Economics
Name
Institution
In essence, Rwanda is outline as the small landlocked country with a population density of almost three hundred and fifty residents per square meter. For many years, Rwanda has been outline to be amongst the least developed. With this in mind, Rwanda priority has been to rebuild and restructure its economy. It is a well-documented fact; since the tragic genocide in 1994, Rwanda suffered from economic consequences. Nevertheless, the country government has worked hard to enhance a stable economy. Studies outline that, since 1994, Rwanda has instigated a broad economic restructuring agenda through providing the macroeconomic stability, establishing better financial institutions, repairing infrastructure and developing the capacity of human resource (National Institute of Statistics of Rwanda, 2008). The main purpose for building such reforms have been to eradicate poverty and enhance growth. Rwanda government efforts have been to achieve progress in reducing poverty from 60.3 % to 32.5. With no doubt; since 1994, there is a considerable scope for increase in exports thus, achieving the goal of poverty reduction. Overwhelmingly, trade has become the driving aspect for the country thus; increasing the country economic growth. With this regard, this paper seeks to analyze Rwanda economic growth over the past ten years.
IMPORTS AND EXPORTS OF RWANDA FOR THE PAST TEN YEARS AND THE MAJOR TRADING PARTNERS
In facts, for the past ten years, Rwanda has made a remarkable development from genocide to peace and economy development. Researchers outline that, the key elements of the macroeconomic stabilization have been achieved through most sectors of economy been recovered (Bernan Press, 2004). With no doubt; much of the growth rate for the past ten years has been much above the Rwanda historical growth rates. The rapid economic growth has been due to large aid inflows, agriculture yields and investments. Nevertheless, the annual average inflation in 2000-2003 decreased from 8 % to 4 % because of drought. In conjunction with this, Rwanda exports remained very low.
Imports
It is borne in mind; the main import commodities are computers, motor vehicles, petroleum oils, pharmaceutical products, cement, cereals, sugar and electrical machines among others. It is a well-documented fact; Rwanda’s imports are mainly from Africa, Europe, North America, Asia and Middle East.
Imports Data
All figures are in millions dollars
Exports
In essence, the Rwanda top five exports commodities are tea, coffee and minerals mainly tantalum, tin ores and niobium. ‘The commodities are mainly exported in South Africa, Kenya, China, Thailand and Malaysia.
Exports Data
Trading Partners of Rwanda for ten years in millions
Interpretation of the data
As outline in the data, Rwanda imports are mainly fertilizer products, Cereals, Pharmaceuticals and sugar. On the other hand, the main exports are tea and coffee, which presents the highest figure in the data. In the nominal term, Rwanda trade growth increased from 26.4% to approximately 31.2% from 2007 to 2008. Tea and coffee exports performed well because of the good rain that had occurred in 2008. In conjunction with this, there was a poor harvest caused by lack of rain. Subsequently, the mineral sector obtained high exports earnings that was due to the high demand of Tin and Coltan from the Chinese.
With this in mind, Imports products require the involvement of customs authorities of the trading partners. In essence, the Rwanda trade imports are much higher than exports. The Rwanda economy is based on small agricultural products, minerals and beverages among others. Studies outline that, the overall agriculture products exports is 45 % and 30 % of minerals (National Institute of Statistics of Rwanda, 2008). From the data interpretation, Rwanda continues to face challenges on imports being higher than exports thus, affecting economy health. With no doubt; lack of economic diversification of various productions beyond coffee, tea and minerals makes the country vulnerable to the market fluctuations.
This assumption is best explained in Absolute advantage theory. Under Absolute advantage theory; there should be a balance of trade that involves differences of value between total exports with the total imports of the nation for a given period of time. With this regard, the Absolute advantage theory outlines that; when imports exceed exports there is trade deficit (Subramanian, 2000). In conjunction with this, under the mercantilism; the favorable balance of trade is regarded as an absolute necessity. On the other hand, classical economics prefer the aspect of a country utilizing its economic resources fully instead of building the trade surplus.
Rwanda trade policy
Studies outline Rwanda as a country that has taken various reforms concerning its economy since 1994 (Subramanian, 2000). With this regard, Subramanian argue that, since 1994, there have been significant progresses in the trade liberalization through a decline of custom duty rates. Nevertheless, based on the 2007 MFN Tariff Trade Restrictiveness Index (TTRI, Rwanda has experienced trade barriers more than its comparators. Under this context, Rwanda TTIR is 16.2% above the Sub-Saharan Africa in addition, an average of 11.3% low income nation group.
In facts, Rwanda began liberalizing the agricultural sector in 1998, and since then, the tariff protection has changed to 12.9% compared to 17.4% of non-agricultural sector. In conjunction this, economics experts argue that, the average of MFN of Rwanda in tariff has decreased from 18.74 to 18.6% from 2006 to 2008 (Rwanda Craft Industry sector strategic plan, 2009). In essence, the maximum applied tariff is 30% excluding tobacco and alcohol, while trade policy is 70.8% measured between the bound and the applied tariffs. In facts, Rwanda reduced its tariff rates in 2009 after its government adopted the East African Community (EAC) in the 2009 fiscal year budget. It is a well-documented fact; the maximum tariff decrease by 25%.
Typically, Rwanda decreased its taxes on the imported foodstuff in 2008 because of food crisis that had become a great concern. Additionally, the country introduced the market based subsidy policy that aimed at promoting the fertilizer usage. With no doubt; this improved the country productivity, which as a result, contributed to the domestic output in 2008.
Trade Barriers
There are various trade barriers faced by Rwanda. This is proved by the aspect of exports being less than imports thus; affecting the overall economy. First, researchers outline that, Rwanda seem to some extent lack the economic diversification beyond tea, minerals and coffee. As a result, the country has become vulnerable to the market fluctuations (Rwanda Craft Industry sector strategic plan, 2009). With this regard, many assume there would be a significant growth in Rwanda if the country would look beyond their current exports. Second, there are barriers of high cost of electricity at about 24.7cents per Kilowatt hours outline as the most expensive globally. With no doubt; this hinders the country from effectively trading with other countries due to lack of enough resources to enhance effective production. This is a critical issue experienced by many companies in Rwanda in that, many ends up using high cost of electricity during production thus; affecting the overall cost of products. It is borne in mind; the high cost of power and limited availability of power continues to impede the growth of the manufacturing stability (Bernan Press, 2004).
Thirdly, Rwanda traders’ experiences transport barriers thus, hindering effective transportation of imports and exports. With no doubt; transportation cost is high, and as a result, burdens many that cannot afford to pay the cost. In conjunction with this, there are no developed railway systems for the port access to Kenya or Tanzania. As a result, this hinders many trading partners that would want to trade with Rwanda.
Fourthly, the country seems to lack freedom of press to extent; for a long time, there have not been a government operated television station in addition, most newspapers publishing weekly. As a result, this denies many traders to freely exchange ideas in addition, hinders them from knowing how traders from other countries handle trading issues and challenges. Fifthly, Political instability is a threat for Rwanda trading partners in the sense that, many people outline Rwanda as country that lack peace uncertainty as a result of the tragedy that occurred in 1994. With this regard, the 1994 tragedy that occurred in Rwanda has imposed fear to many thus; creating barrier to trade.
Sixthly, poverty has been an issue in Rwanda to the extent of being categorized among the poorest countries. In this regard, poverty being a critical issue in Rwanda thus creating barriers in investing in trade. It is borne in mind; an economy that has poverty cycle there are many low income earners thus, leading to low investments and savings. Low investment causes low levels of production. This has become a core barrier in the sense that; despite the country willing to trade with other countries doing better in trade find it challenging to partner in trade due to lack of enough resources. As a result, this hinders the country from getting quality resources.
Seventhly, there are barriers of cultural and social aspects brought by the two main ethnicities Hutus and Tutsi. In facts, the 1994 tragedy was due to the genocide exorcised by Hutu who dominated the government. With no doubt; there is a core barrier for economic progress caused by lack of unity of the two ethnic groups. This is a barrier to Rwanda in the sense that, there is no trust between the two tribes thus creating barrier for effective trading.
Eighthly, corruption has become a core issue in Rwanda to the extent; there is unequal distribution of income that goes only to the rich consumers. Under this context, this becomes a barrier in trade in the sense that, without equal distribution of income, the poor live below poverty with many lacking money to spend. Lack of progress in trade is often caused by lack of equal distribution.
IS RWANDA A MEMBER OF THE WTO AND/OR A MEMBER OF A PREFERENTIAL TRADING ARRANGEMENT WITH OTHER COUNTRIES?
Studies outline that, in accord with the WTO Agreement, a state can only belong to one custom union with only one set of external tariffs and duties (US Census Bureau, 2011). With no doubt; Rwanda is a member of WTO and in pursuant to its rules; Rwanda allows MFN treatment to its trading partners since 1996. In conjunction with this, the country is also a member of preferential trading with other countries particularly: under the European Union trade agreements. Subsequently,
Rwanda trade pattern and policies
According to Subramanian (2000), a trade policy is a significant component of Rwanda economic policy. In facts, the country trade policy is governed by the ministry of industry, commerce, Tourism, Promotion and Cooperatives. The Rwanda government involves private sectors in trade policy issues ensured through public-private partnership forum. The mechanism was put to enhance collaboration of public and private sector. In conjunction with this, there is a federation of Rwanda private sector that act as an umbrella organization of business chambers.
Typically, Rwanda is a trading country that has relatively low tariffs with few non tariff barriers. In this regard, the country encourages private sector to compete internationally and regionally. In addition, there are strategic objectives of increasing the common exports such as coffee, tea, tourism and minerals. Subsequently, there are policies of diversifying exports in business processing outsourcing, milk and minerals; coordinated by Rwanda development board. Under this context, the board plays a fundamental role of implementing trade policy with an aim to promote exports along with industrial development. In addition, there are patterns of increasing the quality and quantity of investments as a vital aspect of dealing with the supply- side constraints closely tied to industrial development policy. Other trade policies include facilitating trade standards that include negotiations of trade agreements in the market access through eradicating non-tariff barriers. In conclusion, there is trade capacity development, which aims at improving the business environment.
References
Bernan Press. (2004). Trade Policy Review, Rwanda. Kigali: World Trade Organization
National Institute of Statistics of Rwanda. (2008). Trade: <http://statistics.gov.rw/index.php?option=com_content&task=view&id=148&Itemid=19 5>
US Census Bureau. (2011). Trade in Goods with Rwanda:
<http://www.census.gov/foreign-trade/balance/c7690.html>
Rwanda Craft Industry sector strategic plan. (2009). <http://www.primature.gov.rw/index.php?option=com_docman&task=doc_download&gi d=884&Itemid=95>
Subramanian,A. (2000). Trade and trade policies in eastern and southern Africa. New York: nternational Monetary Fund
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