Monday, December 13, 2010

Is the free market saving Rwanda?

National Review:

In the World Bank’s Doing Business index, Rwanda was ranked the No. 1 reformer in the world last year and No. 2 this year.

[...]With annual growth averaging 8 percent since 2004, Rwanda is becoming increasingly self-reliant. “In 1995,” says Patrick Kabagema of Rock Global Consulting, “foreign aid was 100 percent of the government budget. Today, it’s 40 percent. Give another ten years to Rwanda, and there will be no foreign aid.”

In the World Bank’s 2011 report, Rwanda is tied with America as the earth’s ninth-easiest country in which to start a business. As recently as 2008, Rwanda was ranked No. 71. Overall, Rwanda has moved from the 150th-best place to do business in 2008 to 58th for 2011. Only Georgia (the nation) has scaled that ladder more quickly.

Through the Rwanda Development Board (RDB), explains Robert Bayigamba, chairman of the Private Sector Federation, “we are able to have the business-registration process finished in 24 hours. It’s now one single window where all the authorizations are given.”

[...]Before the RDB’s “one-stop center” opened in 2008, Bayigamba says, this process took “maybe more than two or three months.

[...]Rwanda has ditched its capital-gains tax, dropped its 6 percent “arrival tax” on investment capital, dumped export taxes, decreased dividend-withholding taxes from 15 percent to 5 percent, and accelerated depreciation on purchased assets. Ranging from 20 to 28 percent, Rwanda’s corporate taxes easily trounce America’s 35-percent business levy.

[...]Meanwhile, Rwanda identified 72 state-owned companies for privatization and has sold off all but ten, including hotels, banks, and the national telephone company.

Once liberated from the government’s all-too-visible hand, newly privatized tea companies began to grow “orthodox” or long-leaf tea, target niche markets, and sell green tea as well as smooth and invigorating black varieties. Such innovations already have pushed industry revenues from $22 million in 2003 to $56 million in 2009. Amazingly, Rwanda’s largest tea company, Sorwathe in Kinihira, now exports green tea to China. This is like shipping petroleum to Saudi Arabia.

[...]Alles recalls when the government attempted to encroach excessively upon his enterprise. “The Tea Authority felt that they should have their own representative at every factory, either to police or, as they said, control everything that’s going on in the factories,” Alles remembers. “We asked them who was going to pay for his salary, his lodging, his board. It appeared that eventually we would be paying for him. We didn’t really think it was necessary. So we complained to the president at one of these meetings. And he promptly called the Tea Authority up and asked them what they were trying to do. The president is very bright. He understood very quickly the problem. He told them, ‘That’s not the way you do things. You don’t put an inspector in every taxi, just to control things . . . or someone at the reception desk in every hotel.’ And so, the Tea Authority promptly withdrew that. Sanity prevailed.”

[...]“If we could have an easier way of borrowing money, let’s say, then I think we would step up to the plate.”

Rwandans reel under 18- to 24-percent interest rates. Credit cards are rarely accepted, and Rwandan francs elicit cold stares among currency-exchange clerks at the airports in Nairobi and Amsterdam. Monetary reform would be a wise addition to Rwanda’s national to-do list.
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  1. Love the progress this country is making!
    Its all about visionary leadership.