Investment Policy Review - Rwanda - UNCTAD Virtual Institute

Investment Policy Review of Rwanda
Such comparisons can only offer rough indications of what can realistically be expected. They provide
a reasonable medium-term benchmark, however. If Rwanda were to attract as much FDI per capita as
sub-Saharan Africa did over 1994-2004, this would translate into annual inflows of about $130 million
over the next decade. Yet, it is probably more appropriate to assess how much FDI Rwanda could attract
based on prospects for GDP growth and national investment rates, and on potential shifts from past
trends resulting from policy actions.
Over the past decade, FDI inflows to Rwanda amounted to about 1.5 per cent of gross fixed capital
formation (GFCF), with national investment amounting to about 17 per cent of GDP. Sustained reforms
could generate nominal dollar GDP growth of 10 per cent 64 over the next decades and raise national
investment rates from 20 per cent of GDP in 2005 to 30 per cent by 2020. Under such a scenario,
the implementation of an FDI strategy as proposed in this chapter could aim to raise FDI inflows as a
percentage of GFCF from 3 per cent in 2004 to 10 per cent by 2020. Net FDI inflows could thus rise
from about $20 million in 2006 to $300 million by 2020 (figure III.2). A “high-end” scenario of whereby
Rwanda would attract FDI inflows equivalent to 14 per cent of GFCF would generate FDI inflows of
about $450 million by 2020. 65 These numbers should by no means be taken as forecasts or targets, but
they set a general framework for ambitious yet realistic goals regarding FDI inflows.
Figure III.2. Potential net FDI inflows, 2006-2020 and comparator LDC countries
(Millions of dollars)
500
450
U.R. of Tanzania, 2001-2004 average
400
350
300
250
200
150
Mozambique, 2001-2004 average
Uganda, 2001-2004 average
100
50
0
Rwanda, 2001-2004 average
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: UNCTAD estimate.
This level of inflows would generate major developmental benefits to the economy and help
achieve the goals set in Vision 2020. In particular, foreign investment would likely contribute to: (1) human
resources development and the transfer of skills; (2) the creation of a knowledge-based economy; (3) the
64
Assuming real GDP growth of 8 per cent along the lines of Vision 2020.
65
With other assumptions unchanged.
75