Upload
ronald-s
View
212
Download
0
Embed Size (px)
Citation preview
227FEATURE ARTICLE
Published online in Wiley Online Library (wileyonlinelibrary.com)
© 2014 Wiley Periodicals, Inc. • DOI: 10.1002/tie.21618
Correspondence to: Ronald S. Thomas, International Business and Strategy Group, 313 Hayden Hall, D’Amore-McKim School of Business,
Northeastern University, Boston, MA 02115, +1 617-373-5009 (phone), +1 617-373-8628 (fax), [email protected].
development plan enabling it to reconstruct much of its
economic and social infrastructure. The plan, termed
“Vision 2020,” projects Rwanda as the economic fulcrum
of East and Central Africa. The country’s leadership has
selected the model of Singapore as the basis for Vision
2020’s aggressive development strategy.
Our analysis of Rwanda’s new policy initiatives is struc-
tured in six sections. First, the Global Competitiveness
Index (GCI) is introduced as the framework for an analysis
Introduction
In 1994, Rwanda, a landlocked country slightly smaller
than the state of Maryland, suffered a catastrophic
genocidal civil war in which an estimated 800,000
people—one-tenth of the nation’s population—mostly of
the Tutsi tribe, were massacred by their Hutu neighbors.
In recent years, Rwanda has achieved a measure of politi-
cal stability and has embarked on an ambitious economic
Despite its recent tragic history of genocide and continuing threats to political stability, Rwanda has
made signifi cant strides in improving its competitive position compared to its African neighbors and to
other countries at an equivalent economic level. The Rwandan business and political leadership have
explicitly taken Singapore as a model for rapid economic growth, with the aim of positioning Rwanda
as a regional hub for transportation and advanced services. This article, based in part on fi eldwork
conducted in Rwanda by the lead author,1 analyzes Rwanda’s development strategy using the World
Economic Forum’s Global Competitiveness framework and evaluates its potential for success in
emulating Singapore’s development pathway. © 2014 Wiley Periodicals, Inc.
By
Lena Ulrich
Ronald S. Thomas
Building National
Competitive Advantage:
Rwanda’s Lessons
from Singapore
228 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
macroeconomic and microeconomic indicators, grouped
into 12 “pillars” of competitiveness. Despite a variety of
criticisms (Berger & Bristow, 2009; Cammack, 2006; Cho
& Moon, 2007; Lal, 2001), the GCI is widely used in the
public and private sector to guide investment and policy
decisions (Schwab, 2010). The GCI enables a comparison
of Rwanda’s strategy to that of Singapore across a wide
range of factors that build national competitiveness.
In the GCI framework, national competitiveness is
defined as “the set of institutions, policies and factors that
determine the level of productivity of a country” (Sala-i-
Martin, Blanke, Drzeniek Hanouz, Geiger, & Mia, 2010).
Higher productivity of a nation’s human, financial, and
natural capital results in higher incomes and higher rates
of return on physical, human, and technological invest-
ments and, consequently, higher rates of growth in the
medium to long term. Thus, the framework can help
explain a nation’s growth potential, using gross domestic
product (GDP) per capita as the dependent variable for
comparing nations’ competitiveness.
The GCI’s 12 pillars of competitiveness, each com-
posed of a number of distinct indicators, are grouped
into three clusters: the Basic Requirements, the Efficiency
Enhancers, and the Innovation and Sophistication Fac-
tors (see Figure 1). The majority of indicators are based
on survey data, while others are based on statistical infor-
mation. For a complete list and technical discussion of all
118 indicators, see Schwab (2010).
of Rwanda’s national competitiveness strategy. The second
section briefly examines the key factors underlying Singa-
pore’s rapid and sustained economic growth from the 1960s
through the early 2000s, and outlines key elements of the
“Singapore model” Rwanda is attempting to implement.
The third section, the country’s development challenge,
discusses Rwanda’s difficult economic and historical starting
point. The fourth section analyzes Rwanda’s competitive-
ness strategy in implementing Vision 2020, which explicitly
aims to imitate Singapore’s route to economic growth. Then
the fifth section analyzes the “pillars” of the GCI framework
as they apply to Rwanda. Finally, the sixth section identifies
implications for policymakers in specific areas to improve
Rwanda’s national competitiveness in each pillar. The
conclusion evaluates Rwanda’s development strategy based
on the Singapore model, and identifies further research
opportunities for studying other countries facing similar
challenges.
The Global Competit iveness Index Framework
The World Economic Forum’s Global Competitiveness
Index (GCI) provides a framework for analyzing Rwanda’s
national competitiveness strategy. Originally based on the
“national diamond” framework introduced by Porter
(1990), the GCI has evolved into a comprehensive
framework that provides a weighted average of over 100
I. Basic RequirementsInstitutions
Infrastructure
Macroeconomic environment
Health and primary education
II. Efficiency EnhancersHigher education and training
Goods market efficiency
Labor market efficiency
Financial market development
Technological readiness
Market size
III. Innovation and SophisticationFactors
Business sophistication
Innovation
Key for Factor-Driven Economies
Compete on factor endowments
Key for Efficiency-Driven Economies
Compete on process efficiency andquality
Key for Innovation-Driven Economies
Compete on unique products and services
FIGURE 1 The 12 Pillars of Competitiveness of the Global Competitiveness Index
Source: Based on Schwab (2010).
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 229
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
per capita of less than $2,000, the Basic Requirements
pillars account for 60% of a country’s overall Global
Competitiveness Index ranking, while Efficiency Enhanc-
ers account for 35% and Innovation Factors only 5%.
For efficiency-driven economies, the weighting is Basic
Requirements 40%, Efficiency Enhancers 50%, and Inno-
vation Factors 10%. For innovation-driven economies,
Basic Requirements comprise 20%, Efficiency Enhancers
50%, and Innovation Factors 30%.
The Singapore Model
Rwanda’s leadership has explicitly taken the experience
of Singapore as the basis for its aggressive development
strategy. On his first official visit to Singapore in 2008,
President Paul Kagame told the audience at the Lee Kuan
Yew School of Public Policy, “In the case of Rwanda, we
look at countries like Singapore as inspirational develop-
ment models due to the rapid pace at which you success-
fully transformed your country” (New Times Rwanda,
2008). Singapore, originally a small British trading post in
a turbulent region, is one of the world’s wealthiest nations,
having grown from a GDP per capita at current market
prices of $428 in 1960 to $45,954 in 2010 ( Singapore
Department of Statistics, 2014). Today, Singapore has one
of the highest per-capita GDPs in the world, ranked fifth
on a purchasing power parity basis (Central Intelligence
Agency, 2010a), and the country is positioning itself as
the region’s financial and high-tech hub. The World
Bank has ranked the ease of doing business in Singapore
first out of 183 economies (World Bank, 2010). Business-
friendly government policies in combination with its
strategic location have helped the country to become a
major destination of foreign investment and an engine
for economic development in the region.
The GCI is not just a static snapshot of a nation’s
development level; it proposes a dynamic of three stages
of economic growth. In each stage, certain pillars (and
their underlying indicators) are assumed to be particu-
larly important in order to provide the platform for fur-
ther growth in wages, national income, and productivity.
In the first stage, an economy is assumed to be
primarily factor driven, and national competitiveness is
primarily based on exporting basic commodities and
providing mainly unskilled, low-cost labor to domestic
firms. Companies compete primarily on price. Essential
for competing in a factor-driven environment are basic requirements such as well-developed institutions (Pillar 1),
a functioning infrastructure (Pillar 2), a stable macroeco-
nomic environment (Pillar 3), and the availability of a
healthy a workforce with at least basic education (Pillar
4). Factor-driven economies are particularly exposed to
swings in global commodity prices and exchange rate
shifts, unless, like China, they can attract foreign invest-
ment by virtue of a large or attractive internal market.
As wages and incomes rise, new competitive impera-
tives emerge. With a higher level of productivity and thus
economic development, a country enters the second, or
investment-driven, stage with a focus on manufacturing and
the export of outsourced services. Companies primarily
compete by enhancing production efficiencies. Higher
wages, which make the country increasingly uncompeti-
tive in lower-wage labor-intensive industries, are offset by
greater efficiencies in goods, labor, and financial markets
as more advanced technologies are incorporated and
institutional quality improves. These efficiency-driven
economies are less vulnerable to fluctuations in com-
modity prices than are factor-driven economies. The
critical efficiency enhancers for this stage are an increased
importance of higher education and training (Pillar 5),
increased goods and labor market efficiency (Pillars 6 and
7), developed financial markets (Pillar 8), the adoption of
and ability to benefit from existing technology (Pillar 9),
and a sizeable domestic or regional market (Pillar 10).
Eventually, the standard of living of the workforce
rises to the point that wages can be sustained only
if a nation’s firms can compete with innovative and
differentiated products. At this third, or innovation-driven,
stage, competitiveness is predominantly driven by innova-tion and sophistication factors such as complex, highly devel-
oped production processes, company business strategies,
and industrial clusters (Pillar 11) and indigenous innova-
tion (Pillar 12) (Sala-i-Martin et al., 2010).
The GCI’s weighting of the indicators that comprise
each of the 12 pillars shifts as a country’s GDP per capita
increases. In the factor-driven stage, defined as a GDP
Rwanda’s leadership has explicitly taken the experience of Singapore as the basis for its aggressive development strategy.
230 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
relatively ineffective in influencing economic policy,
instead focusing their efforts on enhancing the civic and
social responsibilities of citizens (Lee, 2002).
Phase 3: Attracting Foreign Direct Investment (FDI). With a
small domestic market and a lack of natural and human
resources, the strategy for competitiveness was to be
better organized, more stable, and more efficient than
its neighbors, or, in a widely used phrase, “to run the
country like a business” (Vietor & Thompson, 2007).
Founded in 1961 to guide Singapore’s industrialization,
the Economic Development Board (EDB) recognized
early the importance of foreign direct investment and
international trade for Singapore’s economy. Incentives
to attract foreign manufacturing included legal secu-
rity; low tax rates; cheap export credits; an excellent
infrastructure; a fierce anticorruption drive to create
transparent and efficient administration with minimal
bureaucracy; and a docile, English-speaking workforce.
Phase 4: Moving Up the Value Chain. The inherent prob-
lems of becoming an investment-driven state, such as
rising labor costs but decreasing output productivity,
intensifying competition from its low-cost neighbors,
and a limitation in resources, pushed Singapore to qual-
itatively upgrade its economy toward labor, technology,
and capital-intensive industries (Fiels, 1994). In order
How did Singapore get rich so fast? Can Rwanda
learn from Singapore’s experience to develop a strategy
of rapid, sustainable economic growth? First, we need
to understand the sequencing of Singapore’s industrial
development strategies over the past decades in which
five phases can be distinguished (see Figure 2):
Phase 1: Starting Position. After independence in 1965,
the Singaporean government was faced with a rapidly
growing population, high unemployment, and a lack
of both natural and human resources. While lacking
administrative expertise, Singapore enjoyed a strategi-
cally advantageous location with the busiest deep-water
port in the region.
Phase 2: Asserting Government Control. The “benevolent
autocracy” under President Lee Kuan Yew and his suc-
cessors has created an unusually consistent set of policies
over an extended time period. Lee’s People’s Action
Party (PAP) has governed Singapore continuously since
independence. Active government intervention in the
economy has raised the confidence of foreign investors
and provided a stable environment for both domes-
tic and foreign firms. Public sector, government-linked
corporations (GLCs) and multinational corporations have
dominated Singapore’s economy (Vietor & Thompson,
2007). Civil society organizations (CSOs) have been
GovernmentControl
Starting PositionRegionalServices
Hub
Move up theValue Chain
Attract FDI
• Independence in 1965
• No economic
hinterland, small domestic market,
and lack of natural and
human resources• Singapore was
left with high
unemployment, a
rapidly growing
population,
and no
administrational
experience• Strategic
advantageous
location
• Became stepping stone for
investors into the Asian market
• ASEAN membership
• Financial
services, trade,
IT, and logistics
become key
pillars of economy
• Promotion of
industries reliant
on intellectual capital,
biomedical
sciences cluster development
• Strategy for survival was to
be better
organized, more
stable and efficient than neighbors
• Authoritarian government with
high continuity
controlled social,
economic, and physical
environment of
the island
• Goal: maintain delicate racial
harmony and
pass reforms
quickly
• Need to create
competitiveadvantage
against low-cost
neighbors• Second industrial
revolution
• Moved up the
value chain to
make best use of
limited space and
resources• Qualitatively
upgraded
economy towards
labor, technology, and capital
intense industries
• Increased focus
on education and R&D
• Economic Development
Board to guide
industrialization
• Recognized need for foreign
investment to
overcome lack of resources
• Incentives to
attract foreign
manufacturingincluded legal
security, low tax
rates, cheap
export credits,an excellent
infrastructure,
and a transparent
and efficient administration
FIGURE 2 Singapore’s Development Strategy 1965–Present
Source: Authors; Vietor & Thompson (2007).
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 231
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
Business report ranked it as the world’s top reformer,
the first time for a sub-Saharan economy. The Common-
wealth Business Council recognized Rwanda’s improved
investment climate with the Africa Business Award. The
World Bank has predicted Rwanda will be among the
ten fastest-growing economies in the world over the next
decade (World Bank, 2009).
These developments are especially striking in view of
Rwanda’s recent history. Less than 15 years ago, Rwan-
da’s economic situation appeared bleak. Its economy
was undiversified, based predominantly on subsistence
agriculture, with limited natural resources, a small and
fragmented internal market, antagonistic neighbors such
as the Democratic Republic of the Congo (DRC), and
little interconnectedness among regional markets. The
society was split by deep tensions between the country’s
two main tribal groups, the Hutus and the Tutsis. A core
of approximately 10,000 militants, led by radical Hutus
who deny the genocide, remain in the Congo, intent on
overthrowing the Kagame government.
Social and political stability is essential for Rwanda
to become an attractive investment destination and to
integrate it into the wider regional economy of East and
Central Africa. The civil war alienated and displaced large
groups of the population, destroyed the economy, and
with the large-scale extermination of the educated Tutsi
elite, annihilated a major part of the country’s intellectual
capital. The government established priorities for the most
pressing needs by focusing on the “4Rs”: reconciliation,
reform, reconstruction, and regional stability (African
Development Bank, 2008). Reconciliation, or the govern-
ment’s attempt to create an ethnically tolerant nation, pro-
moted a new sense of national unity and public confidence
to move rapidly beyond the factor-driven stage, the
government deliberately discouraged foreign invest-
ments based on cheap labor, by increasing the aver-
age wage level 20% annually between 1979 and 1981
(Bremer, 2002). Many businesses were rationalized
and automated. Education and technical training was
promoted, along with the creation of high-tech indus-
tries and R&D centers. Leveraging on its strategically
advantageous location, Singapore became an attractive
stepping-stone for investors into the Asian market.
Phase 5: Becoming a Regional Services Hub. Throughout
the 1990s and early 2000s, Singapore further diversified
and modernized its export structure and successfully
accomplished its transformation from a production-
driven to an innovation-driven economy. Today, the
industrial sector plays a secondary role; financials
and insurance, trade, information technology, and
transportation and logistics are the backbone of the
economy. To continue to be more competitive than its
developing neighbors, the government plans to achieve
a leading international position in “sunrise industries”
of sophisticated services, such as biomedical sciences,
environmental technology, information technology,
and digital and interactive media.
Rwanda’s Development Challenge
For Rwanda, Singapore’s prosperity is a vision for the
future, not a reality, as Rwanda still ranks among the
world’s least developed countries. In 2010, the coun-
try recorded a nominal GDP per capita of only $558
(International Monetary Fund [IMF], 2011), and 60% of
Rwandans still live below the poverty line, defined by the
United Nations as an income of less than a dollar a day
(Central Intelligence Agency, 2010b).
With a population of 10.2 million, or 387 people per
square kilometer, Rwanda is the most densely populated
country in Africa. Population growth remains high at
2.8%, and the population is expected to exceed 14 mil-
lion by 2020. Despite ongoing urbanization efforts by the
government, the majority of Rwandans continue to live in
rural areas, putting great pressure on the land.
Rwanda has shared the “poverty traps” of civil wars,
mismanagement of natural resources, lack of access
to seaports for landlocked countries, deficits in good
governance, and weak leadership with a number of
other African countries (Bahadur, Schmidt-Traub, Sachs,
McArthur, & Kruk, 2004; Van der Walle, 2001). However,
Rwanda has in recent years taken important policy initia-
tives in recent years to overcome these handicaps and
improve its competitiveness. The World Bank’s Doing
For Rwanda, Singapore’s prosperity is a vision for the future, not a reality, as Rwanda still ranks among the world’s least developed countries.
232 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
focuses private-sector development on five central areas:
(1) increasing the value of existing exports, (2) diversify-
ing exports and developing Rwanda as a regional hub,
(3) promoting standards to facilitate trade integration,
(4) increasing the level and quality of investments in pro-
ductive sectors, and (5) promoting an economic environ-
ment conducive to economic growth (Hategeka, 2010).
According to the Ministry of Finance and Economic
Planning, the major aspiration of Vision 2020 is to “trans-
form Rwanda’s economy into a middle income country
… [which] will not be achieved unless we transform from
a subsistence agriculture economy to a knowledge-based
society, with high levels of savings and private investment”
(Ministry of Finance and Economic Planning, 2000).
Some Vision 2020 goals, such as 100% literacy, an
increase in life expectancy by 6 years to 55 years, and an
investment rate of 30% of GDP primarily from private-
sector investments, may appear unrealistic. Following
the Singapore model of building a business-friendly
environment, Rwanda’s government aims to maintain
macroeconomic stability while providing consistent good
and revived the economy. Community-based “Gacaca”
courts using lay judges have worked on over two million
genocide and war crime cases with the goal of reconcili-
ation through social service as an alternative to imprison-
ment. Economic and political reforms helped to attract
foreign aid and investment, which in turn supported the
reconstruction of the country’s institutional infrastructure.
Under Kagame’s rule, the political situation has
stabilized and peace has returned to the country. A con-
stitution was proclaimed in 2003, and Kagame enjoyed a
landslide reelection in 2010. Nevertheless, there is grow-
ing criticism of his authoritarian and military leadership
style. Kagame’s Rwanda Patriotic Front (RPF) party has
placed limits on press freedom and public dissent; politi-
cal opponents can face prison or exile, and Rwanda still
lacks an independent judicial system.
On top of these impediments, civil society faces inher-
ent obstacles such as a traditional absence of democratic
structures and culture, mutual distrust between the coun-
try’s economically privileged and the mass population,
disparity between national-level associations based in the
capital and CSOs in the rural diaspora, and a decimated
intellectual elite as a consequence of the genocide (US
Agency for International Development, 2001). Similar to
Singapore, the impact of Rwandan CSOs on corporate
and government accountability is minimal. However,
CSOs serve a significant role in promoting the values
of gender equity, poverty reduction, increased transpar-
ency of institutions, decentralization, land reforms, and
environmental protection. The government has acknowl-
edged the importance of women in society, and decen-
tralization policies are providing a legal framework for
greater local participation in decision making (CCOAIB,
2011). Much depends on whether Kagame, whose poli-
cies have produced rapid economic growth and social
progress, is to reduce the country’s dependence on his
personal leadership by introducing more democracy.
Rwanda’s Competit iveness Strategy
The policy and macroeconomic stability created by Presi-
dent Kagame and his government has served as a basis
for the gradual rebuilding of society and repositioning of
the country’s economic activity. The Rwanda Ministry of
Infrastructure’s (MINIFRA) medium-term development
plan, the Economic Development and Poverty Reduc-
tion Strategy (EDPRS), and the “Vision 2020” long-term
strategy provide the policy framework for progressively
improving productivity, competitiveness, and the ease
of doing business in Rwanda while contributing to rais-
ing the standard of living of the population. The EDPRS
Following the Singapore model of building a business-friendly environment, Rwanda’s government aims to maintain macroeconomic stability while providing consistent good governance, especially low corruption in the public sector, and continually upgrading human capital through investments in education.
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 233
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
privatization program, introducing an incentive regime
to attract foreign investment by reforming the country’s
institutional and regulatory framework. Legal reforms
include the abolition of the death penalty, the introduc-
tion of the writ of habeas corpus and the 2003 Constitu-
tion providing for the independence of the judiciary
(African Development Bank, 2008).
What sets Rwanda further apart from its factor-driven
peers and in particular, its regional peers, is the govern-
ment’s policy of zero tolerance for corruption. Just as
Singapore enforced rigorous anticorruption practices in
its third phase of development in order to attract foreign
investors, Rwanda’s high-profile anticorruption campaign
in the mid-2000s sent a message that fighting corruption
was a key goal on its agenda. Ranking 66th of 189 coun-
tries assessed in the Transparency Index (Transparency
International, 2010), and 34th of 139 countries in terms
of ethical behavior of firms, Rwanda ranks better than
most economies at a comparable development stage.
Given its painful recent history, Rwanda has made
significant progress in institution building. On the GCI’s
ranking of 139 nations, Rwanda ranks 19th in terms of
governance, especially low corruption in the public sec-
tor, and continually upgrading human capital through
investments in education. Interviews with government
agencies and private-sector representatives reveal a per-
vasive awareness of the need for systematic, consistent,
and sustained efforts in improving the indicators of
Rwanda’s basic factors, while laying the groundwork that
could enable the country to move rapidly up the chain
of value-adding activities to become a regional hub for
advanced logistics, financial services, and communica-
tion industries (S. Caley, Finabank managing director,
personal communication, August 2011; N. Musengimana,
Private Sector Federation, Director Business Develop-
ment Centre for the Southern Province (BDS), personal
communication, August 18, 2010).
Rated by the GCI for the first time in its 2010/2011
report, Rwanda ranks 80th in overall national competi-
tiveness, but among the top five sub-Saharan countries
(Sala-i-Martin et.al., 2010). Governance indicators have
improved with the creation of a number of institutions,
including the National Unity and Reconciliation Com-
mission and the Human Rights Commission. The World
Bank’s Worldwide Governance Indicators ranks Rwanda’s
government as more stable than most emerging nations
(Kaufmann, Kraay, & Mastruzzi, 2009).
The next section systematically examines Rwanda’s
competitive strengths and weaknesses on each of the
twelve pillars, and concludes with an assessment of the
nation’s opportunities and risks as it implements its
Vision 2020 for rapid economic growth (Figure 3).
Rwanda’s Pil lars of Competit iveness
Group 1: Basic Requirements
For a factor-driven economy such as Rwanda’s, getting the
Basic Requirements right (the pillars of Institutions, Infra-
structure, Macroeconomic Environment, and Health and
Primary Education) is critical. These account for 60% of a
factor-driven country’s competitiveness ranking.
Pillar 1: Institutions
Similar to Singapore’s government upon independence,
Rwanda’s government post civil war required sufficient
control to push through its ambitious plans for social and
economic transformation. By censoring the media and
restricting opposition protests to forced resettlement,
the highly authoritarian leadership has maintained tight
control. Due to strictly enforced penalties, crime rates in
Rwanda remain extremely low.
With little dissent permitted, the government has
embarked on an extensive economic liberalization and
Strategic Objectives
1. Maintenance of macroeconomic stability
2. Transformation from agrarian to knowledge-based economy
3. Fostering entrepreneurship and creating a productive middle class
4. Wealth creation and reduction of aid dependency
Pillars
1. Good governance and a capable state
2. Human resource development, emphasizing science and technology
3. Private-sector innovation with private-sector-led development
4. Infrastructure development
5. Productive high value and market-oriented agriculture
6. Regional and international integration
Selected Performance Targets
1. Annual growth rate of 8%
2. Population growth of 12%
3. Investment rate of 30% of GDP, primarily from private sector
Key Outcome Targets
1. 100% literacy by 2020
2. Infant mortality rate halved by 2020 (50 per 1000 births)
3. Life expectancy increased by 6 years to 55 by 2020
4. Income inequality reduced by 25% to Gini index 0.35 by 2020
FIGURE 3 Rwanda’s Vision 2020
Source: African Development Bank (2008).
234 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
annually over the next few years (Economist Intelligence
Unit, 2010). If achieved, these expected growth rates
would not only outperform most sub-Saharan states but
would make Rwanda one of the fastest-growing developing
nations. However, the high population growth rate (2.8%
in 2009) prevents a comparable increase of GDP per cap-
ita, which remains below sub-Saharan average and presents
a long-term challenge for national competitiveness.
Foreign direct investment (FDI) inflows are below
the regional average, but Rwanda receives more aid per
capita than its peers. In 2005, Rwanda became eligible
for the joint IMF/World Bank/International Develop-
ment Association (IDA) Multilateral Debt Relief Initia-
tive (MDRI). As a direct result, the country’s external
debt declined from 85% of GDP in 2000–2004 to about
15% since 2006 (IDA/IMF, 2010). Despite an analysis
conducted by the IMF and World Bank which found that
the country’s limited export base remains a risk factor for
debt sustainability, the international ratings agency Fitch
upgraded the country’s credit rating from B minus to B
(five grades below investment grade) based on the coun-
try’s growth outlook and continued effort to increase
competitiveness. However, Rwanda faces rising inflation-
ary pressures due to escalating global oil and food prices
(Economist Intelligence Unit, 2010).
Pillar 4: Health and Primary Education
Economic progress is impossible without a healthy society.
Rwanda has only 1 doctor for every 18,000 and 1 nurse
for every 1,700 citizens, and the quality of rural hospitals
is poor. More than half of total health expenditures are
funded through foreign donations. Nevertheless, effective
investments of these funds have resulted in a reduction in
infant mortality from 86 to 62 per 1,000 since 2000. Malaria
morbidity and mortality rates have dropped 60%, and HIV
prevalence is less than 3%. Average life expectancy has
increased from 25 to 55 years (Sezibera, 2010).
strength of institutions, including protection of property
and intellectual property, judicial independence, and
efficiency of legal system in handling disputes. The gov-
ernment’s success in channeling targeted investments is
reflected in Rwanda’s ranking of second in the world for
least wasteful amount of government spending, coupled
with a high ranking for transparency in government
policymaking (substantially surpassing that of France,
the United Kingdom and the United States). The GCI
has identified strong protections for investors, along with
very low levels of organized crime and low costs to busi-
ness of crime, violence or terrorism, as contributing to a
business-friendly environment.
Pillar 2: Infrastructure
Physical infrastructure remains a serious obstacle to eco-
nomic growth. Of the 14,000 km of roads, only 20% are
paved (Rwanda Development Board, 2010a). Rwanda suf-
fers from extremely high transportation costs, at $165 per
ton per kilometer, compared to an average of $95 per ton
per kilometer in the rest of the region (African Develop-
ment Bank, 2008). Transportation costs account for 40%
of the value of imported goods to Rwanda (Majyambere,
2010).
Limited, unreliable, and expensive energy supply
represents another serious bottleneck. Household and
industrial electricity demand is increasing due to an
urbanization trend and the economic upswing of the
country but hasn’t been met by local generation. Conse-
quently, Rwanda heavily depends on electricity imports
from its neighbors. As Rwanda has no upstream oil busi-
ness or refinery industry, crude oil products are imported
over long distances and poor roads from the Indian
Ocean. Electricity costs at $0.21 per kilowatt-hour are
nearly triple that of the rest of the region (African Devel-
opment Bank, 2008). These high-energy costs decrease
the profitability of manufacturing and are one of the
main reasons why the industrial sector remains underde-
veloped.
Pillar 3: Macroeconomic Environment
After experiencing more than a decade of strong growth
averaging 8.3% per year, economic activity slowed sharply
when Rwanda was hit by the global financial crisis in 2009.
The value of exports declined by 28% due to lower prices
for minerals, tea, and coffee on the world market. As a
result, GDP growth dropped from 11.2% in 2008 to 4.1%
in 2009 (African Development Bank, 2008; IMF African
Department, 2010).
Since its 2009 slump, Rwanda’s economy has been
recovering. The IMF forecasts GDP growth to increase 8%
More than half of total health expenditures are funded through foreign donations.
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 235
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
In addition to the liberalization of the Rwandan
market, the government has implemented a vigorous
privatization program. Since 2001, more than 90 gov-
ernment-owned enterprises have been restructured and
partially or wholly sold off to the private sector (IBRD,
World Bank, 2008).
Net FDI inflows have surged from $7.66 million
(0.39% of GDP) in 2004 to $118.67 million (2.34% of
GDP) in 2009 (World Bank, 2011). As a result of these
efforts and the creation of a special “Doing Business“
department within the Rwanda Development Board,
Rwanda was able to raise its ranking in the World Bank Doing Business Report by 76 positions. According to the
Economist Intelligence Unit, the country’s regulations
are now more favorable to business than many economies
in eastern Europe, Asia, the Middle East, Latin America,
or Africa (Economist Intelligence Unit, 2010).
Pillar 7: Labor Market Efficiency
By the end of 2006, the total labor force was estimated at
about five million, with a majority working in the agricultural
sector. This provides businesses in the primary and second-
ary sectors with abundant and inexpensive labor but repre-
sents an obstacle to the government’s goal of transforming
Rwanda into an innovative, technologically advanced and
efficiency-driven society. Each year, around 100,000 young
Rwandans enter the labor market, but 95% are unable to
find adequate employment (Pro€Invest, 2007).
As Table 1 shows, there is a huge difference in
composition of employment between the capital Kigali
and the rural areas of the country. Nearly two-thirds
of the Kigali workforce (and one-third in other urban
areas), comprising one-fifth of Rwanda’s population,
A major driver of these public health successes has
been a universal health insurance plan that now covers
92% of the population. Foreign assistance has enabled
construction of health centers for the poorest quintile
of the population (McNeil, 2010). Primary education is
compulsory and free. Unfortunately, Rwanda’s educa-
tional system is one of the world’s least developed. The
Human Development Index ranks Rwanda 152 of 169
countries in terms of the level of educational attainment
(UNDP, 2010).
Group 2: Efficiency Enhancers
The next six pillars (Higher Education and Training,
Goods Market Efficiency, Labor Market Efficiency, Finan-
cial Market Development, Technological Readiness, and
Market Size) count for 35% of a factor-driven economy’s
competitiveness ranking.
Pillar 5: Higher Education and Training
Historically, Tutsis had occupied most teaching and
research positions. Hence, the genocide left the country
with a chronic lack of skilled human resources. Schools
and universities remained closed or understaffed during
the years following 1994. According to estimates of the
World Bank, 75% of Rwanda’s labor force is unskilled,
and while the adult illiteracy rate dropped to 30%, only
13% of the working population has received educa-
tion beyond the primary level (African Development
Bank, 2008).
The country is endeavoring to rebuild a modern
educated elite. The number of primary and secondary
schools and universities has increased in the past several
years. The focus of higher education has been shifted
toward promoting science, technology, and information
technologies. The path to a highly educated workforce is
steep: 87% of employees in the private sector have only
primary school education and no formal job training.
Only 2% have completed a university degree (Rwanda
Private Sector Federation, 2010).
Pillar 6: Goods Market Efficiency
Having recognized that the country’s future lies in a
thriving private sector, the government has committed
itself to close cooperation with investors in policy and in
practice. In order to strengthen the private sector, the
EDPRS focuses on “promoting an economic environment
conducive to economic growth” ( Hategeka, 2010). The
labor, goods, and capital markets are open to regional
communities and the foreign trade regime is one of the
most liberal in sub-Saharan Africa (Pro€Invest, 2007).
TABLE 1 Occupational Group by Rural and Urban
(in percent)
Occupational Group Kigali Urban
Other Urban
Rural All
Professionals 7.4 4.4 1.3 2
Senior Officials and Managers 0.9 0.1 0 0.1
Office Clerks 4.2 1.5 0.2 0.6
Commercial and Sales 19.1 11.7 4.1 5.8
Skilled Service Sector 31.3 16.6 2.5 5.7
Agricultural & Fishery Workers 14.7 55.9 87.2 79.5
Semiskilled Operatives 16.8 7.1 3.6 4.8
Drivers and Machine Operators 4 1.2 0.2 0.5
Unskilled Laborers 1.6 1.6 0.9 1
Source: National Institute of Statistics of Rwanda (2005/2006).
236 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
access to broadband Internet (Statistisches Bundesamt
Deutschland, 2011). In 2010, Rwanda launched two new
high-speed Internet projects to extend Kigali’s Internet
users’ data connectivity and VoIP services to wireless
broadband and fiber-optic cable. These new services are
expected to bring new network access to nearly four mil-
lion Rwandans and more than 700 administrative institu-
tions, schools, and health care facilities (Fripp, 2009).
Pillar 10: Market Size
Bordering on the DRC in the west, Uganda in the north,
Tanzania in the east, and Burundi in the south, Rwanda
is situated in the center of a region with more than 140
million inhabitants. In 2009, Rwanda and Burundi joined
Kenya, Tanzania, and Uganda in the East African Com-
munity (EAC), whose combined populations are growing
at 3% annually. Considering the small size of its domestic
market, the regionalization of the economy offers enor-
mous growth opportunities for Rwanda. Total intra-EAC
trade amounts to nearly $2.3 billion and is dominated
by Kenya, which accounts for almost half of trade within
the Community. The Rwandan government aims to
bridge the Anglophone states in East Africa and the
are employed in “white-collar” or skilled-service-sector
jobs; nearly 90% of the rural population, or 9.5 million
people, remain in primarily subsistence-level agriculture
or fisheries (National Institute of Statistics of Rwanda,
2005/2006).
Despite these serious challenges, Rwanda’s GCI rank-
ing on this pillar is surprisingly high. All nine of the
indicators place Rwanda higher than 50th. Rwanda is
particularly impressive in the level of female participation
in the labor force, ranking second out of 139 nations, and
tenth overall in terms of flexibility of labor markets. Cou-
pled with excellent cooperation in labor-management
relations, a high level of flexibility in determining wages,
and ease of hiring and firing practices, the overall picture
of labor market efficiency is positive.
Pillar 8: Financial Market Development
Rwanda’s banking sector is comprised of the coun-
try’s Central Bank (Banque Nationale du Rwanda), ten
licensed commercial banks, several microfinance institu-
tions, one development bank, one discount house, and
one mortgage bank. Rwanda lacks investment banks,
and commercial banks account for 76% of the econo-
my’s total financing. Financing costs remain above the
regional average and banks offer a limited range of
commercial products (African Economic Outlook, 2010;
S. Caley, personal communication, August 2011). Finan-
cial market liquidity suffers from an extremely low savings
rate, as low deposit rates and the absence of governmen-
tal retirement and savings plans discourage the already
conservative and risk-averse Rwandans from depositing
their money in bank accounts. Despite an improvement
from 9% in 2005/2006, only 21% of the population held
a bank account in 2010/2011 (National Institute of Statis-
tics of Rwanda, 2012).
Pillar 9: Technological Readiness
The information technology sector in Rwanda is cur-
rently composed of landline telephones, voice-over-
Internet (VoIP), dial-up Internet, Integrated Services
Digital Network (ISDN)-based Internet, broadband Inter-
net, computer software use and development, computer
hardware, assembly, and repair.
According to the Rwanda Development Board, mar-
ket penetration of mobile services is about 32% and even
lower in neighboring Burundi and eastern DRC, which
depend on the import of information and communica-
tion services from Rwanda. This stands in stark contrast
to neighboring Kenya, where mobile phone use is close
to universal. At the end of the decade, only 4.5% of
Rwandans made regular use of the Internet and 0.1% had
Financial market liquidity suffers from an extremely low savings rate, as low deposit rates and the absence of governmental retirement and savings plans discourage the already conservative and risk-averse Rwandans from depositing their money in bank accounts.
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 237
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
In order for Rwanda to become a regionally signifi-
cant center for business and communications, it needs,
like Singapore, a core of highly skilled professionals, a
broader and deeper financial sector, higher levels of
savings and private investment, and an ability on the
part of both government and private-sector firms to
adopt new technologies. Over time, Singapore built lay-
ers of competitiveness by concentrating on investments
in infrastructure and workforce development to supply
the necessary education and skills demanded by a rap-
idly changing business and technological environment.
But unlike the situation that Singapore faced at its inde-
pendence, Rwanda suffers from an inadequate infra-
structure and a shortage of skills among the workforce.
Advances in productivity must come from invest-
ments in the basic and efficiency-enhancing pillars such
as infrastructure, education, and adoption of core tech-
nologies. Rwanda will have a capacity for innovation only
after its technical and vocational training and applied
engineering and scientific research institutes have been
significantly improved. Although innovation and business
sophistication are essential for the eventual realization
of the country’s Vision 2020, Rwanda must first focus on
building firmer foundations in the basic and efficiency-
enhancing pillars by improving its infrastructure and
electricity supply, enhancing its basic education, promot-
ing higher education and professional training, increas-
ing its market size by further integrating into the East
African Community, and deepening its financial sector.
The next subsections assess the country’s progress in
these areas.
resource-rich Central African States. As a regional gate-
way, Rwanda would increase its export base and attract
foreign investments, enabling it to leverage economies
of scale in creating a more liquid stock market, building
regional infrastructure projects, and enhancing its influ-
ence on the world stage.
Group 3: Innovation and Sophistication Factors
The pillars of Business Sophistication and Innovation
represent only 5% of a factor-driven economy’s GCI
ranking. As nations move to more advanced stages of
development, sophisticated business practices and busi-
ness networks become more significant as wages rise and
prior efficiencies limit opportunities for productivity
improvements.
Pillars 11 and 12: Business Sophistication and Innovation
Rwanda’s business landscape is composed mainly of
micro and small-scale enterprises. Most of Rwanda’s 11.5
million inhabitants still have no access to basic services,
including a reliable supply of electricity.
The government has initiated an aggressive strategy
for telecommunications to connect the national network
to the global network via the east coast of Africa. High-
capacity fiber-optic lines are being laid throughout the
country in order to provide high-speed broadband to
100,000 by early this decade. Broadband capability is
expected to decrease communications costs by 90% com-
pared to satellite technology. The current construction of
an antenna at Kigali will cover the city with state-of-the-art
wireless broadband, providing high-speed connectivity
for 4G mobile devices (Blenford, 2009). But even with
a sophisticated domestic and regional communications
network, Rwanda’s capacity for indigenous innovation,
Rwanda’s capacity for indigenous innovation remains
extremely limited due to the lack of a highly skilled
workforce.
Improving Rwanda’s National Competitiveness: Implications for Policymakers
Despite their different stages of development, Rwanda’s
and Singapore’s competitive profiles have similarities.
Both countries benefit from strong, well-functioning
institutions due to very low levels of corruption, a high
degree of government efficiency, and an excellent secu-
rity environment. Rwanda, like Singapore, has focused on
science and technology to establish a business environ-
ment attractive to foreign investors.
Advances in productivity must come from investments in the basic and efficiency-enhancing pillars such as infrastructure, educa-tion, and adoption of core technologies.
238 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
produce value-added, knowledge-intensive goods and
services.
The government recognizes that secondary and col-
lege education must focus on practical skills specific to
essential professional jobs. By emphasizing science and
technology education, Rwanda has now reached a level
of technological readiness comparable to, or better than,
the regional average, according to the African Develop-
ment Bank (2008).
Central to the Vision 2020 initiative is the electronic
government project, which, through its twin policies of
“e-governance” and “e-education,” aims at moderniz-
ing the access to information and government services.
E-education will provide children and adults with relevant
skills demanded on the job market, and e-governance
aims at encouraging Rwandans to participate in decision
making. By building an efficient, state-of-the-art commu-
nications network, the government expects that the effect
on K–12 education, business, government, and society in
general will attract foreign investors to the country. The
government’s information technologies development
agenda supports investments in networking and software
development, broadband fiber-optic infrastructure, call
centers and back-office operations, mobile phone and
computer repair and assembly, and the establishment of
business process outsourcing companies.
Rwanda is aiming to create the kind of entrepreneur-
ial, innovative, and science-focused environment that Sin-
gapore offers investors. Following Singapore’s model that
created international research and development clusters
such as Biopolis in biomedical sciences and Fusionpolis
in communications technology and media, Rwanda plans
to develop its traditional university town, Butare, into
the scientific capital of Central and East Africa over the
next decade. The National University of Rwanda, located
at the heart of Butare, has an excellent reputation in
Eastern Africa. A planned expansion will include public-
sector research facilities, scientific infrastructure, and
corporate laboratories.
Promoting Regional Integration
The return of stability in its political and commercial
relationship to the DRC, Burundi, and Uganda is essen-
tial for regional integration, but more must be done to
strengthen trade. The World Bank ranked Rwanda’s
trading across borders 159th out of the 183 economies
assessed. Even within sub-Saharan Africa, Rwanda’s rank
is low, at 33rd out of 46 (World Bank, 2009). Rwanda’s
landlocked location and relatively high transportation
costs increase the expense and speed of cross-border
trade.
Developing Domestic Infrastructure and International Connectivity
Lacking Singapore’s great natural advantage as the
most developed deep-water port in Southeast Asia, land-
locked Rwanda requires a different strategy to become
the region’s transportation hub, one less dependent on
building export competitiveness. Vision 2020 directs
massive investments to road and rail rehabilitation,
maintenance and development, airport expansion and
management, and electricity generation. Two interna-
tional railway projects are planned to connect Rwanda
to the maritime port of Dar Es Salaam in Tanzania and
to link the region to the South African railway network.
A new international airport in Bugesera is planned, and
construction has begun on a 60-km-long road connection
linking the capital, Kigali, to Burundi. Energy projects
include additional hydropower plants and a methane gas
plant in the volcanic Lake Kivu with an estimated capacity
of 50 to 75 megawatts. If brought to a successful comple-
tion, these infrastructure investments could solve most of
the country’s energy problems.
While the fiber-optic cable project is at an advanced
stage and RwandAir has already acquired two planes for
short-term routes, the international railway lines and the
Bugesera airport project are still in the planning and
fundraising phase, as the government is actively seeking
international investment partners (Rwanda Development
Board, 2010b).
Education as a Prerequisite for Technological Advancement
Education, particularly in the primary and secondary
grades, remains seriously inadequate, due to the destruc-
tion of the educated class in the civil war. Most govern-
ment spending to date has emphasized investment in
physical infrastructure. However, the government’s most
recent strategic plan for the education sector increases
investments in the education of primary and secondary
(K–12) schoolteachers. Through e-learning initiatives
such as “one laptop per child,” the government aims to
promote a culture of information and communications
literacy. With the switch from French to English as the
official language, Rwanda expects to attract more foreign
investment and facilitate becoming a business hub in the
mainly Anglophone East African region.
Higher education has fared better from government
attention. However, Rwanda still lacks qualified college
teachers, as well as educated entrepreneurs, engineers,
technicians and scientists with the technical competence
to adapt new technologies to solve local problems and
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 239
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
infrastructure in relation to border processing represent
further obstacles (Joseph, 2010).
Only after full integration will EAC countries be able
to participate in their fellow members’ capital markets.
The establishment of a common stock exchange could
attract international investors and alleviate Rwanda’s
liquidity problems. Rwanda’s policymakers anticipate the
eventual merger of the EAC, the Common Market for
Eastern and Southern Africa (COMESA), and the South-
ern Africa Development Community into one market,
comprising 600 million people.
Deepening the Financial Sector
Rwanda’s ambition to become the financial hub of the
Central and East African region requires many changes
in the investment environment. The World Economic
Forum’s Executive Opinion Survey has identified a set of
priority issues: (1) access to financing, (2) the “shallow-
ness“ of the domestic capital market, (3) the low penetra-
tion of insurance services, and (4) undiversified financial
products (Schwab, 2010). A solid regulatory foundation
has been laid in the past few years. Recognizing that
high interest rate spreads and fees, unregulated pension
and insurance systems, and scarcity of long-term project
financing put a major constraint on doing business in
Rwanda, the government introduced major financial
reforms to deepen and broaden the banking sector. New
regulations on bankruptcy, disclosure requirements, and
credit history should stimulate lending to the private
sector.
A key challenge is to overcome the financial illit-
eracy and risk-averse attitude towards capitalism among
Rwanda’s population. In addition, the lack of data such
Its new membership in the East African Community is
key to Rwanda’s overcoming transportation barriers and
meeting its development goals by 2020. Table 2 summa-
rizes the four aspired milestones to integration: forming
a customs union, establishing a common market, creating
a monetary union, and ultimately a political federation
among EAC member states. The EAC customs union,
established in 2004, evolved by 2010 into a common
market. Its slogan, “Produce Local, Trade Regional, Sell
Global,” expresses Rwanda’s aspirations. In 2011, Rwanda
launched the Kigali Free Trade Zone (KFTZ), its first
free economic zone, which provides a duty-free environ-
ment for the import of raw materials, or goods imported
for re-export. Through the KFTZ, the government will
encourage export diversification and promote Rwanda as
a regional trade logistics hub (N. Musengimana, personal
communication, August 18, 2010). Although in princi-
pal there is free movement of goods, services, people,
and capital among the common market members, full
implementation will be gradual. The EAC has set 2015
as the year for adoption of a monetary union similar to
the Eurozone, but this aggressive target is unlikely to be
met, due to continuing internal trade barriers and lack of
political coordination.
The EAC needs to agree on homogeneous incentives
for value-added tax, income tax, excise duty, and the taxa-
tion of services. Just as Singapore aggressively moved to
open up its economy to foreign investment by removing
tariff walls and capital controls, Rwanda must lower exist-
ing tariffs that hinder trade. Presently, EAC members are
still reluctant to fully open their borders, and the slow
pace of the member countries’ bureaucracies, constantly
changing import regulations, and an underdeveloped
TABLE 2 East African Community Integration Milestones
01 02 03 04
Customs Union Common Market Monetary Union Political Federation
Customs Union (agreement of March 2004) Common Market (agreement of July 2010)
→ Formation of a single customs territory with trade at the core of the union
→ Widen and deepen cooperation in the economic and social fi elds
• Elimination of internal tariffs and non-tariff barriers • 4 Freedoms (free movement of goods, labor, services, and capital)
• Harmonization of external tariffs • Promote common understanding
• Common safety measures for imports • Enhance research and technological advancement
• Common trade policies
→ Economies of scale and faster economic development → Co-operation, harmonization, and integration of policies
→ Creation of a single market and investment area → Boost trade and investments and make the region more productive and prosperous
Source: Based on East African Community (2011).
240 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
new technologies and building the country’s research
and innovation capabilities. Well-developed transporta-
tion systems and reliable electricity supply are essential
for promoting trade, technological advancement, and
business sophistication.
Rwanda improves its overall ranking in the first stage
with its health insurance plan and localized health cen-
ters (Pillar 4), in the second stage with its e-learning and
e-government initiatives (Pillars 5 and 9), and through
the visionary planning in stage 3 with inspiration from
Singapore’s Biopolis and Fusionpolis.
Following the Singapore example, Rwanda is working
on turning its weaknesses into opportunities. A stable gov-
ernment for the past 18 years led by a “benevolent autocrat,”
low criminal activity, the protection of private property and
a stable and transparent legal system, low corruption, an
effective administration, and low corporate tax rates all aim
at positioning Rwanda as a regional hub, attracting foreign
investment into basic industries and creating export oppor-
tunities for agricultural products. In achieving these first
steps in a comprehensive development strategy, the World
Bank Doing Business Report has identified Rwanda as the
“most improved business reformer” in the world.
The Singapore model demonstrates that rapid
economic transformation is possible when a coherent,
systematically applied strategy for building national com-
petitiveness is implemented. The analysis of Rwanda’s
development strategy using the Global Competitiveness
Index framework may serve as a basis for policymakers
and scholars attempting to analyze the development
strategies of other factor-driven economies. Further
comparative research on Rwanda and its regional neigh-
bors’ development strategies could explore the impact
of sequencing reforms based on the stages of the GCI
framework and the relevance of the Singapore model in
East Africa. Rwanda shows how a country starting from a
nearly hopeless situation can make significant progress
when inspired by the Singapore model of “running the
country like a business.” If Rwanda can sustain long-term
political and institutional stability, it may be able at least
partly to reproduce Singapore’s exemplary development
success and set an example for other “failed states.”
Note
1. In 2010, the senior author conducted field research in Rwanda, including in-depth interviews with senior officials in the Rwandan Ministry of Trade and Industry and Rwandan Development Board and the Private Sector Federation (the independent replacement of the Rwandan Chamber of Commerce); senior executives in the private sector (Finabank, KPMG, Rwanda Electricity Corporation, Heineken International Bralirwa) and foreign development agencies (KfW Devel-opment Bank, German Federal Ministry for Economic Cooperation and Development); and local and foreign entrepreneurs and investors.
as credit histories for individuals and financial state-
ments for companies results in higher risk premiums
and high collateral for loans, making the access to
financing even more expensive and time consuming
for entrepreneurs. Government incentives to foster
a savings environment through the creation of an
education savings plan as well as social security and
mutual funds are first steps (S. Caley, personal com-
munication, August 2011). Further integration into
the EAC and a possible merger of the members’ stock
exchanges will lead Rwanda to increased financial mar-
ket liquidity and efficiency.
Conclusion
Like Singapore in the first years after its independence,
post-civil war Rwanda faces significant competitiveness
challenges. Rwanda shares with Singapore a small market
size and delicate racial relationships in a region prone to
ethnic conflict. It must also contend with a landlocked
position with poor access to seaports, poor quality of its
infrastructure, and minor level of education.
Given these handicaps, why does Rwanda neverthe-
less lead the World Bank’s ranking for ease of doing busi-
ness among sub-Saharan African countries? Applying the
GCI’s 12 pillars enables a systematic analysis of the coun-
try’s competitive strengths and weaknesses and suggests a
sequence of policy measures that will increase a nation’s
competitiveness over time.
Without improved regional economic integration,
Rwanda’s geographic conditions limit the development
of higher value-added sectors of the economy. Invest-
ments in the educational system are critical for adopting
Rwanda’s ambition to become the financial hub of the Central and East African region requires many changes in the investment environment.
Building National Competitive Advantage: Rwanda’s Lessons from Singapore 241
DOI: 10.1002/tie Thunderbird International Business Review Vol. 56, No. 3 May/June 2014
http://www.itnewsafrica.com/2009/12/rwanda-speeds-up-internet- connectivity-in-kigali/
Hategeka, E. (2010). Private sector development—joint sector review summary report 2009/2010. Kigali: Rwanda Ministry of Trade and Industry.
IBRD, World Bank. (2008, August 3). Rwanda joint governance assess-ment report. Retrieved March 3, 2011, from http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/ADF-BD-IF-2008-220-EN-RWANDA-JOINT-GOVERNANCE-ASSESSMENT-JGA.PDF
International Development Association and International Monetary Fund (IDA/IMF). (2010, May 28). RWANDA - Joint World Bank/IMF Debt Sustainability Analysis. Retrieved March 17, 2014 from http://www.imf.org/external/pubs/ft/dsa/pdf/dsacr10200.pdf
International Monetary Fund African Department. (2010). Rwanda: Request for a three-year policy support instrument. Washington, DC: International Monetary Fund.
International Monetary Fund. (2011, September). World economic outlook reports. Retrieved October 14, 2011, from http://www.imf.org/external/ns/cs.aspx?id=29
Joseph, T. (2010, July 2). East Africa: Enough talk, it is time to walk the walk. Retrieved December 19, 2010, from http:// allafrica.com/stories/201007070945.html
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2009). Worldwide gov-ernance indicators. Retrieved February 18, 2011, from http://info. worldbank.org/governance/wgi/index.aspx#home
Lal, S. (2001). Comparing national competitive performance: An eco-nomic analysis of the World Economic Forum’s Competitiveness Index (Working Paper No. 62). Oxford, England: Queen Elizabeth House.
Lee, T. (2002, March). The politics of civil society in Singapore. Asian Studies Review, 26(1). Melbourne: Blackwell Publishing Limited.
Majyambere, G. (2010, May 21). Rwanda: RwF 1. 6 billion for trade facil-itation. The new times. Retrieved March 8, 2011, from http:// allafrica.com/stories/201005210240.html
McNeil, D. G. (2010, June 14). A poor nation, with a health plan. New York Times. Retrieved from http://www.nytimes.com/2010/06/15/health/policy/15rwanda.html?_r=0
Ministry of Finance and Economic Planning. (2000, July). Rwanda Vision 2020. Retrieved October 17, 2011, from http://www.gesci.org/assets/files/Rwanda_Vision_2020.pdf
National Institute of Statistics of Rwanda. (2005/2006). Development in employment sector. Retrieved June 10, 2011, from http://www.statistics.gov.rw/index.php?option=com_content&task=view&id=279&Itemid=313
References
African Development Bank. (2008). Rwanda 2008–2011; country strat-egy paper. African Development Fund.
African Economic Outlook. (2010). Rwanda. Retrieved from http://www.africaneconomicoutlook.org/en/countries/east-africa/rwanda/
Bahadur, C., Schmidt-Traub, G., Sachs, J., McArthur, J. W., & Kruk, M. (2004). Ending Africa’s poverty trap. Brookings Papers on Economic Activity, 35(1), 117–240.
Berger, T., & Bristow, G. (2009). Competitiveness and the benchmark-ing of nations: A critical reflection. International Advances in Economic Research, 15, 378–392.
Blenford, A. (2009, September 21). Bold Rwanda takes broadband leap. BBC News. Retrieved from http://news.bbc.co.uk/2/hi/8266290.stm
Bremer, T. (2002). Der wirtschaftliche aufstieg suedostasiatischer laender: Geographische grundlagen und wirtschaftliche strategien. Universitaet Hamburg.
Cammack, P. (2006). The politics of global competitiveness. Papers in the politics of global competitiveness. Manchester Metropolitan Univer-sity, Institute for Global Studies.
Central Intelligence Agency. (2010a). The world factbook. Retrieved January 12, 2011, from https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
Central Intelligence Agency. (2010b). The world factbook. Retrieved January 11, 2011 from https://www.cia.gov/library/publications/the-world-factbook/fields/2046.html
Cho, D.-S., & Moon, H.-C. (2007). A strengthened tool for analyzing national competitiveness. The IPS National Competitiveness Research 2007 report (pp. 41–61).
Conseil de Concertation des Organisations d”Appui aux Initiatives de Base (CCOAIB). (2011, March). CIVICUS Civil Society Index Analytical Country Report for Rwanda. Kigali, Rwanda: CCOAIB.
East African Community. (2011). Towards a Common Market. Retrieved March 17, 2011, from http://www.commonmarket.eac.int/
Economist Intelligence Unit. (2010). Country report—Rwanda. Lon-don, England: Economist Intelligence Unit.
Fiels, G. S. (1994). Changing labor market conditions and economic development in Hong Kong, the Republic of Korea, Singapore, Taiwan and China. World Bank Economic Review, 8(3), 395–414.
Fripp, C. (2009, December 14). Rwanda speeds up Internet con-nectivity in Kigali. IT News Africa. Retrieved October 10, 2012, from
Lena Ulrich is a research associate at J.P. Morgan Asset Management in New York, conducting fundamental
research in the Biotech and Pharma sectors. Previously she has worked at Credit Suisse HOLT, an equity valuation
team that delivers macroeconomic insights to institutional investors. She holds a dual degree from ESB Business
School, Germany, and Northeastern University, Boston. In 2010, she spent two months in East Africa researching
local economic conditions and conducting interviews with government officials, private-sector representatives, and
investors.
Ronald S. Thomas is senior lecturer in global management in the International Business and Strategy Group,
D’Amore-McKim School of Business, Northeastern University. He received his doctoral degree in psychological
anthropology from Harvard University. He has also held appointments at the Fletcher School of Law and Diplomacy
at Tufts University and at Hult International Business School. He has received several awards for teaching excel-
lence. His research interests center on national competitive strategies, comparative management, and the impact
of culture on international management.
242 FEATURE ARTICLE
Thunderbird International Business Review Vol. 56, No. 3 May/June 2014 DOI: 10.1002/tie
Singapore Department of Statistics. (2014, March 17). Time Series on Per Capita GDP at Current Market Prices. Retrieved March 17, 2014, from http://www.singstat.gov.sg/statistics/browse_by_theme/economy/time_series/gdp.xls
Statistisches Bundesamt Deutschland. (2011). Ruanda. Retrieved June 10, 2011, from Informationen aus internationalen Datenquellen: http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/DE/Content/Statistiken/Internationales/InternationaleStatistik/Land/Afrika/Ruanda,templateId=renderPrint.psml
Transparency International. (2010). Corruption perceptions index 2010 results. Retrieved December 11, 2010, from http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
United Nations Development Programme (UNDP). (2010). Human development report 2010. New York, NY: Palgrave Macmillan.
US Agency for International Development. (2001). Civil society in Rwanda: Assessment and options. Washington, DC: Author.
Van der Walle, N. (2001). African economies and the politics of per-manent crisis, 1979–1999. Cambridge, England: Cambridge University Press.
Vietor, R., & Thompson, E. (2007). Singapore Inc. Boston, MA: Harvard Business Publishing.
World Bank. (2009). Doing business 2010. Reforming through difficult times. Washington, DC: World Bank, IFC, and Palgrave Macmillan.
World Bank. (2010). Doing business—measuring business regulation. Retrieved December 6, 2010, from Economy rankings: http://www.doingbusiness.org/
World Bank. (2011). World dataBank. Retrieved March 1, 2011, from World Development Indicators (WDI) & Global Development Finance (GDF): http://databank.worldbank.org/ddp/home.do
National Institute of Statistics of Rwanda. (2012). Tremendous growth in savings culture in Rwanda. Retrieved March 17, 2014 from http://www.statistics.gov.rw/publications/article/tremendous-growth- savings-culture-rwanda
New Times Rwanda. (2008, May 24). Forget about Africa’s “lost decades,” we’re marching on, Kagame tells Asians. Retrieved January 3, 2011, from http://www.newtimes.co.rw/news/index.php?a=6598&i=13540
Porter, M. (1990). Competitive advantage of nations. New York, NY: Free Press.
Pro€Invest. (2007, June 27–29). Regional investment conference tourism: East Africa and the Indian Ocean: Country profile: Rwanda. Retrieved January 31, 2011, from http://www.bk-conseil.com/ espaceinformation/documentation/ tourism/Rwanda_Country_Profile.pdf
Rwanda Development Board. (2010a). Investing in Rwanda—an over-view. Kigali, Rwanda: Author.
Rwanda Development Board (2010b). Interview with senior official. Kigali, Rwanda: Author.
Rwanda Private Sector Federation. (2010). PSF 10th anniversary book. Kigali: Private Sector Federation Rwanda.
Sala-i-Martin, X., Blanke, J., Drzeniek Hanouz, M., Geiger, T., & Mia, I. (2010). The global competitiveness index 2010–2011: Looking beyond the global economic crisis. In K. Schwab (Ed.), The global competitiveness report 2010–2011. Geneva, Switzerland: World Economic Forum.
Schwab, K. (2010). The global competitiveness report 2010–2011. Geneva, Switzerland: World Economic Forum.
Sezibera, R. (2010, October 19). The success story of Rwanda’s health sector. Retrieved June 8, 2011, from Afroline—The voice of Africa: http://www.afronline.org/?p=9624