RWANDA'S bid to promote a service based economy as well as increase export revenues is being weakened by high transport costs, according to a new report dubbed "Poised to take off; Agribusiness and Manufacturing in Rwanda".
The report, which was sponsored by International Growth Centre, also highlights other challenges that deserve attention such as difficult access to raw materials for production.
According to Professor Mans Soderbom of University of Gothenburg, Sweden, despite the country's efforts to improve the business climate over the past decades, some challenges persist.
"There are still things to be done particularly on the transport side to bring down the cost of sourcing for raw materials," he said during the launch of a report in Kigali.
The revelations follow findings in another report dubbed "Doing Business in the East Africa Community 2012", which indicates that a local exporter pays US$3,275 to transport a container of cargo to the port. This compares to US$2,055 paid by a Kenyan, Ugandan at US$2,880, Burundian at US$2,965 and a Tanzanian at US$1,255.
Local importers pay US$4,990 to transport a container from the port compared to Burundi where it is US$4,855, Uganda, US$3,015, Kenya, US$2,190 and Tanzania, US$1,430.
The new report further reveals important opportunities such as emerging role of the Democratic Republic of Congo and Burundi as export destinations and investment flows to Rwanda from the East African region.
"This report provides policy makers as well as investors interested in our development of a clear picture of Rwanda's industrial sector," the Minister of Trade and Industry, Francois Kanimba, said
He adds; "It conveys a sense of the sector's considerable potential for further growth".
Local exports hit US$$165m in the first five months of this year.
Soderbom notes that good policies will have to continue to improve the business climate, lower transport costs and facilitate access to markets in the East Africa region and abroad.
"The policy framework since recovery has been fundamental in regenerating manufacturing in Rwanda," he added
"This is reflecting the increase in high tech capital for the production of these products."
He, however, notes that the report doesn't prescribe the policy recommendation at this stage.
Experts say that the country needs to increase non commodity exports, which are key towards driving economic growth.
"The capacity for non commodity exports is still limited,while exporting to DRC and Burundi is a stepping stone for Rwanda to export beyond these countries," he said.
Richard Newfarmer, the Country Director of the International Growth Centre, says the country has been performing well by African standards and this growth has had positive implications such as increased tax revenues.
"This is likely to lead to increasing exports because right now Rwanda does export much in terms of GPD but, in the future, exports have to be a growth source for the country," he said Newfarmer also noted that policies like putting in place strong macroeconomic environment, stable business environment, and social expenditure by pulling the poor in development process will help leapfrog the economy and shield it from global shocks.
"Moving to the next phase of growth is the challenge that remains and it won't be easy, but one of the secrets to achieving this growth are good policies."
He added that the country's growth has been facilitated by investment from both public and private sectors, which created important dynamism in the economy especially in sectors such as services, infrastructure and investment.