RWANDA: WHERE IMPRESSIVE ‘DOING BUSINESS INDICATORS’ LEAD TO UNIMPRESSIVE FOREIGN INVESTMENT

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Rwandan leaders and bureaucrats are forever informing the world that they have the best ranking in East Africa in terms of doing business indicators. They are also emphatic in proclaiming that, in this respect, Rwanda is third best on the African continent.

One of my readers is asking a probing question that distinguishes processes and outcomes: do Rwanda’s impressive rankings lead to actual investment? Put in another way, do the indicators translate into a bigger share of foreign investment for Rwanda than its East African neighbours?

Let us explore this matter step by step.

The World Bank’s 2013 Doing Business report that covers a total of 185 nations world-wide ranks the East African Community countries as follows:

* Rwanda: 52nd;
* Uganda: 120th;
* Kenya: 121st;
* Tanzania: 133rd;
* Burundi: 159th.

http://www.doingbusiness.org/reports/global-reports/doing-business-2013

Within the broader continental context, only three countries in Africa have a better ranking than Rwanda:

* Mauritius – 19;
* South Africa – 38;
* Tunisia – 50;
* Rwanda – 52.

When it comes to rankings, therefore, Rwanda is a star performer both within East African and broader African contexts.

DO RWANDAN RANKINGS TRANSLATE INTO A BIGGER SHARE OF FOREIGN INVESTMENT?

According to the latest World Investment Report, foreign investment flows into East Africa for the year 2012 were as follows:

* Uganda – US$1.721bil;
* Tanzania – US$1.706bil;
* Kenya – US$529mil;
* Rwanda – US$160mil;
* Burundi – US$1mil.

http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=588

So what have we here?

The best ranked country in East Africa – Rwanda – in fact attracts the least amount of foreign investment (US$160mil), except for Burundi (US$1mil). Tanzania which is the worst ranked in East Africa in terms of doing business indicators, except for Burundi, attracts a lion’s share of foreign investment (US$1.706bil). Uganda is the best performer, having attracted US$1.721billion in 2012.

DOING BUSINESS INDICATORS IS ONE THING & ATTRACTING INVESTMENT QUITE ANOTHER

The World Bank’s Doing Business Report is currently facing severe criticisms from all angles. Its usefulness is under question from governments, academics, trade unions, civil society, and even from within the World Bank Group itself. The sustained criticism has led, for example, to the suspension of one of the indicators – ’employing workers.’ A battle continues to gather momentum involving various stakeholders, not least the Bank’s staff who have built their careers on what is turning out to be at best a questionable exercise.

Rwanda is a perfect illustration of the limitation of Doing Business report. Its impressive rankings notwithstanding, Rwanda does very poorly in attracting foreign investment. This is also true in terms of developing great domestic firms. More energy is spent on singing about impressive rankings than designing and executing strategies of attracting investment. At the very least, Rwandan leaders and bureaucrats should tone down their rhetoric – which is evidently much ado about nothing.

David Himbara

David-Himbara

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3 COMMENTS

  1. David,

    Thanks for your insight. Anyone who has been following the Rwandan economic performances would ask the same question; but, we know what those handsomely paid guys do – they protect their jobs simply they don’t care what Rwanda will be in years ahead. This reminds me a World Bank advisor who has been with MINECOFIN (he is from west Africa); I came across some of his justification for elephant projects, doctored statistics. He does it that way because he knows truth will cut off his bread. I am sure many still remember that Human Development report and how Rwandan leadership went about rewriting it.

    Going back to investments; people thinks tons and well worded policies to attract investments will suffice to do the trick. Those policies have to work and be tested. We had an influx of USA based investment funds back in 2006. Those guys would show up, sign MOU; then, they will go back home, send in a team or require a set of documents for a due diligence only to realize there is no accountability, the rules of law, the conventional business management practice. Once they find out that you got first to be in good terms with the men in power, they just backed off simply the business culture wasn’t right.

    Crystal venture tells the whole story; economics only work when resources can be efficiently allocated – I don’t see it happening any soon

  2. Very good point Mr Himbara!!!
    Please keep awake those sleeping kagame fans
    so they get to know the TRUTH BEHIND ALL HIS GAMES

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