Why Rwanda remains most competitive EAC economy

Rwanda has moved up four places in the annual Global Competitiveness Index, retaining its pole position as the most competitive economy in the region and third on the continent.

Rwanda has moved up four places in the annual Global Competitiveness Index, retaining its pole position as the most competitive economy in the region and third on the continent.

The country, according to the 2014-15 World Economic Forum annual report released on Tuesday in Geneva, Switzerland, ranks 62nd globally with aggregate 4.3 out of seven.

It is one of the four African economies in the top 75 most competitive countries out of 144 surveyed, the others being Mauritius (39th), South Africa (56th) and Botswana (74th).

Among the other East African Community (EAC) partner states, Kenya comes closest, in 90th position worldwide with aggregate 3.9, while Tanzania, Uganda and Burundi are ranked 121st, 122nd and 139th, respectively.

Globally, Switzerland emerged number one, followed by Singapore and the United States. Finland and Germany both moved a notch higher, to the 4th and 5th, respectively.

The report ranks Rwanda 18th with best structured institutions globally.

On average, Rwanda’s macroeconomic environment scored 4.6 aggregates out of a possible seven, while health and primary education registered 5.5 aggregates.

Competitiveness was also recorded in financial markets (4.30), technological readiness (3.1), business sophistication (3.80), and innovation (3.5).

However, the country underperformed in infrastructure aggregating 3.1 to rank 105th out of 144 countries on that indicator.

Two Asian economies made the top 10, with Japan listed as the 6th and Hong Kong coming a place below it.

Brics economies presented a mixed performance, and China (28th, one place up compared to last year) leading the group, ahead of Russia (53rd), South Africa (56th), Brazil (57th) and India (71st).

The Global Competitiveness Report 2014-2015 assesses the competitiveness of landscape of 144 economies, providing insight into the drivers of their productivity and prosperity.

The report series remains the most comprehensive assessment of national competitiveness worldwide.

Experts react

For Hannington Namara, the chief executive of Private Sector Federation, the report is a reflection of the various efforts by the government to constantly improve the quality of life of citizens and foster a business-friendly environment.

“I’m not sure whether the factors considered under the Competitive Index are very different from the indicators that inform the World Bank’s annual Doing Business reports which have continually ranked Rwanda highly,” he said in reference to the country’s ever-growing reputation as a top business destination.

Namara added: “Rwanda continues to enjoy a macroeconomic stability, health care across the country has never been more accessible, thanks especially to Mutuelle de Sante (a public health insurance system), while our education system is increasingly embracing competence based qualification framework, with technical and vocational schools leading the way.”

“All this continues to directly impact positively on the lives of people and you can see the results on the ground.”

As well as infrastructure, Rwanda is still struggling with issues related to access to finance, skills, insufficient capital to innovate, the report said.

Peterson Mutabazi, the principle senior engineer at the Ministry of Infrastructure, said government has prioritised infrastructure as one of the key areas that will drive growth.

“With the current reforms in the sector and different initiatives, we expect a much better performance in the coming rankings,” he said.

One area where the government is keen to urgently improve significantly is energy with plans to increase by at least five times the current output on the national grid but there are high hopes following the splitting of the former Energy, Water and Sanitation Authority into two wings, one in charge of energy issues and the other water and sanitation.

Karim Tushabe, the coordinator of Doing Business Reforms unit at the Rwanda Development Board, said efforts to improve areas where the country is lagging are underway in various forms.

“Our mandate is to continue coordinating reforms while learning from those (economies) that have done better than us because that’s what will make progress. We are also carrying out consultations with experts from across the world on how we can further improve on our competitiveness.”

Namara said the ongoing infrastructure projects such as the reconstruction of the Kigali-Gatuna highway, the envisaged Mombasa-Kigali standard guage railway line and the soon-to-be constructed Bugesera International Airport are key factors that will significantly help reposition Rwanda in terms of connectivity and business.

Andrew R. Othieno, the head of research and policy at PSF, attributed the good performance to the economic stability prevailing in the country.

“This was to be expected because we have been noticing a strong improvement in the country’s macroeconomic environment and more investments and reforms targeting the business environment,” he said.

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What the report means to common man

Launched in 1979 by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, and initially covering 16 countries, the Global Competitiveness Report has evolved over more than three decades into one of the Forum’s greatest and most unique contributions.

It catalyses constructive policy dialogue among policy-makers, business leaders and other members of civil society.

The Global Competitiveness Report 2014-2015 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The report remains the most comprehensive assessment of national competitiveness worldwide, providing a platform for dialogue between government, business and civil society about the actions required to improve economic prosperity.

Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy.

The different aspects of competitiveness are captured in 12 pillars, which compose the Global Competitiveness Index.

This 35th edition emphasises innovation and skills as the key drivers of economic growth.

While these increasingly influence competitiveness and the global economy tentatively recovers from the economic crisis, significant risks remain, resulting from a strained geopolitical situation, rising income inequality and the potential tightening of financial conditions.

In this context, policymakers, businesses, and citizens increasingly recognise the need for economic growth to be balanced by providing opportunities and benefits for all segments of the population and by being respectful of the environment.

In sum, the social and environmental dimensions of an economy need to be fully considered in any growth or development agenda.

It is, therefore, crucial to address these structural challenges to ensure more sustainable and inclusive growth. More than ever, cooperative leadership among business, government and civil society is needed to re-establish sustainable growth and raise living standards throughout the world.

 

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