SEVEN Fund Student Essay Competition - Turning President Kagame's Vision into Practice

"Where there is no vision, the people perish, but he that keeps the law, happy is he" Prov.29:18

This is an essay I submitted for a competition organized by Seven Fund www.sevenfund.org. We had to take the role of president Kagame's main policy adviser and design a policy action plan to turn his vision for the country into practice. He believes that the advancement and development of entrepreneurship should be the main engine for sustainable development and only through this development approach the full potential of the Rwandan people can be realized!
Here is the essay. I welcome and comments, suggestions and opinions.
Due to the lack of time (I got to know about it just a few days ago), my preparation wasn't as extensive, as I would like it to be, but this is at least an initial step.
Enjoy reading! :)



Your Excellency Mr. President Kagame,

In the light of our discussions on the specific policies which Rwanda needs to undertake in order to achieve the goals set in 'Vision 2020' and the Millennium Development Goals, as well as the goals set in the EDPRS (Economic Development Poverty Reduction Strategy) 2008-2012, I have designed the following 24-point policy plan. It was created to cover extensively the top priorities set by you as stated on various occasions. Their focus is unquestionably the development and expansion of the private sector with strong emphasis on entrepreneurship development. These policies do not aim to encompass all possible approaches to achieving the goals, but they are comprehensible enough to grasp some of the key areas of focus in the process. An important feature is the goal for innovation and diversification of options in the process of development.

Our core goal is the eradication of extreme poverty and provision of opportunities for all Rwandan people to develop their full potential and live better, more sustainable lives. The way forward to make this goal a reality constitutes of several important steps, which all aim to empower the disadvantaged and underprivileged groups of society. The first set of policies targets the strengthening and improvement of microfinance within Rwanda, and the second set of policies acknowledges various challenges and opportunities in the development process and maps out ways to overcome the challenges and utilize the opportunities presented to our country.

Our government recognizes the challenge to find feasible development options that take into account the specific realities of Rwanda and in particular the scarcity of skilled labor, lack of basic infrastructure and very low levels of FDI. In order to overcome these challenges, we need to emphasize the central role that microfinance institutions (MFIs) should play in all our efforts to eradicate extreme poverty. MFIs have already proved their efficiency in alleviating poverty and providing opportunities for development, especially to the poorest. There are several aspects in which the government can play an active role in further enhancing their role and facilitating their actions:


1. We need to continue pursuing a strongly pro-poor oriented economic policy and recognize the key role of microfinance services in tackling poverty.
2. We need to continue to encourage MFIs to design poverty-focused microfinance models which will deliver appropriate financial and non-financial products to the most needy. The government can facilitate the provision of some of these services. In order for this to happen, MFIs operating around Rwanda need to have direct connection with the government to inquire information or any other necessary assistance. Therefore, we need to assign a special position within the Ministry of Commerce, Industry, Investment Promotion, Tourism and Cooperatives (MCIIPTC) to facilitate the connection and coordinate actions.

3. The government needs to implement solid macroeconomic policies, avoiding high inflation. It is also advisable that it liberalizes the interest rates for microfinance, using competition rather than interest rate ceilings to encourage efficiency and lower interest rates over time.

4. It should also undertake the promotion of performance indicators and standards that encourage transparency and sound performance across the range of institutions engaged in microfinance. This will be accomplished through the establishment of a specialized microfinance rating agency. Simple and rigorous reporting requirements must be set.

5. In order to help MFIs overcome the difficulties they face in achieving financial sustainability, we need to recognize that microfinance is a vital part of the financial system and to get more involved by deploying the government’s financial service infrastructures in a way increasingly intended to meet the demand of most citizens. We need to assure the integration of MFIs into domestic financial markets. We can permit the regulated MFIs that meet prudential standards to mobilize deposits from the public, with more liberal treatment of savings mobilization from MFI borrowers.

6. Another useful measurement can be fair tax treatment, including temporary tax incentives for MFIs undertaking the costs of converting to formal, regulated structures.

7. The government is also responsible for making the public familiar with the way MFIs operate and explain to them the reasons for the higher interest rates for micro-loans in comparison with those for corporate finance.

8. Information and communication technology is the key to facilitating and expanding the scope and breadth of MFIs and their overall impact on poverty alleviation as well as the overall long-term development of the country. In this respect, the government should encourage and invest in providing the technological tools necessary to improve the management of microfinance projects. The most feasible choice will be enhanced technological transfer from donor countries, especially China. We also need to ensure, by monitoring and directing the technological assistance, that it reaches the most vulnerable and destitute. Therefore, close contact with MFIs working on the ground is essential.

9. Special attention must be turned to the needs of women and other vulnerable groups, like orphans or disabled people. Only by acknowledging their specific needs and potential, can Rwanda meet its MDG goals and develop in a sustainable manner. Women’s political empowerment in Rwanda has become a landmark of its development and pioneer spirit, but much more effort needs to be put in empowering women economically. The threat of the ‘feminization of poverty’ in Rwanda is evident. The marginalization of orphans and other disadvantaged groups from the development process is also apparent. Therefore, the government must take measures to transform this disastrous trend. MFIs are especially effective in targeting disadvantaged groups but more effort is needed to ensure the accessibility of micro-credits to women and orphans and their ability to fully benefit from these credits. The government needs to cooperate with MFIs to ensure this. We must take the initiative to gather information on women’s needs and design products specifically to meet those needs. We must ensure that women and women’s perspectives are brought into the governance, management, and implementation of microfinance programs.

The government’s main priority has to be investment in information and communication technologies, thus leading Rwanda towards becoming a knowledge-based economy. We will need the help of partners and great efforts on our side to succeed. But with the right policies in place, this is by no means an unachievable goal. These policies should be designed to tackle the most pressing issues impending Rwanda from achieving rapid and sustainable development. These include lack of skilled labor, lack of infrastructure, especially transport, lack of sustainable energy and lack of technology. Therefore:

10. The government needs to prioritize national policies to build productive capacity in the national development plans, for infrastructure as well as vocational and entrepreneurial skills.

11. To improve the efficiency of tax systems and collection to maximize the contribution of domestic resources to public investment.

12. We must vigorously pursue to attract more investment, both ODA and FDI. The government must turn special attention to China as a source for technological transfer (ICT) and as an infrastructure investor. Rwanda-China relations must be strengthened. Rwanda must continue the current educational exchange program with China which provides technology-related training courses to Rwandan students, who in return need to serve work in Rwanda. It needs to find more partners willing to invest in the development of productive capacities, including productive resources, technological development and innovation in both agricultural and non-agricultural sectors, entrepreneurial capabilities and production linkages, and related resources, especially infrastructure and institutions. In this respect, China and other significant partners can play an even more major role and bring know-how, provide the necessary funds to stimulate research and development and investment in education (not only primary, but also secondary and tertiary)! To facilitate this process, we must design an attractive plan to attract China and other partners.

13. In this respect, investment in sustainable energy sources is essential for the overall development. We must define national energy access goals and targets in our macro-development strategies, policies and programs, and estimate the costs to meet the targets. Such clear policies will invite investment into the field. Tax incentives to support the deployment of modern energy technologies will be crucial. We need to reform subsidies to support sustainable development and offer loan guarantees to SMEs building energy businesses in Rwanda. Training and cooperation with other partners must be a priority for building capacity and attracting investment.

14. Public-private partnerships that assist farmers with access to credit, technical assistance, c capacity building, marketing information and crop and product diversification must be established and encouraged. We should also encourage joint research initiatives in different areas, both within the region or internationally and stimulate regional technological sharing.

15. Rwanda needs to extensively research and map out its industries with strong comparative advantages. New industries with the potential to have comparative advantages must be acknowledged and developed in order to stimulate economic diversification.

16. Promoting a green revolution in basic staples should be a priority for the government and we need to persuade partners and donors to share more efficient and environmentally friendly technologies with us.

17. To transform Rwanda into an entrepreneurship country, we need to take a step away from the social welfare and subsidy approach, which doesn’t create a knowledge-based economy. The government needs to remove itself from direct lending to poor people and instead, invest in delivering more training-related services to them, thus empowering them.

18. One way to deliver training and create a favorable environment for research can be the establishment of co-joint workshop training centers, which will be equipped and managed by both Rwandan and Chinese (or others). These centers will provide entrepreneurial skills training with the possibility for connection with MFIs, as well as help for existing small and informal activities to be transformed into organized small-scale enterprises, which will have a greater potential to develop technological capabilities and innovate. We must allocate a greater budget for research and development.

19. Our government needs to encourage and stimulate innovation (in microfinance and economic diversification), which will be the key to any efforts to enhance the economic performance of the country and ensure its long-term sustainable development. In order for this to happen, the government has to ensure the strengthening of the capabilities of entrepreneurs (management and organization) and the labor force (crafts and technical skills, design and engineering skills) as well as the provision of certain financial incentives to stimulate these ( e.g. credit subsidies, tax incentives, and matching grants for innovation projects).

20. We need to explore the great opportunities presented by the so-called “creative economy”. It refers to the interface among creativity, culture, economics and technology, as expressed in the ability to create and circulate intellectual capital, which in turn has the potential to generate income, jobs and export earnings while at the same time promoting social inclusion, cultural diversity and human development.

21. In order to achieve this, we should undertake various initiatives. First, establish a body in charge of mapping inventors of cultural assets and industries, market development through promotion of the creative industries both domestically and internationally, outlining the challenges that inventors and artists face (e.g. lack of financial sustainability, low competitiveness) and finding creative ways to overcome them. Value chain analysis must be used to identify the creative products and services with particular competitive advantages or that are capable of being developed as niche markets in particular situations. The body will be assigned with the task of developing strategies for expanding the scope of creative industries and identifying the strong areas of Rwanda. It will be responsible for establishing workshop centers (both in urban and rural areas) where more people will have the chance to undergo training and become employed in one of the industries. This should be a joint effort of the government (Ministry of CIIPTC), private businesses, NGOs (especially MFIs), international donors and civil society.

22. To facilitate this process, we need to take urgent measures and press for the establishment of copyright legislation and enforcement, which in turn will ensure the artists' intellectual property protection, benefits and earnings. Another possible way to stimulate artists will be by supporting them directly (via fiscal means) or indirectly (through encouragement of private-sector support). The expansion of digital capacity and know-how, as well as data collection and institutional building will be important parts of the process as well.

23. The development of creative industries will facilitate the process of full integration and empowerment of the vulnerable groups discussed in point 9.

24. A database with illustrative cases, best practices, and even lessons from failed projects, both in microfinance and creative economy etc., must be compiled by the government in cooperation with NGOs etc. to serve as guidelines for action.

I sincerely hope that Your Excellency will be content with the outlined policy action plan. I will be more than happy to further discuss any questions or comments that you might raise. I believe that our united efforts will bring Your vision for this nation into practice and that Rwanda will reap the fruits from its hard work!

With respect,

Ivana Koleva, Policy Advisor

06.12.2008

Kigali, Rwanda



References:

1. “Making Globalization Work for the Least Developed Countries”, UNDP 2008.
2. Sam Daley-Harris, “Pathways out of Poverty”, Kumarian Press Inc., 2002.
3. “Creative Economy Report 2008”, UNDP, UNCTAD, 2008.
4. MDG report Rwanda, 2007.