Investment Policy Review - Rwanda - UNCTAD Virtual Institute

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Investment Policy Review of Rwanda should be supplemented with focused “vertical” strategic initiatives in a number of sectors to boost investor attraction. These are summarized below: • Manufacturing. Since medium-term prospects rest on facilitating local production of basic goods, and progressively moving towards regional exports, recommended supporting policy measures are: Establish multi-facility industrial parks with better-than-average infrastructure and open to all investors. These could serve as the basis for the development of clusters of manufacturing companies, domestic and foreign, and promote linkages and learning-by-doing. A traditional export processing zone approach would tend to exclude much prospective manufacturing investment at this stage; Establish a free-port style fiscal regime aimed at promoting Rwanda’s position as a logistics and dispatch centre for the Great Lakes region. • General services. Since medium-term investment prospects also rest on providing basic services for the local and ultimately regional market additional inititatives recommended are: Set up a contractor indigenization programme to leverage investment opportunities arising from Government services procurement. IT services and construction are obvious examples; Introduce fiscal incentives to promote local purchase of services by private companies. • Tourism. The aim should be to widen the current focus on “high-end” tourism to include backpackers tourism, for which Rwanda has a comparative advantage. This would be consistent with attracting small foreign investors. It could be supported by providing some permits for gorilla treks to backpackers at lower prices either directly or as an incentive attached to the construction of budget accommodation. • ICT sector strategy has received comprehensive strategic attention. The announced initiatives to accelerate skills development and improve infrastructure are consistent with the core proposals of this report. Contractor indigenization is also likely to play a significant role in developing the ICT sector. • Finance. The domestic banking sector is a small market. Offshore financial services for the region offer prospects, especially if twinned with the development of Rwanda as a logistics and trade centre. Design of regulatory, tax and market enhancing measures is recommended if market research shows that the development of an offshore financial services centre could attract investment. • Coffee and tea are mature industries with limited new FDI prospects. The potential for attracting foreign investors into flowers, vegetables and herbal products should be more systematically researched. The executives visits programme (see below) is a vehicle for rapid assessment of prospects and necessary government support. • Mining warrants special attention and is receiving it. Rwanda’s mineral potential is still largely unexplored, even though the sector could potentially contribute significantly to development, including through job creation, income generation in rural areas, secondary economic effects and infrastructure development. UNCTAD is working with the Government on a strategy of FDI promotion in industrial mining that seeks to complement the Government’s efforts to revive 116
Investment Policy Review of Rwanda the sector through a new mining code. Mining represents one of the few conceivable paradigm shift events for Rwanda. The discovery and subsequent development of a major base metals mine could underwrite a rail link to the coast and connection to the cheap power available from the Southern African Power Pool. These outcomes would alter significant structural constraints for the economy at large. • Market enhancing measures. These should advance on a broader front. The focus on joining the East African Community is appropriate. This should be complemented by investment and double tax treaties to support inward investment and supply of services to and from the relevant markets. • Executives visits programme. To a large extent, Rwanda remains virgin territory for foreign investors and an economy where almost everything needs to be built. It is difficult under such circumstances for policymakers to precisely identify areas that need additional vertical measures to attract investment. RIEPA should invite executives from targeted companies to visit Rwanda to assess commercial potential and advise on key infrastructure and policy support needed to attract investment. Priority should be given to: (1) ICT, e.g. by inviting software firms from India; (2) horticulture/floriculture, focusing on firms established in Kenya; (3) herbals, inviting firms from India or China; (4) tourism, inviting companies specializing in eco-tourism and the backpacker market. D. Action plan timeline The measures and strategy proposed above can be summarized into an action plan timeline, with expected impact on economic structure and FDI as follows. 117
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Investment Policy Review - Rwanda - UNCTAD Virtual Institute

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