national industrial policies in the regional industrialisation

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Rwanda Governance Board Ikigo cy’Igihugu Gishinzwe Imiyoborere Office Rwandais de la Gouvernance Dr. Félicien USENGUMUKIZA D/CEO, Research and Monitoring Rwanda Governance Board (RGB) Nairobi, June 24 th 2013 National Industrial Policies in the Regional Industrialisation Framework: How to Create the Linkages? The Case of Rwanda

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Page 1: National Industrial Policies in the Regional Industrialisation

Rwanda Governance Board

Ikigo cy’Igihugu Gishinzwe Imiyoborere

Office Rwandais de la Gouvernance

Dr. Félicien USENGUMUKIZA

D/CEO, Research and Monitoring

Rwanda Governance Board (RGB)

Nairobi, June 24th 2013

National Industrial Policies in the Regional

Industrialisation Framework: How to Create the

Linkages?

The Case of Rwanda

Page 2: National Industrial Policies in the Regional Industrialisation

Industrial Sector in Rwanda

The industrial sector is currently small, contributing on average around 15 per

cent of GDP annually;

In order to reach the Rwanda Vision 2020, it requires the share of industry to

increase to 26% of GDP

Industry currently employs just 4 per cent of the workforce. This also

requires the industrial transformation in order to achieve the employment

targets ofVision 2020 - non-farm employment will reach 1.4 million;

Rwanda Industrial Sector versus Regional integration: Challenges and

Opportunities :

EAC and COMESA with population of 450 million and combined GDP of close to

$500 billion. Rwandan firms have an opportunity to serve this market, but will

also face greater competition from businesses in countries with larger and

more sophisticated industrial sectors, such as Egypt and Kenya. Effective policy

is required to ensure that Rwandan enterprise can compete regionally and beyond.

Page 3: National Industrial Policies in the Regional Industrialisation

37 37 35 38 39 38 38 3632 34 32 32 33

14 1414

13 14 14 1414

15 14 16 16 16

44 43 44 42 41 41 42 4446 46 47 45 46

5 6 7 7 6 7 6 6 7 6 6 6 6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Agriculture Industry Services Adjustments

Structure of Rwanda’s GDP (2000-2012)

Page 4: National Industrial Policies in the Regional Industrialisation

Mining and

quarrying

3%

Manufacturing

43%

Electricity and

Water

2%

Construction

52%

Composition of Industrial Sector by Gross Domestic

Product, 2010

Source: MINICOM, April 2011

Page 5: National Industrial Policies in the Regional Industrialisation

Ministry of Trade and Industry Focus areas

Enabling

Business

Environment

Industrial growth for Domestic

Production and Export Diversification

SME Growth for Job Creation

Streamlining the commodity value chains

while promoting fair competition and

protecting consumers

Page 6: National Industrial Policies in the Regional Industrialisation

POLICY DESIGN: INCREASE DOMESTIC PRODUCTION FOR

LOCAL CONSUMPTION AND EXPORT COMPETITIVENESS

Time based model for providing sector-specific support

SHORT TERM MEDIUM TERM LONG TERM

Promote new

desirable sectors as

they become feasible

Reduce support to

successful sectors &

provide support to

new feasible sectors

Improve the feasibility

of desirable industries

& promote feasible

sectors

Page 7: National Industrial Policies in the Regional Industrialisation

Construction

materials, Bio-plastics

and other high tech

industries

Pharmaceuticals, Chemical

products (including fertilizers)

Textiles, Mineral processing, Construction

materials, Dairy, Agro-processing, Diversified

Tourism

Tea, Coffee, Mineral and Tourism

2010

2015

2020

Cluster Progression Ladder, 2011 - 2020

Commodities &

services

+ Processing & value

Addition

+ Low tech Manufactures

+ Medium to High Tech

Manufactures

DIVERSIFICATION AND VALUE ADDITION

Page 8: National Industrial Policies in the Regional Industrialisation

Priority areas of intervention in Rwanda’s Industry

sector

1. Infrastructure

2. Human Resources

3. Improved Access to Finance and Investment

4. Trade Facilitation

5. Technology, Research and Innovation

6. Raw Materials and Industrial Inputs

7. Regulatory Environment

8. Environmental Sustainability

Page 9: National Industrial Policies in the Regional Industrialisation

National Industrial Policies

Regional Industrialisation Framework

Page 10: National Industrial Policies in the Regional Industrialisation

EAST AFRICAN COMMUNITY

INDUSTRIALISATION POLICY 2012 - 2032

The mission of the EAC Industrialization Policy (2012-2032)

is “to create a market driven, regionally and

internationally competitive and balanced industrial

sector based on the comparative and competitive

advantages of the EAC Region”.

Page 11: National Industrial Policies in the Regional Industrialisation

1. Gains from inter-industry trade reflect comparative advantage.

2. Gains from intra-industry trade reflect economies of scale (lower costs) and widerconsumer choices.

3. The monopolistic competition model does not predict in which country firmslocate, but a comparative advantage in producing the differentiated good will likelycause a country to export more of that good than it imports.

4. The relative importance of intra-industry trade depend on how similar countries

are.

• Countries with similar relative amounts of factors of production are predicted

to have intra-industry trade.

• Countries with different relative amounts of factors of production are predicted

to have inter-industry trade.

Intra-industry trade, a challenge for African Region

According to standard industrial classifications, about 25% of world trade is intra-industry trade.

Page 12: National Industrial Policies in the Regional Industrialisation

Comparative of Industrialization between Africa and East Asia

in 1970-2010

1970 1980 1990 2000 2010

AfricaEast

AsiaAfrica

East

AsiaAfrica

East

AsiaAfrica

East

AsiaAfrica

East

Asia

Nominal DGP

per capita

(US$)

246 335 900 1,329 780 3018 740 4731 1701 8483

Share in world

output (%)2.75 9.83 3.65 12.94 2.22 18.14 1.85 21.53 2.73 20.69

Share in global

exports (%)4.99 2.25 5.99 3.74 3.02 8.06 2.31 12.02 3.33 17.8

Source: UNECA, Economic Report on Africa, 2013

Page 13: National Industrial Policies in the Regional Industrialisation

Resource-based industrialization in East African Region

To consider global, regional and national dimensions of linkage;

Given the diversity of resource endowments, social and economic

backgrounds, East African Region can develop both comparative and

competitive advantage in industrial sector;

By developing backward linkage supply firms to the commodity sectors and

resource-processing industries, East African countries can help to diversify

their technological capabilities and skills base, deepening their industrial

structure;

Moreover, the natural resource sector’s need for infrastructure (to extract

and transport the commodities) enhances the potential for linkages

To develop both intra and inter-industry trade and trade diversification.

Page 14: National Industrial Policies in the Regional Industrialisation

… and this requires the strong linkage

For resource-based industrialization, the linkage is

required both regionally and sectorially.

Spatial Linkages:Infrastructure (transport, power, ICT) and

LED

Mining: Concentration, smelting, refining

=> metal/alloy

Forward Linkages:Intermediate products =>

Manufacturing; Logistics ; other sectors (agriculture

, forestry, fisheries, etc.)

Fiscal linkages:Resource rent capture &

deployment: long-term human & physical infrastructure

development

Backward LinkagesInputs:

Capital goodsConsumables

Services

Knowledge LinkagesHRD: skills formation

R&D: tech developmentGeo-knowledge (survey)

Source: Africa Task Force Meeting: Preparing for TICAD V – Agenda

New York, November, 2012

Page 15: National Industrial Policies in the Regional Industrialisation

Thank you for your Attention!