Dominican Republic and Haiti: Country Studies

Dominican Republic: The Economy
kilometers of coastline. Fish production contributes little to the
country's GDP (0.4 percent in 1994). In the late 1990s, the
catch averaged about 22,000 tons per year.
Industry
Manufacturing
This sector consists of traditional or domestic manufacturing
as well as assembly operations in free zones. One of the most
important factors in accelerating the industrialization and
diversification of the Dominican Republic's economy in the
1990s, manufacturing contributed 18.3 percent of GDP in
1998.
Traditional Manufacturing
During the Trujillo era, manufacturing grew more slowly
than in other Latin American and Caribbean countries because
of the dictatorship's disproportionate emphasis on sugar production.
After the Balaguer government introduced the Industrial
Incentive Law (Law 299) in 1968, domestic manufacturers
for the first time received substantial tariff protection from foreign
competition. Although these incentives stimulated an
array of domestic industries, created jobs, and helped diversify
the country's industrial base, Dominican industries tended to
be heavily dependent on foreign input and proved to be inefficient
and unable to compete internationally. In 1990 the government
decided to drastically reduce the rates of import
tariffs; all incentives provided for in Law 299 were eliminated
in 1992. High interest rates caused the performance of the
domestic industry subsector to contract in 1994 and 1995 so
that it was growing at rates substantially below the national
average of manufacturing. Consequently, the GDP share of
domestic manufacturing, including sugar processing, declined
from 16.6 percent in 1992 to 13.4 percent in 1997.
A reversal of the decline occurred, however, in 1998, mainly
because the pressures of external competition, especially from
Mexico, encouraged investment in modernizing plants. The
manufacturing industry experienced a strong growth of 7.4
percent in the first half of 1998 in spite of a 13 percent drop in
sugar production caused by the 1997 drought. The subsector of
domestic manufacturing, which includes mostly consumer
goods, food, and cigar production, grew by 10.1 percent in the
first half of 1998. The growth may have resulted partially from a
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