Cablegate: Rwanda Economic Review

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SENSITIVE
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E.O. 12958: N/A
TAGS: ECON EFIN EINV ENRG EPET ETRD PGOV KIDE OPIC
RW
SUBJECT: RWANDA ECONOMIC REVIEW

REF: KIGALI 623

1. (U) This issue of the Rwanda Economic Review Covers:

Development Issues

-- Government of Rwanda (GOR) consolidates seven agencies
into the Rwanda Development Board (RDB)
-- World Bank approves $24 million for ICT infrastructure
-- GOR offers subsidies to local exporters
-- Central Bank provides guarantee support to microfinance
firms

Commercial Issues:

-- Hong Kong based New Century Development LTD plans new 5
star hotel in Kigali
-- Chinese owned A-link Technologies opens cell phone
assembly plant
-- South African Blue Financial Services opens branch in
Kigali
-- Coffee sees 23 percent price drop and lower than
anticipated production

Economic Indicators:

-- Inflation continues to climb

Development Issues
------------------

2. (U) RDB: The GOR cabinet has approved the consolidation
of seven government agencies under the newly formed RDB. The
consolidated agencies include the Investment Promotion Agency
- RIEPA, the Office of National Parks and Tourism - ORTPN,
the Information and Technology Authority - RITA, Human
Resource Development Agency - HIDA, the privatization
secretariat, the Center for Support to Small and Medium
Enterprise - CAPMER and the Commercial Registration Agency -
RCRSA. U.S. businessman Joe Ritchie has been appointed CEO
of RDB and the former agency directors of RIEPA, RITA and
ORTPN have been named as Deputy CEOs. RDB will report to the
Office of the Presidency and appears to be focused on
bolstering foreign direct investment (FDI) into Rwanda. FDI
in Rwanda has lagged behind other countries in the region
despite aggressive marketing by President Kagame (reftel).
It is so far unclear if the formerly autonomous agencies will
be restructured, or disappear entirely.

3. (U) World Bank: The World Bank will provide $24 million
for the Regional Communication Infrastructure Rwanda Project
(RCIPRW). The fund is part of $424 million allocated to
Southern and Eastern Africa intended to extend access to
broadband communications and expand the deployment of
e-government. The program complements the submarine fiber
optic cable projects being implemented along the East coast
of Africa to link the region into the global communications
network.

4. (U) Export Subsidies: The Rwanda Investment and Export
Promotion Agency (RIEPA - now part of RDB) has launched the
Rwanda Competitiveness for Export Fund (RWACEF) with the aim
of assisting local export companies enter new markets by
subsidizing some export costs such as airfreight (where high
costs have made exports less competitive). The pilot project
with initial funding of $300,000 will subsidize up to 65
percent of export related costs for targeted export
industries such as cut flowers.

5. (U) Microfinance guarantees: The Rwanda Central Band
(BNR) has launched a loan guarantee program to facilitate
commercial bank lending to micro-finance organizations. The
Fund - Society Mutuelle de Garantie pour le Re-financement
(SMGF) - will initially be capitalized at $900,000.

Commercial Issues
-----------------
6. (U) New Five Star Hotel Planned: New Century
Development Limited, a Chinese company based in Hong Kong
plans construction of a new five star hotel in central
Kigali. The hotel will reportedly have 200 rooms and cost
$40 million. Billy Y.T. Cheung CEO of Africa Star Limited, a
subsidiary of New Century Development, told reporters that
construction will begin in January 2009 and take two years to
complete. According to Cheung, the hotel will be the Chinese
company's first investment in Africa.

7. (U) Cell phone assembly: A-link Technologies, a
subsidiary of Beijing-based China Link, has opened a cell
phone assembly plant in Kigali with an initial investment of
$.5 million and a production capacity of 600 mobile phones
per day (current production is 200 per day). The phones,
which sell at $39 will compete against imported phones from
Nokia, Motorola and Samsung, which currently sell at an
average price of $40 per phone. A-link is also planning to
assemble radios in Rwanda.

8. (U) Microfinance: South African-owned Blue Financial
Services has opened a branch in Kigali and plans to offer
microfinance loans and services. Investor Relations Manager
Morne Reiders said the investment in Rwanda was partially
supported with assistance from the Overseas Private
Investment Corporation (OPIC). The Rwandan Central Bank has
approved a license for Blue Financial Services to operate as
a non-deposit-taking micro-finance institution.

9. (U) Coffee: World coffee prices have fallen 23 percent
in the last month negatively affecting Rwanda's coffee export
earnings. Coffee is currently selling at $1.17 per pound
compared to $1.53 per pound a few months ago (Note: Rwandan
speciality coffees are selling well above this price level -
top selections from the Cup of Excellance competition were
recently auctioned for as much as $18 per pound. End note) .
Rwandan production will also be lower than expected at 23,000
tons for the year compared to 29,000 tons that were
previously projected. Coffee is one of Rwanda's top three
export products; approximately 20 percent of Rwanda's coffee
is exported to the United States.

Economic Indicators
-------------------

10. (U) Inflation: The Rwanda National Institute of
Statistics in September reported ongoing strengthening of
inflationary pressures. The annualized Consumer Price Index
(CPI) general index increased to 21 percent for the 12 months
ending in September - up from 13 percent in January and 18.3
percent in July. Prices for bread, cereals, meat and fish
all increased by over 35 percent compared to last year.
Transportation, housing, water and electricity costs also
grew by over 20 percent. Central Bank Governor Francois
Kanimba blamed high global commodity prices for the rising
inflation.

SIM

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