Rwanda

Why Rwanda?

Rwanda is one of the leaders in the area of economic development. In 2015 the World Bank estimated the growth rate at 5,7%, while the economy growth at 7%. Rwanda economy is still suffering from negative trade balance and weak position of companies that in the long term may become leaders. This process has to be combined with the cluster policy and national export strategy. It has to be underlined that the change that will take place in the Rwanda economy must be based on innovation and international openness. Another words the domestic market recapturing strategy must not lead to closing to imports. The imports shall be treated as factor stimulation national companies to develop. Learning through importing is an essential process for countries to develop and create strong competitive economy. Imports brings new technology, know-how and innovation. The key for future development is to strengthen national companies in exporting and learn from importing.

Although Rwanda’s annual average growth rate of 7.7 percent in the past decade is the 14th highest among 129 countries, its GDP per capita is one of the lowest1. While Rwanda‘s exports of commodities have increased significantly in recent years from $241.8 million in 2009 to $653.4 million in 20142. While imports have grown more rapidly – from $282 million in 2003 to $1.9 billion in 2014. Rwanda is a net importer from the EAC region, representing a third of Rwanda‘s overall imports. Rwanda still fails to capture most of the value of its products, depending instead on volatile commodity products within its tea, coffee, and minerals industries for the majority of its product-based export revenues.

The 2010 World Economic Forum‘s annual Global Competitiveness Report ranked Rwanda as the 6th most competitive market in sub-Saharan Africa, and among the world‘s best on indicators such as female participation in the labour force, staff training, and legal rights. Nevertheless, in Global Competitiveness Report 2014-2015 Rwanda has been assigned to the group of factor-driven economies, with the lowest income. Another words, it means its economy is mainly based on production of primarly goods, unskilled labour and natural resources. To strengthen its competitiveness there is a need to increase the productivitiy of labour, as a result of this change it will lead to increase of wages and then to advancement of economy3.

Well educated labour force will enable companies to implement more complex production process, what enables companies to compete globally. To strengthen position of different companies on internal and foreign market it is crucial to product adequate mix of products, taking into consideration supply-and-demand conditions. To achieve high position on internal market and efficiency it is crucial to create in company customer oriented policy. This can create real competition advantage. Next step for companies is the survey on market size for their products, because of the possibility to gain from economy of scale. In the long-term strategy of the anchor companies there should be a place for innovation and technological advancement, but it needs firstly strategy for strengthening the position in mid-term perspective.

Rwanda is predominantly an agriculture-based economy, with growing manufacturing and services sectors. It has a growing population of 8,5 million, 85% of whom live in rural areas. Main exports are agricultural commodities.

Rwanda is a small, landlocked country with an increasing demographic growth. Its economic performance over the last decade has been a success story. Whereas in 2000 70% of the population lived below the poverty line, nowadays this figure has been reduced to 45%. This and other remarkable results towards the achievement of the Millennium Development Goals (MDGs) has been among the best in Sub-Saharan Africa.

In spite of such progress, however, it still remains a low income country, with a high level of inequality and heavily dependent on foreign assistance.

It also hosts around 150,000 refugees from neighbouring countries, namely Burundi and the Democratic Republic of Congo (DRC).

Regional cooperation

Rwanda is a member of a number of African regional organisations, such as the Eastern African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). Rwanda recently also joined the Economic Community of Central African States (ECCAS) to expand its economic interests westwards.

Rwanda is part of the EU-East African Community Economic Partnership Agreement (EPA), together with other countries in the region (Burundi, Kenya, Rwanda, Tanzania, and Uganda).

Millennium Development Goals (MDGs) – achievements

Rwanda is on track to achieving three of the Millennium Development Goals: universal primary education, promoting gender equality and reducing child mortality. Significant progress has also been made in eradicating poverty and improving maternal health.

EU cooperation with Rwanda

The 11th European Development Fund (EDF) National Indicative Programme (NIP) for Rwanda was signed in Brussels in September 2014 with an amount of €460 million for the time period 2014-2020. The overall objective is poverty reduction and the achievement of the MDGs.

The focal sectors are:

  1. Sustainable energy – support to the energy sector will focus on power generation, access to energy for urban and rural households, energy efficiency and the reduction of diesel and biomass dependency;
  2. Sustainable agriculture and food security, with a specific emphasis on improving food and nutrition security among rural households;
  3. Accountable governance, in which the focus will be on strengthening public accountability, democratic governance, and ensuring the efficient, effective and accountable use of public resources.

Overall, support to the focal sectors is underpinned by support to civil society, strengthening of public institutions, as well as their capacity-building.

  1. World Bank Group, Rwanda Economic Update. Financing Development, June 2015, Edition No. 8, p. iv
  2. International Trade Center, www.intracen.org (02.10.2015)
  3. Klaus Schwab, Global Competitiveness Report 2014-2015, World Economic Forum, p. 10.