Feasibility Study Report

Transcription

1 Feasibility Study of the Establishment of the CIBAO Trade Center in the Dominican Republic Feasibility Study Report Ver. 1.0 EC Plaza / MAXTRAT / DATEC Consotium

2 Table of Contents Chapter I. Project Overview Background and Objective Background Objective Project Summary Project Scope Project Executing Agency Region to Execute the Project Estimated Budget Project Period...7 Chapter II. Current Status Country Status Politics Society Economy Status Politics Society Status Economy Industry Status Current Economic Trend Industry and Export Trend Foreign Investment Status Status of Project Site Information Technology Area National Information Technology Status ICT Industry Status Wireless/Wired Communications Status Internet Status PC Distribution Status S/W Developing Company Status Discussion Point Government Information Status...27

3 5. Import/Export Status and Related Policies General Import/Export Status Export Status Export Status Import Status Import/Export Status of Major Goods Export Status of Free Trade Zone Status of Exporting Companies Trading Scope with Korea...34 Chapter III. Project Executing Agency and System PEA and PMO Project Executing Agency (PEA) Project Management Office Project Execution and Cooperation System Experience in Similar Projects Chapter IV. Project Execution Plan Outline Construction of Trade Center Status Analysis Research on Land and Infrastructure Comparison of Construction Features of Similar Local Constructions Status of Major Exhibitions Exhibition Center Status Requests from Project Executing Agency Best Practice Cases of Trade center Exhibition Center Cases Discussion Points Design Goal Scope of Trade center and Major Facilities Construction of Integrated Trading System (ITS)... 68

4 3.1 Status Analysis Business Status IT Status Analysis Discussion Point Best Practice Outline Trend of International Trading Status of Korean electronic trading system Discussion Design Target Model Establish System Target Model Definition of the system-building methods and applied technologies Definition of Measures to link relevant authorities Definition of the plan to revamp laws and policies Trade Academy Analysis of Current Status Analysis of the current trade education Implications Best Practices Overview The Status of Trade Academy Curriculum (2010) Implications Designing a Target Model Basic Plan for Trade Academy Curriculums Project Execution Establishing the process of project execution Procedure for Project Approval Inter-Agency Cooperation Process Preparation for the Project Preparations for the Project Implementation Preliminary Procedures Consulting Service The Need for Consulting Service...123

5 6.2 The Scope of Work Basic Design Bidding Support Supervision Considerations Grounds to calculate the consultant input Calculation of Consulting Costs Education The Need for Education Education Program Construction of Trade Center Integrated Trade System (ITS) Trade Academy Establishing Project Operating Measures Trade Center Integrated Trade System (ITS) Trade Academy Operational Structure Division of Works Project Period and Schedule Construction of Trade Center Construction Period Implementation Schedule Integrated Trade System Period for Establishment Implementation Schedule Trade Academy Procurement Plan Chapter V. Project Budget Estimation Estimated Costs & Funding Plan Estimated Costs Funding Plan...145

6 2. Specifications of Project Costs Costs for Trade Center Construction Costs for site acquisition and infrastructure Architectural, mechanical, and electric costs Cost for establishment of Integrated Trade System (ITS) Cost for the Establishment of Trade Academy Consulting Service Phase II: Evaluation of Training Taxes and Utilities Contingency Project Management Cost Loan Commission Applied Exchange Rate Annual Spending Plans Chapter VI. Feasibility Analysis Feasibility in Project Scale and Scope Construction of the Trade Center Integrated Trade System Trade Academy Feasibility in Project Cost Construction of the Trade Center Integrated Trade System(ITS) Trade Academy Technical Feasibility Economic Feasibility Outline Preconditions for Feasibility Analysis Exchange Rate Discount Rate Analysis Period Inflation Rate and Wage Increase Rate...166

7 4.3 Investment Plan Estimated Project Cost Investment Plan by Years Maintenance Costs Maintenance Costs of the Trade Center Maintenance Costs for the Integrated Trade System Other Operation Cost Cost Flow Estimated Profit Benefit Flow Benefit/Cost Analysis Sensitivity Analysis Summary of the Economic Feasibility Analysis result Financial Feasibility Review on Financial Feasibility Sensitivity Analysis on Financial Feasibility In case of charging membership fee for the Integrated Trade System In case of operating the trade center only In case of charging fees on each use of e-document of the trade portal Strategic Feasibility Environmental Impact Assessment Chapter VII. F/S Items for EDCF Evaluation Capabilities of Project Executing Agency Approval Process for Loan and important documents Approval Process for Loan Approval Process for Procurement & Consulting Approval Process of Construction Permit Probability to provide Korean materials & service The effect of Foreign Currency Earning Responses against Risk Factors Expected Effects

8 6.1 Dominican Republic Laying the foundation for export growth Contribution to acquiring technologies and establishing policies Interrelation in conducting the project Korea Korean companies' advance into the Dominican Republic Improvement of Bilateral Cooperation Performance Evaluation Indicators Similar ODA projects in Dominica Analysis on the International Competitiveness of Korean Companies Construction of Trade Center Integrated Trade System For reference: Introduction of Korea s utradehub Abbreviation Table List of Figures < Figure 2-1 Geographic Regions of the Dominican Republic >...10 < Figure Development Score for Dominican Republic >...12 < Figure Industry Ratio in Dominican Republic's Zona Franca >...15 < Figure 2-4 Map of Dominican Republic >...18 < Figure 2-5 Santiago City expansion trend (1800~1994) >...19 < Figure 2-6 Growth trend of major industries (2002~2008) >...20 < Figure 2-7 View of Santiago City >...20 < Figure 2-8 City view and CEI-RD headquarters >...21 < Figure 2-9 Number of installed wire/wireless lines >...23 < Figure 2-10 Communication Industry Registered Member Ratio >...23 < Figure 2-11 Number of internet users >...25 < Figure 3-1 CEI-RD Organization >...36 < Figure 3-3 Project Management Office Organization >...37 < Figure 3-4 Project Cooperation System >...38

9 < Figure 4-1 Location of CIBAO Trade Center >...43 < Figure 4-2 Photos of Antiguo Aeropuerto Cibao >...44 < Figure 4-3 Antiguo Aeropuerto Cibao: Satellite image >...45 < Figure 4-4 Building exterior >...52 < Figure 4-5 Building interior >...52 < Figure 4-6 View of Trading the Center Building >...62 < Figure 4-7 View of business center >...67 < Figure 4-8 Export Management Flow >...68 < Figure 4-9 Coffee bean authorization process >...69 < Figure 4-10 Origin of certification flow >...70 < Figure 4-11 SIVUCEX Function map >...72 < Figure 4-12 SIVUCEX Work process for related offices >...74 < Figure 4-13 SIGA system conceptual Diagram >...75 < Figure 4-14 Trend of Global e-trade >...77 < Figure 4-15 UN s Roadmap toward e-trade Development >...78 < Figure 4-16 e-trade development status in each country >...79 < Figure 4-17 Comparison of trading dependence and e-trade development status >...79 < Figure 4-18 Development phases of Korean e-trade >...80 < Figure 4-19 utrade Hub Concept drawing >...81 < Figure 4-20 Goal of system construction >...82 < Figure 4-21 To-be system conceptual diagram >...83 < Figure 4-22 Hardware and Network Configuration >...83 < Figure 4-23 Overview of Building e-marketing Portal >...85 < Figure 4-24 e-marketing Portal Objectives >...86 < Figure 4-25 e-marketing Portal System Structure >...86 < Figure 4-26 e-marketplace Concept Diagram >...88 < Figure 4-27 Before and After e-marketing Portal System Establishment >...89 < Figure 4-28 e-trade Portal Overview >...90 < Figure 4-29 e-trade Portal Objectives >...91 < Figure 4-30 e-trade Portal Function Block Diagram >...91 < Figure 4-31 Before and After the establishment of the system for the issue of certificate of origin >...94 < Figure 4-32 Overview of e-trade Document Repository >...95 < Figure 4-33 Structure of e-trade Document Repository >...96 < Figure 4-34 Overview of e-document Relay System >...98

10 < Figure 4-35 Key Factors of the System >...98 < Figure 4-36 Structure of e-document Relay System >...99 < Figure 4-37 CEI-RD The size of the existing Server Room > < Figure 4-38 Expanded Size of Server Room > < Figure 4-39 TBB(Technical Building Block) Hierarchy Diagram > < Figure 4-40 Export-related authorities > < Figure 4-41 Work Flow of Export Customs Clearance with Linked Systems > < Figure 4-42 Implementing Procedures by Relevant Authorities > < Figure 4-43 Conceptual Map of Trade Academy > < Figure 4-44 Curriculum Examples by Program > < Figure 4-45 Project Approval Procedure in Dominica > < Figure 4-46 The Process to Implement Public Projects in Dominica > < Figure 4-47 Operational and maintenance structure of trade center > < Figure 4-48 Example of Maintenance Structure at the Similar Facility in Korea > < Figure 4-49 Overview of System Operation > < Figure 4-50 Strategy of Maintenance > < Figure 4-51 Example of Trade Academy Organization > < Figure 5-1 Total Costs > < Figure 6-1 Details of the Project Cost > < Figure 6-2 Annual Trade Center Maintenance Costs > < Figure 6-3 Annual Trade Center Maintenance Costs (Present Value) > < Figure 6-4 Annual Maintenance Cost for the Integrated Trade System > < Figure 6-5 Annual Cost Flow > < Figure 6-6 Income Benefit from Lending Office Space/Lecture Room > < Figure 6-7 Income Benefit from Lending Exhibition Hall and Meeting Room > < Figure 6-8 Annual Benefit on the Use of the System > < Figure 6-9 Annual Benefit from the Utilization of the Trade Portal > < Figure 6-10 Annual Benefit Flow by Items (Based on Present Value) (Residual Benefit of Land Excluded) > < Figure 6-11 Total Annual Benefit Flow (based on Present Value)(Residual Benefit of Land Included) > < Figure 6-12 Annual Benefit/Cost Flow > < Figure 6-13 Changes in NPV in Accordance with the Discount Rate > < Figure 6-14 Changes in B/C Ratio in Accordance with the Discount Rate > < Figure 6-15 Changes in B/C Ratio in Accordance with Changes in Cost >...199

11 < Figure 6-16 Changes in IRR in Accordance with Changes in Cost > < Figure 6-17 Changes in NPV in Accordance with Changes in Cost > < Figure 6-18 Changes in B/C Ratio in Accordance with Changes in Benefit > < Figure 6-19 Changes in IRR in Accordance with Changes in Benefit > < Figure 6-20 Changes in NPV in Accordance with Changes in Benefit > < Figure 6-21 Changes in B/C Ratio in Accordance with Changes in Cost/Benefit > < Figure 6-22 Changes in IRR in Accordance with Changes in Cost/Benefit > < Figure 6-23 Changes in NPV in Accordance with Changes in Cost/Benefit > < Figure 7-1 Annual Overseas Construction Orders > List of Tables < Table 2-1 Regional divisions and actual provinces of the Dominican Republic >...10 < Table 2-2 Global Competitiveness Ranking of Middle and South American Countries >...11 < Table 2-3 Major Economic Indicators of Dominican Republic >...14 < Table 2-4 Major Import/Export Goods and Import/Export Countries >...15 < Table 2-5 CEI-RD 2010 Foreign Investment Solicitation Plan >...16 < Table 2-6 Foreign Investments in Dominican Republic >...17 < Table 2-7 Communication line installation status in Dominican Republic >...22 < Table 2-8 Comparison of Major Communication Companies >...24 < Table 2-9 Cell phone market share per communication company >...24 < Table 2-10 Internet line status and number of internet users >...24 < Table 2-11 PC distribution rate in major countries >...26 < Table 2-12 Annual PC distribution rate >...26 < Table 2-13 Status of major S/W developing companies >...26 < Table ~2008 Major Electronic Government Project Funded by the Government >...28 < Table 2-15 Economic Prospect of Dominican Republic >...30 < Table 2-16 Annual Import/Export Status >...30 < Table 2-17 Five Major Export Countries >...31 < Table 2-18 Five major import countries >...31 < Table 2-19 Export Status of Major Trading Goods >...32 < Table 2-20 Import Status of Major Trading Goods >...32 < Table 2-21 Export Statistics per Good in Free Trade Zone (03/1~07/1) >...33 < Table 2-22 Number of Exporting Companies Based on Their Scope >...34 < Table 2-23 Exporting Amount Per Scope >...34

12 < Table 2-24 Export Status to Dominican Republic >...34 < Table 2-25 Major exporting goods to Dominican Republic in 2008 >...35 < Table 2-26 Products that showed significant growth in 2008 >...35 < Table 2-27 Products that showed significant downfall in 2008 >...35 < Table 2-28 Major import products from Dominican Republic in 2008>...35 < Table 3-1 Project Summary for Similar Projects >...39 < Table 4-1 Comparison of construction features >...49 < Table 4-2 Schedules of Dominica s major exhibitions >...50 < Table 4-3 Facilities for Major Exhibition Centers >...58 < Table 4-4 Calculation of trade center scope per floor >...64 < Table 4-5 Calculation of the trade center scope per usage >...65 < Table 4-6 Major contents of SIVUCEX >...73 < Table 4-7 Major Contents of SIGA >...75 < Table 4-8 Work Scope and Details >...87 < Table 4-9 e-trade Portal work scope >...92 < Table 4-10 Relevant Authorities >...92 < Table 4-11 Work Scope and Details >...95 < Table 4-12 Work Scope and Details >...99 < Table 4-13 Equipment Scale for ITS Operation > < Table 4-14 TBB(Technical Building Block) Hierarchy Descriptions > < Table 4-15 Trade-related educational institutions > < Table I*CEi Curriculums > < Table 4-17 Trade Academy Curriculums for 2010 > < Table 4-18 Work scope and duration of Consulting Service > < Table 4-19 Consultant Structure of Each Phase > < Table 4-20 Maintenance Details by Category > < Table 4-21 Maintenance Support Activities Guideline > < Table 6-1 Construction Cost per unit area according to building type as surveyed in the project site > < Table 6-2 Construction cost composition percentage per work types according to building usage types > < Table 6-3 Calculation of Function Point > < Table 6-4 Latest Inflation Rate and Annual Average Wage >...166

13 < Table 6-5 Estimated Project Cost > < Table 6-6 Investment Plan by Years-EDCF > < Table 6-7 Investment Plan by Years-DR > < Table 6-8 Trade Center Maintenance Costs > < Table 6-9 Maintenance Cost for Integrated Trade System > < Table 6-10 Annual Cost Flow(Future Value) > < Table 6-11 Annual Cost Flow (Based on Present Value)> < Table 6-12 Income Benefit from Lending of Office Space/Lecture Room > < Table 6-13 Income Benefit Lending Exhibition Hall and Meeting Room > < Table 6-14 Benefit on the Use of the Integrated Trade System > < Table 6-15 Benefit on Utilization of the Trade Portal > < Table 6-16 Annual Benefit Flow (Based on Future Value) > < Table 6-17 Annual Benefit Flow(Based on Present Value) > < Table 6-18 Comparison of Benefit/Cost Analysis Methods > < Table 6-19 Benefit/Cost Analysis Results > < Table 6-20 Sensitivity Analysis Results According to Discount Rate > < Table 6-21 Sensitivity Analysis Results in Accordance with variation in Benefit/Cost >..198 < Table 6-22 Benefit/Cost Analysis Results > < Table 6-23 Income and Expenditure(Based on Future Value) > < Table 6-24 Income and Expenditure in Case of Not Charging Membership Fee for the Trade Information System(Based on Future Value) > < Table 6-25 Income and Expenditure in Case of Consideration of the Trade Center Building(Based on Future Value)> < Table 6-26 Income and Expenditure in Case of Charging each Use of e-document on Export/Import(Based on Future Value) > < Table 7-1 Project Budget of Eligible Source Country(EDCF)> < Table 7-2 Risk Factors and Responses > < Table 7-3 Expected Amount of Overseas Construction Orders for 2010 > < Table 7-4 Trade-related capabilities of domestic companies > < Table 7-5 Summary of Trade-related Laws in Korea>...235

14 Chapter I. Project Overview The name of this project is The Establishment of the CIBAO Trade Center in the Dominican Republic. 1. Background and Objective 1.1 Background In a bid to achieve a dynamic economy through creating employment, one of the four core strategies of the 2010~2030 National Development Plan 1 announced in November 2009, routes to boost exports(plan and system, etc.) must be strengthened and plans to develop export financing must be made. The current government of the Dominican Republic with President Leonel Fernandez re-elected in 2008 has established 4 core strategies, 51 detailed objectives (Objetivos Especificos), and 274 action lines (Líneas de Acción) through a discussion with relevant ministries in a bid to present the blueprints on the nation s future. They announced the 2010~2030 National Development Strategy (Estrategia Nacional de Desarrollo de la República Dominica 2010~2030) in November It was recommended that the Dominican Republic promote exports and enhance its export capacity through the Knowledge Sharing Program (KSP) of the Republic of Korea, which started in Through this opportunity, the Dominican Republic realized the need to support trade by constructing a trade center and requested the support of the Korean Economic Development Cooperation Fund (EDCF). President Leonel visited Korea in 2006, acknowledged the development experience of Korea and ordered Executive Director Eddy Martinez of the Export and Investment Center of the Dominican Republic (CEI-RD) to cooperate with the Korea Development Institute (KDI). In August 2007, Mr. Martinez visited Korea and asked for policy advice through Korea s Knowledge Sharing Program. In March 2008, the Korean Ministry of Strategy and Finance designated the Dominican Republic as a partner state of KSP in at the official request of Mr. Martinez under the theme of Promoting exports and developing the export capacity of the Dominican Republic and collaborated with CEI-RD. By analyzing the economic development process and current state of the country s economy through the KSP project, the Dominican Republic s strategies were reset. By 1 See details of 2010~2030 National Development Strategy on the 6. Strategic Feasibility in Chapter VI. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 1

15 analyzing the development state of its human resources and its problems, education and job training policies that would form the basis for the promotion of exports were recommended, in addition to Korea s policy experiences for the development of human resources handed down. Also, measures to revitalize export finances were suggested in order to recommend policies that would promote exports and foster the capability to export. Such economic development strategies are meaningful in that they would provide the opportunity for the country to raise its economic development a step higher by revitalizing exports. National interest in a project for sharing economic development experiences was very high, making it easier to effectively hand down Korea s export-oriented economic development experiences. The Dominican Republic s view of the project was very positive, and this was a great opportunity to raise Korea s national image. Need to build the trade center in Santiago, a central city of CIBAO As the capital of fabric exports, the fabric industry was the main export industry in the late 90s. However, there is no upcoming industry that can replace the fabric industry in the export market. Also, the amount of exports that takes up the GDP has decreased to 15% in 2007 from 27% in 2003, and therefore this country is in serious need of policies supporting exports. The CIBAO region has established and managed a Free Trade Zone based on its ample human and physical resources, being the main region that produces export goods with more trade activities than other regions. But it does not have a permanent exhibition hall to support exports, and consequently the lobby in the 1 st floor of the CEI-RD located in Santo Domingo 180km southeast of Santiago, has been used instead. Also, EXPO CIBAO 2, the largest trading exhibition held every year, is hosted by borrowing a gymnasium located far away from the suburban area of Santiago. It is a long-cherished wish of the Santiago Chamber of Commerce to construct a trade center with an exhibition hall where they can support the export industry, permanently exhibit regional products, and hold the international trade expo every year. Need to build the Integrated Trade System(ITS) The Dominican Republic enjoyed the most rapid economic growth (average 9.5%) among countries in Latin America, but the annual export increase rate was below 6% during , significantly lower than the average annual export increase rate of DR-CAFTA member countries, 11%. The number of exporters stood at about 3,000 as of 2009, out of which about 98% were SMEs recording annual revenues less than USD1 million. Therefore coming up with supportive measures for such SMEs is essential. 2 See details on the Status of Major Exhibitions in Chapter IV. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 2

16 In order for exports to increase, the President ordered measures to strengthen marketing capabilities and overseas information collection abilities. A portion of requirements verification for exports has been done via an on-line system, but the usage rate is only about 10%, and most of this is being done manually by visiting relevant organizations. Accordingly, there is a need to build a pan-national electronic trade infrastructure, innovate the trade process in accordance with changes in the information environment, and gain a competitive edge to cope with the changing global trade environment. Organizations such as the UN, APEC and ASEM recommend the construction of an Electronic Trade Single Window for the promotion of global trade. The Electronic trade single window is an integrated trade information system that is currently operated or will be implemented by governments to provide a one-stop service in connection with services of related organizations such as customs clearance, harbors, quarantine, and foreign exchange to various trading companies attempting to trade goods with local companies. Need to enhance curriculum and operation method of the trade academy of CEI-RD in order to foster trade experts in CIBAO. Even though providing capable human resources was considered a key factor in Korea s success in achieving rapid economic growth and building a knowledge-based economy, the lack of Dominica s human resources is holding their economy back, limiting the nation s strategy to beef up exports and strengthen competitiveness in the industry. However, there is only one professional training institution on trade, the Overseas trade and corporate innovation institute(i*cei) run by CEI-RD, within the capital, Santo Domingo. Also, the curriculum of the I*CEi center on seminars and trade-related training focusing on practical business has not been conducted successfully. Therefore, it is necessary to build an institution to foster human resources, to develop a training curriculum and training materials, and to adopt advanced techniques for the operation of the trade academy. 1.2 Objective In order to strengthen exports and revolutionize the business environment of Santiago, the second largest city of Dominican Republic, through corporate innovation and business continuity; Construct the CIBAO Trade Center that can provide a physical space to display goods, hold trade expos, and support the business of exporters. Implement an integrated trade system (hereinafter referred to as ITS ) to Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 3

17 provide a one-stop trading service Improve management and education courses of the trade academy to raise the quality of future human resources. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 4

18 2. Project Summary 2.1 Project Scope This project is divided into a consulting service and a construction project. Consulting Service Scope EDCF Contents Basic design for construction of trade center and ITS (Integrated Trade System) Provide bidding documents including Technical Assistance reports for bidding documents Evaluate proposal and support contract negotiations Supervise the trade center construction and trade system implementation Construction Project Scope EDCF Contents Design and land work for cconstruction of a 20,000 m 2 CIBAO construction center that can host the EXPO CIBAO as well as hold an exhibition and training center for export purposes. (Construction, electricity, mechanical work) Detail design work and implementation for marketing portal, trading business portal, electronic document storage, and relay system Establishment of materials needed for installation and operation of ITS (H/W, N/W, S/W) Development of a curriculum and education materials Consulting service for the operation of the trade academy Education required for operation and maintenance of the trade center and ITS Support maintenance efforts of ITS for 2 years Dominican Republic Obtain and confirm the construction site (obtaining permission for a construction license and land-use) Perform soil tests and underground utility surveys Construction of the trade center infrastructure (road, electricity, gas, water) Deliver furniture and office automation equipment for the trade center Construction and expansion of a server room, power supply, and UPS Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 5

19 2.2 Project Executing Agency The project executing agency is the Export and Investment Center of the Dominican Republic (Centro de Exportación e Inversión de la República Dominicana CEI-RD) under the direct command of DR s president. The organization has 242 staff members as of February 2010 under the direction of Executive Director Eddy Martinez. They are divided into the Dominican Exports Corporate Services and the Foreign Investment Dominican Republic Headquarters, located in Santo Domingo with a regional office in Santiago. 2.3 Region to Execute the Project The Dominican Republic is divided into the southeast area (Sur Occidental Region) where the nation s capital Santo Domingo is located, the northwest area (El Cibao Region) where Santiago, the second largest city and commercial center of the nation is located, and the southeast area (Sur Oriental Region). The region where the project is to be executed is Santiago, the central city in the region of CIBAO and the industrial center of the Dominican Republic. Santiago City was formed after the discovery by Columbus in It is the first city established on the American continent and is located 180 km northwest of the capital city, Santo Domingo. The area of CIBAO is 3,112km2 with about three million inhabitants while the area of Santiago is 489km2 with about one million inhabitants as of In Santiago, an international airport linking it to major cities abroad has been operated since 2002 and more than 20 percent of the country s export products are produced here, taking up 14 percent of the country s Gross Domestic Product (GDP). It is in dire need of the construction of trade center that can support active industries of the Santiago City. Santo Domingo City, where ITS will be constructed holds 30% of the Dominican population. It is estimated that 3 million Dominicans reside within the city. It is the capital of education and economy in the Dominican Republic. ITS will not only support companies within the CIBAO region but it will continue to support the entire exporting industry of Dominican Republic. In order to support the entire nation, the ITS system will be located along the main system of the Ministry of Export Investment. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 6

20 2.4 Estimated Budget The total cost of the project is estimated to be US$ million with loans of US$ 30 million from EDCF. Of the direct cost of the project, EDCF will financially support 70.4 percent of the Trade Center Construction, 20.7 percent of the cost to build the Integrated Trade System, 7.3 percent of the provision of Consulting Services, 1.3 percent Training and 0.3 percent of the Trade Academy. Item Foreign Currency Portion Korea 3rd Countries EDCF Local Currency Portion EDCF Total Gov. of Dominican Republic (Unit: USD) Total 1. Trade Center Construction 8,754,820 1,481,240 8,763,940 19,000,000 25,474,318 44,474,318 1) Land Acquisition & Infrastructure ,474,318 25,474,318 2) Architecture 6,164, ,200 7,253,060 13,604,000 13,604,000 3) Mechnical 1,222, , ,880 2,546,000-2,546,000 4) Electric 1,368, , ,000 2,850,000-2,850, Integrated Trade Data System 4,431, , ,500 5,586,904-5,586,904 1) Equipment 304, , , ,182 2) S/W Development 3,633, ,500 4,358,390-4,358,390 3) Installation & Test 493, , , Trade Academy 87,882-87,882-87, Consulting Services 1,822, ,000 1,969,266-1,969, Training 345, , ,506 1) Local Training 174, , ,616 2) Overseas Training 170, , ,890 Base Cost 15,442,242 1,911,876 9,635,440 26,989,558 25,474,318 52,463, Taxes & Duties ,349,478 1,349, Contingencies 1,708, ,794 1,064,565 2,980,471 4,570,530 7,551,001 1) Physical Contingency 772,112 95, ,772 1,349,478 1,273,716 2,623,194 2) Price Contingency 936, , ,793 1,630,993 3,296,814 4,927, PMO(2% of base cost) - 1,049,278 1,049, Service Charge(0.1% of EDCF) 29,970 29,970 29,970 Total 17,180,324 2,119,670 10,700,005 30,000,000 32,443,604 62,443,604 Percentage(%) of EDCF 57.30% 7.10% 35.70% 100% Percentage(%) of Total 27.50% 3.40% 17.10% 48.00% 52.00% 100% 2.5 Project Period The project period is composed of the professional consulting service period and the main project period established during consulting. In order to execute a successful consultation outcome, a professional consulting company will be hired. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 7

21 ITEM 1M 2M 3M 4M 5M 6M 7M 8M 9M 10M 11M 12M 13M 14M 15M 16M 17M 18M 19M 20M 21M 22M 23M 24M 25M 26M 27M 28M 29M PMO Select Consultant Project Management (Schedule Mgt, Administrative Support, Leading PIU, Mediation & Approval, etc.) Organize PIU Secure & Survey Site Elec./Water/Sewage Server room Setup Road Widening Consulting Service Procurement Support Proposal Evaluation & Contract Sup. Execution Drawing Anal. Pre. Design & Build Exec. Drawing Supervision Trade Center Construct n Construction Work Mechanical Work Electric Work Location Survey & Set-up Environment Analysis & Planning Analysis & Planning Civil construction & Foundation Order material Order material Structure construction Air conditioner & Equipment installatiom Finishing & Building Equipment construction Switchgear equipment & Power plant,,power trunk Test Test ITS Trade Academy Analysis & Design Order equipment Install -ation Construction & Deploy Test Analysis & Design Phase I Construction & Deploy Test Phase II Consultancy Service Overseas Training Local Training * IT : Inform ation T echnology T A : Trade Academ y C onst.: C onstruction IT IT IT TA Const. Period of selecting professional consultant: 3 months Bidding process will be led by the project execution agency s PMO. Consulting service period: 26 Months Basic design for the first 3 months and bidding support for 2 months are carried out. Proposal evaluation and negotiation of a contract supporting work are done for three months. During the 18 months and 12 months allocated for trade center construction and trading information system implementation respectively, three inspections should be performed at the inception, interim, and the final stage of each process. Construction project period: 18 months The trade center construction process will take a total of 18 months. During that time, design, construction, mechanical work, and electric work will be performed. The first phase of the integrated trading data system construction will take 6 months and the second phase will take 8 months. The trade academy consulting and education will be performed during the construction project. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 8

22 Chapter II. 1. Country Status Current Status The Dominican Republic takes up 2/3 of the Hispañola Island in the Caribbean. A total of 9.9 million citizens reside within the country with a GDP of 4,930 US dollars per individual. The territory of the Dominican Republic was under the rule of Spain after its discovery by Christopher Columbus in The population is composed of 73% mulatto, 16% white, and 11% black people. Most of the people are catholic and the national language is Spanish. The Dominican Republic is divided into the southeast area (Sur Occidental Region) where the nation s capital Santo Domingo is located, the northwest area (El Cibao Region) where Santiago, the second largest city and commercial center of the nation is located, and the southeast area (Sur Oriental Region). Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 9

23 < Figure 2-1 Geographic Regions of the Dominican Republic > < Table 2-1 Regional divisions and provinces of the Dominican Republic > Regions Geographic regions Sub-regions Provinces Provincial capital Duarte San Francisco de Macorís Cibao Oriental Hermanas Mirabal María Trinidad Sánchez Salcedo Nagua Samaná Samaná El Cibao Cibao Cibao Norcentral Santiago Espaillat Puerto Plata Santiago de los Caballeros Moca San Felipe de Puerto Plata Cibao Central La Vega Sánchez Ramírez Monseñor Nouel Concepción de La Vega Cotuí Bonao Valverde Santa Cruz de Mao Cibao Occidental Monte Cristi Santiago Rodríguez San Fernando de Monte Cristi San Ignacio de Sabaneta Dajabón Dajabón Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 10

24 Regions Sur Geographic regions Sur Occidental Sur Oriental Sub-regions Provinces Provincial capital El Valle Enriquillo Metropolitana Valdesia Yuma Azua San Juan Elías Piña Barahona Baoruco Independencia Pedernales Distrito Nacional Santo Domingo San Cristóbal Monte Plata Peravia San José de Ocoa La Romana San Pedro de Macorís Hato Mayor El Seibo La Altagracia Azua de Compostela San Juan de la Maguana Comendador Santa Cruz de Barahona Neiba Jimaní Pedernales Santo Domingo de Guzmán Santo Domingo Este San Cristóbal Monte Plata Baní San José de Ocoa La Romana San Pedro de Macorís Hato Mayor del Rey Santa Cruz de El Seibo Salvaleón de Higüey The report presented by the World Economic Forum (WEF) in 2009 showed that out of the 133 countries surveyed worldwide, the Dominican Republic s national competitiveness ranked 95 th. As shown in <Table 2-2>, it is in the lower middle level among Latin American countries. < Table 2-2 Global Competitiveness Ranking of Middle and South American Countries > Global Category Competitiveness Name Innovation and Ranking Basic Efficiency Sophistication (2009~2010) Requirements Enhancers Factors Costa Rica Brazil Panama Mexico Columbia El Salvador Peru Argentina Jamaica Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 11

25 Dominican Republic Ecuador Venezuela Paraguay Reference: WEF( Global Competitiveness Ranking) <Figure 2-2> below shows the development score of the Dominican Republic in The lowest score is 1 and the highest score is 7. < Figure Development Score for Dominican Republic > Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 12

26 2. Politics Society Economy Status 2.1 Politics Society Status As a republic, the Dominican government is currently led by Leonel Fernandez of Partido de la Liberacion Dominicana(PLD) since he was elected in May The congress is elected every four years. During his first term, President Fernandez contributed significantly in overcoming the economic crisis in Thanks to his strong leadership, we won the election again in Ironically during that time, economic depression, social instability and various scandals made the voters turn away from him and his party. However, his newly announced " National Development plan" in 2009 is attracting Dominica again with new goals and development strategies. Shying away from "US oriented" foreign policies, the Dominican Republic started to host SICA and OAS in It is focused on strengthening diplomatic relationship with Arab countries as well. It is rising up as one of the strong diplomatic voices in the Central and South American countries by participating in the temporary UN Security Council, and Rio Trilateral Commission in Economy Industry Status Current Economic Trend Since the launching of new regime in 2004, various economy support plans have been implemented to deal with the bankruptcy of Baninter Bank, the 2nd largest bank in Dominica, and IMF funding in Since then, the macro-economy of Dominican Republic has been stabilized along with increase in travel industry and internal market growth. Dominica showed annual growth of 8% during , the fastest economic growth in the Central and South American countries. Economic growth in 2008 decreased 5% due to the global economic depression which ultimately led to a decrease in foreign investments and profits from the export market. President Leonel Fernandez is currently focused on "stabilizing the economy and recovering the growth". His main policies deal with cost stabilization, currency stabilization, electric supply stabilization and employment stabilization. As shown in <Table 2-3>, foreign bonds of the Dominican Republic has been limited to 30% of the GDP since The DSR is within 10% and is not a significant burden on the Dominican economy. The Dominican Republic received 1.7 billion USD from IMF and 0.5 billion USD from IDB in order to fund various economic growth policies. Even though increased debt may become a serious burden to the country, IMF is optimistic about Dominica's economic growth in the future. Dominica is expected to reach its rapid economic Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 13

27 growth rate within a couple of years. < Table 2-3 Major Economic Indicators of Dominican Republic > Classification GDP(US$100 Million) GDP(US$100 Million) 3,247 3,468 4,404 4,797 Economic Growth(%) Inflation (%) Unemployment (%) Foreign Exchange Holding (US$100 Million) Foreign Bond (US$100 Million) Yearly average currency (Compared to US$) D. S. R Balance on current account (US$100 Million) Export (US$ Million /FOB) 6,145 6,610 6,270 6,949 Import (US$ Million /FOB) ,559 13,820 13,569 Reference: 2009 data from Central Bank of Dominican Republic, EIU, IMF, KOTIS Industry and Export Trend As a capital of fabric exports, the fabric industry was the main exporting industry in the late 90s. However, there is no uprising industry that can replace the fabric industry in the export market. Also, the amount of exports that take up the GDP has been decreased to 15% in 2007 from 27% in Dominica is in serious need for another strong exporting industry to support the market. Below, <Figure 2-3> represents ratio of various industries within the Zona Franca, a major part of Dominica's exporting industry. Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 14

28 < Figure Industry Ratio in Dominican Republic's Zona Franca > Industrial 도미니카공화국 Component 산업비중 Ratio in DR Component Ratio by the types of business in Free 도미니카공화국 Trade Zone 자유무역지대 업종 비중 31% 7% 12% 16% 11% 11% 13% The manufacturing 제조업 industry 유통업 Distribution industry 건설업 Construction industry 통신업 Telecommunication industry 농수산업 Agriculture and fisheries industry 관광업 The tourist industry 6% 15% 18% 9% 17% 29% 6% 의류 Clothes 신발 Footwear 전자제품 Electronic products 담배 Tobacco products 의료제품 Medical products 보석류 Jewelry 기타 The others 기타 The others Reference: 2007 KOTRA and CNZFE Data < Table 2-4 Major Import/Export Goods and Import/Export Countries > Classification Export Import Ratio of 3 major products (%) Ratio of 3 major import/export countries (%) Ferro nickel 25 Petroleum 9.3 Steel 8.1 Gasoline 6.3 Rum 4.8 Fuel 4.5 USA 20.9 USA 30.2 Haiti 12.7 Venezuela 10.4 Spain 8.4 Taiwan 6.7 Reference: 2008 Dominican Republic Ministry of Export Promotion Report and Export data from Custom Service As shown in <Figure 2-3> and <Table 2-4>, Dominica is focused on promoting various export industries to avoid relying solely on the fabric industry to maintain the export market. Based on the most advanced communication infrastructure among Central American countries, Dominica is focused on promoting various high-value industries such as IT and the travel industry. A reflection of the president s willingness to develop the economy and advance industrial structure, and emphasize development of systems and human resources, the nation has established and promoted the Mid- and long-term plan for educational innovation, technological promotion, and vocational training improvement for 10 years(2008~2018). The major details are shown below. Require everyone 15 years or older to complete elementary school curriculum by 2015 in line with the UN Millennium Goals(MDGs) For educational innovation, promote 10 innovation tasks including budget allocation of Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 15

29 16% of public expenses and 4% of the GDP into educational expenses For vocational training, promote 10 tasks led by INFOTEP including vocational qualification system, vocational training facilities, industry-academy collaboration, industrial demand survey, financial aid, labor ethics, etc. In order to gain a competitive edge, promote the innovation of technology led by PECYT+I(INFOTEP) and SEESCyT. While the National Plan 2010~2030 presents the blue-print of the Dominican Republic society, economy, environment areas, the Mid-and long-term plan for educational innovation, technological promotion, and vocational training improvement for 10 years (2008~2018) establishes nation-wide HRD goals and presents strategic tasks concretely. In order to promote the exporting industry, various tax alleviations and advantages are given to companies residing within the free trade zone which takes up 70% or more of exports of Dominican Republic. Also, by signing free trade agreements with CARICOM and CACM as well as the Contonou agreement with EU, Dominica is focused on opening up the trading market to the world Foreign Investment Status Since DR-CAFTA in March 2007, FDI influx has increased significantly. In order to promote direct foreign investments and exporting markets in the free trade zone, CEI-RD has focused its efforts on implementing various policies to entice foreign investments. CEI-RD has surveyed FDI scale and tendency, roles of multi-national companies and their influence over the Dominican Republic, set a direction for boosts in export and export solicitation, and establish and make PR activities on National brand through PR program. For PR activities of the nation s brand, the nation has prepared the plan as shown below in <Table 2-5>. < Table 2-5 CEI-RD 2010 Foreign Investment Solicitation Plan > Target Details PR via press External supportive activities PR activities regarding nation s brand image through TV, radio, newspaper, internet, etc. In order to promote brand PR campaign in the global market, hold international forums and workshops for study, analysis, and definition of proposed strategies. In collaboration with the overseas offices of CEI-RD, promote PR activities by visiting Europe(Spain, Germany, France, Swiss), US(Miami, New York, New Jersey), Caribbean countries(puerto Rico, Jamaica), Latin America(Columbia, Peru, Argentina, Brazil) and holding international road shows Visit the Cacao area of the Dominican Republic, hold leaders meetings and presentations Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 16

30 Others (National image improvement activities) Plans to start a reality show called 'Beisbol Republic' to strengthen the symbol and value of Dominican Republic baseball Plans to make documentary named Caribbean Sun to introduce mass culture Plans to publish National brand covering noble image of Dominican Republic Plans to promote PR activities for Dominican Republic fashion through an event called Dominicana Moda In order to promote various high-value industries such as IT and high-technology industries as the main exporting industries of Dominica, an IT industry valley called "Cyber Park" has been constructed near Santo Domingo < Table 2-6 Foreign Investments in Dominican Republic > Classification Foreign Investment Status Scope of Foreign Investments (2004~ 2008) Investment in different Areas Country % USA Spain Canada Others , Total , , ,698 2, Year Mineral Commu nication Energy Manufa cturing Free trading zone Finance Travel Real estate Total ,884 Ratio Reference: 2008 Statistics from Central Bank of Dominican Republic Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 17

31 3. Status of Project Site Santiago City Name : Santiago Location : 180km Northwest from Santo Domingo < Figure 2-4 Map of Dominican Republic > Climate : Tropical climate (Temperature : 20~40 C degrees, Humidity: 50~60%) Landscape : Flat land (Cibao region) between central and north mountain range. Population: Approximately 1,051,522 (Male: 519,586 Female: 531,936), 2006 Administrative District : Santiago City is the central city of 7 regional communities in the Cibao area (Janico, Licey al Medio, Santiago, San José de las Matas, Tamboril, Villa Bisonó, Villa González). Scope : Total area(2,839), Urban Area(612), City Area(75) City expansion trend Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 18

32 < Figure 2-5 Santiago City expansion trend (1800~1994) > Reference: Santiago City Development Society (CDES) Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 19

33 < Figure 2-6 Growth trend of major industries (2002~2008) > Reference : Central Bank of the Dominican Republic As shown in table above, President Fernandez s economic promotion policy led to rapid growth in the real estate and trading industry since his reelection in Santiago City, Dominican Republic's No. 1 city in terms of industrial market, is suited for the implementation of various economic growth polices led by the government. In order to further promote the economic growth of the Dominican Republic, construction of a Trade center seems appropriate. < Figure 2-7 View of Santiago City > Feasibility Study of the Establishment of the CIBAO Trade Center in the DR 20