Investment Climate

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COUNTRY PROFILE
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Rwanda is a land-locked nation located in Central East Africa. It is still recovering from the 1994 Genocide and war, during which more than 800,000 Rwandans died out of an estimated population of 8 million. Today, Rwanda’s economy remains fragile and is heavily dependent on foreign aid (51% of the government’s budget for 2004). Rwanda’s GDP growth rate for 2003 is estimated to be 0.9% (USD $2.1 billion) and inflation was 7.3%, according to the IMF. The currency exchange rate is now at 577 Rwandan Francs to one US dollar. Macro-economically, Rwanda’s current account has been worsening in recent years due to stagnant exports and increased imports. Exports were USD $62.9 million and imports were USD $247.4 million for 2003, but indicators for 2004 show improvement, primarily due to increased coffee exports and decreased construction-related imports. The IMF is holding Rwanda to task for HIPC performance criteria completion and so far for 2004 the Government of Rwanda (GOR) is on track, according to a July 2004 IMF team visit to Rwanda. Micro-economically, Rwanda lacks a middle class, energy production and distribution are inadequate, private investment is poor, the commercial court system is in a nascent stage, and the banking system is very conservative and poorly developed. Though the banks are improving, they still lack financial products that facilitate investment (reasonable collateral requirements, land collateral issues, low loan interest rates, credit card facilities, etc.). Export-oriented production and further diversification are lacking. Moreover, agricultural development in Rwanda will remain very vulnerable to weather, market fluctuations, and an ever expanding population. Rwanda has also not yet undergone a sovereign credit rating.



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OPENNESS TO FOREIGN INVESTMENT
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Despite many challenges, the GOR is making progress economically as it continues to focus on its historically weak economy and on combating poverty. It is emphasizing the importance of promoting private investment as an engine of development, especially in promoting exports. In light of its trade deficit and IMF pressure on the GOR to stay on track with economic performance goals, the GOR has implemented several initiatives to increase investment and exports in compliance with its Vision 2020 plan. The Rwanda Investment Promotion Agency (RIPA), established in 1998, is charged with increasing investment in Rwanda. RIPA has developed information materials, held trade fairs at home and abroad, and established assistance offices in Rwanda to encourage and assist investors. In addition, this year the GOR is submitting new legislation to the Rwandan Parliament on trade law, taxes, customs, land ownership, and investment that, if passed, will lay an important framework in support of private business investment and a market-based economy.



Rwanda has also set in place several institutions that support an open market based economy. These include: the Privatization Secretariat, created in 1996; the National Tender Board, established in November 1997; the Rwandan Revenue Authority, established in 1998; and the Chamber of Commerce, restructured in 2000. Rwanda joined the Common Market for Eastern and Southern Africa (COMESA) in 2004. The end goal is to diversify Rwanda’s economy, grow export-oriented jobs, and do this with minimal additional borrowing.


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CONVERSION AND TRANSFER POLICIES
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The Rwandan Franc (RwF) is convertible for essentially all business transactions since March 6, 1995. Rwanda has a liberal monetary system and complies with IMF Article VIII and all Organization for Economic Cooperation and Development (OECD) convertibility requirements. The Rwandan Franc exchange rate is set against a batch of currencies, including the Euro, the Pound Sterling, and the USD.

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LAND REFORM
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The GOR owns all land and grants the right to individuals and organizations to use it on a fee-simple basis. The constitution states that private ownership of land and other rights related to land are granted by the state. The law further specifies the modalities involved with the acquisition, transfer, or use of land. Rwandan land laws are currently under review, and changes concerning land ownership are expected in 2004. The GOR currently allows individuals or organizations to acquire land on leasehold from 50 to 99 years. Authorities issue “titlesâ€? for land usage, but rights of the titleholder only relate improvements made to the property. Rwandan financial institutions accept these land-use titles as collateral. With the assistance of the Rwanda Investment Promotion Agency, foreign major investors can obtain land-use title with relative ease compared to local investors. Most local and foreign investors involved in extensive agricultural projects have land-use titles. 


Should land be required for use for the public good, expropriation laws are in place that allow the state to compensate individuals for the value of improvements to the land and the remaining leasehold time should their land be expropriated. For example, the City of Kigali is currently undergoing new city planning, making expropriation common with new developments. Compensation is usually paid by the new investor and usually targets rundown, inexpensive structures or empty lots. The government expropriates in favor of investors who pay appropriate fees and who in turn pay the expropriated fair market value for the land in question. The system works, but expropriated citizens often complain of late compensation when the government is responsible for payments. There is also lack of price adjustment of expropriated property to inflation. Expropriation laws state that prices for expropriated property should be adjusted for inflation every 18 months, but the most recent adjustment was in 1996. A committee consisting of Ministry of Land and Kigali City officials is adjusting current prices to inflation at the request of the Parliament, and prices are expected to change soon. Rwanda is a member of the African Trade Insurance Agency (ATI), which offers risk coverage against expropriation to investors for a fee. Investors are further protected by the Rwandan Investment Code (1998), which is undergoing revision this year.

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DISPUTE SETTLEMENT
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There have been few private investment disputes in Rwanda, and the government has never been involved as a complainant or respondent in World Trade Organization dispute settlement. Rwanda signed and ratified the Multilateral Investment Guarantee Agency (MIGA) convention on October 27, 1989. MIGA issues guarantees against non-commercial risks to enterprises that invest in member countries. An arbitration center was created shortly after the establishment of the Rwanda Investment Promotion Agency in December 1998 with the mission of settling all commercial disputes. It is staffed by experienced lawyers and is located in the same building as the Rwanda Investment Promotion Agency and the Federation of the Private Sector. Rwanda currently has no specialized commercial court, but the justice system is undergoing reforms that include the creation of a commercial court system. Rwanda is a member of the International Center for the Settlement of Investment Disputes (ICSID) and African Trade Insurance Agency (ATI), which are supported by the World Bank and Lloyds of London. ATI covers risks against restrictions on import and export activities, inconvertibility, expropriation, war, and civil disturbances.


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PERFORMANCE REQUIREMENTS AND INCENTIVES
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Since its inception in 1998, RIPA has registered more than 200 investors, but only a modest number of new foreign investors. Registered investors obtain certificates that bring benefits, including exemption from value-added tax and duties when importing machinery, equipment, and raw materials. RIPA also assists with the issuance of expatriate work permits, securing all the required government permits, and assisting with land acquisition if required. 

Other tax incentives are given to investors who create significant export-oriented growth, since export enterprises in Rwanda may qualify for the benefits of the Free Export Economic Processing Zone (FEEPZ). Determination is made upon request and is based on several factors: exports must total at least 80% of production or exports total at least 10% if manufacturing under bond; the entity must be engaged in the export of services; and capital investment is at least USD $50,000 (local investors) or USD $100,000 (foreign investors). The Rwandan investment code is currently under review to determine precise duration periods for exemption from taxes and to provide more incentives for investors. 


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RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
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Private ownership is preserved in the constitution of Rwanda, except with ownership of land, which, as previously stated, is owned by the GOR. The constitution stipulates that every person has the right to private ownership of other types of property, whether personal or in association with others. It cannot be violated except in the public interest, in circumstances and with procedures that are determined by law, and is subject to fair and prior compensation. Local and foreign investors have the right to own and establish business enterprises within law in all forms of remunerative activity. 

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PROTECTION OF PROPERTY RIGHTS
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As a member of COMESA, Rwanda is automatically a member of ARIPO, the African Regional Intellectual Property Organization. It is also a member of WIPO, the World Intellectual Property Organization, and is currently working towards conforming its legislation to WTO trade-related aspects of intellectual property. The Ministry of Commerce (MINICOM), the Rwandan Revenue Authority (RRA), and the Rwandan Bureau of Standards (RBS) work together to address issues involving counterfeit products on the Rwandan market. In June 2004, for example, the RRA, together with the Rwandan Bureau of Standards, cooperated fully with an American business interest and the Embassy in destroying contraband shoe polish that had entered the country illegally. Although much remains to be done, it appears that the GOR is committed to combating the illegal transfer and manufacture of commercial goods.

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TRANSPARENCY OF THE REGULATORY SYSTEM
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Rwanda established an ombudsman’s office in 2004 that monitors transparency and compliance to regulation in all governmental sectors. The Rwanda Utility Regulation Agency, Auditor General’s Office, Anticorruption Division in the Revenue Authority, National Bureau of Standards, and the National Tender Board, are all in place to enforce regulations as well. Moreover, the press has openly exposed instances of bad debts this year involving private citizens and GOR leaders. This has led to some resignations within the GOR. 



A key component of the GOR’s regulatory system is the Auditor General’s Office, established in 1999 to continuously audit government adherence to fiscal controls. The office managed to make substantial progress in making government finances more transparent according to IMF officials. The Auditor General audited the CY 2002 accounts of 41 public entities (including the Ministries of Defense and Finance and seven other ministries) and issued a report to Parliament in March 2004. 

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EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
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Rwanda does not have a stock exchange, but plans are underway to develop capital markets. Ministry of Finance officials are studying the preconditions for such a step and the creation of a regulatory authority. Rwanda has also not yet undergone a sovereign credit rating.

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POLITICAL VIOLENCE
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Rwanda remains a stable country with little violence. A strong police and military provide an umbrella of security that continues to minimize criminal activity and political disturbances. Elections in 2003 were peaceful, although significant voting irregularities were documented. Rwanda still faces insurgent activity from rebel groups operating in the Democratic Republic of Congo; and, therefore, it aggressively responds to any rebel incursions into Rwanda. Rwanda has a smaller problem with crime and terrorism than its neighbors, and the GOR actively cooperates in efforts to identify and freeze the assets of known terrorist individuals or organizations. 

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CORRUPTION
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The GOR senior leadership maintains a consistent policy of combating corruption within Rwandan society. Although less corrupt than many other African governments, the GOR, despite its firm hold on public policy, is confronted with periodic allegations of misconduct or persons using their office for personal gain. In general, such incidents do not go unpunished, and when it involves high-ranking officials, they are dismissed or reassigned to positions of diminished responsibility. The National Assembly takes an active role in investigating public officials accused of corruption and, in concert with the recently established Ombudsman Office, has exposed corrupt public officials, several of whom have resigned in 2004. The government adopted a code of conduct and rules of disclosure for public officials. 

Relating to visitors to Rwanda, tourists are treated well; and there is, overall, no harassment by police or immigration officials. These officials are also not generally known to ask for bribes. There is petty smuggling across borders, but the RRA is becoming more vigilant in reducing the amount of illegal or under-valued goods imported into or through Rwanda. 

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BILATERAL INVESTMENT AGREEMENTS AND AGOA
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Rwanda is eligible for trade preferences under the African Growth and Opportunity Act (AGOA), which the United States enacted to extend duty-free and quota-free access to the U.S. market for nearly all textile and handicraft goods produced in eligible beneficiary countries. With the extension of AGOA until the year 2007, the GOR is anxious to see Rwanda realize more advantages under AGOA. AGOA II changes are being made, and small-scale cloth and textile handicraft businesses are starting to export their products to the U.S. USAID and its USAID-East and Central Africa (ECA) Global Competitive Trade Hub partners are working diligently to assist Rwanda in expanding its AGOA opportunities in 2004. Rwanda has other investment and trade agreements in place, including membership in COMESA, and agreements with Mauritius and South Africa. 



Only one major textile firm is operating in Rwanda. The Usine Textile du Rwanda (UTEXRWA) is a privately owned textile factory located in Kigali, Rwanda. In operation since 1985, UTEXRWA currently employs 1,000 people who produce up to 6,000 garments each day from raw materials imported and processed in Rwanda. The company imports raw cotton from Uganda and Tanzania, and polyester fabric made in South Africa. From these materials the factory can process, spin and weave 10 million yards of fabric per year in any combination of cotton and polyester. UTEXRWA also has the capability to dye, print, and process the fabric for finished goods production. Workers at over 250 sewing machines cut and sew material to produce upwards of 6,000 garments per day. Finally, the company maintains a designs library of over 2,000 products and can easily add to current production and shift manufacturing lines within days to meet a new demand.



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OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
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The Overseas Private Investment Corporation (OPIC) currently has only one investment guarantee in Rwanda: Sorwathe, an American-owned tea factory that received an additional loan guarantee from OPIC in spring 2004. OPIC is expected to expand its program for Rwanda, with due diligence work now being completed for a USD $10 million loan program for the Rwandan Bank of Commerce, Development, and Industry (BCDI). Given the enduring stability in the country and pending investment climate changes, OPIC officials have expressed strong interest in expanding OPIC involvement in Rwanda. The Export-Import Bank (EXIM) continues its program to insure short-term export credit transactions involving various payment terms, including open accounts that cover exports to the U.S. of consumer goods, services, commodities, and certain capital goods. 
Rwanda is a member of the Multilateral Investment Guarantee Agency (MIGA) and the African Trade Insurance Agency (ATI).


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LABOR
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The national labor code was revised in 2000 to eliminate gender discrimination, restrictions on the mobility of labor, and wage controls. A new labor code and laws relating to insurance are being prepared. Companies will find skills deficits in many sectors when hiring in Rwanda, but these deficits will continue to shrink as literacy rates increase and more qualified people graduate from Rwandan institutions of higher learning. The general population’s literacy rate continues to improve each year since the 1994 Genocide and war. Before 1994 the rate was 64%; for 2003 the rate was 52%. More than 1,000 students each year for the past three years have completed training at the Kigali Institute of Technology (KIST) and the National University of Rwanda (NUR). These students are fluent in French, English, or both. Several hundred Rwandan students complete their studies abroad each year and return to work in the country. It is also possible to find qualified labor from South Africa or from neighboring countries such as Congo, Uganda, and Kenya.

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FOREIGN TRADE ZONES/FREE PORTS
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Rwanda is a member of several sub-regional economic organizations, such as the Economic Community of Central African States (CEEAC), the Economic Community of the Great Lakes (CEPGL), and the Common Market for Eastern and Southern Africa (COMESA). Rwanda plans to establish a free trade zone in the near future.

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PRIVATIZATION
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In 1996, the Rwandan government enacted the Privatization and Public Investment Act, which provides for, among other things, the liquidation, contracting out, restructuring and whole or partial divestiture of any public enterprise. The same law established the Privatization Secretariat to drive the process. Of 90 public enterprises, 48 have been privatized since 1996. The government is considering privatizing the telephone company, two banks, and several tea plantations this year. The German company Lahmeyer International manages the water, gas, electricity, and utility company "ElectroGaz". The GOR expects to sell the utility by the year 2008. 


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FOREIGN DIRECT INVESTMENT STATISTICS

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Foreign direct investment statistics will be updated in the next full revision of the Investment Climate Statement, which will be published in January 2005.



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KEY ECONOMIC CONTACTS

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Key economic contacts are:



RWANDAN INVESTMENT PROMOTION AGENCY
WILLIAM NKURUNZIZA
DIRECTOR
TEL: 250-585223/585221 FAX: 510249
MOBILE: 250-08300205 

EMAIL: WnKurunziza@rwanda1.com or rwanda1.com

PRIVATIZATION SECRETARIAT
BONAVENTURE NIYIBIZI
DIRECTOR
TEL: 250-575383 OR 570989
FAX: 250-575384
EMAIL: PVS@RWANDATEL1.RWANDA1.COM OR Niyibizi@Rwanda1.com

NATIONAL TENDER BOARD
JANVIER KANYAMASHULI
EXECUTIVE SECRETARY
TEL: 250-571682
FAX: 250-571107
MOBILE: 250-08302989

MINISTRY OF FINANCE AND ECONOMIC PLANNING
DR. DONALD KABERUKA
MINISTER
TEL: 250-575777
FAX: 250-575719
WEBSITE: WWW.RWANDA1.COM

MINISTRY OF COMMERCE, INDUSTRY AND TOURISM
DR. MANASSEH NSHUTI
MINISTER
TEL: 250-573944
FAX: 250-575465
EMAIL: mnshuti@yahoo.co.uk

MINISTRY OF COMMERCE, INDUSTRY AND TOURISM

HENRY GAPELI
SECRETARY GENERAL
TEL: 250-573944
FAX: 250-575465
EMAIL: DCE@RWANDATEL1.RWANDA1.COM

FEDERATION OF THE PRIVATE SECTOR
BART GASANA
EXECUTIVE SECRETARY
TEL: 250-583538 CELL: 250-0830-1966
FAX: 250-583532
EMAIL: bgasana@yahoo.com

ASSOCIATION OF WOMEN ENTREPRENEURS
CHRISTINE MUREKATETE
PRESIDENT
TEL: 250-517106 OR 250-0830-1818
FAX: 250-517106

Interested parties are encouraged to contact the Economic/Commercial Officer at the U.S. Embassy in Kigali, Rwanda: Fax: 011-250-505601 x3241; Email:
AMEMBKIGALI@HOTMAIL.COM; Mail: B.P. 28, Kigali, Rwanda



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COMMENT

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Several challenges continue to confront potential investors in Rwanda: chief among these are the provision of consistent and inexpensive energy, the time it takes to start a business, the maintenance of regional stability, fast and secure transport links to major ports, and adherence to financial discipline and privatization within the GOR. Population growth, poverty, and disease will remain long-term obstacles. On the positive side, Rwanda continues to be a focal point of stability and relatively low-corruption in Central Africa. Politically and financially, the GOR has committed itself to bringing additional private investment to Rwanda, in line with its long-term vision of becoming a middle-income nation by the year 2020. The legislative changes being considered in 2004 will lay the groundwork for further progress. Rwanda’s mild climate, strong agricultural base, increasingly educated human resources, improving internal road infrastructure, and location in Central Africa position it to become a crossroads for the people and markets of the region. Its assets include over 650 species of birds and the world-renowned mountain gorillas. Moreover, natural methane gas reserves in the Lake Kivu area should not be overlooked. Finally, Rwanda’s competitive wages, increasing government investment incentives, banking reforms, and population fluent in French or English can help attract potential investors. Given time, dedication to a long-term vision, the right know-how, and resources in the proper place, Rwanda could become an excellent return on investments.