Project fever

The Dominican Republic is undergoing a dramatic makeover through a programme of construction projects, of which the most ambitious is the Santo Domingo metro.

The Caribbean’s second underground mass transit system responds to the need to reduce the heavy road traffic congestion and air pollution of the country’s capital city. The 15.5-kilometre metro now under construction will have one line and 16 stations, with €92.6m of rolling stock supplied by France’s Alstom from its factories in Belgium, France and Spain. The government expects to have the line open early next year, with capacity for 200,000 passengers.

OPRET, the public authority in charge of the reorganisation of public transport in the Dominican Republic, says the project is part of the government’s development programme to meet the increasing demand for public transport and reduce road traffic congestion in Santo Domingo.

The metro is one of the largest of the infrastructure programmes in the planning or execution stage, as the country’s economy regains the momentum it lost in the 2003-04 financial crisis.

Santo Domingo is also the home of the country’s first cyber park, a public-private partnership providing IT and related industries, including information services exports, software development and computer design, as well as of manufacturing technology products. Parque Cibernético Santo Domingo is established in Andres, Boca Chica, less than five minutes from Las Américas International Airport. The cyber park is designed for industrial and office users. Planned infrastructure includes a state-of-the-art digit park, designed to host software and telecom-based operations, and an industrial area for high tech manufacturing.

Project go-ahead

Since president Leonel Fernández came into office three years ago, the government has given the green light to nearly 1000 projects, representing an outlay of about $3.5bn. The construction industry is benefiting from a huge increase in public spending following successful sovereign bond issues in the international markets since Mr Fernández took office. Public spending in this sector has increased 16.8%, which also stimulated a 27% rise in private sector investment in construction.

“Low interest rates, which have come down from 50% or more to 11%, have fuelled a construction boom,” says Ivelisse Mieses, an associate at PricewaterhouseCoopers in the Dominican Republic. “Hence investors are taking a renewed interest in the country as an attractive market, thanks in a large degree to a low interest rate environment and a massive programme of investment in infrastructure.”

These projects range from urban renewal, housing and power infrastructure, to roads and seaports. Much of the work is focused on modernising the country’s tourism facilities, the major foreign exchange earner.

IFC commitment

The International Finance Corporation (IFC), the private sector arm of the World Bank, has provided a long-term financing package to Sans Soucí Ports to expand and operate the Sans Soucí and Don Diego cruise ship terminals in Santo Domingo. The IFC’s $21m financing will help to reintroduce the cruise industry to the city and support tourism.

Sans Soucí Ports is carrying out a 40-year build-operate-transfer concession that will renovate the existing infrastructure at the terminals, manage pollution issues that affect the Ozama River basin, and upgrade the navigational channel. Expanding the Sans Soucí and Don Diego ports is part of a larger urban revamp, which includes a marina and a real estate development, to create a multipurpose attraction on the Santo Domingo waterfront.

Salem Rohana, IFC country manager for the Dominican Republic, says: “IFC’s involvement will encourage international investors to extend private financing to local companies like Sans Soucí Ports.”

The government has invested more than $120m in infrastructure renewal in the Puerto Plata region in the past three years, as part of a $275m outlay on projects in the city. “This investment in the province of Puerto Plata represents more than what has been spent in the area in 25 years,” says the government’s tourism secretary Félix Jiménez. The work includes a new sewerage system, roads connecting various towns in the province and public housing, as well as new tourism facilities offering snorkelling and other water sports.

Wealth of projects

The government’s infrastructure programme is spread across the country, focusing on schools, hospitals, roads and sanitary facilities in rural areas, as part of the 2004-2008 Provincial Development Council. In the region around Santo Domingo, 76 projects are under way, ranging from the refurbishment of the university to swamp drainage.

The bulk of the work is being carried out with state funds. There has been a rising level of foreign participation in some of the larger projects, however. Some examples are the Caucedo megaport, and the $100m in foreign investment going into infrastructure projects of several international airports, such as Samaná, Puerto Plata and Las Américas in Santo Domingo.

Foreign participation in government contracts is not allowed to exceed 50%, except in certain cases when 70% control may be granted to a foreign investor depending on the complexity or sophistication of the project. Investors point out that the negotiating process can be arduous and unnecessarily time-consuming, particularly when it involves regional or local authorities.

The big stumbling block for any infrastructure project is a reliable and sufficient supply of electricity. High levels of energy loss are a result of technical failures due to deficiencies in substations and transmission lines, fraud committed in connection services and direct theft of power supply. Energy losses until last year amounted to 40% of total generation.

“We have managed to reduce the amount of loss to 30%,” says Ricardo Arrese, general manager of Edesur, one of the country’s three electricity distributors. “We have installed 3000 new transformers in the past two years to improve our distribution network, reduce theft and improve the quality of service.”

The company has spent $5m to install new meters that register consumption levels directly to a central computer, and which can automatically cut off electricity supplies if a customer fails to pay. “Thanks to our new tamper-proof systems, electricity bill payments in Santo Domingo are expected to increase by 15% to 20% this year,” says Mr Arrese.

Nevertheless, the three electricity distributors are still costing the government about $600m a year in subsidies. There is talk of privatisation once the companies are operating on a profitable basis, but no move in this direction is expected until after next year’s general election at the earliest.