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Symposium 2011

Proposal - The Rwanda Experience

The Challenge

The world may be on the cusp of an era of enormous capital investments. This boom will be driven by growth in emerging markets as well as the need to replace and repair part of the capital stock in de ...

The world may be on the cusp of an era of enormous capital investments. This boom will be driven by growth in emerging markets as well as the need to replace and repair part of the capital stock in developed economies. Demand for sustainable infrastructure in the broadest sense will be particularly high and it will come at a time when strained public balance sheets call for austerity, leaving little room for public investment programs.

The Government of Rwanda (GoR) has embarked on an ambitious program to reconstruct and restructure state institutions, systems, procedures, processes, restoring law and order and putting in place an enabling environment enhancing private sector growth. Our economic growth of 8% in the last 5 years has led to significant need for additional infrastructure across a wide array of sectors, notably energy and transport. Supporting this, the GoR has systematically developed and introduced policies to increase efficiency of public investments and bring in private investments through PPPs in a wide array of physical and social infrastructure sectors.

  • Capacity Building;
  • Encouraging the inclusion of SMEs in consortia bidding for large PPP projects ;
  • A comprehensive financial PPP framework targeting project development costs and project finance with long term maturities;
  • Enabling regulatory framework for PPPs;
  • Creating an ecosystem to support large projects;
  • Stimulating cross border infrastructure and connectivity.

I. Human Capacity Building

Rwanda understands that effectiveness and efficiency of a country’s public sector is vital to the success of the national development agenda. This philosophy gave rise to the process of developing a Multi Sector Capacity Building Program (MSCBP) which would coordinate and guide capacity building interventions across the public sector, private sector and civil society. Though this program, experts have been hired across government including PPP experts, technical advisors for key ministries (agriculture, infrastructure, mining and natural resources), etc. This will significantly enhance the GoR’s ability to implement innovative and more complex PPPs.

II. Encouraging local SMEs to participate in international consortia bidding for large infrastructure projects

Currently over 80% of Rwandans are engaged in agricultural production. The SME sector, including formal and informal businesses, comprises 98% of the businesses in Rwanda and 41% of all private sector employment — though the formalized sector has much growth potential with only 300,000 currently employed (as of June 2010). Thus, a SME policy was approved in June 2010, to regulate the proliferation of SMEs which would strengthen existing SMEs and at the same time lay grounds for establishment of new ones. In addition, this subject is mentioned in the forthcoming PPP law where the GOR strongly encourages international companies to include local SMEs in their consortia.

Encouraging local SMEs to participate in international consortia bidding for large infrastructure projects

  • A comprehensive financial PPP framework targeting project development costs and project finance with long term maturities

The GoR is dependent on external grants and borrowing for 48% of government revenue. With our total debt at almost $900 million, almost 94% is concessional. This is primarily because the GoR has demonstrated effective and targeted use of aid and grant money over the years. More recently, Rwanda was only one of 2 countries to be ranked ‘A’ by the OECD on aid effectiveness. This performance puts Rwanda in a good stead to secure further concessional financing for infrastructure projects going ahead. In addition, after the impending re-classification by the IMF this quarter, GoR will be allowed to tap more flexible and concessional loans to help finance its infrastructural needs. The GOR is currently involved in the design of a comprehensive PPP financial framework targeting a project facilitation facility (to compensate the high project development costs) and project finance with long term maturities. This is executed in close coordination with the World Bank.

III. Enabling regulatory structure for PPPs

The GoR has currently finalized a draft PPP law that will encourage the regulation of PPPs in a fair and transparent manner and will provide more clarity to potential investors. It is expected this law will be enacted by parliament in the beginning of next year. Key components include details on competitive and transparent bidding process, Government financial contributions that may be expected by private investors and clauses on providing legal comfort to investors respecting PPP agreements and safeguarding their investments in the country.

IV. An holistic and comprehensive approach of large infrastructure projects

The Government of Rwanda understands that large infrastructure projects cannot be implemented in isolation from other social and environmental considerations – for an airport to be successful, there needs to be a holistic and comprehensive approach. This includes building hotels, investing in the national carrier and having a tourism master plan to encourage growth in passenger numbers in Rwanda.

In addition, the Kigali Convention Center (already under construction), one of the largest of its kind in East Africa will further help boosting visitor inflows. The Rwanda Development Board in coordination with the Ministry of Finance and relevant ministries (infrastructure and others) are constantly looking at the overall strategy and ensuring the linkages are in place to support large infrastructure projects. This also helps in convincing potential investors and financiers on the long-term viability of such projects.

V. Promoting benefits of large infrastructure projects across the region

Rwanda is an active member of the East Africa Community and the Great lakes region. The GoR has already been working closely with neighboring governments in the areas of power (NELSAP regional grid) and roads (connecting the resource rich Congo with the ports in East Africa). Similarly the new international airport is expected to provide an economic boost not just for the Republic of Rwanda, but also to neighboring countries such as DRC, Burundi and Tanzania. The new airport is projected to serve as a major hub for the East African region, connecting passengers from here to the rest of the world. A similar approach is being taken on the proposed railway project, (currently under discussion with the governments of Tanzania, Burundi and others). A multi-billion dollar project, the investment can be recovered only through making it accessible to a larger market (120 million people in EAC) and unfettered access to ports in Kenya and Tanzania. The policy for the rail project and the enabling regulation is likely to be finalized in 2012. To this end the EAC is currently assessing regional infrastructure funds both for project development costs and project finance with long term maturities.

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