Knowledge-based services key to Rwanda's future growth prospects

The International Monetary Fund and the World Bank recently revised downwards economic growth prospects for most emerging economies, including Rwanda.
Kato says Rwanda has great potential to become an ICT and knowledge-base hub. (Courtesy)
Kato says Rwanda has great potential to become an ICT and knowledge-base hub. (Courtesy)

The International Monetary Fund and the World Bank recently revised downwards economic growth prospects for most emerging economies, including Rwanda.

According to the World Bank, Rwanda’s economy will grow by 6.8 per cent this year and 7.2 per cent in 2017.

The economy will grow at low pace due to the slowdown of the Chinese and European economies, and decline in international commodity prices, particularly oil and minerals. Already, the country’s mining sector has been affected by the decline in global commodity prices.

Hiroshi Kato, the Japan International Co-operation Agency (JICA) vice-president, says diversifying and embracing knowledge-based services and high value agriculture products could increase Rwanda’s exports to keep the economy stable and competitive. The JICA boss, who was in the country for World Economic Forum for Africa last week, told Business Times’ Peterson Tumwebaze that he is confident Rwanda will maintain impressive economic growth rate levels if more investments are channeled towards boosting agriculture and infrastructure development, creating more jobs for the youth

The World Bank and IMF have downgraded growth outlook for emerging economies. What should Rwanda do to cushion the economy and remain competitive?

The slowdown in global economic growth that is driven by drop in commodity prices will greatly affect economies that rely on such commodities, like minerals.

As for Rwanda, the negative impact should be smaller. The secret lies in its efforts to transform itself into knowledge-based economy, which means the country may not greatly be affected if more resources are utilised for realising this objective.

However, for the country to maintain the impressive growth, more investment in the agriculture sector, particularly on value addition, is needed to spur production, create more jobs and ensure the sector is sustainable.

Rwanda imports products from Japan than it exports to the country. How can this trade imbalance be corrected?

It is important that Rwanda begins to export services, especially knowledge intensive services, such as software programming, to other countries, including Japan. This way, the country will be able to earn more forex revenues and narrow its trade deficit.

It is also important to begin looking at exporting high-value agriculture products, including macadamia nuts and coffee, to Japan.

You have been supporting Rwanda’s efforts to become an ICT hub for Africa. How critical is it for country’s economic development?

The ICT industry is by far the most important in terms of achieving the transformation to knowledge-based economy.

Rwanda should take advantage of its resources, especially human capital and the good leadership, to leverage on its ICT sector to achieve economic excellence. This can enable it to overcome issues like being a landlocked country with limited natural resources to remain competitive. However, there has to be clear systems, policies and regulation, and institutions as key ingredients to create an enabling environment to nurture and support a strong ICT industry. The country must also continue to invest in human resource development, while ensuring that there is social acceptance to sector policies if ICT is to become an enabler for socio-economic development.

What is your assessment of Rwanda’s ICT sector and economic status in general?

Rwanda has made credible steps putting in place an eco-system that encourage the development of ICT and innovation. However, there is still a challenge of human resources and institutional development that call for investment to help build the capacity of the local personnel and institutions to drive the ICT industry. These two factors will play a significant role in helping improve the sector, and augmenting its contribution to the national economy.

Japan funded the construction of Rusumo bridge on the Rwanda-Tanzania border along the Central Corridor. (File)

Secondly, one of the economic successes of Japan lies in investing in education to boost literacy levels. I believe by investing more in education, while emphasising digital literacy will catapult Rwanda’s ICT industry to the next level.

JICA supports regional integration projects, especially infrastructure development. How do we see the contribution such projects to regional and Rwanda’s development?

As a principle, JICA aims to support African countries on their journey toward achieving economic excellence through many ways, including funding regional integration initiatives. Therefore, we respect the choice and policies by the African people. From our experience in Asia, especially Indo-China, we have a conviction that countries cannot develop unless they integrate with each other. This idea would be relevant in African economies, too.

We are also aware of the importance of regional development projects, like the Northern Corridor Integration Projects initiative, which we believe will be key in unlocking potential of economies, like Rwanda. That’s why we attach a lot of importance and support regional infrastructure development projects because this will help reduce the cost of doing business and attract more private investments.

Secondly, we are looking at the development of Rwanda in relation to what is happening in the neighbouring countries. JICA’s support to the Northern Corridor in Uganda and Kenya, including the Mombasa Port, will benefit the Rwandan economy, too. The Rusumo bridge, and the Rusumo-Kayonza road projects will improve Rwanda’s connectivity on the Central Corridor and ease trade and movement of people.

Going forward, what should Rwanda expect from JICA in the next five years?

Our policy remains to accompany our partner states towards achieving social and economic development; we will remain committed to supporting Rwanda whenever they want to improve agricultural productivity, ICT-based solutions, and implement regional integration projects. We, however, need consistency. If Rwanda’s priorities change, we will discuss how to adjust to the new priorities. We are ready to continue our support and encouraging Japanese investors to come and do business with Rwanda so as to benefit the economy and Rwandan people.