31 October 2013

Rwanda: Behind Rwanda's Excellence in Doing Business Report 2013

'Ukraine, Rwanda, the Russian Federation, the Philippines, Kosovo, Djibouti, Côte d'Ivoire, Burundi, the former Yugoslav Republic of Macedonia, and Guatemala are among the economies that improved the most in 2012/13 in areas tracked by Doing Business," is how this year's report sums up the ten best performing countries.

Every year, Rwanda is showered with glowing tributes for its consistent economic performance and is today lauded as one of the fastest growing economy.

Rwanda's so-called "meteorical" rise in not an accident of nature or a fluke, but is the result of not taking the foot off the peddle as it strives to achieve a middle income status in the next five years.

This year's report singles out Rwanda as the best improved economy in the last five years.

"Every region has a leading champion in the scopes of improvements since 2005 ... And this year, a small country in sub-Saharan Africa, Rwanda, overtook another small country-Georgia in Europe and Central Asia-as the economy advancing furthest towards the regulatory frontier since 2005."

During this period, Rwanda implemented 35 statutory reforms. In the mid-sized population ranking, Rwanda was 4th behind Portugal and Austria, respectively, and came top in small income category.

One of the key catalysts to the stellar performance were improvements in the Construction Permits category where several regulatory reforms were unveiled. The issue of permits has been a major headache, but that could soon be history.

The report said new regulations take time to be implemented because of red tape. It gave an example where it took Russia more than ten years for the 1997 urban planning code to be implemented in Moscow.

"Builders in Moscow are only now experiencing the positive effects of its implementation," the report reads in part.

Other key drivers:

Property registration was also key in improving ranking of the 10 best performers where seven of them took steps to prioritise the sector.

Rwanda Natural Resources Authority (RNRA) set in motion a countrywide land registration drive that has seen more than 90 per cent of property registered. Burundi borrowed a leaf from Rwanda when, in March 2013, it set up a One-Stop Centre for property transfers.

In previous Doing Business reports, access to credit was one of the major bottlenecks that were hampering small and medium sized enterprises because of lack of collateral or secure repayment systems, but now the property reforms have solved the issue.

Tax evasion, corruption and unnecessary barriers have always been the bane of many developing economies, so streamlining methods of paying taxes was also a major factor among the most improved countries.

Rwanda, Macedonia, Guatemala, Philippines and Ukraine led the pack by simplifying the process of paying taxes, where they introduced or improved online tax payment systems and simplified tax forms.

Kigali has made the removal of trade barriers a priority and has been spearheading their total elimination in the region. Not only is it the driving force in the One-Border to speed up the clearing of goods, but in January 2013, Rwanda went a step further when it introduced an electronic single window system at the Rusumo border crossing on the border with Tanzania.

Rusumo is the gateway to the Indian Ocean port of Dar es Salaam.

There is no need for traders to shuttle between the border and Kigali because the system is connected to major institutions such as Rwanda Development Board and Rwanda Bureau of Standards so traders are able to receive clearances and approvals electronically.

But these reforms would not hold any water if there were no institutional mechanisms to make life easier for investors, however small. Access to utilities such as electricity and protecting investments was another area that Rwanda scored highly.

Only two of the top 10 performers strengthened the protection of minority investors: Rwanda and FYR Macedonia.

Although in the Construction Category Rwanda jumped 37 places and is one of the best improved sectors, it still needs a major makeover. The same goes for the Trading Across Borders category where the country scored dismally.

These are two areas that RDB should focus on, and if we are to go by its past performances, it has the capacity to succeed.

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