Rwanda - Overview
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Rwanda has implemented a new corporate tax for the companies working on the mining sector, which helped to increase the state's revenue, reaching EUR 140 million in 2013. The government expects to reach EUR 300 million in 2017. Rwanda is involved in the PSI program (The Policy Support Instrument) with the IMF in order to strengthen the stability of its economy, to promote a long-term growth and to reduce the country's dependence on foreign aid (more than 40% of the country's budget). This three-year program is about to expire and a new agreement should be concluded with the IMF in 2014. The institution has expressed its satisfaction regarding the macroeconomic results of Rwanda in 2013, but it recommends the government to remain focused on their policies and to modernize the fiscal regime of the country. The government wants to diversify its economy, the program "Vision 2020" establishes the priorities for the development of non-agricultural activities, reinforces efficiency in services and identifies the most important measures to be applied for social protection.
Rwanda is a poor country, where the majority of the population lives below the poverty line and where almost 30% of the population suffers from the lack of food security.
Foreign trade overview
Rwanda's economic policy is very open to trade: international trade represents almost one-third of the country's GDP. Rwanda signed a bilateral agreement with the United States in December 2011. The country also belongs to the East Africa Community (EAC) in which the members signed in December 2013 a currency union treaty. The members are: Kenya, Burundi, Tanzania, Uganda and Rwanda, and they will all use a common currency (Shilling). In order to implement this system, these countries have to unify their regulations and monetary policies and they must create a central bank.
The country's customs duties are rather low (an average of 14.4%) and non-tariff barriers practically do not exist. The main obstacles to the Rwandan economy remain, in 2014, its unstable geopolitical environment and its unskilled workforce.
Due to the country's strong growth and its demand for manufactured products, Rwanda has a structural trade deficit, a trend that is expected to continue during the next coming years. In order to improve its trade balance, the government expects to invest in telecommunications and road networks of high performance, as well as the development of industry and the tertiary sector (already 54% of the GDP in 2012). The exports of crops (tea, coffee, pyrethrum) have accomplished good results in 2013.
Rwanda's main trading partners are the EAC (East African Community) member countries, the European Union and China. Its exports are mainly coffee, tea and minerals.
In a context where the inflows of FDI have slightly increased globally in 2013 (without having yet reached the level of 2011), macroeconomic fragility and political uncertainties, are conditions that are keeping investors cautious. Information regarding the 2013 FDI influx in this region can be found in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
Although FDI stocks have increased in the last recent years due to the political stability and the measures focusing on the improvement of the business atmosphere, FDI flows still remain very weak. The political instability of its neighboring country, the Democratic Republic of Congo, has had an impact on the entire Great Lakes region, and it has played a negative role in Rwanda's FDI inflows.
The low level of human resources, the poor quality of its infrastructures, the country's landlocked position, high operating costs, the limited natural resources and the political instability of the region are some of the factors that limit the potential attraction of the country. Nevertheless, Rwanda has many assets: a substantial reserve of methane gas, a mining potential in expansion and hardly explored, and a reputation of being one of the least corrupted countries in Africa. Lastly, the government has continued to develop liberal policies to make of Rwanda a hub of trade and services. This strategy has obtained a real success as shown by the significant reduction of its bureaucratic procedures (according to the World's Bank, there are only two administrative procedures to follow and in three days, a new company can start its activities). The institution is very positive regarding the business climate of Rwanda. The country has moved up 22 places in the classification Doing Business 2014 issued by the World's Bank, it ranks 32, one of the most spectacular progress of the year. It ranks second in the Sub-Saharan African region after Mauritius.
Coffee, tea, tin, energy and telecommunications are some of the sectors targeted by foreign investment. In 2012, the government and the American company Visa Inc. signed a contract for the development of electronic financial services and this will open the doors to new future investments. Indonesia, China and Germany are the main investing countries.