Why Rwanda promoting business competitiveness

Ministry of Commerce and the Rwanda Investment and Export Promotion Agency (RIEPA) are strategising to have a more liberal and competitive business environment that can spur economic growth. Policies have been drafted. The latest on board to boost competitiveness is the Rwanda Competitiveness and Export Fund (RWACEF). It is a new scheme launched by RIEPA to help private companies that operate in Rwanda, improve their competitiveness in export markets. The scheme will also help Rwandan private companies to hire consultants and obtain other services that will help them diversify, improve, and expand their product lines. A Professor of Strategy and Director of the Gordon Institute of Business Science in South Africa, Nick Bennidel, says, “Competitiveness in an economy is the quality of business, the regulative and legislative environment in comparison to other economies.” He says that it is also the shape in which the global economy is built around the country, and how an economy respond to it. National competitiveness is an aspect of the state and how it may create or destroy value for the country, compared to other countries in the region. Bennidel, goes further to say that smart states create value, and not so smart states destroy value. According to Vincent Karega, State Minister for Industry and Investment Promotion, competitiveness means the ability to compete with firms on a global scale. “It must be recognised that it is firms that compete not nations. Firms have their own strategies for lowering cost, improving product quality and finding marketing networks,” Karega said. Government’s support for the competitiveness principle is not against local industries but means the ability of a firm to step up competition to international level of best practice. It is however, due to the fundamental failure of markets in critical areas. Why? According to United Nations Industrial Development Organisation (UNIDO), the reductions and elimination of tariffs and quotas that are a decisive element in the trade liberalisation process, the growth of developing countries’ exports to developed countries’ markets and the associated developmental impact has been limited. The marginalisation of developing countries from global trade is a major concern today but the problem arises from the lack of a competitive supply capability of industrial goods to be traded. Karega said the essence of a competitiveness strategy is to promote innovation through in-firm learning, skill development and technological effort; improve the supply of information, skills and technology from surrounding markets and institutions; and coordinate collective learning processes that involve different firms in the same industry, or across related industries popularly known as ‘clusters’, geographical or activity-wise. “This assists developing countries’ enterprises in accessing global subcontracting and supply chains and networks. Firms develop their capabilities within different ‘markets’, using the term broadly, for example those relating to physical infrastructure, human capital, finance, technology and cluster effects. The need for a competitiveness policy arises when any of these markets fails to function efficiently. The secret of competitiveness lies in the effectiveness with which countries promote the development of technological and managerial capabilities. Government support for firms has in some contexts proved to be an important component of the process of attaining competitiveness. Note that developing technological capabilities does not mean innovation in the sense of ‘reinventing the wheel’ to create technologies that are available elsewhere, often at lower cost. It does mean learning to use existing technologies efficiently, an enormously challenging task. It can involve a lot of investment, effort, time, risk and constant interaction with other actors with whom information and skills are shared. In developing countries, firms often do not know how to go about making new imported technologies work at world best practice levels. They do not understand what new skills, technical knowledge and organisational techniques are involved and where to access them. The experience of the ‘Tigers’ of East Asia indicates that coherent and carefully crafted policies can accelerate shifts in competitiveness and promote entry into very complex and high technology activities. However, while it is conceptually true that whenever markets fail to function effectively, there is in principle a case for government intervention. The strategy of competitiveness undermines the argument by Uganda and Tanzania, to protect young economies in the recently ended East African Community (EAC) Common Market negotiations in Nairobi. Uganda, Tanzania, Rwanda and Burundi are classified as least developing countries unlike Kenya, which has more industries. The decision is to ensure that all member states get equitable treatment in trade matters and encourage the development of domestic industrial capacities expected to form a greater economic force against none members in future. However, economists argue that highly protected domestic markets not only reduce incentive to export but also penalise the economy by allowing inefficient domestic producers to extract policy induced rents from domestic consumers. It is upon this background that East African companies have also been urged to become more innovative in order to secure international markets for their products and services and in the quest for competitiveness. David Nalo, the Permanent Secretary of the EAC also called upon manufacturers and service providers in the region to strive to achieve the super-brand status which strengthens global brands. This portrays how the EAC encourages innovation in branding as this is critical in the ever competitive markets where product differentiation is a key determinant in positioning super brands. The economies of East Asia, both the first tier newly industrialised economies (Korea, Taipei, China, Hong Kong and Singapore) and a second tier group (Thailand, Malaysia, the Philippines and, more recently, PRC) offer a dramatic illustration of what rapid growth of manufactured exports can achieve. These economies are located at various positions on the ladder of comparative advantage, but to varying degrees they have each succeeded in diversifying out of traditional primary exports into more dynamic manufactured goods. Contact: eddiemukaaya@yahoo.com

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Why Rwanda promoting business competitiveness