Download DOMINICAN REPUBLIC

DOMINICAN REPUBLIC
Economic Freedom Score
25
World Rank:
86
Regional Rank:
16
Least
free 0
he Dominican Republic’s economic freedom score is 61.0,
Toverall
making its economy the 86th freest in the 2015 Index. Its
score is 0.3 point lower than last year due to consid-
50
75
Most
100 free
61.0
Freedom Trend
63
erable declines in the control of government spending and
business freedom that outweigh gains in labor freedom and
freedom from corruption. The Dominican Republic is ranked
16th out of 29 countries in the South and Central America/
Caribbean region, and its score is just above the regional average.
A free trade agreement with the United States and a strategic
location in the Caribbean have facilitated economic growth
in the Dominican Republic. Over the past half-decade, however, the Dominican Republic has recorded positive changes
in only two of the 10 economic freedoms. Labor freedom
improved only marginally, but investment freedom advanced
by 20 points.
Once an agricultural economy, the Dominican Republic now
boasts a robust tourism and services sector. Liberalization of
the investment regime has facilitated growth surrounding
free trade zones along the coast. However, entrepreneurship
and private-sector development remain constrained by inefficient government services and weak rule of law. Corruption is
still pervasive in the economy, exacerbated by drug trafficking
in recent years. Institutionalizing free-market principles will
be vital for securing long-term growth.
BACKGROUND: Danilo Medina of the center-left Dominican
Liberation Party (PLD) won the presidency in August 2012,
succeeding three-term President Leonel Fernández, also of
the PLD. Haitian immigration is a hot political issue. A 2013
Supreme Court ruling that limited the rights of Haitians who
are unlawfully present in the country and their Dominicanborn children was partially undone by a Medina-sponsored
law in 2014. The Dominican Republic is the second-largest
economy in the Caribbean. The traditional agricultural economy has shifted in recent years toward greater reliance on
tourism and manufacturing. Remittances from the United
States account for about 10 percent of GDP. Drug and human
trafficking undermine the rule of law.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
62
61
60
59
58
2011
2012
2013
2014
2015
Country Comparisons
Country
61.0
World
Average
60.4
Regional
Average
59.7
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 10.4 million
GDP (PPP): $103.2 billion
4.1% growth in 2013
5-year compound annual growth 4.7%
$9,911 per capita
Unemployment: 15.0%
Inflation (CPI): 4.8%
FDI Inflow: $2.0 billion
Public Debt: 33.8% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
191
DOMINICAN REPUBLIC (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 30.0
Freedom from Corruption 29.0
0
20
40
60
80
Rank
1–Year
Change
94th
127th
0
+1.7
100
Late in 2013, the government launched an effort to improve public-sector transparency, but
it seems unlikely to make the institutional reforms needed to reduce widespread graft, and
bureaucratic processes will probably remain vulnerable to corruption. The judiciary is politicized and riddled with corruption, and the legal system offers little recourse to those who lack
money or influence. Enforcement of intellectual property rights is poor.
Fiscal Freedom 84.1
GOVERNMENT
Government Spending 87.1
SIZE
57th
25th
0
20
40
60
80
+0.4
–5.2
100
The top individual income tax rate is 25 percent, and the top corporate tax rate has been
reduced from 29 percent to 28 percent. Other taxes include a value-added tax and a tax on net
wealth. Overall tax revenue is 13.5 percent of gross domestic product. Government expenditures equal 20.7 percent of the domestic economy, and public debt equals 34 percent of annual
domestic income.
REGULATORY
EFFICIENCY
Business Freedom 53.5
Labor Freedom 57.5
Monetary Freedom 76.0
140th
109th
97th
0
20
40
60
80
–2.6
+2.3
+0.3
100
Launching a business takes seven procedures, and the minimum capital required equals about
half the level of average annual income. Obtaining necessary permits takes over 150 days on
average. The non-salary cost of employing a worker is moderate, but the labor market lacks
flexibility in other areas. The government’s SIUBEN system includes targeted conditional cash
transfers, electricity and cooking gas subsidies, and subsidized health insurance.
OPEN
MARKETS
Trade Freedom 77.8
Investment Freedom 75.0
Financial Freedom 40.0
84th
36th
106th
0
20
40
60
80
0
0
0
100
The Dominican Republic’s average tariff rate is 6.1 percent. Imports of used cars are restricted,
and government procurement rules can benefit domestic companies. Foreign investors sometimes find it challenging to deal with the bureaucracy. The small financial sector has been
modernized and consolidated, but confidence in banking has been shaky. Capital markets are
underdeveloped, and long-term financing is hard to obtain.
Long-Term Score Change (since 1995)
GOVERNMENT
SIZE
RULE OF LAW
Property Rights
Freedom from
Corruption
192
0
–1.0
Fiscal Freedom
Government
Spending
–0.2
–8.2
REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom
2015 Index of Economic Freedom
OPEN MARKETS
–1.5
+0.6
–0.2
Trade Freedom
+46.8
Investment Freedom +25.0
Financial Freedom
–10.0