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The East African : May 26th 2014
10 DIVERSIFYING, NARROWING TRADE DEFICIT Kigali targets new sectors in revised export strategy Focus: P≥omoting new eme≥ging secto≥s, facilitating c≥oss-bo≥de≥ t≥ade and boosting local p≥oduction By BERNA NAMATA The East African R wanda plans to offer new incentives to attract investors in export-oriented projects in coming months under a new export strategy. It is also developing a framework to guide land allocation and infrastructure prioritisation for investment. The new export strategy, still un- der discussion, is part of a broader plan to diversify and narrow the country’s trade deficit, which has been climbing in recent years. Rwanda’s traditional export products including tea, coffee, pyrethrum as well as minerals continued to dominate the sector in 2013, representing 62.1 per cent of total exports against 59.4 per cent in 2012. This dependence on a few primary commodities remains one of the main challenges for a country seeking to reduce the high external trade deficit and build resilience to external shocks. For instance, while exports are projected to grow by seven per cent to $751 million from $ 703 million in 2013, the import bill is also expected rise by 16 per cent to $2147.4 million from the $1148.4 million in 2013. As a result, the country’s current account deficit is expected to deteriorate to $803.2 million in 2014 from $537.5 million in 2013. François Kanimba, the Minis- ter of Trade and Industry, told The EastAfrican that the revised export strategy will focus on promoting new emerging sectors, facilitating cross-border trade and boosting local production. “We came to realise that the sec- tors that had been identified as the main generators of foreign exchange were not necessarily those that are currently generating foreign exchange. There are also new emerging sectors,” Mr Kanimba said. In the revised export strategy service sub-sectors, including the information and communications technology (ICT) and financial sectors, are expected to benefit from new incentives as they are seen as enabling traditional services to overcome the country’s old constraints of physical and geographic proximity. The government is specifically targeting promoting software development, call centres, and outsourced business processes that can be traded like value-added and manufactured products. It is aiming to access new mar- kets within the region by stepping up investment in cross-border infrastructure including setting up markets on its different border posts. “A diversified range of products is being exported on a daily basis; focusing on these and seeing how to facilitate cross-border trade is going to be extremely important,” he said. This week, the United States Agency for International Development (USAid) launched a new threeyear programme — the USAid Trade Infrastructure Programme — which will work to improve the efficiency of regional trade in Rwanda. Under the $5.7 million pro- gramme, to be implemented by TradeMark East Africa (TMEA), the focus will be on reducing the time it takes for goods to cross and clear Rwandan borders. It will also work towards reduc- ing technical barriers to trade, and enhance Rwanda’s ability to export and import goods through increased regional integration. “Time really is money, and with the reduction in delays, trucking companies can complete more trips, traders can depend on moving goods more efficiently, exports can compete on global markets, and consumers will benefit from more and cheaper goods,” said Peter Malnak, USAid/Rwanda mission director. While the country has been im- plementing its National Export Strategy since 2012, most initiatives for export promotion that previously focused on boosting public in- PLANNED ROJECTS Cement being packed at Cimerwa factory in Rusizi District, Western Promoting software development, call centres, and outsourced business processes. Stepping up investment in crossborder infrastructure. Reducing technical barriers to trade, and enhancing Rwanda’s ability to export and import goods through increased regional vestments to increase exports have failed. In 2013, the export sector grew marginally, recording 19 per cent growth against the national target of 28 per cent. However, Mr Kanimba said the government plans to step up investment in infrastructure including feeder roads and energy to facilitate private investment in the manufacturing sector. Specifically, local exporters who are currently operating on a small scale are expected to benefit from incentives including access to finance and market information to improve their capacity. “When you look at the former export strategy, there is very little in terms of what has to be done to support a small business that is currently exporting goods worth $500 integration. Stepping up investment in infrastructure including feeder roads and energy. Tea expansion, introduction of a beef farm for export in Gako, mineral exploration, provision of land expansion for pyrethrum and horticulture. to bring them to a level where they can export goods worth $2 million - $3 million in the next few years,” Mr Kanimba said. According to the draft budget framework for 2014/2015, in the new financial year, the government is expected to increase spending on energy and roads to improve access and roads for industries. “When you look at the trend of exports in our market — the key areas are going to be manufacturing. We have a number of regional investment groups who are coming in,” he said. The government specifically plans to install 10MW of electricity for the country’s sole cement company, Cimerwa, a move that is expected to not only lower the company’s current cost of production but also increase its production capacity. Rwanda. Kigali plans to install 10MW of electricity for the factory — the country’s sole cement company, to lower the cost of production. Picture: File The EastAfrican NEWS MAY 24-30,2014 Tax b≥eaks: Da≥ losing ove≥ $20b By ERICK KABENDERA The EastAfrican TANZANIA IS losing over $20 billion in revenues through tax incentives to investors in the export processing zones and illicit flows, a new survey that calls for tough legislation to stem the loopholes shows. The latest Global Financial Integrity (GFI) report on trade mis-invoicing launched last week found that mis-invoicing of trade facilitated a whopping $60.8 billion in illicit financial flows out of Tanzania, Kenya, Uganda, Ghana and Mozambique between 2002 and 2011. Gross illicit flows due to trade mis-invoicing in Tanzania alone were $18.73 billion during the period while the government lost another $248 million per year in tax revenue from mining companies alone. Trade mis-invoicing happens either under export under-invoicing or import over-invoicing while through transfer pricing, firms hide their profits from taxation by employing complex county specific strategies — mainly manipulation of prices of cross-border transactions between related affiliates. Analysts in Dar es Salaam now want the Tanzania government to reconsider tax exemptions to EPZs and introduce new curbs to cheating corporations. Raymond Baker, GFI president, said 10-year tax holidays provided to investors under EPZs in Tanzania were being misused by companies to unlawfully move capital out of the country, undermining the roles such initiatives were expected to play in the economy in the first place. “Some of the measures to be taken include adopting a legislation making abusive trade missinvoicing wherever and however it is done, against the law,” said Mr Baker. Benno Ndulu, Governor of the Bank of Tanzania, said the government should enter into bilateral ties with Western countries through which it could push for a return of the stolen assets under illicit mis-invoicing. “Such surveys are ineffective unless something is done about the trade mis-invoicing problem. One of the ways is to use bilateral ties to push for the stolen assets to be returned to the country,” said Prof Ndulu.
May 19th 2014
June 2nd 2014