This chapter provides a quantitative analysis of the Dominican Republic’s advanced manufacturing sector and assesses the conditions in which semiconductor and microelectronics firms could operate. It starts by examining recent macroeconomic trends and analysing the demographics and performance of advanced manufacturing firms in the Dominican Republic. Furthermore, the chapter analyses the integration of the Dominican Republic’s advanced manufacturing sector into global value chains and foreign direct investment.
Review of the Dominican Republic's Enabling Environment for the Semiconductor and Microelectronics Industries
Abstract
This chapter provides an assessment of the Dominican advanced manufacturing sector, with a focus on the semiconductor segment where possible.1 It is organised into two main parts: the first addressing the macroeconomic environment and local industrial market structure, and the second exploring the enabling conditions for the development of a semiconductor ecosystem in the Dominican Republic, including integration into global value chains (GVCs) and foreign direction investment (FDI). The analysis builds on a combination of publicly available aggregate data, granular commercial data accessible to the OECD Secretariat, and granular data provided by the Dominican Republic’s National Statistics Office (ONE) to the OECD Secretariat.
The semiconductor industry does not currently operate in the Dominican Republic and the country hosts only a small number of microelectronics firms. Therefore, to assess the conditions in which semiconductor and microelectronics firms could operate, this analysis focuses on the advanced manufacturing sector as a relevant benchmark within the broader economic landscape. Accordingly, this section first provides an overview of the latest macroeconomic developments in the Dominican Republic and then sheds light on the size and structure of the advanced manufacturing sector in the country. This analysis includes an overview of the business demographics (e.g. number of firms, market concentration) and economic activity (e.g. profits, value added) of advanced manufacturing, compared to other manufacturing industries.
Over the past decade, the Dominican Republic has experienced steady gross domestic product (GDP) growth, averaging around 5% annually, outperforming the OECD average. Rising incomes, poverty reduction and a strong labour market (5.6% unemployment rate in 2023) accompanied this growth. Inflation, after peaking at 8.8% in 2022, returned to target levels (defined by the Central Bank of the Dominican Republic (BCRD) as 4.0% ± 1.0%) by 2023.
By 2023, there were 1 046 advanced manufacturing firms in the country, most of which were micro firms (with ten or fewer employees) and concentrated in the country’s two main industrial hubs (Santiago and Santo Domingo). Between 2016 and 2022, employment growth in the advanced manufacturing sector closely mirrored that of the rest of the manufacturing sector, despite weaker value-added growth. In recent years, overall profitability in the advanced manufacturing sector has remained comparable to the rest of the manufacturing sector, though certain advanced manufacturing industries have demonstrated notably higher profitability.
The following two sections delve more deeply into these topics, presenting a detailed analysis of recent macroeconomic trends in the Dominican Republic and an in-depth examination of the size, structure and economic performance of the advanced manufacturing sector.
2.1.1. Macroeconomic environment
From 2010 to 2024, the Dominican Republic experienced consistent GDP growth, driven by strong private consumption and investment on the expenditure side and by the services and, to a lesser extent, the industries sector on the production side (IMF, 2024[1]). Averaging around 5% annually, average GDP growth rates in the country surpassed other Latin American countries (with similar GDP per capita levels in 2022) and the OECD average (Figure 2.1, Panel A), which helped to steadily raise income and reduce poverty. From 2015 to 2023, the share of population living in poverty (earning less than USD 6.85 per day) decreased from 30.4% to 17.9% (World Bank, 2025[2]). In 2023, economic growth slowed to 2.2% (below its average growth of 5%), driven by a sharp deceleration in private consumption and investment in the first half of 2023 (IMF, 2024[1]). However, domestic demand rebounded in the second half of 2023 and economic growth rebounded to 5.0% in 2024. Headline inflation rose to 8.8% in 2022 but returned to the BCRD’s target range of 3-5% by 2023, staying below the levels recorded in other Latin American countries like Mexico and Peru, as well as the OECD average (Figure 2.1, Panel B).
In 2023, the labour market remained strong, with the unemployment rate standing at 5.6%, below pre‑COVID-19 levels and lower than in other countries in the region such as Brazil and Costa Rica (ILO, 2025[3]). Employment growth in the fourth quarter (Q4) of 2023 was relatively broad-based, with sectors such as construction and tourism surpassing 2019 Q4 levels, while the industrial sector remained in line with 2019 Q4 levels. Despite these positive trends, significant gender disparities persisted in labour force participation and employment (IMF, 2024[1]).
The contribution of manufacturing to the Dominican Republic’s GDP is relatively low, representing only 13.8% in 2023. This is comparable to other countries in the region, such as Brazil (13.3%) and Costa Rica (13.6%), but significantly lower than Mexico (20.1%) (World Bank, 2025[4]). Manufacturing’s contribution to GDP has declined from 21.6% in 2004, reflecting a gradual shift towards a more services-oriented economy. While value added in manufacturing has grown in absolute terms, its slower growth compared to the services sector might reflect key challenges, including dependence on tourism and the need for greater diversification and innovation to boost productivity and value creation in the manufacturing sector.
Note: Panel A shows annual growth rates while Panel B shows annual percentage changes. In Panel B, the shaded grey area reflects the inflation target marked by the BCRD. The latest observations are for 2024.
Sources: Panel A: OECD calculations based on World Bank (n.d.[5]), GDP (constant 2015 US$) (indicator), https://data.worldbank.org/indicator/NY.GDP.MKTP.KD (accessed on 15 October 2025); Panel B: OECD calculations based on World Bank (n.d.[6]), Inflation, consumer prices (annual %) (indicator), https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG (accessed on 15 October 2025).
2.1.2. The electronics and advanced manufacturing ecosystem in the Dominican Republic
As detailed in Section 3.2, the free zone regime in the Dominican Republic was designed to promote industrial development and overseas exports. While it has successfully attracted advanced manufacturing industries, such as medical device manufacturing, the free zone regime has yet to draw semiconductor operations to the country and microelectronics firms have only a very small presence. This section analyses the advanced manufacturing sector to help understand the broader setting in which semiconductor and microelectronics firms may operate. This analysis sheds light on the correlation between firms’ performance and characteristics, pointing to possible policies to unleash the potential of the Dominican semiconductor and microelectronics ecosystem.
Granular data provide a better understanding of the market structure and firm dynamics and reveal important differences in performance across different categories of firms, thereby helping policymakers better design and target policy actions. This report builds on data made available by ONE (see Box 2.1).
This report employs data made available by ONE and includes the following datasets:
The Register of Enterprises and Establishments (Directorio de Empresas y Establecimientos): The business registry dataset offers identification information, geographical location, number of employees (by size bands) and economic activity for the universe of firms in the Dominican Republic. Available to the OECD Secretariat for the years 2015 to 2023.
The National Survey of Economic Activity (Encuesta Nacional de Actividad Económica, ENAE): This survey provides detailed insights into the structure and financial performance of formal firms. It includes data on general firm characteristics and income statements (e.g. revenue, costs, profit), enabling the analysis of trends across various sub-sectors. Available to the OECD Secretariat for the years 2016 to 2022.
In 2023, there were 1 046 firms in the advanced manufacturing sector, representing 1% of all registered firms in the Dominican Republic. Of the 1 046 firms, 47 (4.5%) corresponded to the manufacturing of computer, optical and electronic products (hereafter, electronics sector). In 2023, the chemicals sector had the highest number of firms within the advanced manufacturing sector, with 491 firms (46.9%), followed by electrical equipment manufacturing with 161 firms (15.4%) and machinery and equipment manufacturing with 142 firms (13.6%) (Figure 2.2, Panel A). Overall, the advanced manufacturing sector grew by 355 firms since 2015, with the electronics sector adding 29 new firms. As a result, the share of advanced manufacturing firms within the total manufacturing sector increased from 11.5% in 2015 to 13.4% in 2023. A significant portion of advanced manufacturing firms were micro firms, employing ten or fewer workers. In 2023, micro firms accounted for 69.4% of the firms, up from 62.2% in 2015 (Figure 2.2, Panel B), in line with total manufacturing (67.5% in 2023).
Figure 2.3 illustrates the distribution of advanced manufacturing firms in the Dominican Republic by province in 2023, highlighting a strong concentration in the Santo Domingo area (composed of the Distrito Nacional and Santo Domingo province) and in Santiago, both of which host the country’s main industrial hubs. In 2023, the Santo Domingo area accounted for 61.4% of the advanced manufacturing firms, whereas Santiago accounted for 16.4% of the firms. A large share of these firms operates within free zone industrial parks, which are heavily concentrated in these two areas. According to the National Council of Free Zones (CNZFE) (2025[7]), Santo Domingo and Santiago are the provinces with the highest number of free zone industrial parks, with 20 and 29 respectively. Together, these provinces host 488 out of the 843 firms operating under the free zone regime. The Santiago industrial park was the biggest industrial park in the country (measured in terms of workforce) in 2023, with 22 600 employees, according to ONE (2025[8]), followed by the San Cristóbal Industrial Park (22 141 employees), and the Las Américas Industrial Park (20 006 employees). The latter 2 parks have seen the most significant workforce growth in the country since 2017, each adding around 7 000 employees.
Between 2015 and 2023, 355 new advanced manufacturing firms were established in the country, but the overall concentration of firms in the Santo Domingo area and Santiago has remained relatively unchanged. Santiago’s share of advanced manufacturing increased from 13.3% in 2015 to 16.4% in 2023, while the share in the Santo Domingo area declined from 68.1% in 2015 to 61.5% in 2023. Nevertheless, the Santo Domingo area remains the primary hub for industrial expansion, accounting for 49% of the newly established advanced manufacturing firms during this period, compared to 22% in Santiago.
Note: Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 Clasificación Nacional de Actividades Económicas (CNAE). They correspond to sectors classified as medium-high and high-technology (high-tech) industries based on research and development (R&D) intensity following Galindo-Rueda and Verger (2016[9]). Firms are categorised by size: micro (1‑10 employees), small (11‑50 employees), medium (51-250 employees) and large (more than 250 employees).
Source: OECD calculations based on ONE (n.d.[10]), “Directorio de Empresas y Establecimientos, 2015-2023”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details.
Note: Based on 1 046 firms corresponding to advanced manufacturing firms in 2023. Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 CNAE. They correspond to sectors classified as medium-high and high-tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]).
Source: OECD calculations based on ONE (n.d.[10]), “Directorio de Empresas y Establecimientos, 2015-2023”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details.
For the total economy, in 2023, 49.9% of the firms were located in the Santo Domingo area whereas 15.4% of the firms were located in Santiago. While expansion of the main industrial hubs can provide benefits such as shared infrastructure, access to specialised labour or knowledge spillovers, supporting infrastructure development and offering investment incentives in underrepresented provinces could help expand manufacturing capacity beyond these hubs and enhance regional economic growth, fostering a more balanced industrial landscape across the country (see also Section 3.2.4).
In 2022, nearly 40 000 workers were employed in the advanced manufacturing sector, representing an increase of approximately 2 500 employees compared to 2016. Regarding workforce composition, 45% of employees in advanced manufacturing were female in 2022, reflecting a gradual increase from 33% in 2017 (Figure 2.4, Panel A). Furthermore, the female participation rate in advanced manufacturing was noticeably higher than in other manufacturing sectors, where 36% of all employees were female in 2022.
By sector within the advanced manufacturing sector, the chemicals sector had the highest number of employees in 2022 (13 700), followed by the pharmaceuticals (11 3000) and electrical equipment (10 9000) sectors (Figure 2.4, Panel B). In 2022, the advanced manufacturing sector accounted for 13% of total employment in manufacturing and for 5% of total employment in the sectors covered by the ENAE.2
Note: Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 CNAE. They correspond to sectors classified as medium-high and high-tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]). In Panel A, the data label indicates the share of the respective group in total employment. From ENAE 2018 (based on 2017 data) onwards, only formal employer firms with at least 16 employees are included.
Source: OECD calculations based on ONE (n.d.[11]), “Encuesta Nacional de Actividad Económica, 2016-2022”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details.
Understanding the performance of different manufacturing sectors is essential for assessing the overall competitiveness and growth potential of the Dominican Republic’s advanced manufacturing landscape, including for the development of semiconductor and microelectronics industries. Figure 2.5 compares the evolution of labour productivity, real value added, number of employees and real wages between the advanced manufacturing sector and other manufacturing sector. These key indicators provide insights into structural shifts within the manufacturing sector, highlighting both areas of convergence and divergence.
Note: All values are presented as an index with 2016 as the base year (2016=100), to allow for relative comparison over time. Labour productivity is calculated as real value added over total employees. Nominal value added is deflated using the producer price index (PPI) for manufacturing with December 2013 as the base period. Nominal wages are deflated using the PPI for manufacturing with December 2013 as the base period. Wages denote annual salaries and they correspond to wages declared in Question 6.1.1 of ENAE divided by the number of employees. Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 CNAE. They correspond to sectors classified as medium-high and high‑tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]). Data for Sector 29 for 2016 are not available. Data for Sector 30 prior to 2019 are not available. Other manufacturing refers to manufacturing sectors not classified as advanced manufacturing. From ENAE 2018 (based on 2017 data) onwards, only formal employer firms with at least 16 employees are included.
Sources: OECD calculations based on ONE (n.d.[11]), “Encuesta Nacional de Actividad Económica, 2016-2022”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details; ONE (n.d.[12]), Índice de Precios al Productor (IPP): Variación porcentual acumulada de la sección de industrias manufactureras, según divisiones de la Clasificación Nacional de Actividad Económica. Diciembre de 2013 a Noviembre 2024, https://www.one.gob.do/media/pg0kncgu/ipp-industrias-manufactureras-segun-divisiones-cnae-_de-diciembre-de-2013-a-noviembre-2024.xlsx (accessed on 15 March 2025).
Although labour productivity remains higher in the advanced manufacturing sector, reaching DOP 887 905 (Dominican pesos) per worker in 2022, the gap to the other manufacturing sector has narrowed in recent years. Labour productivity in the other manufacturing sector increased by 11.7% from 2016 to 2022, reaching DOP 849 067 per worker in 2022. In contrast, the advanced manufacturing sector saw a more modest increase of just 1.8% over the same period (Figure 2.5, Panel A). This trend is explained by the evolution of real value added (Figure 2.5, Panel B), which has grown at a faster pace in the other manufacturing sector, particularly in 2021 and 2022. The advanced manufacturing sector also presents more volatile behaviour, with fluctuations in value-added growth more pronounced in recent years. At the same time, the number of employees (Figure 2.5, Panel C) has remained broadly stable in both sectors, indicating that productivity gains have been mainly driven by value-added growth rather than significant shifts in employment levels. To better understand what drove productivity gains in the other manufacturing sector between 2016 and 2022, a shift-share decomposition analysis can be carried out (see Annex C). The results suggest that aggregate labour productivity growth during this period (11.7%) was mainly driven by improvements within individual subsectors, contributing 12.2 percentage points (p.p.). Shifts in employment towards initially more productive subsectors added another 3.3 p.p. However, this was partly offset by a negative interaction effect of 3.8 p.p., suggesting that some employment moved into subsectors experiencing declining productivity, or away from those where it was improving.
Lastly, the evolution of real wages (Figure 2.5, Panel D) shows that despite the narrowing labour productivity gap, wage growth remains stronger in the advanced manufacturing sector. From 2016 to 2022, real wages in the advanced manufacturing sector grew by 18.6%, whereas in other manufacturing they increased by 8.3%.
Between 2016 and 2022, the pharmaceuticals sector had the highest average labour productivity, exceeding DOP 1.4 million per worker and per year. It was followed by the chemicals and electronics sectors, with average productivity of DOP 0.97 million and DOP 0.90 million respectively. In terms of average monthly real wages, the chemicals sector again led with DOP 26 080, followed closely by the pharmaceuticals sector with DOP 25 889, and the electronics sector with DOP 20 541. At the other end of the spectrum, average real wages in the other transport equipment manufacturing sector were notably lower, at just DOP 10 163. This sector also lagged in terms of labour productivity, recording the lowest levels among the advanced manufacturing sectors.
Since 2016, profits (measured in real terms) in the advanced manufacturing sector have decreased by 7.5%, with pharmaceuticals being the exception. In 2022, motor vehicle manufacturing, machinery and equipment manufacturing and other transport equipment manufacturing were facing losses, whereas the profit margin for the pharmaceuticals industry stood at 21.7%, significantly above the advanced manufacturing (10.4%) and other manufacturing (10.6%) averages. The electronics sector was also profitable (12.6%) and above the average for the advanced and other manufacturing sectors, even if profitability declined by 4.3 p.p. from the value recorded in 2021 (Figure 2.6).
Comparing labour productivity across different firm sizes can offer valuable insights into how firms of different scales manage resources, innovate and achieve higher efficiency. Larger firms in manufacturing often have the advantages of economies of scale, higher capital investment or greater access to advanced technologies, which can lead to higher labour productivity. On the other hand, small and medium-sized firms (SMEs) may face more challenges in accessing economies of scale or cutting-edge technology (Marchese et al., 2019[13]; OECD, 2024[14]). Examining productivity trends across firm sizes can reveal disparities between sectors and highlight the specific challenges and opportunities faced by firms, thus providing insights into possible policies to help enhance productivity and promote economic growth, including for the semiconductor and microelectronics industries.
Figure 2.7 shows that in 2022, labour productivity was higher in large firms across both advanced and other manufacturing sectors. Notably, large firms in other manufacturing outperformed their counterparts in advanced manufacturing. The productivity gap between large and smaller firms was particularly pronounced in the other manufacturing sector, where large firms demonstrated significantly higher productivity than medium and small firms.
These findings suggest the need for policies that focus on improving efficiency in large firms within the advanced manufacturing sector, while also supporting SMEs in the other manufacturing sector. Increased efforts in R&D, innovation and the integration of digital transformation could significantly boost productivity by enhancing efficiency and fostering the adoption of innovative technologies (André and Gal, 2024[15]) (see also Section 3.4 for details on the Dominican Republic’s science, technology and innovation ecosystem).
Note: The profitability of firms in an accounting period is determined by calculating the share of the revenue earned minus the total value of expenses incurred, compensation of employees and depreciation of machinery and work equipment over total revenues. From ENAE 2018 (based on 2017 data) onwards, only formal employer firms with at least 16 employees are included.
Source: OECD calculations based on ONE (n.d.[11]), “Encuesta Nacional de Actividad Económica, 2016-2022”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details.
Capital investment is an important driver of productivity, as capital-intensive firms tend to have higher returns to scale (OECD, 2024[14]). However, direct data on capital stock from financial firm-level data are often unavailable, making it necessary to rely on proxy measures to assess capital intensity.
Note: Labour productivity is calculated as real value added over total employees. Nominal value added is deflated using the PPI for manufacturing with December 2013 as the base period. Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 CNAE. They correspond to sectors classified as medium-high- and high-tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]). Other manufacturing refers to all other manufacturing sectors not classified as advanced manufacturing. Firms are categorised by size: small (11-50 employees), medium (51-250 employees) and large (more than 250 employees). From ENAE 2018 (based on 2017 data) onwards, only formal employer firms with at least 16 employees are included.
Sources: OECD calculations based on ONE (n.d.[11]), “Encuesta Nacional de Actividad Económica, 2016-2022”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details; ONE (n.d.[12]), Índice de Precios al Productor (IPP): Variación porcentual acumulada de la sección de industrias manufactureras, según divisiones de la Clasificación Nacional de Actividad Económica. Diciembre de 2013 a Noviembre 2024, https://www.one.gob.do/media/pg0kncgu/ipp-industrias-manufactureras-segun-divisiones-cnae-_de-diciembre-de-2013-a-noviembre-2024.xlsx (accessed on 15 March 2025).
Figure 2.8 provides insights into how variations in estimated capital investment per worker relate to labour productivity. In the absence of direct data on capital stock, capital intensity is approximated by the ratio of amortisation and depreciation costs to total employment. While imperfect, this serves as an indirect indicator of a firm’s capital expenditure.3 This measure also includes amortisation costs for intangible assets, such as patents or software, reflecting the allocation of expenses associated with the use and consumption of these non-physical capital assets. The findings reveal a positive relationship between capital intensity and labour productivity, with a stronger correlation in the advanced manufacturing sector.
Note: Capital intensity is proxied as the ratio of amortisation and depreciation costs to total employment. Labour productivity is measured as value added per worker. Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 CNAE. They correspond to sectors classified as medium-high and high-tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]). Other manufacturing refers to all other manufacturing sectors not classified as advanced manufacturing.
Source: OECD calculations based on ONE (n.d.[11]), “Encuesta Nacional de Actividad Económica, 2016-2022”, Confidential data, Oficina Nacional de Estadística (accessed in March 2025). See Box 2.1 for additional details.
The successful development of a semiconductor ecosystem requires strong connections with foreign markets, integration into GVCs and sustained investment in advanced manufacturing capabilities. Trade and investment data provide insights into enabling conditions, helping to assess the sector’s growth potential.
The Dominican Republic has actively integrated into GVCs, leveraging its strategic location and free zones to boost economic development, diversify its economy and enhance competitiveness. FDI plays a pivotal role in strengthening the advanced manufacturing ecosystem by introducing new technologies, enhancing workforce training, employment and wages and by enabling potential productivity spillovers. Over the past three decades, FDI inflows to the Dominican Republic have remained stable and moderate, surpassing other Latin American countries, with significant growth in FDI in free zones, although other sectors such as tourism have historically attracted most of the investment.
The following two sections provide a detailed analysis of the Dominican Republic’s integration into GVCs and the role of FDI in the economy, exploring their key dimensions and implications.
2.2.1. Integration into global value chains
The Dominican Republic has been actively integrating into GVCs, leveraging its strategic location and connections with the United States, Canada, and Central and South America, along with its extensive network of free zones, to become a pivotal player in regional supply chain networks. This integration is crucial for the country’s economic development, particularly as it seeks to diversify its economy and enhance its competitiveness in global markets. Trade plays a significant role in the Dominican Republic’s economy, accounting for approximately 50% of GDP in 2023 (World Bank, 2025[16]). The Dominican Republic has been expanding its local manufacturing capabilities, attracting investment and fostering growth in advanced sectors such as medical devices and electronics, which has contributed to its economic development and global trade participation.
According to data from the database for international trade analysis BACI,4 the Dominican Republic’s primary export products in 2023 were instruments and appliances for medical devices (classified under Harmonized System [HS] code 901890), gold (HS code 710812) and cigars (HS code 240210). The main trading partner that year was the United States, accounting for more than half (53%) of total Dominican exports. The Dominican Republic’s main imports were petroleum oils (HS codes 271000 and 270900) and natural gas (HS code 271111), underscoring the country’s energy dependence (see also Section 3.5.1). The United States was also the main source of imports, supplying 41% of total imports.
In real terms,5 exports of medical instruments (4-digit HS code 9018), the leading export category, amounted to USD 1 322 million in 2023, reflecting a 9.9% increase compared to 2014. As for overall exports, the United States is by far the most important destination for Dominican medical instruments (USD 907 million in exports). Nonetheless, exports to the People’s Republic of China (hereafter China), the second-largest market for Dominican medical instruments in 2023, have more than doubled during the last decade, from USD 35 million in 2014 to USD 79 million in 2023 (124% increase). The revealed comparative advantage (RCA) indicator, which can be used to assess the Dominican Republic’s relative specialisation within different markets, reveals that the country is one of the most specialised countries in medical devices globally. In 2023, it achieved an RCA value above 20, the second highest value globally, just behind Costa Rica.6
The Dominican Republic’s experience in producing and exporting medical instruments can provide a solid foundation for entering the semiconductor and microelectronics industries, with opportunities to leverage existing trade relationships, develop and expand key infrastructure, and attract investment to support growth in this advanced industry.
The semiconductor value chain encompasses multiple stages and complex production processes, from the extraction and refinement of raw materials to the final assembly, testing and packaging of chips. At each stage, a diverse set of critical inputs is essential to the production process, which can be broadly categorised into six key areas: raw materials, wafer inputs, silicon wafers, foundry inputs, manufacturing equipment and final semiconductor products, such as chips and photosensitive devices. These categories encompass the core materials, specialised components and advanced machinery required for semiconductor fabrication.7 The products at each stage can be classified according to international trade data standards, with a comprehensive list provided in Table A B.1 of Annex B.
Exports of semiconductor-related products have experienced a notable decline from USD 29 million in 2014 to USD 15 million in 2023, nearly halving (Figure 2.9, Panel A).8 The most exported product in this group was photosensitive semiconductor devices (HS code 854140). Conversely, imports of semiconductor-related products have followed an upwards trajectory. Since 2014, imports have more than doubled, increasing from USD 122 million in 2014 to USD 253 million by 2023 (Figure 2.9, Panel B). The most notable increase was again observed in photosensitive semiconductor devices (HS code 854140), for which imports grew by USD 98 million. Imports of chips also increased significantly, from USD 61 million in 2014 to USD 84 million in 2023, with parts of electronic integrated circuits (HS code 854290) accounting for 46% of the imports of chips in 2023. Similarly, imports of manufacturing equipment rose from USD 42 million in 2014 to USD 53 million in 2023. The most imported items were machinery and apparatus for filtering or purifying gases (HS code 842139) and their parts (HS code 842199), which together accounted for 37% of total imports of manufacturing equipment in 2023. The widening gap between imports and exports reflects a worsening trade balance in semiconductor-related goods, indicating the growing weight of imports in the sector.
Note: Semiconductor-related products are detailed in Annex B. Exports and imports are adjusted for inflation using the PPI for manufacturing, with December 2013 as the base period.
Sources: OECD calculations based on CEPII (n.d.[17]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html (accessed on 15 March 2025); ONE (n.d.[12]), Índice de Precios al Productor (IPP): Variación porcentual acumulada de la sección de industrias manufactureras, según divisiones de la Clasificación Nacional de Actividad Económica. Diciembre de 2013 a Noviembre 2024, https://www.one.gob.do/media/pg0kncgu/ipp-industrias-manufactureras-segun-divisiones-cnae-_de-diciembre-de-2013-a-noviembre-2024.xlsx (accessed on 15 March 2025).
In 2023, the United States was the main export destination, receiving 55.4% of the semiconductor-related products. In contrast, China was the primary source of imports, accounting for 48.8% of the total. Notably, the share of China’s imports has grown significantly, increasing by 36.6 p.p. since 2014. This heavy reliance on a partner for imports underscores the importance of assessing potential risks and effectively managing supply chain dynamics.
Understanding the concentration of sources for essential semiconductor components is crucial for assessing potential risks in supply chains. The Herfindahl-Hirschman Index (HHI) is a widely used measure of market concentration.9 For the semiconductor-related products that the Dominican Republic imported the most (with annual imports of at least USD 1 million in nominal terms), 69% show a high concentration, while 31% exhibit a moderately high concentration. The highest concentration in 2023 is observed in photosensitive semiconductor devices (HS code 854140), which are commonly used in renewable energy production, particularly in solar panels. China held a significant share of the supply of this product, accounting for 85% of imports. Furthermore, the concentration for this product has intensified in recent years, with the HHI surpassing 0.7 since 2019 (Figure 2.10).
Similarly, in 2023, the concentration for integrated circuit parts (HS code 854290), categorised under chips, remained notably high, with the United States supplying 73% of the total imports. The concentration of imports for this product has remained high for the whole sample period. Imports of photographic goods (HS code 370790), categorised as inputs for wafers, have also remained highly concentrated, with an HHI above 0.4 for the entire period. In 2023, China accounted for 57% of these imports and the United States 39%, leaving only 4% for other countries.
The strong concentration in the imports of semiconductor-related products highlights the heavy reliance on specific trading partners, which could create vulnerabilities in the event of supply chain disruptions, geopolitical tensions or changes in trade policies, such as the imposition of tariffs or revisions to trade agreements. It also underscores the importance of diversifying sources of imports in developing the local semiconductor industry to reduce potential risks relating to market instability and disruption.
2.2.2. Foreign direct investment
The role of FDI is crucial for strengthening the advanced manufacturing sector and help materialise ambitions to develop semiconductor and microelectronics ecosystems. FDI can produce positive productivity spillovers as multinationals integrate domestic firms into their productive process and foster the development of a local ecosystem (OECD, 2022[18]). Moreover, multinationals may bring new technology and provide access to new markets, thereby improving the training and qualifications of the local workforce and improving employment and wages (Carril‐Caccia and Pavlova, 2020[19]; Alfaro Urena, Manelici and Vasquez, 2021[20]). The positive spillovers of investment by multinationals can be further leveraged if co‑ordinated with the development of a local ecosystem of suppliers and customers to help ensure long-term benefits to the local economy (see also Section 3.2.3). Multinational corporations engage in FDI activities for various strategic purposes. As highlighted by Carril-Caccia and Pavlova (2020[19]), market potential, asset seeking, efficiency seeking, institutional quality and macroeconomic stability are among the primary determinants for firms to engage in FDI activities.
Figure 2.11 shows that over the past three decades, the Dominican Republic has maintained relatively stable and moderate FDI inflows, with significant peaks in the early 2000s and around 2008. In the most recent period, the Dominican Republic’s FDI inflows surpassed those of Brazil, Mexico and Peru (as a percentage of GDP), remaining below Costa Rica which led the region in FDI attraction.
According to the BCRD, FDI inflows to the Dominican Republic continued to perform strongly in 2023, increasing by 7.1% compared to 2022 and reaching USD 4.39 billion (BCRD, 2025[21]). This growth is particularly noteworthy given the global context of declining investment flows, with global FDI decreasing by 1.5% in the same period (UNCTAD, 2024[22]).
Herfindahl-Hirschman Index
Note: Only products for which imports amounted to USD 1 million or more (in current USD) in each year are included.
Source: OECD calculations based on CEPII (n.d.[17]), The CEPII‑BACI dataset, https://www.cepii.fr/DATA_DOWNLOAD/baci/doc/baci_webpage.html (accessed on 15 March 2025).
FDI in the Dominican Republic originates from a range of different countries. As of 2024, the United States remained the leading source of FDI (USD 1 162 million), followed by Spain from where FDI flows increased by more than 5 times between 2010 (USD 203 million) and 2024 (USD 1 126 million). Notably, investment from Spain rose sharply in 2024, increasing from USD 668 million in 2023. Brazil was the third-largest investor in 2024, with USD 229 million followed by Mexico (USD 210 million) and Canada (USD 207 million). Other countries, such as Panama and France, have also increased their investments, reaching USD 192 million and USD 163 million respectively (Figure 2.12, Panel A).
The Dominican Republic’s free zones, analysed in depth in Section 3.2, have experienced remarkable growth, becoming a vital engine for economic development and job creation, particularly in the manufacturing sector. The growth in these zones has been particularly notable in recent years, with significant expansion in key industries. According to the CNZFE (2025[7]), the electronics sector saw substantial growth, with the number of firms increasing from 20 in 2017 to 30 in 2024. Similarly, the medical devices manufacturing sector grew from 31 to 40 firms over the same period, reflecting the country’s increasing attractiveness for high-tech industries.
Note: FDI is the net inflow of investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings and other long-term as well as short-term capital as shown in the balance of payments. This series shows net inflows (new investment inflows less disinvestment) in the reporting economy from foreign investors and is divided by GDP. The chart shows three-year moving averages. The latest observations are for 2024.
Source: World Bank (n.d.[23]), Foreign direct investment, net inflows (% of GDP) (indicator), https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS (accessed in October 2025).
After adjusting for inflation, FDI flows in free zones increased from USD 100.6 million in 2010 to USD 294.6 million in 2024 (expressed in constant 2018 USD), representing, by 2024, 9.2% of the total investment in the country (Figure 2.12, Panel B). This trend reflects growing investor interest in this special regime, which includes a range of activities including manufacturing and services. Nonetheless, tourism has consistently been the dominant sector for FDI inflows, especially since 2015, representing a substantial portion of total investment. Other sectors such as energy, commerce/industry and real estate have also attracted significant capital.
A breakdown of FDI by type provides a better understanding of the strategic preferences of foreign investors and the impact of these investments on the Dominican Republic’s economy. FDI can generally be categorised into two main types: greenfield or brownfield. Greenfield investments involve the creation of entirely new facilities, infrastructure or operations which are particularly significant for economic growth. In contrast, brownfield investments take place through acquisitions of existing ventures which are already operating, often through mergers and acquisitions (M&A). These investments enable businesses to quickly gain market presence and enhance efficiency while minimising the risks and costs associated with developing entirely new projects. They can be particularly beneficial in mature industries where existing facilities can be modernised to boost productivity and competitiveness.
Note: The observations with negative values correspond to operational losses, disinvestment and/or dividend payments. Statistics calculated in accordance with the Sixth Edition of the Balance of Payments and International Investment Position Manual of the International Monetary Fund (IMF, 2009[24]). Others reflect the sum of other countries/sectors not represented in the chart. The selected countries/sectors represented are those with a higher investment in 2024.
Source: OECD calculations based on data from BCRD (2025[21]), Inversión extranjera directa (IED) por país de origen and Inversión extranjera directa (IED) por sectores de destino, https://www.bancentral.gov.do/a/d/2532-sector-externo (accessed on 13 March 2025).
Data from the cross-border investment tracking database fDi Markets covering greenfield investment indicate that between January 2003 and May 2024, the hotel and tourism sector attracted the largest share of greenfield capital investment, exceeding USD 12 billion. This sector also led in job creation, generating 40 000 direct new jobs. Despite receiving significantly lower investment (USD 0.4 billion), the medical devices sector ranked second in direct job creation, contributing over 8 000 jobs. This reflects a substantially higher employment intensity in the medical devices sector, with nearly 19 direct jobs generated per million USD invested, compared to only 3 in the hotel and tourism sector (Figure 2.13).
Note: Based on 347 projects recorded between January 2003 and May 2024 for the Dominican Republic. Job creation only refers to direct jobs.
Source: OECD calculations based on fDi Markets (2024[25]), The crossborder investment monitor, https://www.fdimarkets.com/ (accessed on 15 March 2025).
Regarding brownfield investment, Bureau van Dijk’s Zephyr10 data show that the majority of M&A transactions in the Dominican Republic were concentrated in the electricity, gas, steam and air conditioning supply sector (Statistical Classification of Economic Activities in the European Community [NACE] code 35), telecommunications (NACE code 61) and beverage manufacturing (NACE code 11) between 2000 and 2022. Together, these sectors accounted for 75.3% of the deals value (USD 7 618 million). In contrast, M&A activity in advanced manufacturing sectors remained limited, totalling USD 66 million, of which USD 60 million were in the manufacture of machinery and equipment (NACE code 28) and USD 6 million in the chemicals sector (NACE 20).
References
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← 1. Advanced manufacturing sectors correspond to Sectors 20, 21, 26, 27, 28, 29 and 30 of the 2019 Clasificación Nacional de Actividades Económicas (CNAE). They correspond to sectors classified as medium-high and high-tech industries based on R&D intensity following Galindo-Rueda and Verger (2016[9]).
← 2. ENAE covers the following sectors: mining and quarrying; manufacturing industries; electricity supply; water supply; construction, trade, transport and storage; accommodation and food services; and information and communications.
← 3. Assets such as machinery and equipment are typically subject to physical deterioration over time, and the costs associated with their depreciation provide an estimate of the firm’s investment in maintaining or upgrading its capital base. Using amortisation and depreciation costs per worker as a proxy for capital intensity has, however, significant limitations. While this method can offer some insights, particularly when direct capital stock data are unavailable, it should be interpreted with caution. This approach reflects, to some extent, the historical allocation of resources towards capital assets such as machinery or equipment, but it may not accurately represent current or future capital intensity. Additionally, accounting methods and industry-specific factors and the age of assets can significantly influence depreciation rates, further complicating cross-firm comparisons.
← 4. French acronym for Base pour l’Analyse du Commerce International. The BACI database can present several advantages over the raw United Nations Comtrade database, which is the most comprehensive database on world trade, building on data on bilateral trade flows reported by countries to the United Nations Statistical Division (for more information, see https://comtradeplus.un.org/). However, while countries report both their imports and their exports through Comtrade, mirror flows (which should be identical for the reporter and partner country) between partners may differ. BACI employs a procedure to reconcile flows reported by importers and exporters to provide consistent trade flow estimates (Gaulier and Zignago, 2010[26]).
← 5. To account for inflation, nominal exports were deflated using the producer price index (PPI) for manufacturing with December 2013 as the base period, sourced from ONE.
← 6. The RCA indicator compares a country’s share of exports in a particular segment to the global share of those exports, thereby providing evidence of countries’ specialisation in certain segments and products. An RCA value above 1 indicates a specialisation.
← 7. For more details, see Annex A.
← 8. Given that there is no active semiconductor industry in the Dominican Republic, chip exports likely represent re-exports rather than domestically produced goods.
← 9. The HHI is calculated as the sum of the squared market shares of each country for a given good. The index equals one in the case of a monopoly and converges to zero with a large number of atomistic suppliers. Thus, the closer the value is to zero, the lower the concentration. The interpretation of the HHI level varies depending on the context. Vicard and Wibaux (2023[27]) and Bonnet and Ciani (2023[28]) deem a product to be concentrated when the index exceeds 0.4. Following Kowalski and Legendre (2023[29]), this report classifies markets with an HHI between 0.15 and 0.25 as moderately concentrated, and those above 0.25 as highly concentrated.
← 10. For more information, see https://login.bvdinfo.com/R1/ZephyrNeo. The covered transactions include deals in the following categories: genuine acquisition; further acquisition; minority stakes; and joint venture. Only cross-border investments are considered: domestic deals are not included.