIN THE DOMINICAN SYSTEM. THE DOMINICAN REPUBLIC HAS NOT RECOGNIZED THE GENERAL RIGHT OF INVESTORS TO SUBMIT DISPUTES TO BINDING INTERNATIONAL ARBITRATION. THE DR IS NOT A MEMBER OF THE INTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES (ICSID, ALSO KNOWN AS THE WASHINGTON CONVENTION), NOR IS IT MEMBER OF THE NEW YORK CONVENTION OF 1958 ON THE NEGOTIATION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS. A5) PERFORMANCE REQUIREMENTS/INCENTIVES: THERE ARE NO REQUIREMENTS THAT INVESTORS EXPORT A CERTAIN PERCENTAGE OF THEIR PRODUCTION. FOREIGN COMPANIES ARE UNRESTRICTED IN THEIR ACCESS TO FOREIGN EXCHANGE. LAW 69 REQUIRES LOCAL SOURCING WHEN COMPONENTS ARE OF APPROPRIATELY EQUAL COST AND QUALITY COMPARED TO IMPORTS. IN ADDITION, THERE ARE NO REQUIREMENTS THAT FOREIGN EQUITY BE REDUCED OVER TIME, OR THAT TECHNOLOGY BE TRANSFERRED ACCORDING TO CERTAIN TERMS. HOWEVER, AS ALREADY NOTED IN SECTION A1, THERE ARE AREAS WHERE DIRECT FOREIGN INVESTMENT IS RESTRICTED, OR IS PERMITTED ONLY UNDER JOINT-VENTURE ARRANGEMENTS. THE GOVERNMENT IMPOSES NO CONDITIONS ON INVESTMENT, SUCH AS REQUIRING LOCATION IN SPECIFIC GEOGRAPHICAL AREAS, OR SPECIFYING A REQUIRED PERCENTAGE OF LOCAL PARTICIPATION, OR DESIGNATING IMPORT/EXPORT REQUIREMENTS OR TARGETS. THE DR LABOR CODE ESTABLISHES THAT 80 PERCENT OF THE LABOR FORCE OF A FOREIGN COMPANY, INCLUDING FREE TRADE ZONE COMPANIES, MUST BE COMPOSED OF DR NATIONALS (THE MANAGEMENT STAFF OF A FOREIGN COMPANY IS EXEMPT FROM THIS REGULATION). THE FOREIGN INVESTMENT LAW PROVIDES THAT LICENSING CONTRACTS FOR THE USE OF PATENTS OR TRADEMARKS, THE LEASING OF MACHINERY AND EQUIPMENT AND THE PROVISION OF TECHNICAL KNOW-HOW, MUST BE SUBMITTED FOR APPROVAL TO THE DIRECTORATE OF FOREIGN INVESTMENT. IN DECIDING WHETHER TO APPROVE THESE CONTRACTS, THE DIRECTORATE ASSESSES "THE CONTRIBUTION" THE ARRANGEMENT WILL MAKE TO THE DOMINICAN ECONOMY. A6) RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT: THE RIGHT OF FOREIGN PRIVATE ENTITIES TO ESTABLISH OR OWN BUSINESSES AND/OR TO ENGAGE IN REMUNERATIVE ACTIVITIES IS RESTRICTED TO SPECIFIC AREAS, AS REPORTED ABOVE. PRIVATE DOMESTIC INVESTORS GENERALLY HAVE A WIDER RANGE OF POSSIBILITIES THAN DO FOREIGN INVESTORS. LITTLE PROGRESS HAS BEEN MADE TOWARD PRIVATIZATION OF PUBLIC ENTERPRISES. A7) PROTECTION OF PROPERTY RIGHTS: IN ADDITION TO PROBLEMS WITH ENFORCEMENT OF CONTRACTUAL AND PROPERTY RIGHTS OUTLINED IN SECTION A4, PROTECTION OF INTELLECTUAL PROPERTY RIGHTS IS ALSO DEFICIENT. DOMINICAN LAW PROVIDES FOR COPYRIGHT PROTECTION, BUT THE LAW IS INADEQUATELY ENFORCED. THE U.S. GOVERNMENT AND INDUSTRIES THAT RELY ON PROTECTION OF INTELLECTUAL PROPERTY RIGHTS (SUCH AS THE MOTION PICTURE, PUBLISHING, APPAREL AND PHARMACEUTICAL INDUSTRIES) ARE INCREASINGLY CONCERNED ABOUT A WIDE VARIETY OF INTELLECTUAL PROPERTY RIGHTS ISSUES IN THE DOMINICAN REPUBLIC. ALTHOUGH THE DOMINICAN GOVERNMENT HAS RECENTLY TAKEN SOME STEPS TO HELP REMEDY SHORTCOMINGS IN THIS AREA, PROTECTION OF INTELLECTUAL PROPERTY RIGHTS REMAINS PROBLEMATIC. ALL CONTRACTS WITH FOREIGNERS FOR THE USE OF TRADEMARKS, OR FOR THE USE OF SPECIALIZED TECHNICAL KNOWLEDGE, MUST BE SUBMITTED TO THE FOREIGN INVESTMENT DIRECTORATE FOR REGISTRATION. THE DIRECTORATE IS PERMITTED TO DELAY OR EVEN TO DISAPPROVE THESE CONTRACTS. A8) REGULATORY SYSTEM: DURING THE LAST TWO YEARS, THE GOVERNMENT HAS CARRIED OUT A MAJOR REFORM EFFORT AIMED AT IMPROVING THE TRANSPARENCY AND EFFECTIVENESS OF THE LAWS AFFECTING COMPETITION. CUSTOMS REGULATIONS, TAX LAWS AND THE LABOR CODE HAVE BEEN REFORMED AND NEW IMPLEMENTING REGULATIONS ARE BEING DEVELOPED. BANKING LAWS ARE ALSO BEING REVAMPED. HOWEVER, AS IN MOST DEVELOPING COUNTRIES, RED TAPE AND DIFFERENCES BETWEEN LAW AND ACTUAL PRACTICE REMAIN SIGNIFICANT PROBLEMS. A9) EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT: DURING 1991 AND 1992, THE DOMINICAN BANKING SECTOR AND THE DOMINICAN GOVERNMENT HELD LENGTHY AND DETAILED NEGOTIATIONS ON THE PROVISIONS OF A NEW AND SORELY NEEDED FINANCIAL/MONETARY LAW. THIS LAW WAS SUPPOSED TO FORTIFY A SOMEWHAT RICKETY FINANCIAL SYSTEM. THE NEW LAW WAS SUPPOSED TO BOLSTER BANK SUPERVISION, STRENGTHEN CAPITAL ADEQUACY REQUIREMENTS AND REDUCE THE NUMBER OF SMALL SPECIALIZED BANKS OPERATING IN THE COUNTRY. AS OF MAY 1994, THIS LAW HAD NOT BEEN PRESENTED TO THE DOMINICAN CONGRESS. SOME OF ITS FEATURES (ESPECIALLY THOSE RELATED TO CAPITAL ADEQUACY) ARE BEING ENACTED BY PRESIDENTIAL DECREE, BUT MANY OF THE SERIOUS SHORTCOMINGS OF THE DR BANKING SYSTEM REMAIN UNADDRESSED. THE DOMINICAN STOCK MARKET IS IN ITS INFANCY, AND CURRENTLY TRADES ONLY IN COMMERCIAL PAPER. AT PRESENT, THERE IS NO REGULATORY OVERSIGHT AND NONE IS EXPECTED TO BE INCLUDED IN THE BANKING CODE CURRENTLY UNDER DISCUSSION. WIDESPREAD REPORTS OF TAX EVASION CALL INTO QUESTION THE TRANSPARENCY AND ACCURACY OF ACCOUNTING PRACTICES IN THE COUNTRY AS A WHOLE. A10) POLITICAL VIOLENCE: DURING 1994, A CANADIAN/SWEDISH NICKEL MINING FIRM SUFFERED DAMAGES TO ITS PROPERTY AND INSTALLATIONS IN POLITICALLY- MOTIVATED ATTACKS RESULTING FROM A CAMPAIGN TO BLAME THE COMPANY FOR ALLEGED ENVIRONMENTAL POLLUTION. THE ENVIRONMENT IS GROWING INCREASINGLY POLITICIZED IN A WAY THAT CIVIL DISTURBANCES COULD BE MORE LIKELY IF THE RECENT ELECTION ACCORDS AND PROPOSED REFORMS ARE NOT ADHERED TO. (B) BILATERAL INVESTMENT AGREEMENTS: THERE IS NO BILATERAL INVESTMENT AGREEMENT BETWEEN THE DOMINICAN REPUBLIC AND THE UNITED STATES. THE DR DOES NOT HAVE BILATERAL INVESTMENT PROTECTION AGREEMENTS OR TREATIES WITH OTHER COUNTRIES, ALTHOUGH THERE HAVE BEEN DISCUSSIONS WITH SPAIN. (C) THE OVERSEAS PRIVATE INVESTMENT CORPORATION IS ACTIVE IN THE DOMINICAN REPUBLIC WITH BOTH INSURANCE AND LOAN PROGRAMS. THE DOMINICAN GOVERNMENT HAS HAD THE MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA) CASE UNDER STUDY FOR SOME TIME. HOWEVER, THE CALVO DOCTRINE USED IN THE DR LEGISLATION (REQUIRING THAT COMMERCIAL DISPUTES BE RESOLVED IN THE COURTS OF THE TERRITORIES IN WHICH THEY OCCUR) RAISES QUESTIONS CONCERNING THE USEFULNESS OF DR MEMBERSHIP IN MIGA. (D) LABOR: AN AMPLE LABOR SUPPLY IS AVAILABLE, ALTHOUGH THERE IS A SCARCITY OF SKILLED WORKERS AND TECHNICAL SUPERVISORS. MOST U.S. EMPLOYERS HAVE FOUND THE LOCAL WORK FORCE COMPETENT, TRAINABLE, AND COOPERATIVE. FOREIGN EMPLOYERS ARE NOT SINGLED OUT WHEN LABOR COMPLAINTS ARE MADE. ABOUT 12% OF THE NATION'S WORK FORCE IS UNIONIZED. THE LABOR CODE SPECIFIES THAT 20% OR MORE WORKERS IN A COMPANY MAY FORM A UNION. BEFORE A UNION MAY ENTER INTO A COLLECTIVE BARGAINING AGREEMENT OR CALL A STRIKE, IT MUST HAVE THE APPROVAL OF 51% OF THE COMPANY'S WORKERS. THE UNEMPLOYMENT RATE FOR THE DOMINICAN WORK FORCE IS APPROXIMATELY 30%; ANOTHER 20% ARE UNDEREMPLOYED. TOURISM AND THE FREE TRADE ZONES ARE TWO IMPORTANT SECTORS IN THE DOMINICAN ECONOMY IN WHICH LOW TECH, LOW WAGE, HIGH TURNOVER JOBS PREDOMINATE. THE DOMINICAN LABOR CODE IS A COMPREHENSIVE PIECE OF LEGISLATION WHICH ESTABLISHES POLICIES AND PROCEDURES FOR ASPECTS OF EMPLOYER/EMPLOYEE RELATIONSHIPS RANGING FROM MINIMUM WAGE LEVELS, HOURS OF WORK, OVERTIME AND VACATION PAY, TO SEVERANCE PAY, CAUSES FOR TERMINATION, AND UNION REGISTRATION. THE LABOR CODE ALSO SPECIFIES THAT 80% OF NON-MANAGEMENT WORKERS OF A COMPANY MUST BE DOMINICAN NATIONALS. THE STANDARD WORKWEEK IS 44 HOURS. MOST JOBS PAY SALARIES AT OR NEAR THE MINIMUM WAGE. DOMINICAN AND INTERNATIONAL LABOR ORGANIZATIONS HAVE CHARGED THAT THE DOMINICAN REPUBLIC DOES NOT ENFORCE COMPLIANCE WITH INTERNATIONALLY RECOGNIZED WORKER RIGHTS. A SPECIFIC COMPLAINT HAS CENTERED ON THE FREE TRADE ZONES, WHERE UNIONS HAVE ACCUSED COMPANIES OF FAILING TO RESPECT THE RIGHT OF FREEDOM OF ASSOCIATION BY FIRING UNION ORGANIZERS AND WORKERS WHO JOIN UNIONS. THE NEW LABOR CODE, WHICH BECAME LAW IN JUNE, 1992, SIGNIFICANTLY STRENGTHENS WORKER RIGHTS CONCERNING FREEDOM OF ASSOCIATION, PROTECTION OF UNION OFFICIALS, AND THE RIGHT TO STRIKE. (E) FOREIGN-TRADE ZONES/FREE PORTS: THE DOMINICAN REPUBLIC'S FREE TRADE ZONES ARE REGULATED BY LAW NUMBER 8-90. THIS LEGISLATION IS MANAGED BY THE FREE TRADE ZONE NATIONAL COUNCIL (CNZF IN ITS SPANISH ACRONYM). THE CNZF IS JOINT PRIVATE SECTOR/GOVERNMENT BODY. LAW 8-90 PROVIDES FOR 100% EXEMPTION ON ALL KIND OF TAXES, DUTIES AND CHARGES AFFECTING PRODUCTIVE AND TRADE ACTIVITIES IN THE ZONES. THESE INCENTIVES ARE FOR 20 YEARS FOR ZONES LOCATED NEAR THE DR-HAITI BORDER AND 15 YEARS FOR ZONES LOCATED IN THE REST OF THE COUNTRY. THE FREE TRADE ZONE NATIONAL COUNCIL HAS DISCRETIONARY AUTHORITY TO EXTEND THE TIME LIMITS ON THESE INCENTIVES. LAW 8-90 IDENTIFIES TWO CATEGORIES OF BENEFICIARIES: "OPERATORS," WHO WORK UNDER LICENSE TO PROVIDE FACILITIES (ROADS, BUILDINGS, UTILITY SERVICES); AND "ENTERPRISES," COMPANIES WHICH ARE ENGAGED IN THE ACTUAL PRODUCTION OF GOODS AND SERVICES FOR EXPORT. PRIVATE INVESTMENT IS WELCOME FOR FUNDING OPERATORS AND/OR ENTERPRISES. HARD CURRENCY FLOWS FROM THE FREE TRADE ZONES ARE HANDLED VIA THE FREE FOREIGN EXCHANGE MARKET. FOREIGN AND DOMINICAN FIRMS ARE AFFORDED THE SAME INVESTMENT OPPORTUNITIES (BOTH BY LAW AND IN PRACTICE). STATISTICS AVAILABLE FROM THE FREE TRADE ZONES SHOW THAT TOTAL CUMULATIVE INVESTMENT INCREASED FROM US$512 MILLION IN 1990 TO US$631 MILLION IN 1991. DURING 1991, THE DOMESTIC CONTRIBUTION WAS 33% OF THE TOTAL INVESTMENT; THE REST WAS FROM ABROAD. MOST OF THE FOREIGN INVESTMENT CAME FROM THE U.S. (47%), FOLLOWED BY COMPANIES REGISTERED IN PANAMA AND KOREA. IN GENERAL, FIRMS OPERATING IN THE FREE TRADE ZONES EXPERIENCE FAR FEWER BUREAUCRATIC AND LEGAL PROBLEMS THAN DO FIRMS OPERATING OUTSIDE THE ZONES. FOR EXPORTERS/INVESTORS TO SEEK FURTHER INFORMATION WITH THE CNZF, THE CONTACT IS AS FOLLOWS: CONSEJO NACIONAL DE ZONAS FRANCAS LEOPOLDO NAVARRO NO. 61 EDIF. SAN RAFAEL, PISO NO. 5 SANTO DOMINGO, D.R. PHONE: (809) 686-8077 FAX: (809) 686-8079 AND 688-0236 CONTACT: ING. ACELIS ANGELES DE GLASS, EXECUTIVE DIRECTOR (F) CAPITAL OUTFLOW POLICY: THE DOMINICAN REPUBLIC HAS NO SPECIFIC POLICY FOR CAPITAL OUTFLOW NOR FOR OUTWARD DIRECT INVESTMENT AND THERE ARE NO LAWS PROVIDING INCENTIVES FOR INVESTMENT OVERSEAS BY DOMINICANS. (G) NON-FREE TRADE ZONE FOREIGN INVESTMENT BY SECTORS - CUMULATIVE AS OF AUGUST 26, 1992 - (US$ MILLIONS) - (SOURCE: FOREIGN INVESTMENT DIRECTORATE, CENTRAL - BANK OF THE DOMINICAN REPUBLIC) AGRICULTURE 2.8 1/ MINING 30.6 MANUFACTURING 64.2 - FOOD, BEVERAGE, TOBACCO & OTHERS 33.5 - TEXTILES/LEATHER 0.6 - CHEMISTRY PRODUCTS, PETROLEUM & - CHARCOAL BY-PRODUCTS, PLASTICS, - PHARMACEUTICAL PRODUCTS 22.0 - METAL INDUSTRY (EQUIP. & MACHINERY) 8.1 ENERGY (PETROLEUM REFINERY) 4.4 PRINTING, PAPER & PUBLICATIONS 0.6 CONSTRUCTION 5.1 COMMERCE 41.5 TOURISM (HOTELS & RESTAURANTS) 21.7 TRANSPORTATION, WAREHOUSE & COMMUNIC. 374.4 2/ BANKING 47.0 OTHER SERVICES 96.3 TOTAL 688.6 - FOREIGN INVESTMENT BY COUNTRY OF ORIGIN - CUMULATIVE AS OF AUGUST 26, 1992 - (US$ MILLION) UNITED STATES OF AMERICA 224.0 SPAIN 23.4 CANADA 390.0 2/ PANAMA 6.9 HOLLAND 2.9 SWITZERLAND 2.9 BAHAMAS 1.9 VENEZUELA 1.4 OTHERS 35.2 TOTAL 688.6 1/ CENTRAL BANK STATISTICS FAIL TO REFLECT THE US$35 MILLION INVESTMENT OF THE DOLE COMPANY. 2/ THE TELEPHONE COMPANY, CODETEL, IS A DOMINICAN CORPORATION, OWNED BY A CANADIAN SUBSIDIARY OF GTE (U.S.). DURING THE LAST FEW YEARS NON-FREE TRADE ZONE FOREIGN INVESTMENT HAS GROWN MODERATELY. FOR 1987, OFFICIAL DATA REPORTED TOTAL NON-FREE TRADE ZONE FOREIGN INVESTMENT OF US$458 MILLION. IN 1991, IT ROSE TO US$606 MILLION. MOST OF THIS INVESTMENT IS IN THE TELECOMMUNICATIONS AND FOOD INDUSTRIES. THE ABOVE TABLE SHOWS THE SOURCES OF NON-FREE TRADE ZONE FOREIGN INVESTMENT. DATA ON THE DOMINICAN REPUBLIC FROM U.S. DEPARTMENT OF COMMERCE, BUREAU OF ECONOMIC ANALYSIS SURVEY OF U.S. DIRECT INVESTMENT POSITION ABROAD (HISTORICAL COST BASIS): $1,020 MILLION IN 1993, UP FROM $779 MILLION IN 1992, $661 MILLION IN 1991 AND $529 MILLION IN 1990. (H) MAJOR FOREIGN INVESTORS: FOLLOWING ARE THE TOP TEN NON-FREE TRADE ZONE COMPANIES REGISTERED AS FOREIGN BUSINESSES BY THE CENTRAL BANK OF THE DOMINICAN REPUBLIC: 1. COMPANIA DOMINICANA DE TELEFONOS (CODETEL): IT HAS OPERATED IN THE DR FOR MORE THAN 40 YEARS. REGISTERED CAPITAL: $370.1 MILLION. 2. CENTRAL ROMANA CORPORATION (U.S.): A DIVERSIFIED OPERATION WHICH INCLUDES A HOTEL, SUGAR PLANTATIONS, A MILL AND A REAL ESTATE BUSINESSES, AMONG OTHER ACTIVITIES. REGISTERED CAPITAL: $92 MILLION. 3. FALCONBRIDGE DOMINICANA (CANADA): DEALS WITH NICKEL MINING IN THE DR. REGISTERED CAPITAL: $15 MILLION. 4. SHELL COMPANY (HOLLAND/ENGLAND): SHARES OWNERSHIP WITH THE DOMINICAN GOVERNMENT OF THE ONLY PETROLEUM REFINERY IN THE COUNTRY (50% EACH) AND ALSO HAS AN IMPORTANT INTEREST IN THE WHOLESALE DISTRIBUTION OF PETROLEUM BY-PRODUCTS IN THE DR. REGISTERED CAPITAL: $17.4 MILLION. 5. E. LEON JIMENES, C. POR A. (A LOCAL PARTNER OF PHILLIP MORRIS, FROM THE U.S.): THIS COMPANY IS INVOLVED IN CIGARETTE MANUFACTURING. REGISTERED CAPITAL: $13 MILLION. 6. CITIBANK (U.S.): THE BANK HAS OPERATED IN THE DR FOR MANY YEARS. REGISTERED CAPITAL: $13 MILLION. 7. ESSO STANDARD OIL (U.S.): ESSO IS A LONG-TIME DISTRIBUTOR OF PETROLEUM BY-PRODUCTS. REGISTERED CAPITAL: $11 MILLION. 8. TEXACO CARIBBEAN (U.S.): THE SAME TYPE OF BUSINESS AS ESSO STANDARD OIL. REGISTERED CAPITAL: $10 MILLION. 9. COLGATE PALMOLIVE, INC. (U.S.): A LEADING MANUFACTURER IN THE DR OF SOAPS AND TOOTHPASTE. REGISTERED CAPITAL: $9.5 MILLION. 10. BANK OF NOVA SCOTIA (CANADA): ONE OF THE OLDEST FOREIGN COMMERCIAL BANKS IN THE DR. REGISTERED CAPITAL: $8 MILLION. NOTE: - CENTRAL BANK STATISTICS FAIL TO REFLECT THE US$35 MILLION INVESTMENT OF THE DOLE COMPANY (U.S.). - THE TELEPHONE COMPANY, CODETEL, IS A DOMINICAN CORPORATION, OWNED BY A CANADIAN SUBSIDIARY OF GTE (U.S.).