The latest World Bank Doing Business Report shows that Rwanda has further consolidated its reputation as a business destination of the first order by reforming its business landscape.
In the international business arena, image and perception are everything, but Rwanda has gone beyond both.
The government has actually improved the business environment, by easing restrictions on setting up companies, put in place an efficient taxation regime and ensured that the judiciary works.
These measures have abundantly paid off and the World Bank Report is proof enough. But it goes beyond putting Rwanda at the top of the business pecking order ahead of its East Africa Community partners and in Africa.
It makes a bold statement about the need to have a transparent and accountable government that is inclusive, and one that is not hostage to corruption.
But Rwanda’s journey to this heady moment has been far from easy. The challenges that the government has faced have been formidable.
It has soldiered on with its highly ambitious transformation agenda that has seen it emerge the second best business reformer in the world over the last five years after Georgia.
According to the Report, Rwanda is now the third friendliest place in which to do business in Africa, with less than 10 years remaining before the Vision 2020 deadline to achieve its development goals. It is clearly on the right path but more needs to be done.
The report is a clear indication that the government will go at any lengths to see that foreign investments, which have been identified as the fulcrum of the transformation agenda, flood in.
For Vision 2020’s ambitious aspirations to be met, Rwanda needs on average $200 million annually in Foreign Direct Investments (FDI) until the year 2020, according to planners.
This figure is a high target by any measure, especially given the emerging realities and challenges in the global FDI patterns, particularly in the wake of the global financial crisis and the looming Euro zone crisis.
The wide ranging reforms have been the result of consensus on how Rwanda can engage businesses, local and foreign investors, as trusted partners to the transformation agenda.
“The Rwanda Development Board (RDB) will continue the public- private dialogue that has precipitated some of the reforms, as well as drive the efforts to provide a better and conducive business climate in order to encourage private sector growth,” said RDB CEO, John Gara, in a statement.
The World Bank Report says that its quantitative data and benchmarking can be useful in stimulating debate about policy, both by exposing potential challenges and by identifying where policy makers might look for lessons and good practices.
“For governments, a common first reaction to the Doing Business data is to ask questions about the quality and relevance of the data and about how the results are calculated,” it says, adding that the debate typically proceeds to a deeper discussion exploring the relevance of the data to the economy and areas where business regulation reform might make sense.
The World Bank’s dialogue with governments on the investment climate is designed to encourage critical use of the data, sharpening judgment, avoiding a narrow focus on improving Doing Business rankings and encouraging broad-based reforms that enhance the investment climate.
The Report states that it is only Rwanda and Colombia that use the World Bank data on Doing Business consistently by their regulatory reform committees in order to report directly to their respective presidents .
That, way, the report adds, Rwanda uses, “the Doing Business indicators as one input to inform their programmes for improving the business environment”.
The statement is quite telling. It shows how serious the country is about implementing its development agenda by getting the highest office, that of President Paul Kagame, to back its economic strategies. Other countries, the Report noted, uses the data at ministerial levels.
Obviously, using the data at the ministerial level waters down the level of support it needs to effect wide-ranging policies aimed at cutting the red tape that stifles business in Africa.
But more reforms are needed if Rwanda’s private sector is to play its critical role of driving the country’s economic agenda. For example, a report that outlines the current status of Rwanda’s young private sector, titled “Establishment Census 2011” by the ministries of Trade and Industry, shows that Rwanda’s private sector is dominated at 52.3 percent of total enterprises, by wholesale and retail trade.
This situation is a far cry from Rwanda’s aspirations to develop a huge import substitution industry that should add significant value to its local products.
Manufacturing represents 3.7 percent of the total number of firms. This structural imbalance is only mitigated by the heavy public sector establishments within business that are mainly utilities (electric, gas, water and waste management).
It is only through undertaking wide ranging reforms that the structural weaknesses within Rwanda’s economy can be overcome. Recommendations in the World Bank’s Doing Business are a starting point.
The author is an editor with The New Times firstname.lastname@example.org