Review of the Dominican Republic's Enabling Environment for the Semiconductor and Microelectronics Industries

1. Assessment and recommendations

Abstract

This chapter sets out the key findings and policy recommendations of the OECD’s review of the Dominican Republic’s enabling environment for the semiconductor and microelectronics industries. It identifies the Dominican Republic’s main strengths and focuses on areas for improvement, relating to the institutional framework; free zone regime; business environment; science, technology and innovation ecosystem; and infrastructure.

Policy recommendations

Institutional framework

• Establish formal mechanisms to co‑ordinate the implementation of the National Strategy for the Promotion of the Semiconductor Industry (hereafter the National Semiconductor Strategy) across government agencies and to collaborate with non-governmental stakeholders.

• Co‑operate with international institutions, including the OECD, to develop complementary semiconductor policies and align semiconductor supply chains.

• Prioritise specific segments of the semiconductor value chain that align with the Dominican Republic’s skills and industrial capabilities.

• Enhance monitoring and evaluation capabilities to enable periodic updates to the National Semiconductor Strategy and the refinement of the strategy’s underlying policies.

Free zone regime

• Consider updating the eligibility criteria for free zone firms and complementing the tax exemptions with targeted incentives to help attract the semiconductor and other advanced manufacturing industries.

• Facilitate the process for firms to establish operations in the free zone regime.

• Promote linkages between the free zone regime and local economy.

• Increase the availability of industrial land, through initiatives including but not limited to Santo Domingo 2050, and assess the potential of regions beyond Santo Domingo to host semiconductor or microelectronics clusters.

Business environment

• Nominate one government agency to be responsible for guiding semiconductor firms through the foreign direct investment (FDI) and export processes and create a single one-stop shop for all public services required by semiconductor firms.

• Expedite the construction and environmental permitting processes to reduce the regulatory burden on semiconductor and microelectronics firms.

• Clarify the impact of expropriation provisions and foreign investment restrictions on foreign investors, including semiconductor firms.

• Remove the remaining tariffs on semiconductor-related products and consider signing the Information Technology Agreement 2.

• Diversify semiconductor-related imports by fostering trade partnerships and conducting supply chain risk assessments to enhance resilience and mitigate potential disruptions.

• Support access to finance for semiconductor and other advanced manufacturing firms and industrial parks.

Science, technology and innovation (STI)

• Establish robust STI indicators that adhere to international statistical standards.

• Introduce a research and development (R&D) tax credit to incentivise firms’ investment in R&D.

• Significantly reform the National Fund for Innovation and Scientific and Technological Development (FONDOCYT) to improve the disbursement of R&D funding, support firms and promote industry-academia collaboration.

Infrastructure

• Ensure sufficient electricity supply for semiconductor and microelectronics firms by increasing renewables generation and introducing energy efficiency measures.

• Expand electricity transmission infrastructure to integrate renewables and upgrade distribution infrastructure to reduce electricity losses and improve reliability.

• Incentivise investment in rainwater harvesting, water and wastewater treatment infrastructure.

The Dominican Republic has experienced consistently strong economic growth in recent years. Since 2010, the gross domestic product (GDP) growth rate has averaged about 5% annually, above the average for Latin America and the Caribbean (LAC) and for OECD Member countries. During this period, the composition of the Dominican Republic’s manufacturing exports has gradually shifted, with medical devices replacing textiles and clothing as the largest share of exports by value. The Dominican Republic aims to continue this evolution towards increasingly advanced manufacturing by developing semiconductor and microelectronics industries. Currently, microelectronics firms only have a small presence and no semiconductor firms operate in the country.

The Dominican Republic aims to attract semiconductor and microelectronics investments and develop a domestic industry by capitalising on global efforts to diversify the semiconductor supply chain and increase resilience. The Dominican Republic has many strengths, including generous incentives for firms in its free zone regime, an existing advanced manufacturing base, political stability and democratic institutions, good transport infrastructure and proximity to large export markets in the Americas, including the United States’ semiconductor industry.

The Dominican Republic can further improve the enabling environment for the development of the semiconductor and microelectronics industries, including in five key policy areas: the institutional framework; free zone regime; the business environment; science, technology and innovation (STI); and infrastructure. Skills and human capital are another key lever but are outside the scope of this report. This chapter offers tailored policy recommendations for each of the five areas under consideration. Some of these recommendations entail spending decisions, which the Dominican Republic should carefully assess to retain budget neutrality in a constrained fiscal environment. These recommendations and the underlying analyses also informed the development of parts of the Dominican Republic’s National Strategy for the Promotion of the Semiconductor Industry. See Sections 1.1 and 3.1 of this report for more details.

1.1. Institutional framework

Issued in June 2024, Presidential Decree 324-24 identifies the development of a semiconductor industry as a high national priority for the Dominican Republic and commits to publishing the National Semiconductor Strategy. In August 2025, the Dominican Republic launched its National Semiconductor Strategy, which is based on five pillars: industrial development; governance; workforce and human capital; country promotion; and strategic partnerships (MICM, 2025[1]). Box 1.1 summarises the Dominican Republic’s National Semiconductor Strategy and its key policy measures.

In drafting its National Semiconductor Strategy, the Dominican Republic engaged constructively with the OECD. For example, the strategy’s second pillar on governance draws on some of the evidence and analysis put forward by the OECD in this report. Indeed, it incorporates – in full or in part – many of the recommendations contained in this chapter of the report. While this alignment is encouraging, it remains important that these recommendations are effectively implemented.

To successfully implement the National Semiconductor Strategy and develop semiconductor and microelectronics ecosystems, the Dominican Republic will need to co‑ordinate efforts across both public and private institutions and ensure enhanced domestic and international collaboration.

Box 1.1. The Dominican Republic’s National Semiconductor Strategy

The Dominican Republic published its National Strategy for the Promotion of the Semiconductor Industry (Estrategia Nacional de Fomento a la Industria de Semiconductores) on 12 August 2025. More specifically, the National Semiconductor Strategy intends to prioritise the development of three segments of the semiconductor and microelectronics industries:

• fabrication of passive components (such as resistors and capacitors) and discrete semiconductors

• fabrication and assembly of printed circuit boards (PCBs); and

• assembly, testing and packaging (ATP) of a variety of mature-generation semiconductors.

The National Semiconductor Strategy is structured around five pillars, each foreseeing several policy measures:

1. Industrial development: This pillar aims to transform the Dominican Republic’s industry from predominantly labour-intensive assembly to advanced, technology-driven manufacturing. Policy measures include: investing in industrial infrastructure (electricity, water, telecommunications); encouraging advanced manufacturing clusters; developing a network of local suppliers.

2. Governance: This pillar aims to establish the institutional framework and business environment that are conducive to FDI in the semiconductor and microelectronics industries. Policy measures include: creating structures for cross-government policy co‑ordination and collaboration with the private sector; streamlining government bureaucracy; increasing government funding for research, development and innovation.

3. Workforce and human capital: This pillar aims to develop semiconductor and microelectronics skills in the Dominican Republic. Policy measures include: enhancing science, technology, engineering and mathematics (STEM) education at the primary and secondary levels; creating technical and vocational certifications aligned with industry needs; establishing specialised semiconductor degree programmes at universities.

4. Country promotion: This pillar aims to attract FDI to the Dominican Republic in advanced manufacturing sectors. Policy measures include: developing a unified investment strategy across government agencies; increasing the Dominican Republic’s visibility in global high‑technology investment circles; strengthening sector-specific branding and messaging.

5. Strategic partnerships: This pillar aims to develop partnerships between the Dominican Republic and regional and international academic institutions, governments and the semiconductor industry.

Following the National Semiconductor Strategy’s publication, the Dominican Republic is now preparing for its implementation.

Note: For a taxonomy of the different types of semiconductors, see OECD (2024[2]). For additional information on the semiconductor value chain, see Annex A.

Source: MICM (2025[1]), National Strategy for the Promotion of the Semiconductor Industry, https://micm.gob.do/wp-content/uploads/2025/08/National-Strategy-for-the-Promotion-of-the-Semiconductor-Industry-ENFIS.pdf.

1.1.1. Establish formal mechanisms to co‑ordinate the implementation of the National Semiconductor Strategy across government agencies and to collaborate with non‑governmental stakeholders

The Ministry of Industry, Commerce and Micro, Small and Medium-Sized Enterprises (MICM) is responsible for semiconductor policy. However, for a complex, whole-of-government priority like the National Semiconductor Strategy, the Dominican Republic will need to draw on the policy levers and resources of a wide range of relevant government institutions.

The Dominican Republic might wish to establish a formal, centralised co‑ordination mechanism to support the MICM in the development of coherent semiconductor policy. A mechanism to co‑ordinate the delivery of the National Semiconductor Strategy could be modelled on the examples of the Innovation Cabinet and the Cabinet for Digital Transformation. These two cabinets, established in 2021, helped to co‑ordinate two major cross-governmental initiatives in the Dominican Republic, providing technical knowledge and political capital and acting as fora for decision making across ministries.

The National Semiconductor Strategy also requires effective collaboration with non-governmental stakeholders, including private firms, business associations, universities and research centres, labour representatives and civil society organisations. These institutions are likely to be responsible for implementing semiconductor policy or be directly affected by it, but there is currently no formal channel for their input into the National Semiconductor Strategy.

The Innovation Cabinet and the Cabinet for Digital Transformation again provide a helpful model. These two cabinets were supported by a small number of working groups (mesas de trabajo), which brought together governmental and non-governmental stakeholders to focus on a specific policy area and provide recommendations for each cabinet’s approval. The MICM could establish a similar channel to allow the National Semiconductor Strategy to benefit from stakeholder expertise and increase the structure and transparency of public-private engagement.

1.1.2. Co‑operate with international institutions, including the OECD, to develop complementary semiconductor policies and align semiconductor supply chains

International collaboration on semiconductor policy would allow the Dominican Republic to share its expertise and learn from best practice. This is already starting to happen: in 2024, the MICM signed a memorandum of understanding with Purdue University (United States) to promote semiconductor research and academic exchange opportunities. In 2025, the University of the Caribbean (UNICARIBE) opened a Centre of Excellence in Santo Domingo with US firm Keysight Technologies, aimed at developing semiconductor skills. Also in 2025, the Dominican Republic hosted the Third Americas Partnership for Economic Prosperity Semiconductor Symposium, which focused on financial strategies for the semiconductor ecosystem.

The Dominican Republic should build on this progress, for example by increasing its engagement with like‑minded countries. The Alliance for Development in Democracy, which the Dominican Republic co‑founded alongside Costa Rica and Panama, could help to co‑ordinate regional supply chains and policies (see also Recommendation 1.3.5). Additionally, the Dominican Republic could use its membership of the Ibero-American Program of Science and Technology for Development (CYTED) to work with other governments to strengthen the STI ecosystem which supports the semiconductor industry. The Dominican Republic’s participation in the OECD Semiconductor Informal Exchange Network offers a unique forum for the exchange of semiconductor industry and policy information.

1.1.3. Prioritise specific segments of the semiconductor value chain that align with the Dominican Republic’s skills and industrial capabilities

Decree 324-24 outlines the Dominican Republic’s ambitions to “develop every segment of the semiconductor industry: R&D, design, fabrication, assembly, testing and packaging (ATP)”. While it is important that the decree sets out this bold vision, the National Semiconductor Strategy must also define its priorities to ensure that available capabilities are effectively leveraged to build a competitive and sustainable semiconductor industry.

The Dominican Republic should prioritise specific segments of the semiconductor value chain to enable policymakers, industry and academia to co‑ordinate and focus their resources. For example, semiconductor ATP is relatively labour-intensive and less capital-intensive than front-end manufacturing and has previously served as the entry point for countries developing semiconductor ecosystems in Latin America and Southeast Asia. Semiconductor ATP could prove a viable medium- to long-term path for the Dominican Republic. In the nearer term, the Dominican Republic could also consider focusing on printed circuit board manufacturing and assembly. While it is important that the National Semiconductor Strategy outlines its priorities, it should be cautious of excessive focus, for example on specific semiconductor types: particularly in public-facing strategies, this could unduly limit the Dominican Republic’s capacity to seize new opportunities in a fast-moving industry.

1.1.4. Enhance monitoring and evaluation capabilities to enable periodic updates to the National Semiconductor Strategy and the refinement of the strategy’s underlying policies

Article 9 of Decree 324-24 also makes the MICM responsible for establishing a new mechanism to monitor the National Semiconductor Strategy’s progress. The Dominican Republic should ensure that this new monitoring and evaluation (M&E) mechanism has access to the necessary data and human resources to effectively support the National Semiconductor Strategy’s implementation. A robust M&E mechanism would allow the Dominican Republic to periodically update the National Semiconductor Strategy, as required by Article 10 of the decree.

The new M&E mechanism faces several challenges. As set out in Recommendation 1.1.1 on policy co‑ordination, semiconductor policy is a cross-government initiative, but datasets tend to belong to individual agencies as opposed to a single, centralised entity. The Dominican Republic should therefore work to break down data silos and enhance access to and sharing of data for better policymaking. For example, the new M&E mechanism should be able to access firm-level and other highly granular data from agencies including the National Statistics Office (ONE), General Directorate of Internal Taxes (DGII) and the Central Bank of the Dominican Republic (BCRD) to enable the Dominican Republic to monitor the impact of the National Semiconductor Strategy and its policies on the country’s manufacturing industry.

Beyond data access, the new M&E mechanism also needs to be adequately staffed with the necessary human capital. To this end, the Dominican Republic should map the analytical and technical skills needs of the M&E mechanism and encourage secondments to the M&E mechanism from relevant institutions to fill any identified gaps. The data and skills required for monitoring and evaluating semiconductor policy are similar to the data and skills needed for the M&E of other aspects of public policy. Therefore, the scope of the new M&E mechanism should perhaps extend beyond the National Semiconductor Strategy and also analyse the impact of other economic and industrial policies in the Dominican Republic.

1.2. Free zone regime

As of 2024, the Dominican Republic’s free zone regime – a type of special economic zone – encompasses 93 industrial parks and 843 firms, all of which benefit from generous tax exemptions and simplified customs procedures as set out in Law 8-90. With its focus on manufacturing and exports, the free zone regime has been credited with driving much of the country’s economic growth and industrial development in recent decades (World Bank, 2016[3]). As the Dominican Republic prepares to develop semiconductor and microelectronics industries, it should assess the possibility of adapting the free zone regime to better attract advanced manufacturing firms and maximise the impact of potential semiconductor and microelectronics investments throughout the economy.

1.2.1. Consider updating the eligibility criteria for free zone firms and complementing the tax exemptions with targeted incentives to help attract the semiconductor and other advanced manufacturing industries

The Dominican Republic’s free zone incentives are generous but generic. Free zone firms benefit from a 100% exemption on corporate income tax and a range of other taxes for 15 years, regardless of whether they manufacture cigars (160 free zone firms) and textiles (98 firms) or medical devices (40 firms) and electrical devices (30 firms) (CNZFE, 2025[4]). Furthermore, 40% of firms in the free zones are Dominican, which indicates that the free zone regime is not strongly focused on attracting multinational corporations or FDI, even though semiconductor firms will necessarily be international. The one-size-fits-all nature of the incentives means that the free zone regime does not support specific policy objectives and comes at a high fiscal cost.

The Dominican Republic should, first, clarify the objectives of the free zone regime. The current objective of the free zones – to promote export-led growth – is very broad and dates back decades. It is worth considering whether this objective should be modified or made more specific for the next stage of the Dominican Republic’s development. Second, the Dominican Republic should tighten the eligibility criteria for firms to operate under the free zone regime, so that these firms contribute to the clearly defined objectives of the free zones. Third, if necessary, the Dominican Republic could consider complementing the free zones’ tax exemptions with a more strategic incentives structure that encourages specific types of high-value investment or expenditure. For example, other countries in the LAC region and elsewhere have adopted targeted incentives frameworks that take into account investment size, sector or technological sophistication, and provide support for capital investment and R&D.1 If the Dominican Republic does choose to operate two incentives systems in parallel – for example, the existing tax exemptions alongside the more targeted support for R&D and capital investments – it would be important to monitor these systems and assess in the medium term whether consolidation into a single well-targeted incentives scheme would be warranted.

1.2.2. Facilitate the process for firms to establish operations in the free zone regime

Advanced manufacturing firms currently face significant delays to establishing operations in the free zones and benefitting from the associated incentives: medical device manufacturers required on average 44 weeks to navigate through 96 administrative requirements managed by 6 government agencies (World Bank, 2023[5]). Semiconductor and microelectronics manufacturers are expected to face a similar challenge.

To facilitate the entry of semiconductor and microelectronics firms into the free zone regime, the Dominican Republic should enhance its digitisation efforts as some of the administrative requirements still rely primarily on in-person interactions or very basic digital processes. Greater digitisation would also enable better data sharing, making it easier for information submitted through a single digital portal to be accessed and reused by multiple agencies. In this way, greater data sharing – which should preserve data privacy and confidentiality – can reduce repeated data requests and ease the bureaucratic burden on firms. Additionally, the Dominican Republic should increase transparency by clearly outlining all procedural steps and criteria required for firms to operate within the regime. Greater clarity on the renewal process for free zone operating permits – which can be renewed beyond 15 years at the discretion of the National Council of Free Zones (CNZFE) – could also enhance firms’ certainty and enable them to make more informed investment decisions.

1.2.3. Promote linkages between the free zone regime and local economy

While the free zone regime can be particularly attractive to potential semiconductor and microelectronics investments, most firms and employees in the Dominican Republic operate outside of the free zones in the so-called local economy. Therefore, strong linkages between the free zones and the local economy would be required to amplify the economic impact of semiconductor or microelectronics investments and expand the potential for spillover effects. However, there is room for improvement in linking free zones with the local economy. For example, the proportion of inputs that medical and electrical device manufacturers in the free zones source from the local economy is only 3%, which suggests very weak backwards linkages for the advanced manufacturing sector (World Bank, 2018[6]).

Stronger backwards linkages require a sustained, long-term policy focus (Sturgeon, 2025[7]). To begin to strengthen these linkages, the Dominican Republic should help firms in the free zones identify potential suppliers within the local economy by enhancing its existing supplier database. Currently, the Tool for Categorising Suppliers (herramienta de categorización de proveedores) targets only the medical devices and pharmaceuticals sector and so should be extended to include the electronics sector. The Dominican Republic should also launch a supplier development programme to help local manufacturers meet international quality standards and gain certifications. Additionally, the matchmaking programme Encadena.DO, which aims to connect firms in the local economy and free zones, should be expanded into an annual programme and include in-person events. Taken together, these initiatives could strengthen linkages and increase the broader economic impact of investments in semiconductor and other advanced manufacturing firms that would typically establish themselves in the free zone regime.

1.2.4. Increase the availability of industrial land, through initiatives including but not limited to Santo Domingo 2050, and assess the potential of regions beyond Santo Domingo to host semiconductor or microelectronics clusters

Industrial parks in the Dominican Republic have a 98% occupancy rate. These land constraints are particularly acute in and around Santo Domingo, where several parks report having no remaining serviced industrial land. This is consistent with the high concentration of advanced manufacturing firms in the Santo Domingo area. Scarce and expensive land poses a major barrier to industrial parks’ expansion and their ability to attract semiconductor and microelectronics firms.

The Dominican Republic is undertaking a variety of schemes to address this shortage of industrial land. For example, the Santo Domingo 2050 initiative aims to redevelop state-owned land near the capital city for a variety of social, economic and industrial goals. The Dominican Republic should ensure that some of this land is allocated – by sale or long-term lease – to new industrial parks which are capable of hosting advanced manufacturing firms such as the semiconductor or microelectronics industries. Additionally, in 2025, logistics firm DP World announced the expansion of their industrial park and port in Caucedo, just outside Santo Domingo. In parallel, the Dominican Republic should address land shortages and congestion around Santo Domingo by assessing the potential of other regions to host a semiconductor or microelectronics cluster. The Dominican Republic should ensure that environmental protections are respected in whichever regions semiconductor or other advanced manufacturing firms establish their operations.

1.3. Business environment

While a dynamic business environment is critical for the development of semiconductor and microelectronics ecosystems, firms in the Dominican Republic report significant challenges. For example, according to the World Bank, 39% of firms in the free zones identified the Dominican Republic’s business environment as a major challenge to their operations (World Bank, 2022[8]). The Dominican Republic should enhance efforts to improve the institutional, legal and regulatory conditions that shape the country’s investment climate and business environment.

1.3.1. Nominate one government agency to be responsible for guiding semiconductor firms through the FDI and export processes and create a single one-stop shop for all public services required by semiconductor firms

ProDominicana is the Dominican Republic’s investment promotion agency that aims to attract FDI and increase the country’s exports. However, its mandate is in practice very similar to that of the CNZFE, which also aims to develop investment and export opportunities, particularly in the free zones. Firms, industrial parks and government agencies interviewed for this report all recognised that ProDominicana and the CNZFE’s overlapping remits lead to ambiguity and duplication. In the absence of a unified FDI strategy, parts of the Ministry of Foreign Affairs (MIREX) and business associations such as the Association of Foreign Investor Companies (ASIEX) are also highly active in this space, increasing uncertainty for prospective investors as to the relevant points of contact in the Dominican Republic and the country’s investment priorities.

The need for a more cohesive institutional approach is also evident in the proliferation of online one-stop shops (ventanillas únicas). A one-stop shop should help firms and investors to navigate a country’s bureaucratic requirements by gathering all relevant government services and administrative processes onto a single digital platform. However, the Dominican Republic has at least four one-stop shops that a prospective semiconductor firm would plausibly need to navigate through: investment, foreign trade, construction and environment. Each one-stop shop is managed by a different government agency, which increases complexity and the risk of delays.

The Dominican Republic should nominate one agency to be responsible for guiding semiconductor and microelectronics firms through the entire legal and regulatory process, from establishing operations in the Dominican Republic through to export. This lead agency for semiconductor and microelectronics investment and exports should also manage an overarching one-stop shop which brings together all administrative processes that semiconductor and microelectronics firms are expected to face into a single place, thereby reducing their bureaucratic burden.

In addition to these near-term actions which aim to improve the situation for semiconductor and microelectronics firms specifically, the Dominican Republic could also consider some medium-term actions with the potential to improve the investment landscape more broadly. For example, the Dominican Republic could map the mandates of ProDominicana and the CNZFE and clarify each agency’s activities across all sectors, not just semiconductors and microelectronics. A national investment strategy, which the Dominican Republic currently lacks, could help co‑ordinate efforts and further strengthen the country’s FDI attraction efforts.

1.3.2. Expedite the construction and environmental permitting processes to reduce the regulatory burden on semiconductor and microelectronics firms

The Dominican Republic’s regulatory environment has improved in recent years. Between 2020 and 2024, the Zero Bureaucracy programme (Burocracia Cero) – the country’s flagship regulatory reform initiative – contributed to DOP 60 billion (Dominican pesos) in cost savings, equivalent to 1% of GDP (CNC, 2024[9]). However, obtaining construction and environmental permits remain two of the most time-consuming processes that a firm must navigate in the Dominican Republic. On average, firms in the Dominican Republic need 206 days to be granted the necessary construction licences, receive the required inspections and be connected to utilities, which is above the regional average of 191 days (World Bank, 2019[10]). Meanwhile, securing an environmental permit takes an average of 13 weeks for some advanced manufacturing firms seeking to operate in the free zone regime, but could be longer depending on the expected environmental impact of semiconductor firms.

The MICM should engage closely with the National Competitiveness Council, Ministry of Housing and Construction, and Ministry of the Environment and Natural Resources to accelerate the permitting process. Improvements to the One-Stop Shop for Construction (VUC) and One-Stop Shop for Environmental Services (VUSA) could be included as part of the Zero Bureaucracy programme. Currently, both one-stop shops take a sector-agnostic approach to permitting and do not prioritise applications from certain sectors. The Dominican Republic should consider fast-tracking permits for semiconductor and microelectronics projects and other strategic sectors that it might wish to prioritise.

1.3.3. Clarify the impact of expropriation provisions and foreign investment restrictions on foreign investors, including semiconductor firms

Although reforms in recent decades have substantially improved the Dominican Republic’s investment environment and opened most sectors of the country’s economy to foreign investment, several areas of uncertainty remain. Some investors have raised concerns about the government’s handling of expropriation proceedings, citing insufficient compensation, a lack of transparency and delays in judicial decisions. For example, in 2023, a tribunal of the International Centre for Settlement of Investment Disputes ruled that the Dominican Republic had breached international investment agreements relating to indirect expropriation, fair and equitable treatment, and the umbrella clause (ICSID, 2023[11]). Separately, Law 16-95 sets restrictions on foreign investment that could lead to environmental harm or have national security implications. Although other countries also have similar investment restrictions, given the environmental impact of some semiconductor manufacturing processes and semiconductors’ dual-use nature, these restrictions could be interpreted as applying to prospective semiconductor investments.

To minimise uncertainties in the investment climate, the Dominican Republic should increase the speed and transparency with which expropriation claims are handled and clarify that investments in the semiconductor industry will not normally be affected by foreign investment restrictions. In the near term, this clarification could entail the publication of data on the enforcement of these laws and targeted communications. In the medium term, the Dominican Republic could envisage amendments to Law 16-95 to clarify its scope, although this would be considerably more time-consuming and sensitive.

1.3.4. Remove the remaining tariffs on semiconductor-related products and consider signing the Information Technology Agreement 2

The Dominican Republic has made significant progress in recent decades to liberalise its trade regime and eliminate tariffs. For example, in 2006, the Dominican Republic signed the World Trade Organization (WTO) Information Technology Agreement 1 (ITA 1), which aims to remove tariffs on hundreds of information technology (IT) products belonging to seven broad categories, including semiconductors and semiconductor manufacturing equipment.

Despite these efforts, the Dominican Republic still maintains tariffs on some semiconductor-related products. Removing these remaining tariffs would bring at least two benefits. First, it would send a clear signal to the industry about the country’s commitment to participating in the global semiconductor value chain. Second, it would lower the import costs of these products for firms in the Dominican Republic, particularly those located in the local economy. One way of removing tariffs on most of these semiconductor-related products would be for the Dominican Republic to sign and ratify ITA 2, which the WTO brokered in 2015 to expand tariff-free status to another 201 IT products. Signing ITA 2 would also bring the Dominican Republic in line with other countries in the region such as Costa Rica.

1.3.5. Diversify semiconductor-related imports by fostering trade partnerships and conducting supply chain risk assessments to enhance resilience and mitigate potential disruptions

The Dominican Republic’s imports of semiconductor-related products are highly concentrated. To enhance semiconductor supply chain resilience, the country could expand trade partnerships with a broader range of economies, reducing exposure to potential supply chain disruptions and market fluctuations.

Additionally, conducting regular supply chain risk assessments would help identify potential vulnerabilities in semiconductor-related imports. Using customs data provides a solid foundation for these assessments (see Section 2.2.1), while firm-level import data offers even greater value, as it would allow for a more granular analysis of potential disruptions. These assessments would provide valuable insights into areas of over-reliance on specific suppliers or logistical challenges that may disrupt the supply chain, and they can also be evaluated to take into account geopolitical risks. Policymakers would therefore be able to develop targeted policies to enhance the resilience and stability of a semiconductor and microelectronics industry in the country. Similarly, the Dominican Republic should be mindful of the risks associated with over-reliance on a single main export market.

1.3.6. Support access to finance for semiconductor and other advanced manufacturing firms and industrial parks

Firms and industrial parks in the Dominican Republic have noted several challenges in accessing finance, including limited sources of finance, the high cost of finance and a lack of long-term capital. Banking credit to the private sector as a percentage of GDP is 29.5% in the Dominican Republic, below the regional average (46.9%), suggesting that the country’s banking system might not be providing sufficient finance to firms (World Bank, 2023[12]). Moreover, the Dominican Republic’s lending interest rate is 14.4%, higher than in Costa Rica, Mexico or Panama, implying that financing from Dominican banks is relatively expensive (World Bank, 2023[13]). The semiconductor industry is capital-intensive, so the Dominican Republic should consider how best to tackle firm financing challenges.

First, the state-owned Development and Export Bank (BANDEX) should consider how its concessional loans and technical support could be tailored to the needs of the semiconductor and microelectronics industries. This might include larger BANDEX loans or extended repayment schedules. Second, the MICM and the Ministry of Finance should work with the Stock Market Superintendence (SIMV) and the Pensions Superintendence (SIPEN) to explore alternative sources of financing for industrial parks. For example, updating regulations relating to pension and mutual funds would build on a previous OECD recommendation and could help unlock additional investment (OECD, 2022[14]).

1.4. Science, technology and innovation

Thriving semiconductor and microelectronics industries depend on a strong STI ecosystem. Despite the Dominican Republic’s sustained economic growth and industrial development in recent years, STI remains one of the country’s main challenges. The country’s ecosystem is characterised by insufficient collaboration between firms and universities, low levels of funding and a lack of R&D activities. The National Innovation Policy 2030, published in 2022, aims to address some of these challenges but is still being implemented. The Dominican Republic must therefore further its efforts to enhance STI.

1.4.1. Establish robust STI indicators that adhere to international statistical standards

The Dominican Republic lacks a system of reliable STI indicators. This gap in data is a challenge for the Dominican Republic because the design of STI policy should build on robust evidence. Moreover, reliable and comparable STI indicators allow countries to benchmark themselves against international peers and monitor whether policy actions are having the intended impact domestically.

In particular, the World Bank and Ibero-American Network for Science and Technology Indicators (RICYT) do not include the Dominican Republic in their datasets on R&D expenditure – an important proxy for innovation inputs – because the country does not report official R&D figures. Different government agencies – such as the National Statistics Office (ONE), the Ministry of Higher Education, Science and Technology (MESCYT), and the Ministry of Finance – already collect some R&D data, albeit on an irregular basis and in a decentralised manner. The Dominican Republic should build on the recent progress of ONE’s National Innovation Survey to formalise and centralise the R&D data collection and validation processes, in a way that is consistent with the OECD Oslo Manual and Frascati Manual (OECD/Eurostat, 2018[15]; OECD, 2015[16]).

1.4.2. Introduce an R&D tax credit to incentivise firms’ investment in R&D

Although the Dominican Republic’s R&D data are subject to significant limitations, the available data suggest that R&D expenditure is very low, ranging between 0.01-0.03% of GDP (Gabinete de Innovación, 2022[17]). This is well below the average R&D expenditure for the LAC region (0.55%) and the OECD (2.7%) (UIS, 2022[18]; OECD, 2022[19]). Increasing R&D investment is an important way of developing an STI ecosystem that can nurture semiconductor and microelectronics industries.

To incentivise R&D investment, the Dominican Republic should create an R&D tax credit to make eligible investments financially advantageous to firms. While firms in the Dominican Republic’s free zone regime already have low or no tax liability, a refundable tax credit would enable these firms to benefit by claiming a refund from the government on their eligible R&D expenditure. In designing the R&D tax credit, the Dominican Republic must give careful consideration to the eligible R&D activities, the rate of the tax credit and its administration. If designed and implemented correctly, the R&D tax credit could increase private investment in R&D, driving up the absorptive capacity of firms,2 accelerating the development of new technologies and improving existing products and processes. These are all conditions that support the emergence of semiconductor and microelectronics industries.

1.4.3. Significantly reform the National Fund for Innovation and Scientific and Technological Development (FONDOCYT) to improve the disbursement of R&D funding, support firms and promote industry-academia collaboration

FONDOCYT is practically the only source of public R&D funding in the Dominican Republic. However, it is underfunded, allocating only DOP 3.69 billion to projects between 2005 and 2019. Moreover, just over half of total approved FONDOCYT funding during this period was successfully disbursed, due to significant delays and administrative challenges (UNCTAD, 2021[20]). FONDOCYT grants only very limited funding to firms, as it prioritises R&D projects carried out by universities and research centres.

The Dominican Republic should make significant reforms to FONDOCYT to streamline the disbursement of R&D grants, increase the funding available to firms and make it easier for firms to collaborate with universities on research projects. Whereas R&D tax credits typically allow firms the flexibility to choose which projects to invest in, the Dominican Republic should consider whether a reformed FONDOCYT should prioritise certain strategic sectors to receive R&D grants, including but not limited to semiconductors and microelectronics.

1.5. Infrastructure

The Dominican Republic’s infrastructure has many strengths. For example, the World Economic Forum ranked the country in the top three in the LAC region for air transport infrastructure quality, port infrastructure quality and road quality (WEF, 2021[21]). This could help the Dominican Republic become an important regional hub for logistics and trade in semiconductor-related products. In parallel, however, the Dominican Republic should also look to improve other parts of its infrastructure that are also important for the semiconductor and microelectronics industries, namely electricity and water.

1.5.1. Ensure sufficient electricity supply for semiconductor and microelectronics firms by increasing renewables generation and introducing energy efficiency measures

Semiconductor manufacturing depends on a stable and affordable supply of energy. Electricity demand in the Dominican Republic is expected to increase substantially by 2030 and the possible development of the semiconductor and microelectronics industries would further increase this demand. This will require the expansion of generation capacity. Currently, renewable sources account for only 16% of the Dominican Republic’s electricity generation and fossil fuels account for the remaining 84% (IEA, 2023[22]). The Dominican Republic relies heavily on imported fossil fuels, which can leave its industry vulnerable to supply disruption and global fuel price shocks. There is therefore a strong case for increasing renewable electricity capacity, which would also support the Dominican Republic’s domestic and international decarbonisation commitments.

On the supply side, the Dominican Republic can adopt several measures to incentivise and facilitate private investment in renewables. First, it should continue efforts with public tenders for renewable projects, ensuring they proceed smoothly and transparently. Decree 65-23 recently introduced the requirement that competitive public bidding processes should be used to set electricity prices for long-term renewable electricity contracts. It is important that these tenders set out clear and consistent terms and conditions to build investor confidence and unlock financing. Second, the Dominican Republic should streamline the onerous permitting process for renewable energy projects, which requires prospective investors to engage with approximately 19 different government agencies. Third, the Dominican Republic could look to increase electricity generation from auto-producers by raising the limits on auto-producers’ maximum capacity and the share of their electricity that they are allowed to sell.

In parallel, on the demand side, the Dominican Republic should take further action on energy efficiency. Decree 158-23 mandates energy efficiency measures in government buildings and across the public administration but does not extend these requirements to the private sector or residential consumers of energy. As a result, the Dominican Republic is one of the few countries in the region that does not have a comprehensive regulatory framework for energy efficiency. A draft law on energy efficiency was first approved by the Senate in 2023 but has not been passed by the Chamber of Deputies. The Dominican Republic could look to pass and implement some form of energy efficiency legislation.

1.5.2. Expand electricity transmission infrastructure to integrate renewables and upgrade distribution infrastructure to reduce electricity losses and improve reliability

The Dominican Republic’s electricity infrastructure requires significant improvements. Expanding the transmission infrastructure is required to integrate renewable electricity into the grid, as it allows the transfer of electricity from the locations where renewable energy is generated to the demand centres. As renewable generation increases, investment in transmission will be essential to support grid stability and minimise the curtailment of renewable power.

In the distribution segment, outdated equipment and infrastructure and inadequate tension levels contribute to significant electricity losses for the three state-owned electricity distribution companies (Empresas Distribuidoras de Electricidad, EDEs). These technical losses, combined with non-technical losses such as unmetered electricity or theft, mean that 37% of electricity generated is lost during the distribution segment (MEM, 2024[23]). This creates chronic financial deficits for the EDEs and frequent power outages for consumers. These outages predominantly affect users outside the free zones, whereas semiconductor and microelectronics firms are expected to be located within the free zones. Nonetheless, this could make it more difficult for local firms to become suppliers to the semiconductor and microelectronic industries in the free zones.

The state-owned Dominican Electricity Transmission Company holds a monopoly over electricity transmission and the EDEs dominate the distribution segment. However, public investment in electricity infrastructure – including transmission and distribution – has been falling in recent years, reaching just 0.17% of GDP, which is below the regional average of 0.20% (OECD, 2022[14]). Therefore, the Dominican Republic should reverse this under-investment in electricity infrastructure. The announcement of planned investments of USD 450 million in transmission infrastructure and USD 300 million in distribution infrastructure between 2024 and 2028 is a positive first step (MEM, 2024[24]). The issuance of the Dominican Republic’s first sovereign green bond in 2024 could also facilitate further investment in electricity infrastructure. It is now essential that this funding is disbursed properly: for example, this funding should not go towards the continued subsidisation of EDE losses but instead be used to invest in tangible improvements to the electricity network.

In parallel to increased infrastructure investment, a complementary means of addressing some of the EDEs’ financial losses would be for the Dominican Republic to review the electricity tariff that the EDEs are permitted to charge regulated users. Currently, the Electricity Superintendence (SIE, the electricity regulator) sets the electricity tariff below the costs faced by the EDEs, resulting in the EDEs making a loss on each unit of electricity sold, implying transfers from the Dominican government to the EDEs worth more than 1% of GDP per year (IMF, 2024[25]). The Dominican Republic should therefore consider measures to help ensure the long-term financial sustainability of electricity distribution, including a gradual transition to cost-reflective tariffs. See Section 3.5.1 for a more detailed discussion.

1.5.3. Incentivise investment in rainwater harvesting, water and wastewater treatment infrastructure

Semiconductor manufacturing also requires large quantities of high-quality water. However, the Dominican Republic has a higher level of water stress3 than other countries in the region such as Costa Rica or Panama and this situation is expected to worsen due to population and economic growth and climate change. Furthermore, only 53% of the Dominican Republic’s water treatment plants and 26% of wastewater plants operate at a suitable level (World Bank, 2020[26]).

To address some of the concerns around water supply, the Dominican Republic should support industrial parks to implement rainwater harvesting systems. These systems have been demonstrated to work in Chinese Taipei, where industrial parks collect, store and reuse water from typhoons. The Dominican Republic should explore options to make the most of the water available during the hurricane season.

The Dominican Republic should also look to reverse the state’s under-investment in water and sanitation infrastructure (only 0.04% of GDP in 2019), well below the regional average (0.16%) (OECD, 2022[14]). This would help repair and expand water transmission and treatment infrastructure, increase metering and reduce water losses. Through preferential water tariffs, the Dominican Republic could incentivise firms to invest in water treatment technologies. The new sovereign green bond, which was issued in 2024 and raised USD 750 million, has earmarked some of this financing for water and wastewater management projects and could support public investment in water infrastructure.

References

[9] CNC (2024), Burocracia Cero - Improving Competitiveness through the Efficiency of Public Services, Consejo Nacional de Competitividad.

[4] CNZFE (2025), Datos Estadísticos, National Council of Free Zones, https://www.cnzfe.gob.do/index.php/es/datos-estadisticos (accessed on 11 February 2025).

[27] Cohen, W. and D. Levinthal (1990), “Absorptive Capacity: A New Perspective on Learning and Innovation”, Administrative Science Quarterly, Vol. 35/1, pp. 128-152, https://josephmahoney.web.illinois.edu/BA545_Fall%202022/Cohen%20and%20Levinthal%20(1990).pdf (accessed on 10 April 2025).

[17] Gabinete de Innovación (2022), Política Nacional de Innovación 2030.

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[22] IEA (2023), “Dominican Republic”, International Energy Agency, https://www.iea.org/countries/dominican-republic/electricity (accessed on 5 March 2025).

[25] IMF (2024), Dominican Republic: 2024 Article IV Consultation - Press Release and Staff Report, IMF Country Report No. 24/294, International Monetary Fund, https://www.imf.org/-/media/Files/Publications/CR/2024/English/1domea2024001-print-pdf.ashx (accessed on 5 March 2025).

[24] MEM (2024), “Gobierno proyecta invertir USD$750 millones en el sistema de distribución y transmisión energética”, Ministro de Energía y Minas, https://mem.gob.do/gobierno-proyecta-invertir-us750-millones-en-el-sistema-de-distribucion-y-transmision-energetica/ (accessed on 16 July 2025).

[23] MEM (2024), “Informe de Desempeño Empresas Eléctricas Estatales período de enero-noviembre 2024”, Ministro de Energía y Minas, https://mem.gob.do/wp-content/uploads/2025/02/Informe-de-Desempeno-de-las-Empresas-Electricas-Estatales-EEE-noviembre-2024.pdf (accessed on 5 March 2025).

[1] MICM (2025), National Strategy for the Promotion of the Semiconductor Industry, Ministerio de Industria, Comercio y Mipymes, https://micm.gob.do/wp-content/uploads/2025/08/National-Strategy-for-the-Promotion-of-the-Semiconductor-Industry-ENFIS.pdf (accessed on 16 October 2025).

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[14] OECD (2022), Multi-dimensional Review of the Dominican Republic: Towards Greater Well-being for All, OECD Development Pathways, OECD Publishing, Paris, https://doi.org/10.1787/560c12bf-en (accessed on 28 February 2025).

[16] OECD (2015), Frascati Manual 2015: Guidelines for Collecting and Reporting Data on Research and Experimental Development, The Measurement of Scientific, Technological and Innovation Activities, OECD Publishing, Paris, https://doi.org/10.1787/9789264239012-en.

[15] OECD/Eurostat (2018), Oslo Manual 2018: Guidelines for Collecting, Reporting and Using Data on Innovation, 4th Edition, The Measurement of Scientific, Technological and Innovation Activities, OECD Publishing, Paris/Eurostat, Luxembourg, https://doi.org/10.1787/9789264304604-en.

[7] Sturgeon, T. (2025), “Drawing a New Roadmap for Industrial Upgrading in the Dominican Republic: Industrial Ecosystem Review and Strategic Assessment”.

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[20] UNCTAD (2021), República Dominicana: examen de las políticas de ciencia, tecnología e innovación, United Nations Trade and Development, https://unctad.org/system/files/official-document/dtlstict2020d8_es.pdf (accessed on 14 February 2025).

[21] WEF (2021), World Economic Forum Travel & Tourism Development Index, World Economic Forum, https://prosperitydata360.worldbank.org/en/dataset/WEF+TTDI (accessed on 28 March 2025).

[12] World Bank (2023), Domestic credit to private sector by banks (% of GDP), World Bank, Washington, DC, https://data.worldbank.org/indicator/FD.AST.PRVT.GD.ZS (accessed on 28 February 2025).

[13] World Bank (2023), Lending interest rate (%) - Dominican Republic, World Bank, Washington, DC, https://data.worldbank.org/indicator/FR.INR.LEND?locations=DO (accessed on 28 February 2025).

[5] World Bank (2023), Reporte sobre tramitología para el establecimiento de empresas en tres regímenes especiales de República Dominicana, World Bank, Washington, DC, https://documents1.worldbank.org/curated/en/099112224175036219/pdf/P178504-76925377-6a5d-4130-ae65-f21ef927c822.pdf (accessed on 18 March 2025).

[8] World Bank (2022), Paving the way for prosperous cities and territories: Urbanization and Territorial Review of the Dominican Republic, World Bank, Washington, DC, http://documents1.worldbank.org/curated/en/099520007132233569/pdf/P172715065b95b0bc08ce70a7fe6442f014.pdf.

[26] World Bank (2020), “Realizing Sustainable Development Goals for Water and Sanitation in the Dominican Republic”, World Bank, Washington, DC, https://www.worldbank.org/en/results/2020/05/06/realizing-sustainable-development-goals-for-water-and-sanitation-in-the-dominican-republic (accessed on 7 March 2025).

[10] World Bank (2019), Dealing with Construction Permits, World Bank, Washington, DC, https://archive.doingbusiness.org/en/data/exploretopics/dealing-with-construction-permits (accessed on 25 February 2025).

[6] World Bank (2018), Dominican Republic: Systematic Country Diagnostic, World Bank, Washington, DC, https://documents1.worldbank.org/curated/en/980401531255724239/pdf/Dominican-Repuiblic-SCD-final-07022018.pdf (accessed on 5 March 2025).

[3] World Bank (2016), Special Economic Zones in the Dominican Republic: Policy Considerations for a more Competitive and Inclusive Sector, World Bank, Washington, DC, https://documents1.worldbank.org/curated/en/184001487332346268/pdf/112878-REVISED-PUBLIC-GVC-and-SEZ-in-DR-P152202-output-final-clean-new-title.pdf (accessed on 20 March 2025).

Notes

← 1.  Incentives for R&D investment are also considered separately in Recommendations 1.4.2 and 1.4.3.

← 2.  Absorptive capacity is defined as “the ability of a firm to recognise the value of new, external information, assimilate it, and apply it to commercial ends” (Cohen and Levinthal, 1990[27]). R&D is an important determinant of a firm’s absorptive capacity and its innovative capabilities.

← 3.  The World Bank defines the level of water stress as freshwater withdrawal as a proportion of available freshwater resources.