National Industrial Policies in the Regional Industrialisation Framework: How to Create the Linkages? The Case of Rwanda
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1 Rwanda Governance Board Ikigo cy Igihugu Gishinzwe Imiyoborere Office Rwandais de la Gouvernance National Industrial Policies in the Regional Industrialisation Framework: How to Create the Linkages? The Case of Rwanda Dr. Félicien USENGUMUKIZA D/CEO, Research and Monitoring Rwanda Governance Board (RGB) Nairobi, June 24 th 2013
2 Industrial Sector in Rwanda The industrial sector is currently small, contributing on average around 15 per cent of GDP annually; In order to reach the Rwanda Vision 2020, it requires the share of industry to increase to 26% of GDP Industry currently employs just 4 per cent of the workforce. This also requires the industrial transformation in order to achieve the employment targets ofvision non-farm employment will reach 1.4 million; Rwanda Industrial Sector versus Regional integration: Challenges and Opportunities : EAC and COMESA with population of 450 million and combined GDP of close to $500 billion. Rwandan firms have an opportunity to serve this market, but will also face greater competition from businesses in countries with larger and more sophisticated industrial sectors, such as Egypt and Kenya. Effective policy is required to ensure that Rwandan enterprise can compete regionally and beyond.
3 Structure of Rwanda s GDP ( ) Agriculture Industry Services Adjustments 100% 90% % 70% 60% % 40% % 20% 10% %
4 Composition of Industrial Sector by Gross Domestic Product, 2010 Mining and quarrying 3% Construction 52% Manufacturing 43% Source: MINICOM, April 2011 Electricity and Water 2%
5 Ministry of Trade and Industry Focus areas Industrial growth for Domestic Production and Export Diversification Enabling Business Environment SME Growth for Job Creation Streamlining the commodity value chains while promoting fair competition and protecting consumers
6 POLICY DESIGN: INCREASE DOMESTIC PRODUCTION FOR LOCAL CONSUMPTION AND EXPORT COMPETITIVENESS Time based model for providing sector-specific support SHORT TERM MEDIUM TERM LONG TERM Improve the feasibility of desirable industries & promote feasible sectors Promote new desirable sectors as they become feasible Reduce support to successful sectors & provide support to new feasible sectors
7 Cluster Progression Ladder, Medium to High Tech Manufactures Construction materials, Bio-plastics and other high tech industries Low tech Manufactures Pharmaceuticals, Chemical products (including fertilizers) Processing & value Addition Textiles, Mineral processing, Construction materials, Dairy, Agro-processing, Diversified Tourism Commodities & services Tea, Coffee, Mineral and Tourism DIVERSIFICATION AND VALUE ADDITION 2010
8 Priority areas of intervention in Rwanda s Industry sector 1. Infrastructure 2. Human Resources 3. Improved Access to Finance and Investment 4. Trade Facilitation 5. Technology, Research and Innovation 6. Raw Materials and Industrial Inputs 7. Regulatory Environment 8. Environmental Sustainability
9 National Industrial Policies Regional Industrialisation Framework
10 EAST AFRICAN COMMUNITY INDUSTRIALISATION POLICY The mission of the EAC Industrialization Policy ( ) is to create a market driven, regionally and internationally competitive and balanced industrial sector based on the comparative and competitive advantages of the EAC Region.
11 Intra-industry trade, a challenge for African Region According to standard industrial classifications, about 25% of world trade is intra-industry trade. 1. Gains from inter-industry trade reflect comparative advantage. 2. Gains from intra-industry trade reflect economies of scale (lower costs) and wider consumer choices. 3. The monopolistic competition model does not predict in which country firms locate, but a comparative advantage in producing the differentiated good will likely cause a country to export more of that good than it imports. 4. The relative importance of intra-industry trade depend on how similar countries are. Countries with similar relative amounts of factors of production are predicted to have intra-industry trade. Countries with different relative amounts of factors of production are predicted to have inter-industry trade.
12 Comparative of Industrialization between Africa and East Asia in Nominal DGP per capita (US$) Share in world output (%) Share in global exports (%) Africa East Asia Africa East Asia Africa East Asia Africa East Asia Africa East Asia , Source: UNECA, Economic Report on Africa, 2013
13 Resource-based industrialization in East African Region To consider global, regional and national dimensions of linkage; Given the diversity of resource endowments, social and economic backgrounds, East African Region can develop both comparative and competitive advantage in industrial sector; By developing backward linkage supply firms to the commodity sectors and resource-processing industries, East African countries can help to diversify their technological capabilities and skills base, deepening their industrial structure; Moreover, the natural resource sector s need for infrastructure (to extract and transport the commodities) enhances the potential for linkages To develop both intra and inter-industry trade and trade diversification.
14 and this requires the strong linkage For resource-based industrialization, the linkage is required both regionally and sectorially. Spatial Linkages: Infrastructure (transport, power, ICT) and LED Backward Linkages Inputs: Capital goods Consumables Services Mining: Concentration, smelting, refining => metal/alloy Knowledge Linkages HRD: skills formation R&D: tech development Geo-knowledge (survey) Forward Linkages: Intermediate products => Manufacturing; Logistics ; other sectors (agriculture, forestry, fisheries, etc.) Fiscal linkages: Resource rent capture & deployment: long-term human & physical infrastructure development Source: Africa Task Force Meeting: Preparing for TICAD V Agenda New York, November, 2012
15 Thank you for your Attention!
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