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16 years ago, Rwanda was a country under siege grappling with its very existent, having turned on itself in the most vicious of ways. Today, after the genocide that killed an eighth of the population, Rwanda is working hard on a path to recovery with the sole aim of shaking off this painful part of its history through economic empowerment
Everybody knows or has heard the story of Rwanda’s vicious past.
Unfortunately, Rwanda is not well endowed. It is landlocked, largely deforested and ridiculously packed: About the size of Nairobi, it has a population of almost 10,746,311. The country has no oil and few minerals but it does have one abundant asset: well-placed friends.
By embracing a new model of economic development, the strategy is to build a global network of powerful friends to lure private investment -- and market the brand of Rwanda.
The World Bank Doing Business Report 2010 ranks Rwanda as 67th worldwide, putting that nation ahead of Kenya which ranks 97th in terms of ease of investing. Both countries are enjoying an improved ranking from the preceding year, following a ‘recalculation in rankings to reflect changes to the methodology and the addition of two new countries.’ Kenya is ranked 93rd in protecting investors to Rwanda’s rank is 27 in the world. Kenya dropped five places on this list while Rwanda climbed 144 places from 2009.
Under President Paul Kagame’s leadership, Rwanda has gained the reputation of a country that is serious and committed to economic growth and development through increased investments and exports; the result has been increased inflow of FDI into Rwanda.
Kagame is pretty ambitious. His plans are: to boost GDP sevenfold, find paying jobs for half of Rwanda's subsistence farmers, nearly quadruple per capita income to USD 900, and turn his country into an African center for technology, all by 2020. The government is doing what it can -- it has, for instance, committed to investing annually 5% of its GDP in science and technology by 2012 -- but to reach those goals, it's going to need outside assistance. This strategy relies on wealthy and powerful friends to lure private investment, train a new generation of managers, build a globally competitive economy, and wean the country off foreign aid. This connected and business-savvy team is marketing the brand called Rwanda.
In their bid to achieve their objectives, Rwanda’s government revised the country’s investment code, customs and income tax laws in order to provide a range of competitive incentives to investors such as: duty free importation of machinery, equipment and raw materials and other goods in the free zone; free and unfettered repatriation of profits and capital; a reduction in corporate tax of between 2-7% depending on how many people the investor has employed and even an indefinite tax holiday for international headquarter companies registered in Rwanda, among other benefits.
According to a UNCTAD framework for attracting and benefiting from FDI published in 2008,
“Although the benefits of FDI are well known, the magnitude of the potential effects is determined by the economic characteristics of a given country and a host of other factors. FDI can have a direct impact on economic growth, income generation and job creation. Higher levels of FDI can also trigger increasing levels of total trade of goods and services and a variety of other linkages with the domestic economy, such as technology transfer, human capital formation, creation of new industries and greater integration into the world economy.”
Rwanda has enjoyed stable macroeconomic growth since they began to implement an aggressive growth strategy with 8.8% average year-on-year GDP growth since 2004 and a GDP growth rate of 11.2% in 2008, the highest in East Africa. They have also benefited from controlled inflation, increasing government tax revenues and a stable exchange rate. The country is also thriving in terms of political stability, giving investors the confidence they need to set up shop and make long-term investment decisions.
Why is Rwanda growing exponentially? Because it wants to and has effectively identified a strategy for this growth.
To his credit, Kagame has effectively stabilized the country, but prosperity is still a long way off. Despite annual economic growth of about 6%, Rwanda still ranks 194th out of 208 countries on the World Bank's most recent per capita income table.
It seems the ramifications of poverty are more than economic and this is what drives the country’s development strategy. Kagame's desire to transform the economy is rooted in the belief that poverty exacerbated the tensions that erupted into 1994's genocide. To ensure that the past never rears its ugly head again, the country must grow its economy to create the conditions for tolerance, trust and optimism.
Rwanda is indeed now on and committed to a path of growth that, quite frankly, serves as a wake up call to countries such as ours. East African countries such as Kenya, Uganda and Tanzania could do well to a borrow a leaf from the Rwanda story especially now as we get closer to realizing the East African Community (EAC) dream. More than ever we need a ‘ purpose-driven’ plan for economic development. The Kenya-Uganda Railway which has been in the headlines the past couple of weeks is an example of a regional asset that could benefit from private investment for the mutual benefit of all East Africans. The entry of Citadel Capital into the region is welcome and the promise to inject Ksh 18 billion in the restructuring of the railway system a boon to the region’s economic development.
Whether we like it or not we share a common past (though not to the frightening decibels ) with Rwanda. Rwanda’s past is everybody’s story, so why can’t it’s promising future be as well?
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1"Mr"
at Tuesday, 16 March 2010 05:39
Yes, Rwanda has made great strides but just like any African leader H.E Kagame is following the footsteps of his Ugandan mentor: mainly to retain power. I emplore readers to look beyond the present, I think there is a sucess story that will end up in ashes if leaders cannot serve and retire. My finances would do great to look at that. All these years of great service would have conviced Kagame to retire but he is not and hence the tragedy... Watch and possibly pray for Rwanda.
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