12 April 2019

Rwanda: Persistent Challenges of Development


This year marks 25 years of Rwanda Patriotic Front rule since the 1994 genocide against the Tutsi.

Over that time, President Paul Kagame and his government have led the country through a remarkable period of economic recovery, alongside impressive increases in social standards.

For a densely populated country, at a geographical disadvantage from being landlocked and located far from coasts, to achieve such successes has been a remarkable feat.

Yet despite progress in Rwanda, the country continues to face external and internal pressures that may threaten the miracle of the its recovery.

Rwanda's economic success has been driven by the country's services sectors and public investments, funded by foreign aid.

There has been some degree of export diversification in the country away from coffee. However, the export basket has largely diversified to other primary commodities (particularly, minerals).

The rapid growth of tourism receipts has also been vital for managing the country's large trade deficit.

Driven by the desire to make Kigali into a hub of various kinds--from tourism to finance--there has been a construction boom, which has contributed to the expansion of business tourism.

The transformation of the city of Kigali is evident although critics argue that this visible growth has not been redistributed equally to the majority, rural segments of the population.

Within Vision 2020, the manufacturing sector has also been neglected, contributing to Rwanda's "developmental state" strategy being quite different from successful East Asian latecomers like Korea and Taiwan.

In 2014/5, Rwanda suffered a severe foreign exchange crunch because of fluctuations in global commodity prices, prompting the government to refocus its attention on reviving growth in its manufacturing sector.

A Domestic Market Recapturing Strategy was published and the government embarked on attempts to bring key demonstration effect investors like C&H Garments, Positivo and Volkswagen to the country, hoping it would contribute to an influx of manufacturing sector investments.

Despite some success in driving Rwanda's services-based strategy and making some progress in encouraging manufacturing (particularly the agro-processing sector, the sustainability of the growth of these sectors remains vulnerable.

Though business tourism--through heavy investments in the Kigali Convention Centre and RwandAir--has increased, there has been limited attention to supporting domestic linkages that accompany increased demand for local goods.


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