Export Processing Zones in the Dominican Republic

Résumé du livre

This dissertation examines the nature and trajectory of export processing zones (EPZ) in the economy of the Dominican Republic (DR) in the light of John Dunning's Ownership, Location and Internalisation (OLI) paradigm and the literature on the new international division of labour (NIDL). In this context, three factors were identified as explanations for the rapidly expanding EPZ industry in the Dominican Republic: 1) characteristics of the DR's labour force, 2) its geographic proximity to the United States, and 3) its market access to that country. In terms of Dunning's OLI paradigm, all three of these may be considered country-specific, although the third one may include industryspecific OLI characteristics. Among the country-specific OLI advantages identified are access to the United States (US) market via US preferential trade programs like the Caribbean Basin Initiative, and Section 9802.00.80 of the US Tariff Schedule. The latter turned out to be the most important with sub-Section 9802.00.8010 being particularly significant. This sub-Section, in turn clearly limits value added by favouring assembly processes over manufacture. With respect to location-specific advantages, it was found that geographical proximity to the US explains the attractiveness of the Caribbean and Central America as a site for EPZ enterprises in general, while the cost of labour explains the particular attractiveness of the DR over other regional competitors. Significantly, skilled labour was low on the list of locational factors. The scant importance given skills in part follows from the high concentration of assembly segments of mature industries such as garments, footwear and certain electronics subsectors, a scenario actively encouraged by government policy. This lack of emphasis on skills also prevailed in operations internalised into large multinational companies. On the basis of these findings it is therefore concluded that the EPZs (as currently operating in the DR), offer only very constrained opportunities for sustainable economic growth. The extreme dependence on one market, coupled with other OLI characteristics such as abundant, semi and unskilled labour meshed with mature industries only offer a temporary solution to the unemployment and foreign exchange problems of the DR. Furthermore, the main OLI advantage of cheap labour - as mediated through the exchange rate - is at best temporary for individual countries and there is evidence that the region is becoming locked into a form of competition based on a spiral of devaluation: The future of the DR as well as the region's EPZ sectors depend on a diversification of markets and industries and in particular towards higher value-added types of production.