37 Rwanda: fostering 20072012' prosperity by promoting 2004 entrepreneurship il lmI2013 Emerging from a decade marked by civil Bui ding on a 2-year consultation process, Rwanda's commitment to private war and political instability, Rwanda the government designed a long-term sector development has facilitated began a comprehensive and ambitious development strategy, Rwondo Vision growth in exports, domestic campaign in 2000 to rebuild, foster 2020, aimed at transforming Rwanda investment and foreign direct national reconciliation and drastically into a middle-income economy by investment inflows-and the reduce poverty. The government's raising income per capita from $290 to implementationofeffectivefiscal agenda gave priority to health, education, $900 before 2020.2 Introduced in 2000, policies supported by structural infrastructure, and private and financial the strategy recognized and sought to and institutional reforms. sector development, showing a overcome Rwanda's multiple development Starting in 2000, Rwanda commitment to improving citizens' living challenges-including past civil war, developed a strong institutional conditions and building a solid foundation poor governance, weak infrastructure, pipeline for designing and for reconciliation. underdeveloped financial and private implementing business regulation sectors, unemployment, overwhelming reforms. Starting early on in the reform campaign, public debt, a poorly developed education Rwanda has implemented many system, HIV and the rapid growth of a Since2004Rwandahas business regulation reforms. These have population expected to reach 13 million by substantially improved access to transformed the life of the private sector 2020. credit,streamlined procedures and made it noticeably easier to do for starting a business, reduced business. While challenges remain, the In 2001 the World Bank set up the the time to register property, country has achieved much success in Competitiveness and Enterprise Develop- simplified cross-border trade and its reform agenda since the early 2000s. ment Project, designed to help the made courts more accessible for This success stems from many factors, government establish an environment resolving commercial disputes. and Rwanda's experience may provide conducive to private sector growth and 0 Rwandaisamongmorethan35 useful lessons for other nations seeking the emergence of a more competitive economies where the executive to improve their business climate, investment climate. The project focused on branch has made private sector particularly for those coming out of developing and updating the commercial development a priority by conflict. law and supporting the government's establishing institutions whose privatization program through technical main purpose is to design and DESIGNING A STRATEGY assistance, capacity building and advice implement business regulation Between 2005 and 2011 Rwanda's rea on bank restructuring. This program reforms. GDP per capita grew by 4.5% a year, contributed to an overhaul of the reflecting a sustained expansion of country's financial sector that led to the exports and domestic investment, with recapitalization of banks, the establishment inflows of foreign direct investment also of an insurance market and the introduction increasing substantially.' In addition, of microfinance lenders. In addition, the government strengthened the the Competitiveness and Enterprise foundations of macroeconomic stability Development Project collaborated with the by implementing cautious fiscal policies World Bank's Rwanda Investment Climate supported by a number of structural and Reform Program to develop a robust reform institutional reforms. Underpinning this agenda. The project helped establish policy stance was a strong and sustained the Doing Business Unit, the institution commitment by national authorities to responsible for spearheading Rwanda's private sector development. reform initiatives, while the investment 38 DOING BUSINESS 2013 climate reform program provided technical other economies-including economies The Doing Business Unit identifies reform assistance and expertise to support the that have made some of the biggest opportunities; the technical task force implementation of planned legal, regulatory improvements in the ease of doing and the steering committee approve the and institutional reforms. business, such as Burundi, Colombia reform proposals. The annual plan for and Georgia.6 The approach has proved regulatory reforms is then communicated Rwanda's 2007 Economic Development effective in triggering reforms. In Rwanda to the cabinet. The steering committee and Poverty Reduction Strategy, like its it helped put investment climate reforms and the technical task force commit Vision 2020, emphasized private sector at the top of the economic policy agenda to the new priorities that are agreed development as the key to creating for promoting private sector development on at the national leadership's annual jobs, bringing peace, generating wealth and helped consolidate and unify the retreats.' The Doing Business Unit and ultimately eliminating poverty.' In multiple reform efforts. monitors implementation and reports addition, aware of its scarce natural to the steering committee and to resources and landlocked location, Since reforms to the investment climate the prime minister, who is ultimately Rwanda has focused on business require changes across many areas responsible for ensuring the execution regulation reform to attract foreign of government, the Doing Business of goals.' Besides reporting directly to investment. Steering Committee, bringing together the Rwanda Development Board, the unit Dubbed "Africa's new Singapore" by representatives from different ministries, also periodically informs the head of the The Economist for its positive economic was created in early 2009 to lead the Strategy and Policy Unit in the Office of reforms,' Rwanda has been effectively reform efforts at the cabinet level. While the President about reform progress. learning from the success stories of other countries have created similar economies like Singapore since the early institutions to promote reform, Rwanda Par from being rigid, this structure 2000s. And in 2007 it started using the has made effective use of the steering has been further improved by the Doing Business report as a tool to identify committee in implementing successful involvement of other stakeholders. Ahead and learn from good practices in business regulatory reforms (as detailed in the of the promulgation of major pieces of regulation and to monitor improvement, following section). legislation, the Rwanda Development Board has worked closely with the Several elements of a successful reform Below the steering committee is a parliament and the judiciary, both of program were present, including political technical task force made up of 6 working which have helped in meeting targets will and commitment at the highest groups focusing on business entry, and deadlines. Civil society, development level and a broadly appropriate set of licensing reform, legislative changes, partners and institutions such as the macroeconomic policies that created taxes and trade logistics, construction Presidential Advisory Council have also room in the budget to invest in reforms permits and property registration. One provided crucial input in shaping the and gained strong support from the donor key to the working groups' effectiveness reform agenda.' community. has been their inclusion of private sector representatives. This has helped LAUNCHING REGULATORY BUILDING AN EFFECTIVE ensure private sector buy-in and allowed REFORMS REFORM PIPELINE participants to share their experiences Even as the internal organization was Government responsibility for improving during discussions about reform design. evolving, the government was enacting the investment climate in Rwanda and T reforms: since 2005 Rwanda has drivingTo ensure success, the organizational implemented 26 business regulation over time. The responsibility was initially structure still needed something to reforms as recorded by Doing Business. assigned to tne Rwanda Investment bring all the pieces together. For this Promotion Agency. In August 2008 this purpose the Doing Business Unit was Improving access to credit agency was joined by 7 others to create created. A small, full-time team, this unit A series of changes improved conditions the Rwanda Development Board.' links the working groups to the steering for getting credit. In 2005 the public committee, coordinates with donors credit registry expanded its database of The board's creation marked not only providing technical support, manages financial institutions and improved the a change in name and gains in size, development funding to ensure proper content of its credit reporting system. In resources and efficiency but also a use and promotes efforts to improve 2009 a new secured transactions law fundamental increase in political will and the investment climate. It also advises was introduced, allowing a wider range support. The president of Rwanda made agencies, explains the reforms to the of assets to be used as collateral and business regulation reform a priority, private sector and monitors progress permitting out-of-court enforcement as did the leaders of more than 35 through internal indicators. proceedings."' RWANDA: FOSTERING PROSPERITY BY PROMOTING ENTREPRENEURSHIP 39 In 2010 the legislature passed a law FIGURE 5.1 Rwanda streamlined the procedures for starting a business regulating the distribution of information Time (days) from credit bureaus. This led to the 18 creation of the country's first private Rwanda eliminated 7 procedures credit bureau, which provides wider 15 and cut the time by 15 days coverage than the public registry because 12 it includes information from utilities. In addition, the public registry expanded 9 coverage to loans of all sizes. In December 6 2011 the public registry stopped issuing credit reports, and now only the private 3 bureau shares credit information. The 0 public registry still collects information 1 2 3 4 5 6 7 8 9 from regulated financial institutions but Procedures only for supervisory purposes. 2004 0 2012 Streamlining regulatory Source: Doing Business database. processes Other changes streamlined regulatory The administrative reorganization and extended operating hours for border processes. In 2006 the introduction of the statutory time limits reduced the posts and implemented an electronic hundreds of new notaries made starting time required to transfer property by 346 data interchange system and risk-based a business faster. Before, only 1 notary days-from more than a year in 2004 to inspections. And in 2010 it streamlined had been available countrywide, and the less than a month (figure 5.2). And the trade documentation requirements and high volume of requests meant a long changes in the transfer fees reduced the improved border cooperation. wait for entrepreneurs wanting to register cost from 10.3% of the property value to a new business. After an overhaul of the 5.6%.11 Results are clear. In 2006 exporting company law in 2009, entrepreneurs goods in Rwanda required 14 documents no longer needed to use the services of Changes over several years made and 60 days (figure 5.3). Today it takes a notary; they could use standard forms trading across borders faster. In 2005 only 8 documents and 29 days. The story instead. An online system for publishing Rwanda made it possible to submit is similar for importing. the registration notice replaced customs declarations electronically. In requirements for physical publication. 2007 the customs authority introduced Strengthening laws and And a new one-stop shop streamlined more acceptance points for customs the judiciary business registration by reducing the declarations, reducing the waiting time The new company law adopted in 2009 number of interactions required from 9 to to submit them. In 2008 the government introduced several concepts into Rwanda's 2 (figure 5.1). The time required to start a business fell from 18 days to 3, and the FIGURE 5.2 Rwanda cut the time for property transfers by almost a year cost from 235% of income per capita to 4%. Time to register property (days) 400 Rwanda also made it easier to transfer Rwanda reduced the time property. In 2008 it eliminated mortgage required to complete procedures 300 from 371 days to 25 registration fees and shifted from a 6% transfer tax to a flat rate of 20,000 Rwandan francs (about $33). In 2010 the 200 government decentralized the Office of the Registrar and Land Titles and created 100 5 branches throughout the country, purging the backlog of cases in Kigali. It 0 1 2 3 4 5 also introduced strict time limits for some procedures. One was the issuance of tax Procedures clearance certificates, which had been 2004 02012 the lengthiest part of the process. Source: Doing Business database. 40 DOING BUSINESS 2013 FIGURE 5.3 Big reduction in time and documents to trade across borders in Rwanda (financed by the Competitiveness and Timeanddocumentstoexport Enterprise Development Project) and the Institute for Legal Practice are training 80 14 judges, legal officers and lawyers to work 70 12 in a mixed legal system, where the civil 60 10 law tradition dominates but common law 50 and customary law tendencies are also 08 evident." 40 6 30 With the aim of increasing efficiency 20 in resolving corporate insolvencies, the 10 2 government enacted a new insolvency law 00 in 2009. But resolving insolvency remains 2006 2007 2008 2009 2010 2011 2012 the one area among all those included in the ease of doing business index in Time and documents to import which Rwanda still has great room for Time (days) Documents (number). . 100 20 improvement. Achieving widespread use of the law in insolvency cases has been 80 15 among the greatest regulatory reform challenges in this area." 60 10 40 SEEING MEASURABLE RESULTS 20 5 The ultimate goal of the reform program is a private sector that promotes 0 0 economic growth and job creation." And 2006 2007 2008 2009 2010 2011 2012 the program is achieving measurable Time progress toward this goal. Inland transport U Customs clearance -0- Documents Terminal handling U Document preparation After Rwanda simplified formalities for Source: Doing Business database. business registration in 2006, 77% more firms registered in the following year." In corporate legal system for the first time: laws proved crucial for the approval of 2008 more than 3,000 firms registered, minority shareholder rights, regulation of important legal reforms. The government up from an average of 700 in previous conflicts of interest, extensive corporate further enhanced the court system in years, In 2009 the number rose to 6,905. disclosure and directors' duties. The new 2008 by creating lower commercial And in 2010 the government managed to law introduced rules requiring approval courts. register 18,447 new businesses-nearly by the board of directors for related-party achieving its goal of registering 20,000 transactions representing less than 5% of Consistent with its emphasis on bringing that year." The jump in registration the company's assets and by shareholders in the skills and expertise needed numbers cannot be attributed solely to for those representing more than 5%. The to ensure the success of the reform the simplification of the start-up process; law strengthened the director liability process, the government also hired non- the business registration reforms were regime for breach of fiduciary duties and Rwandan expatriate judges: 2 Mauritian part of a wider government agenda for related-party transactions that harm judges to help local judges run the new to promote private sector growth and the company. And it increased corporate commercial courts during the first 3 entrepreneurship in Rwanda. Even so, the transparency by improving disclosure years of operation." In addition, the increase points to a positive trend. requirements and minority shareholders' government has provided incentives Good results are also showing up in access to corporate information. for Western-educated members of the the area of contract enforcement: the diaspora to repatriate and has promoted commercial courts started operating in In 2005 the government made contract an exchange of skills by opening the job Kigali in May 2008 and had fully cleared enforcement more of a reality by market to immigrants from neighboring the case backlog by the end of 2009.20 establishing more commercial courts2 countries, including Burundi, Kenya, and creating the Business Law Reform Tanzania and Uganda.4 Moreover, Rwanda's consistent reforms to make Cell, whose review of 14 commercial the Capacity Strengthening Program trade easier improved the productivity RWANDA: FOSTERING PROSPERITY BY PROMOTING ENTREPRENEURSHIP 41 of customs officials, who increased the lawyers and judges-to ensure program to support the Rwanda Revenue number of documents they cleared proper administration of the reforms. Authority is considered a success, annually by 39% between 2006 and Recognizing the benefits of a diverse enabling the agency both to improve its tax collection rate and to simplify its 2009. And according to the Ministry of knowledge base, Rwanda has also interactions with businesses. Trade and Industry, Rwanda's exports imported technical expertise from other 10. Legal changes often require only rose from $147 million in 2006 to $193 countries, to replicate good practices and modest investments. For the secured million in 2009. build capacity. And the government has transactions law, for example, Rwanda involved the private sector in the reform invested $55,320 (excluding technical Rwanda recently adjusted some of the process and maintained an open line of assistance from donors) in the validation and translation of the new law as well as targets set in Vision 2020. Most notably, communication to keep entrepreneurs, in the legislative process. it raised the income per capita target from civil society and other stakeholders 11. World Bank 2010a. $900 to $3,500. This brings the target apprised of developments. 12. World Bank 2006. into line with levels in middle-income economies today and reflects Rwanda's All these efforts are showing results in 13. Hertveldt 2008. recent growth, which increased income Rwanda's regulatory performance. And 14. "Africa's New Singapore?" The Economist, February 25, 2012, per capita to around $570 in 2011.21 Rwanda's dedication to private sector http://www.economist com/. development, in triggering positive legal 15. The Institute for Legal Practice was CONCLUSION reforms, has contributed substantially to established by an organic law in 2006 Every country facesdifferentdevelopment its overarching goal of promoting national and started to operate in May 2008. challenges. But Rwanda's ambitious reconciliation and prosperity. 16. "Rwanda: Country Struggles on Insolvency Law," East African Business and complex reform program may offer Week, May 13, 2012, http://allafrica lessons for others seeking to reform NOTES .com/. through private sector development. This case study was written by Moussa 17. Edmund Kagire, "New Reforms Set Up Traor6, Adrian Gonzalez, C6sar Chaparro to Boost Doing Business," New Times One key to its achievements has been Yedro, Jean MichelLobet andJonathan (Kigali), April 18, 2010. the strong commitment to reform shown Bailey. 18. World Bank 2010a. by Rwanda's leaders and its citizens. The 1. World Bank, World Development 19. Frank Kanyesigye, "Rwanda government has established structures Indicators database, http://data Development Board Targets to Register for building a foundation for private .worldbank.org/. 20,000 New Businesses," New Times sector development and coordinating 2. Rwanda, Ministry of Finance and (Kigali), May 14,2010. g Economic Planning 2000. 20. Interview by Business Times (Kigali) with government-wide reform efforts. And 3. Rwanda, Ministry of Finance and Benoit Gatete, vice president of the it has created a well-defined, long-term 3.onomic Rw a nit nae a. commercial high court, January 12, 2010, reform strategy that informs all of the Econmic Planninga2007."http://allafrica.com/. country's short-term development goals. The Economist, February 25, 2012, 21. "Government to Adjust Vision 2020," hetp//wEcon conoist.omis, FNew Times (Kigali), February 25, 2010; The government entities involved in .e. World Bank, World Development 5. The 7 agencies were Tourism and Indicators database, http://data the process have had clearly defined Conservation, the Registrar General's .worldbank.org/. roles and responsibilities, and they Office, the Privatization Unit, Human and have respected the goals set in initial Institutional Development, the Center implementation strategy documents. The for the Support to Small and Medium- Sized Enterprises (CAPMER), the IT Doing Business Unit has played a pivotal Agen nte aiona . ERoneT Agency and the National Environment role not only in ensuring coordination Management Authority. within the government and between 6. See box 2.2 in the chapter "About Doing the government and donors but also Business" for a list of economies using in coordinating development funding this approach. initiatives so as to avoid duplication. 7. These retreats, which gather about 300 top members of the administration, have The government has worked to meet the included Doing Business reforms on the needs of entrepreneurs by streamlining agenda since 2007. regulatory processes involved in starting, 8. Presentation by Emmanuel Hategeka, permanent secretary, Ministry of Trade operating and closing a business. Beyond and Industry, Kigali, March 16, 2011; undertaking legal and administrative Karim 2011. reforms, the government has invested 9. In particular, the U K. Department for in training for professionals-including International Development's multiyear