A World Bank report has rated Rwanda as one of the countries with least restrictive and obsolete laws to Foreign Direct Investment (FDI).
According to a report recently compiled by the World Bank; dubbed “Investing across borders 2010”, Rwanda is one of the few countries in the world alongside Canada and Georgia where it takes less than a week to establish a subsidiary of a foreign company.
This is the first World Bank Group report to offer objective data on laws and regulations affecting foreign direct investment that can be compared across 87 countries.
The report says clear and effective laws and regulations are vital for ensuring best results for host economies, their citizens, and investors.
“Foreign direct investment is critical for countries’ development, especially in times of economic crisis. It brings new and more committed capital, introduces new technologies and management styles, helps create jobs, and stimulates competition to bring down local prices and improve people’s access to goods and services,” said
Janamitra Devan, Vice President of Financial and Private Sector Development, World Bank Group in a release issued recently.
The report says Angola and Haiti excessive red tape means it can take half a year to establish a subsidiary of a foreign company.
Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, Republic of Korea, and Sudan. In Pakistan, Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award.
The report finds that countries that do well on the Investing Across Borders indicators also tend to attract more foreign direct investment relative to the size of their economies and population.
Conversely, countries that score poorly tend to have higher incidence of corruption, higher levels of political risk, and weaker governance structures.
The report ‘Investing Across Borders 2010’ aims to help countries develop more competitive business environments by identifying good practices in investment policy design and implementation.
It provides indicators examining sector-specific restrictions on foreign equity ownership, the process of starting a foreign business, access to industrial land, and commercial arbitration regimes in 87 countries.
‘Investing Across Borders’ does not measure all aspects of the business environment that matter to investors. For example, it does not measure security, macroeconomic stability, market size and potential, corruption, skill level, or the quality of infrastructure.
However, the indicators provide a starting point for governments wanting to improve their global investment competitiveness.
In the region, the report has ranked Uganda, Tanzania and Angola as some of the top three countries, which are restrictive to foreign ownership in the banking, insurance and telecommunications industry.
Out of the 21 countries surveyed in Sub Saharan, they are rated at 100 per cent as more restrictive than other countries.