Rwanda Economy

27 January 2010
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MACROECONOMIC PANEL
 90% of the Rwandan population works in agriculture, which contributes to 39.4% of GDP.

The Rwandan economy is based on small farms that practice subsistence farming and the cultivation of tea and coffee.
Rwanda, however, has no food self-sufficiency. Due to the high population density (343 p / sq km - the highest in continental Africa), the management of the land has always been the main cause of internal conflicts. Since 2005 the Laws on land use have reintroduced sharecropping, together with a plan that pools held and planning of the crops, which caused the forced displacement of peasants from their lands, with opposition particularly strong in the north-west .

The mining industry (cassiterite, wolframite, gold, sapphires and coltan) provides an important contribution (98 million U.S. $ in 2008, 5% of earnings in foreign currency). Thanks to the abundance of rivers and lakes, Rwanda could become a major producer of hydroelectric power and thus replace coal in households without the exploitation of forests.

Tourism is in expansion, however,and hospitality facilities are improved and upgraded. Today the country is considered safe and in fact tourism is the largest generator of foreign currency (U.S. $ 214 mln in 2008, +54%). As regards the export of the country's main trading partners are China, Germany and the United States, for the import instead Kenya, Germany, Uganda and Belgium.

With Belgium was signed in 2007 a four-year trade agreement for cooperation in agriculture, for about 30 million per year. Since the years of genocide, Rwanda has made great economic progress. With the World Bank has implemented an ambitious program of privatization. It 's also part of the HIPC (Heavily Indebted Poor Countries) IMF, for which he obtained from the Paris Club a total forgiveness of foreign debt.
The Rwandan government is implementing a series of development programs aimed at transforming the nation from a country of subsistence farming to a knowledge-based economy.

In September 2006, the World Bank has provided a strong benefit to Rwanda (U.S. $ 10 million) through the IDA, for the development of a computer network and telecommunications. Despite this, the Rwanda remains among the countries with the greatest inequalities between social classes. There are no intermediate classes for which we find the rich and the poor.
The average age of life is still very low about 44 years and one third of the population suffers from food shortage, according to the latest report of UNDP.

Specifically:
The economic base of the country is constituted by 'plantation agriculture, which occupies most of the work force and which was first introduced in colonial times by the Germans and then by the Belgians. 
It is currently the subject of government plans for development, financed by foreign aid, which have as objectives:
 * Increased productivity;
* The extension of arable land (which are still low compared to the population);
* The intensification of commercial relations.

The sector has developed very slowly because of backwardness of the structures. The productions are insufficient to the needs of the population. They are grown for the domestic market sweet potato, cassava, potatoes, sorghum, corn and other agricultural products as vegetables, for export coffee, tea, pyrethrum, tobacco, peanuts, soybeans and other plants for the extraction of oil. The cultivation of rice and sugar cane gave unsatisfactory results.
The forests are largely untapped and cover 21% of the territory. The timber is used only as fuel. The breeding is favored by the vast spaces of prairie and savanna, from an adequate level of rain and limited spread of mosquito-tse-tse. It is however limited by lack of water, quality feed and veterinary services are adequate to cope with cyclical epidemics. Although the herd has been running an outstanding, meet its own requirements. Especially cattle and goats are raised, especially for milk. Fishing is an activity of minor importance, practiced mostly in Lake Kivu, but limited by the depletion of fish shoals.

OPPORTUNITIES FOR ITALIAN COMPANIES

Rwanda presents significant opportunities for Italian companies wishing to invest. The growth of gross domestic product has had a break in 2003 due to the rains and reduced foreign aid (50% budget). In general, however, is unbalanced growth, driven from construction and services while the manufacturing sector has had a recession and revenues of coffee, tea and pyrethrum have collapsed. The development of Kigali contrasts with the stagnation and sometimes with the regression of the campaigns. In the cities many small to medium retailers have closed shop due to the insolvency of customers. Moreover, the monthly salary of a teacher is about 25 €, half the salary before the genocide. Today, 8.5 million Rwandans, over one million in March 1994, following the return of refugees from the Uganda, Burundi, Tanzania and the DRC Congo.The agricultural production is not able to feed the entire population , 124mila people depend on food aid. Food availability per capita is declining while the population continues to increase.
You must therefore rely on the construction boom that absorbs a part of underemployment in the countryside.
The government is also focusing on developing services to redress the balance of trade (imports exceed exports by 25%) for this purpose is investing on both the construction of an efficient telecommunications network and roads or education, it has made to all free primary education, the target set for 2020 and that about 350 secondary schools are connected to the Internet.
There are many opportunities for both foreign and domestic investors, particularly in the areas of:
 * Tourism
* Agricultural and agro-industries
 * Utilities
* Service sector
* Production of a wide range of products for the domestic and export.

Rwanda is fully committed to promoting domestic investment and foreign in this context has commissioned a study to develop wind energy. The project is part of a series of initiatives for the diversification of energy sources. Investment opportunities in Rwanda and the better climate for investments are tangible and not futuristic.

INDUSTRY

In Rwanda there is essentially an industry which deals with mining cassiterite (from which we extract then the pond), tungsten, the Columbia, tantalite, gold, beryllium and natural gas. The latter is particularly in Lake Kivu, one of the world's reserves are considered more significant (28.3 billion cubic meters), but the extraction is hindered by lack of money. The metallurgical sector in 1982 saw the creation of the first factory for the production of tin. Other forms of industry providing small establishments for the processing of agricultural products, cement production and the manufacture of tobacco.

SECTORS IN EXPANSION

Rwanda is about to begin a program of privatization and liberalization in order to achieve sustainable economic growth. The goal is to transform the economy, which depends to 90% from agriculture into a modern system, based on new and differentiated sectors booming, firm-rooted, with capacity for investment and creating new jobs and new opportunities . The country exports: coffee, tea, tin, cassiterite and pyrethrum. Recently there has been major private investment in tourism and development of new industries, such as flowers for the export of fish and livestock, areas attractive to investors.
The Government, through the agency RIEPA (Rwanda Investment Promotion Agency) is to support investors. While the domestic trade is underdeveloped because of poverty of the population, Rwanda has a vibrant business with foreign countries despite, paradoxically, the difference between imports and exports has a negative sign, that is, capital input is less than output. Investment Law The investment code, established by law in 1998, clearly provides a guarantee of the government regarding: 1) The protection of investments; 2) The resolution of disputes between investors and the government 3) The outsourcing of funds (including capital, dividends and royalties) Other safeguards are available in the form of: Risk coverage by local insurance companies to financial risks. Activities of dispute resolution through arbitration. Rwanda is a member of the African Trade Insurance (ATI), which provides coverage against the risk of expropriation, cancellation of licenses and the restriction of imports and exports, inconvertibility and the inability to transfer the local currency to hard currency, as well as cover against the risks of war and civil. RIEPA Agency (Rwanda Investment Promotion Agency) is the point of reference for the 'ATI in the country.

TRADE AGREEMENTS

Rwanda has in force with the U.S. following the bilateral agreement: Investment Framework Agreement (TIFA), which is' designed to promote cooperation in bilateral trade and investment. ll Rwanda is a member of global and regional organizations and treaties of interest to potential investors, such as: * The African Trade Insurance Agency (ATI) * The Common Market for Eastern and Southern Africa (COMESA) * The Cotonou Agreement between the European Union and African, Caribbean and Pacific (ACP) * The International Center for Settlement of Investment Disputes (ICSID) * The Multilateral Investment Guarantee Agency (MIGA) * The Paris Convention on Intellectual Property, the Universal Copyright Convention and the Berne Copyright Convention * The World Intellectual Property Organization (WIPO) * The World Trade Organization (WTO).

THE RWANDAN TAX SYSTEM

DIRECT TAXES
Income tax Includes: the tax on corporate profits resulting from the profits of corporate enterprises, cooperatives, associations and public enterprises. The tax rate is 35% of taxable profits paid no later than 30 June of the following year. Respect of income from self-employed instead the tax is calculated on the basis of their real income or using the alleged tax scheme.
Flat-rate taxation scheme This is for anyone with a turnover that is equal to or above 36 million per year. However, legal entities or natural persons with annual turnover exceeding 36 million must pay tax under a flat tax, unless you opt for the scheme of taxation of real incomes. Under the flat tax regime, the rate is 4% of annual turnover.

Tax on earnings (PAYE)

This is a tax levied on salaries of emoluments which therefore applies to those who receive a salary. Are to be included allowances including accommodation and transportation. To determine the tax due, the taxable income is determined after deducting 20% of salary from the taxpayer's total compensation earned during a year or more or less in a period of one year. Tax calculator This tax is calculated on interest earned from loans obtained and used to make investments in companies with established residence in Rwanda or in Rwanda or the profit that includes interest on the loan invested in companies or given to self-employed, who are not resident in Rwanda or those not having their seat in Rwanda. The tax rate is 20% of taxable income, paid within 30 days from the date of acquisition of profits.
 
Value Added Tax (VAT)

 Final consumers of goods and services pay the VAT rate which is 18%. As regards goods and services consumed by privileged persons, the VAT rate is set at 0%. Privileged people are those with diplomatic status, those dealing with exports and donor-funded projects carried out under an agreement between the Government of Rwanda and donor. Moreover, all those who have a business turnover of less than 15.000.000Frw year or 3.750.000Frw in three consecutive months, which coincide with the last quarter of the year are required to register and pay VAT. Property Tax: That tax is paid on boats and motor vehicles and is proportional to engine power.

 EXCISE
This include excise duty paid on certain imported goods which is locally produced. The highest rate of duty is 70% and is paid on liquor and wine. The lowest is 5% tax paid on vehicles.

CUSTOMS DUTIES

Import duty: Import duties are paid on imported goods. The rates applicable to the import duties are listed in the book of tariffs. Currently there are four tax rates: Finished Products: 30% Semis: 15% Raw materials: 5% Capital goods: 0% Semi-finished or finished products which are considered as inputs for industries with an exploitation are taxed at 5%.

PROPERTY

The legislature of Rwanda recognizes the right of ownership. Private property, including industrial property rights, is fully protected. Are recognized and protected property rights on buildings and furniture. Soil property is not recognized as for which the government offers concessions.

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