Review of investment code to spur FDI

Government expects Foreign Direct Investments (FDIs) to help bridge the gap between registered and operating projects when the new investment code becomes operational.With support from United Nations Conference on Trade and Investment (UNCTAD), government is revising the investment code, aimed at adjusting some investment incentives. The process will run through the remaining months of this calendar year.The current investment code provides a raft of tax incentives and exemptions to inventors.The policy is, however, under intense scrutiny from experts, who say that the incentives, which mainly target foreign investors, are not effective in attracting private sector investments which are vital in furthering the country’s long term strategy of sustainable economic growth, transformation, and job creation to eradicate poverty.According to Jean Louis Uwitonze, the director of Planning, Monitoring and Evaluation at the Ministry Trade and Industry, the process involves reviewing fiscal incentives and advantages that are given to investors. “The ultimate objective is to increase investments in the country, close the gap between the projects registered and those on ground,” he said.Treasury targets to raise at least Rwf5b from the revision of investment code in this fiscal year.Despite the country’s investor-friendly environment, low levels of corruption and political will to facilitate doing business, actual investments are way below the number of projects registered at Rwanda Development Board (RDB).Private investment flows reached Rwf477 billion in the first half of this year up from Rwf220 billion in the same period last year.In a similar move to increase FDI, a special team will be established to study the gap between registered projects and operating projects and advise the government accordingly.According to Uwitonze, the incentives seem not to be adequate, but the technical team will also identify the priorities and some incentives that are not utilised.The new investment code will also revise the immigration regulations and working permits.Traditionally approved investors are entitled to an exemption from import duties and sales taxes on imports of plant, machinery and equipment. Deduction from taxable income of 50 per cent of training, research and product development costs.Other incentives are right to fully offset the cost of providing infrastructure to the site of the business operations and free repatriation of capital and profits, and investment allowances of 30 per cent of the value of invested capital during the first year of operations.The code is reportedly also tailored for alignment with the East African Community with a precision to accommodate other codes.