DOMINICAN REPUBLIC - Economy
Country Manager, World Bank
McDonald Benjamin currently serves as the Country Manager of the World Bank for the Dominican Republic. His experience with the World Bank covers the entire world, including Africa, Latin America, North Africa, East Asia, and South Asia. Before coming to the Dominican Republic, he served as Deputy Director for nine countries in Africa. From 2004 to 2008, he was Sector Manager of the World Bank for social development in Latin America. Benjamin holds a Master’s degree and PhD in Economics from Georgetown University, Washington, DC, and a Bachelor’s degree in Philosophy, Politics, and Economics (PPE) from the University of Oxford, UK.
If there is one message regarding the Dominican Republic, it is that it has truly been a high flyer, an achiever in terms of economic growth in the region. From 1991 to 2013, it grew at 5.7% per year. In 2011 GDP per capita was 50% above that of 2000, whereas in Latin America, on average, GDP per capita rose 26% over the same period. The Dominican Republic, along with Panama and Peru, has been among the most rapidly growing economies in the region in recent years. The difference between the region and here is that the Dominican Republic’s high growth rate has not led to the same level of poverty reduction. Whereas in Latin America more than 70 million people have been lifted out of poverty since 2003, here in the DR we have a poverty rate today exceeding that of 2000. Four out of 10 Dominicans still live in poverty, and almost one in 10 lives in extreme poverty. Therefore, there is still clearly much work to do in spite of the high growth rates, to generate more and better jobs for faster poverty reduction.
Our role as the World Bank is to be on the one hand a trusted advisor and a provider of knowledge services, that the government can turn to and count on, bringing insights from experiences in other countries that the government can then use to determine the program it wants to put in place. The second role we play concerns financing development projects with a focus on better services and opportunities for the poor. Thirdly, we provide support in such areas as bringing together diverse actors, both nationally and internationally, to exchange ideas. The World Bank Group’s key mission is the elimination of extreme poverty by 2030 at a global level, meaning no more than 3% of people around the world living in extreme poverty by 2030. This is consistent with the government’s own vision of just 2% or less of the Dominican population living in extreme poverty by 2030.
The vision for 2030 is a state vision, one of the people and one that has been consulted with thousands of Dominicans. It is a vision that has been enacted into law and that goes beyond any given government, and hopefully will guide all administrations between now and 2030. I think there are certain areas where clear progress is being made: one important area is social protection. If we go back to the 2003 to 2004 period, there was no social safeguard in place at the time of the severe banking and macroeconomic crisis. Inflation rose, real wages did not keep up, unemployment rose, poverty climbed from 32% to almost 50%, and there was no safety net to protect the poor. Yet today there is a social safety net in place that reaches over 800,000 Dominican households, and at a reasonably low cost as a share of GDP. Moreover, an increasing share of this program is being carefully targeted, and more importantly being conditioned on actions that increase the human capital of the poor and strengthen their health and the education of their children, so that it is not just a handout, but rather, an investment in human capital.
The Dominican Republic is one of the two economies that has introduced the most reforms in the Caribbean region in recent years. Only Jamaica has done more. The DR advanced significantly during the 2005-2009 period and has again taken several steps more recently to strengthen its position. The Dominican Republic ranks 84th in the world among 189 economies. It is encouraging that it is focusing on strengthening the investment climate, and indeed it has a dynamic program underway to continue strengthening its reforms, particularly through the Ministry of Economy, Planning and Development, but also through several other entities within the state and the private sector. In fact it took steps over the past year to reduce the number of forms needed for importing and exporting and that contributed to its strong position. There are other areas where it took steps this past year: for example, the protection of personal information through Law 172-13, which was important because it covers credit information, and therefore access to credit. In addition, the country has taken steps to strengthen the laws relating to transparency, governance, and the protection of minority shareholders. In the area of trading across borders, the Dominican Republic is now in 24th place and therefore among the top countries in the world. It is also among the top 50% in the world in 6 out of 10 indicators. The latest Doing Business report introduced an important concept this year called “distance to the frontier.” This metric enables you see an absolute measure of how far you are from the best practice in the world on a given Doing Business indicator and on aggregate across all 10 indicators. The Dominican Republic is among the top third of countries in the world this year in terms of its improvement on the aggregate ‘Distance to the Frontier’ measurement.
One concern over the past decade was that in the rest of the region around 42% of people were upwardly mobile, rising from poor to vulnerable, from vulnerable to middle-income, or from middle-income to upper income, while in the Dominican Republic only 2% of the population moved up an income class. In fact one in five, 19%, moved down an economic class. So the real challenge is addressing the underlying cause of that. What we observe from Central Bank and other data is that there had been a large increase in productivity, which is 40% higher today than in 2000, but this has been accompanied by a decline in real wages. There are sectors that have done well in growth, such as telecommunications, which rose from 8% to 23% of the economy, and mining, which has recently been significant in terms of its contributions to growth and to improving the country’s export performance. Yet neither of these sectors has generated significant employment, while many jobs have been lost since 2004 in the Special Economic Zones. The country has a number of areas of potential beyond the above sectors, including tourism and agriculture. For example, the Cibao valley is highly fertile and there is tremendous potential for adding value to that agricultural production and generating more jobs by linking it more to global markets. This involves strengthening phytosanitary standards, grading, cold chains, storage facilities, and financing for agriculture to get more high-quality Dominican products into a global value chain, as well as investing in agri-business to generate greater added value and employment here in the country.
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