“Analysis of the impact of national investment incentives on the flow of foreign direct investment in Rwanda”: from 2008 TO 2012.

Abstract

Foreign Direct Investment is one crucial development strategy for a country like Rwanda. It attracts foreign capital, brings to the country international level technical, technological and resource expertise. In order to attract such capital, there is need to establish sound measures. Rwanda has put in place investment incentives and has done remarkable efforts in order to make the country the most preferable destination for foreign investors.

This research’s main objective was to analyze the impact of national investment incentives on the foreign direct investment in Rwanda between 2008 and 2012. Specific objectives were to find out which incentives have been more attractive to foreign investors, to find out if there are other factors that might have attracted foreign investors in Rwanda, to find out which sectors have attracted more FDIs in the country, to find out how foreign investors got the information about investment opportunities in Rwanda and to find out challenges they face and additional incentives they would like to suggest for a better investment climate. The methodology used in this research was to collect primary data through questionnaire directed to foreign investors and secondary data through information got from the Rwanda Development Board and the National Institute for Statistics in Rwanda as well as books, reports, journals, articles related to this topic.

The study revealed that investment incentives such a tax exemptions on imported goods, incentives given to construction projects and investment allowance to investment offered to investments in rural areas and in priority sectors have a great positive impact on attracting Foreign Direct Investment in Rwanda when combined with other factors such as political stability, zero tolerance to corruption, good economic growth and business supportive government. Foreign businesses face some challenges too; among others, insufficiency and high cost of electricity, insufficiency of skilled human resource force and high cost of transport. Additional incentives such as offering preferential tariff rates on electricity and allow more expatriate staff in country were also proposed. Several recommendations were made including revision of the incentives such as research and training expenses incentive, and revise the conditions for profits discount related to employment incentives and to improve advocacy and investment aftercare service offered to foreign businesses operating in the country.