FDIs change market dynamics
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RE: “RDB officials quizzed over investment incentives” (The New Times, October 2).
I believe this is a good and well called for debate (foreign direct investments (FDI) and domestic investments).
The benefits of foreign direct investments are obvious: job creation, transfer of technology and know-how (including modern managerial and business practices), access to international markets, and access to international financing.
Domestic investments can also lead to the same benefits (job creation, technology know-how, international markets, etc). So the real question should be paraphrased as such: Can Rwanda achieve economic growth on domestic investments alone? The answer is YES, but it will take a long time to achieve this without FDI input.
Take a look at StarTimes Rwanda. Prior to that company, local TV industry was minimal with only Rwanda TV. Broadcasting policies then were restrictive, but due to the infrastructure that StarTimes brought in, it has brought a slew of TV outlets which then prompted more accommodating broadcasting policies.
Another example: the entry of Kenyan banks into local banking industry. Previously, who would have thought that your neighbourhood kiosk would be a banking outlet if not that one Kenyan bank brought with them this innovation? The spillover from this innovation is continuing to deepen formal financial services.
FDIs enhance domestic investment benefits in the country. For example, entry of big name hotels in the hospitality industry found the domestic hotels skill-force ready to be absorbed and paid much higher than the domestic hotels. This translates into increased taxes, more spending and overall higher standards of living.
This however does not mean FDIs are a solution to all the problems. It has its negative side effects as mentioned with the real estate investor who swindled many and then left the country. I think herein lies a key role of RDB: that of ensuring that the right environment is in place to foster the transfer of the FDI benefits into the domestic economy, a role that I believe RDB performs very well through sound investment policies and promotion strategies.