The future of DR's manufacturing-for-export industry

[aegap]

...is from low skill low value added textile manufacturing productions and into skilled high value added technological manufacturing productions? i.e. The way Taiwan did it, ..

Several months ago:

Fernandez, the DR's best salesman


President Leonel Fernandez continues to push for more investment in the Dominican Republic, and is making the most of his stay in California to meet with key business leaders, such as Sergey Brin and Larry Page, the owners of Google.com. Fernandez is trying to get people like Brin and Page to invest in technology in the Dominican Republic's Cyberpark located near Boca Chica. The two founders of Google expressed their support to projects underway to encourage young entrepreneurs to enter into high tech areas (1), according to the Presidency press office. Brin and Page offered Fernandez to help the Dominican government in the area of Internet communications, utilizing the platform used by the US government. The Google heads also offered to participate in the development of virtual communities with expatriate Dominicans. Through google.org, they offered to assist the government in social projects, as reported in El Caribe.
...
President Leonel Fernandez continues to push for more investment in the Dominican Republic, and is making the most of his stay in California to meet with key business leaders, such as Sergey Brin and Larry Page, the owners of Google.com. Fernandez is trying to get people like Brin and Page to invest in technology in the Dominican Republic's Cyberpark located near Boca Chica. The two founders of Google expressed their support to projects underway to encourage young entrepreneurs to enter into high tech areas (1), according to the Presidency press office. Brin and Page offered Fernandez to help the Dominican government in the area of Internet communications, utilizing the platform used by the US government. The Google heads also offered to participate in the development of virtual communities with expatriate Dominicans. Through google.org, they offered to assist the government in social projects, as reported in El Caribe.
Fernandez then met with the chief executives of Nanosolar (1) (2), who also promised the Dominican President their assistance in the development of new technologies for renewable energy. The Cyberpark (1)will participate in an innovative solar energy project that will use new materials manufactured by Nanosolar to reduce the cost of solar energy installations by 50 or 60%. In Silicon Valley, President Fernandez met with Martin Roscheisen and Brian Sager of Nanosolar. As reported in Diario Libre, President Fernandez expressed his interest that the company in the future may manufacture these materials in the DR for export to the East Coast of the US, the Caribbean and Latin America. ..

Today's DR1 Daily News:

Solar power to get a boost
One of the world's leading solar energy companies is opening two factories in the Dominican Republic with an initial investment of more than EUR100 million and plans to invest as much as EUR1.0 billion over the next ten years.
The president of the National Energy Commission, Aristides Fernandez Zucco announced that Isofoton, the world's fifth largest manufacturer of solar products, and the largest in Spain, plans to install two factories in Haina, just south of Santo Domingo. The company, known as IsoTecsol-RD in the Dominican Republic, makes photovoltaic cells for electricity and solar water heaters. The new plant will produce the photovoltaic plates needed for energy production. Construction is scheduled to start in January 2007. The second facility will be installed in Las Americas Cyber-Park

A nice parallel to the coming luxury tourism.
I'm sure DR-CAFTA was, and will continue to be pivotal in this sort-of metamorphosis.. ..Both come have come just in time, as their low value added counter parts are proving to be economically unsustainable.

Kudos to Leonel for taking the initiative during his first term, and so far seeing it through(e.g. 1 2).

[aegap]

..I suppose Call Centers can also be included.

[Russian]

I can see at least one big difference between Taiwan and DR, which IMHO could and most likely would be one of the factors making difficult for DR to follow the success story of Taiwan. From a few interactions with DR export/import sector and duty-free zones I have a strong impression that small-scale high value-added operation does not seem to be sustainable at this time. I am talking about “import – process-with-added-value – export” kind of operation, where imported goods are not raw materials, but already expensive equipment. Large operation may overcome "hidden costs", but small to medium scale enterprise will be very difficult to sustain.

Of cause this is personal opinion and thus very subjective. If someone has experience proving the opposite, please correct me – I would love to learn, change my mind, and bring equipment here.

Taiwan, on the contrarily, seem to have small and medium-scale operations happily importing and exporting high value-added gizmos without much of the roadblocks or hidden costs.

[aegap]

..I suppose Call Centers can also be included.


As textiles go, call centers/BPOs come; if that's the trade off, I kind of like it:

Dominican Call Centers Serve the U.S. Hispanic Marketplace

CALL CENTERS

The Dominican Republic is ..becoming a major area for contact centers in Latin America. It boasts more than 40 call centers, employing more than 18,000 people, according to government data. That’s more than contact centers employ in Panama and CAFTA countries like Costa Rica and El Salvador, according to the Zagada Institute.

U.S.-based Stream opened up its second contact center in the country in September. The new facility, located at the Cyberpark technology park just outside of Santo Domingo, employs 450 people. That comes on top of the San Isidro Industrial Free Zone, where Stream employs 800 people."

ICMI - Dominican Call Center Industry Witnesses Growth

The blossoming of call centers in the country has indeed attracted industry attention as the Dominican Republic focuses on high-tech services more sharply. According to the Zagada Institute, a business development analytics firm, the Dominican Republic is the leading call center location in the Caribbean and Central America, followed by Jamaica, which employs roughly 10,000 agents throughout 16 centers, Panama with 9,500 agents, Costa Rica 4,500 and El Salvador with 4,000


Eddy Martinez, Executive Director of the Dominican Republic's Center for Investment and Exports (CEI-DR for its Spanish acronym), expects the number of business process outsourcing (BPO) agents to grow to 30,000 by the end of 2007. "We are bullish on the BPO industry because we have seen the explosive demand for Spanish-language backoffice, telemarketing and customer support services," says Martinez. "We are now starting to reap the benefits of our investments in training and technology, and our positioning as the Spanish-language partner to countries such as India, who are global BPO industry leaders."
There are several other contributing factors to the Dominican Republic's emergence as a Call Center/BPO destination. A key one, according to current BPO investors, is its proximity to the United States, which makes it attractive to U.S.-based companies who want their offshore operations to be "nearshore." The Dominican Republic is located less than 850 miles from Miami, or about a two-hour flight. The Dominican Republic is not only physically close to the U.S. mainland, but its cultural affinity also makes it easier to find skilled bilingual agents at a time when the labor pool is tight.

[Keith R]

Call centers are not "manufacturing-for-export."

[aegap]

The Miami Herald had a nice article out today, ..

Dominican call centers cashing in on U.S. connection - 04/21/2008 - MiamiHerald.com

Dominican Republic becoming bigger player on outsourcing scene

'Did you unplug everything from the radio?'' the Dominican customer service agent asked her American client, with just the ever-slightest touch of an accent. As the Dominican Republic taps into its returning immigrant population to become the Caribbean's leader in the call center industry, few would notice her inflection. And that's the idea.

The government in Santo Domingo is offering incentives, sending thousands of young people to English immersion school and clearing out failed textile factories to make room for one of the biggest trends in telecommunications: the Caribbean. The number of agents in the Caribbean increased fivefold in six years.


''The perception that used to prevail was that the Dominican Republic was mostly a location for tourism with great beaches, a land of sugar and baseball,'' said Eddy Martínez, the Dominican Republic's secretary for exports and investments. ``The image out there was a distorted one. That image did not include the fact that we have the most sophisticated and advanced telecom infrastructure in the entire Latin America and Caribbean region.''

Four years ago, the country had just 11 call centers. Now, there are 56 and nearly 25,000 employees who, at salaries of up to $650 a month, earn two or three times the going rate for comparable jobs. With more and more companies looking to expand in Spanish-speaking markets, Martínez said he expects to see 100,000 call center jobs in the next four years.
The government hopes to fill the posts with the thousands of students given scholarships to take nine-month English immersion courses.
The Caribbean region has about 60,000 call center jobs. The Dominican Republic is the Caribbean's industry leader.

Martínez said the top selling point for Santo Domingo is not just low labor costs or Spanish speakers, but culture. The bulk of the call center jobs are in English, and this nation of 10 million people has 1 million of its countrymen living in the United States.
''The Dominican Republic has a great cultural affinity for the United States,'' he said. ``We've grown up with cable TV, CNN and U.S. channels and movies.''
And besides, he said, ``They don't play baseball in India.''

POSITIVE REVIEWS

The nation is becoming an industry leader largely because of positive reviews for quick problem-solving response times.

''You can have great government policy, low labor costs and good demographics, but at the end of the day if the service quality was low, you would not get a lot of new business,'' he said.

Roger Meier, vice president of the Caribbean Stream call center company, said the Dominican Republic represents just one of the 16 nations where Stream does business, but the company is looking for more sites.
''One of the reasons we've gone to Santo Domingo first and foremost is quality of the people,'' Meier said by phone from Costa Rica. ``The people are responsive to whatever goes on in the United States. They've lived there, traveled there and understand the U.S.''

He said just 1,500 of the company's 16,000 worldwide jobs are currently in the Dominican Republic. Another 4,500 are in the United States, which has been losing ground in the industry as companies seek lower labor and telecom rates.

Meier acknowledged the challenges of working in developing countries, such as natural disasters or energy shortages. During The Miami Herald's visit to its Santo Domingo call center, the lights at Stream went out three times.
''The power went out,'' Meier said, ``but the phones never stopped working.''

A call center in the Cyber Park in the Center for
Technology of the Americas in Santo Domingo,
Dominican Republic, on Feb. 6, 2008.



Students of the Technology Institute of the Americas (ITLA)
in Santo Domingo, Dominican Republic, take English classes
for four hours daily during the week.

[MrMike]

There are some basic factors that make it quite a bit different from Taiwan, including corruption, electricity, labor laws, laziness, etc.

This is never going to be Taiwan.

[J D Sauser]

One thing that is a big difference to most Latin American countries I have lived in or visited is the blatant lack of manufacturing for the LOCAL market.
It would seem that IF something is made here it is meant for export.... Dolares, Dolares, Dolares. But by failing to supply the local market, we currently export 2 Dollars for each Dollar get from exporting merchandise to buy basic stuff we could have made here.
It furthers keeps the commerce with tools, raw and prepared materials so sparse it is at times really difficult to imagine trying to make something here (not just steel guitars ).
Finally, without an affordable and guaranteed supply of energy... I see no chances.
We need industrial parks besides those free trade zones too. And they have to be accessible to small, medium and large manufacturing and business.

I just bought some shoes... around 1000 pesos a pair, well made, leather on leather.... feito no Brasil! There is no reason we shouldn't be able to buy quality Dominican made shoes and apparel here. I bought my footwear in Ecuador locally too. So it is in Colombia and other countries. This stuff is easy to make if you can have affordable work force to make partially hand made products
Clothing... same issue. How would we compete with China on international markets if what you will mostly find in local stores is.... from China?
Cooking ranges, mixers, fridges... all items you will find at least assembled locally in most other Latin American countries... are just plain imports here. Not only making them more expensive but also exporting... Dolares. Sure it makes the cash registers at the customs go "bling, bling"... but at the end of the day... the result is the economy we live in here... it's not all that bad yet, but the outlook is worrisome as other countries are passing by on the fast track.

... J-D.

[Skippy1]

Call centers are not "manufacturing-for-export."

KeithR is right!!!

DR has a long way to go if it actually wants to become a manufacturing base, or even and assembly operator.
The focus seems to be on property, tourism, agriculture and services (call centers).

The economy does not enjoy a really viable manufacturing base. The cost of labour would not be the problem as it compares with many other manufacturing countries. The problem seems to be one of lack of skills and materials. The cost to import parts to assemble are far too high and is preventing companies from operating in the DR.

For example anyone wishing to assemble car parts transmissions engines AC units are priced out of the markets by import tarriffs. No natural minerals of any sizable quanties...(Tin Copper Zinc etc).

Added to the difficulties is the high cost of employment despite the wages being low its actually quite expensive to Hire and Fire in the DR. As if this was not so bad the reputation of the Jurdicuary here makes becoming an employer very risky.

DR should be among the best Caribbean countries to invest in but, with a relatively good communications and internet industry, foriegn countries will not risk doing business with coruption and patronage at the levels it is here.
Sure the huge multinationals work in worse areas around the world than this but they are not the ones that would be attracted here due to the relatively small home market...9 million inhabitants is not enough to build on for them.
I have always wondered why the DR does not develop more into the Finacial markets and financial services, Shipping also, its in a good location that would make it idea for the Caribbean markets.
Maybe someone can explain the pros and cons better and why its not really happening for the DR at the moment????

Skippy1