Rwanda needs to pursue a clear and bold strategy on industrialisation if it is to achieve its ambitious midterm target of attaining upper middle-income status by 2035, according to business experts.
The call comes in the wake of a review of the country’s industrial policy and experts say that a clearly defined agenda would guide the country towards its industrialisation ambition in the next decade.
They were speaking at a two-day conference on industrial policy co-organised by Rwanda’s Trade and Industry Ministry, International Growth Centre (IGC), and the World Bank.
According to Richard Newfarmer, IGC’s Country Director in Rwanda, the new framework for industrialisation should be linked to promoting exports via value chains and taking into account best practices from elsewhere.
“To promote industry you have to promote exports. Rwanda can grow its exports and it will attain the income levels that it aspires to by 2035,” he said, adding that going forward the country needs to design the strategy that will see the exports double in the next decade.
He argued that diversifying export base to high value goods and services will enable the country achieve its industrialisation and economic plans.
Newfarmer also said that Rwanda can borrow lessons from East Asia whose industrialisation journey has been hailed as a miracle.
“East Asia built its development path around traditional manufacturing and pioneered global value chains. Rwanda can learn from East Asian success, exports push, for example, and using public policy to support private sector interactions,” he noted.
For John Page, another expert from Tanzania, achieving industrialisation in the next ten years will depend on how Rwanda is able to bring the special economic zones up to world class.
“It will also require strengthening the links between the firms that operate under the special economic zones and domestic suppliers. The new industrial policy should consider all these aspects,” he said.
In the past five years, industry’s contribution to Gross Domestic Product (GDP) increased to 17 per cent, up from 13 per cent in 2000, according to official data. Industrial growth has averaged 8 per cent since 2012.
However, Vincent Munyeshyaka, the Minister for Trade and Industry, told The New Times that there was a need for a new industrial policy to correct what was not done well previously and address the challenges.
“In the new policy, we shall focus on where we have not been doing very well as a country. There are issues around cost of production in our industries as well as issues related to skills development,” he said.
Munyeshyaka said the majority of companies operating in Rwanda are operating below their capacity.
“Most of them (companies) operate at 50 per cent. The new policy will respond to such issues,” he said.
Victor Steenbergen, the Head of Investment Climate Unit at the World Bank, said that the new policy must address the issues related to tax incentives.
“Currently, we are seeing that there is misallocation of tax incentives in Rwanda, like customs duty exemptions, and most tax incentives tend to favour companies that are already profitable,” he said.
World Bank data shows that in 2015 tax incentives to investors cost Rwanda Rwf51.9 billion, or 0.9 per cent of GDP.
According to the minister, the new policy could be adopted in two months.