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24/05/2018 06:06 SAST | Updated 24/05/2018 06:06 SAST

Developing Countries Could Learn A Thing Or Two From Rwanda

The country's capital city, Kigali, is an anomaly among developing world cities.

mtcurado/ Getty Images

Kigali, the capital of Rwanda, is an anomaly among developing world cities. It has kilometres of boulevards girded with lawns, clean streets with a plastic ban enforced, it's safe for women to walk there at night and there's a near absence of corruption. Also, the Rwandan economy has grown.

From 2006 to 2016, it was among the top eight fastest -growing economies globally. On a per-capita basis, Rwanda ranked second in the top 10 fastest-growing African economies during this period. The country improved its ranking in the World Bank's "Ease of Doing Business" ladder by 77 places from 2006 to 2016. By 2018, its ranking had improved a further 21 places.

This improvement of 98 places is the biggest globally in the past 12 years. While the methodology of such rankings may have shortcomings, Rwanda saw its efforts translate into positive outcomes. According to OECD data, foreign direct investment (FDI) in Rwanda grew at a positive rate in as many as eight of the 10 years from 2006 to 2016.

Employment is still a concern, but jobs created through the investments partially helped reduce the poverty rate to 40 percent from 60 percent in 2000 .

Among the large emerging markets, only India notched positive growth in seven out of these 10 years, while Russia, Chile and South Africa followed with six. Its ratio of FDI flows to gross domestic product (GDP) in 2016 compared with 2006 showed an improvement of 400 basis points (bps), placing it among the top 10 players in Africa.

As per the IMF, its average export growth from 2006 to 2016 was among the top 30 globally, above most leading oil exporters (the drop in crude prices occurred later in this period). Its average import growth was among the top 10 globally, coinciding with an uptick in its gross investment rate. So one assumes much of these imports were for productive use such as machinery and equipment, which should create long-term value.

So how did a small landlocked country clock such rapid improvement, more so given its 1990s genocide history, its distance from sea-trading routes and its relatively small population as a domestic consumer base?

Its growth strategy

While construction, agriculture and mining were the traditional drivers, Rwanda diversified its economy in four ways. First, by providing value addition to exported commodities instead of exporting just raw resources. Such factories coincided with its high gross investment rate. Its exports now go across Asia and the Middle East, not just the United States or Europe.

Employment is still a concern, but jobs created through the investments partially helped reduce the poverty rate to 45 percent in 2010 from 57 percent in 2005.

Second, it is building its secondary cities outside the metros to fuel further growth; an area where many developing countries lag.

Third, it is boosting the services sector with tourism and technology.

Getty Images
A view over the rooftops of Kigali City, the capital of Rwanda and center of one of the most horrific atrocities of our times, the Rwanda genocide between the Hutus and Tutsis. The city and the people are still in the process of healing from this time.

To promote itself as a destination for MICE (meetings, incentives, conferences, events) tourism, Rwanda smoothed the experience for tourists, from the airport to visas, transport, safety, connectivity and so on.

The proof of the pudding was when it hosted the prestigious World Economic Forum on Africa in 2016. In technology, while it covered staples such an ICT park, innovations fund and ICT clusters, it also deepened the use of ICT extensively in public service delivery. This is an area in which many Asian countries continue to struggle.

Last, it built the knowledge economy through capacity building. Rwanda strengthened its higher end research capabilities, so it could support policymakers while building the capacity to train the youth. The collaboration of the University of Rwanda and Sweden's SIDA is an example of how it is building quality research capacity across different areas. Many developing countries still rank low on quality parameters in their research, despite churning out ample quantity.

Its governance strategy

Rwanda implemented performance contracts for civil servants, to measure their efficiency and make them accountable for public spending. Most developing countries have yet to implement such efficiency measures.

Its leaders visited high-growth economies such as Singapore, Thailand and China to understand how they made processes easier for businesses (EODB), which resulted in high foreign investment in their early years. They implemented similar steps in Rwanda, resulting in it improving by those 98 places in just over a decade.

At the Rwanda Development Board, investors get most registrations/clearances literally from the same place. Registering a new business takes just hours, while it still takes days in most nations; not to mention the inconvenience of having to go to several different offices.

The efficiency of public services means one gets it when it is due, instead of dealing with delays. It improved tax collections by reducing leakages, maintaining fiscal stability with domestic resources.

The leadership has been clear in its direction. It integrated with its neighbours to ensure movement of capital, people and goods. Access to this East African market helped it supplement its small domestic consumer base with export growth. Its government has welcomed investors and businesses of all nationalities, instead of taking any sides in an increasingly polarised world.

The idea is not to justify any authoritarianism, but there is a difference between constructive and non-constructive firmness.

Its social strategy

To get social consensus on development policies, it used Umganda and Ubudehe. Under these, people participated in community work on a day at the end of each month and addressed issues related to development. This promoted collective action and mutual support to solve problems.

A national dialogue council met yearly, wherein citizens came together to debate national issues. This community participation helped foster inclusive development. It encouraged women's participation to improve output from the employable workforce.

Rwanda's Parliament now has among the highest proportion of women globally.

So that the populace could move ahead after the genocide, it used gacaca courts — a community-based justice system. The government put in place systems to govern this. These tried more than a million perpetrators, achieving faster reconciliation at lower costs than the classic courts.

Using tribe names was banned to prevent the social divisions that caused the genocide in the first place. It used Kinyarwanda, so that language barriers did not cause social exclusion. It stepped up security and is one of the safest places in Africa today. All these helped improve worker motivation and productivity.

SIMON MAINA via Getty Images
Rwandan President Paul Kagame and Chairperson of the African Union gives his remarks during the closing ceremony of the 30th Ordinary Session of the Assembly of Heads of State and Government of the African Union, in Addis Ababa, January 29, 2018. (Photo credit should read SIMON MAINA/AFP/Getty Images)

Critics argue that Rwanda is a small nation, but larger peers can try these tactics at provincial levels if not at a federal level. Critics also allege authoritarianism, though this is unproven. The idea is not to justify any authoritarianism, but there is a difference between constructive and non-constructive firmness.

Many nations counted high achievers today spent their initial years under constructive firmness, without which they might not have achieved such rapid growth. Nevertheless, some lessons from Rwanda may be useful for many large developing nations such as India, which is now upping the ante on its pace of development.

Some input from Rwanda might just help.

Sourajit Aiyer is a business writer and researcher at South Asia Fast Track. He worked previously with Motilal Oswal Financial Services in Mumbai, UBS Investment Bank in London, Evalueserve Research in Gurgaon and Grameen Bank in Dhaka. He has written articles for 47 publications in 17 countries on 100+ topics spanning business, strategy, policy and politics.