Reflections on a dream

In the first part of this commentary we saw that the Vision 2020 addresses in a more concrete manner the transformations needed by the Rwandan economy to emerge from a deeply unsatisfactory social and economic situation. There was broad consensus on the necessity for Rwandans to clearly define the future of the country. This process provided the basis upon which this vision was developed. As at the close of 2008, Rwanda finds itself at what one may call the ‘definitive crossing line’. This is a transition from the humanitarian assistance phase associated with the 1994 Genocide into one of sustainable development. To undertake this successfully, the economy will have to actualize a host of plans and programmes. This writer advances the thinking that with a prudent all inclusive approach which has been instituted, the vision will actually be realised as planned. The second part of the ‘reflections’ will asses the key value drivers of the Vision 2020. The value driversMaking the shift would require that planners take into account Rwanda’s extremely scarce resources. This in turn means that prioritisation and sequencing will be crucial. Prioritisation and sequencing are actually the basic key value drivers of this transformation. These value drivers have been fashioned into different timelines encompassing short, medium and long run tasks. The drivers according to the Finance and Planning ministry, acknowledges the interdependencies and complementarities between different policies and development objectives. For instance industry and service sector development cannot be realised without a competitive stock of skills, infrastructure and financial services. The short term prospects: Promotion of macroeconomic stability and wealth creation In order to ensure economic stability the private sector has been designated as the engine of growth expectations. In this regard economic planners will put into place macroeconomic stabilisation policies that are conducive for private sector development. This, together with expanding the domestic resource base and increasing exports, is the only way to lessen aid dependence. Various structural weaknesses within the country’s wealth generation drive have been a source of its macroeconomic instability and have led to an unsustainable debt burden and dependency on foreign aid. To offer an alternative source away from this dependency it will be crucial to develop effective strategies to expand the tax base, attract foreign investors and address the debt situation. Also, diversification and the development of non-traditional exports need to be promoted, as well as addressing the anti-export bias in public policies. Thus pro-private sector policies, some of which are already being formulated and others under implementation such as trade liberalisation, privatisation, tax reforms, competitive exchange rates and market driven interest rates will form part of the broad policy drives. Government on the other hand is expected to outsource those services that the private sector can deliver more efficiently and competitively. Once these policies are in place the economy will be in a better position to undergo the envisaged transformation from a largely agrarian subsistence economy into a sophisticated knowledge based society. The medium term: Transforming from an agrarian to a knowledge -based economy According to the Ministry of Finance and Planning, the medium term will entail embracing an assumption that even if Rwanda’s agriculture is transformed into a high value, high productivity sector, it will not, on its own, become a satisfactory engine of growth. Thus a divergent strategy is being instituted to offer relief from reliance on agriculture with a focus being squarely on the secondary and tertiary sectors. Technocrats are upbeat that the real issue, however, according to one of the economic recovery team members based at the Finance and Economic Planning headquarters is not simply one of a strategy based on agriculture, industry or services, but rather, that of identifying Rwanda’s comparative advantage and concentrating strategies towards it’. For instance, Rwanda boasts of plentiful supply of cheap labour with a large multi-lingual population. On the other hand the country’s strategic location as the gateway linking East and Central Africa as well as its small size is a key consideration. These collectively can be referred to as some of Rwanda’s comparative advantages. ‘The local industries which have to be established are hitherto infant would need to address basic needs, for which there is a readily available market, as these products can satisfy local demand and even move towards export markets within the medium terms’, remarked an economist based at National University of Rwanda. Long term prospects: Creating a productive middle class and fostering entrepreneurship During the transition from medium to long term, the services sector is poised to be a key component of Rwanda’s economy. ‘Since Rwanda is landlocked and has limited natural resources, the Government should take a lead role in designing policies geared towards encouraging investment in services, so as to acquire and maintain a competitive edge regionally’, was a comment from a UNDP analyst who is engaged in offering expertise on the actual design of the vision’s planned expectations. ‘It should be noted that the elaboration of such policies will not merely be sufficient to achieve a knowledge based economy. Major infrastructural investment will be required in the areas of energy, water, telecommunications and transport to reduce costs of doing business, whilst increasing their quality and reliability. The key pointer is to drive competitiveness,’ he added. Improvements in education and health standards will be crucial for providing an efficient and specialized manpower which will inturn form part of the emerging middle class who will bear the actual task of developing an entrepreneurial class who will be the drivers of the transformation. Within the long-term prospects it will be imperative to churn out productive entrepreneurs whose focus will be centered on the traditional private sector roles of creating wealth, employment and vital innovations through tapping opportunities for profit making. Stimulating the private sector, particularly with regard to the promotion of exports and competitiveness will not be easily achievable without broadening and deepening the financial sector such as banking, insurance and the application of information technology. Provision of high quality educational services in sciences and technology will be necessary for consolidating development gains made in the short and medium term. Part of the planned long term prospects is centered on the local economy’s need to inculcate over time a niche market in the region, for example by becoming a telecommunications hub. In the last part of ‘Reflections of a Dream’ the writer will examine the financing requirements of Vision 2020. ojiwah@gmail.com