RWANDA MONTHLY ECONOMIC REVIEW FOR FEBRUARY

UNCLAS KIGALI 000161 SIPDIS SIPDIS DEPARTMENT FOR AF/C DEPARTMENT PASS USTDA: EEBONG DEPARTMENT PASS USTR: WJACKSON DEPARTMENT PASS COMMERCE: RTELCHIN DEPARTMENT PASS OPIC: BCAMERON ADDIS FOR LISA BRODEY E.O. 12958: N/A TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW SUBJECT: RWANDA MONTHLY ECONOMIC REVIEW FOR FEBRUARY ¶1. (SBU) This edition of the monthly economic roundup includes: -- Commercial News: - Mobile Phone Industry Heats Up - New Stock Exchange Continues to Grow - Property Registration Fees Change -- Investment Issues: Bilateral Investment Treaty Signed -- Regional Issues: - Kenyan Violence Continues to Impact Economy - Cross-Border Trade Post Finished -- Macro Economic Indicators: Monetary Policy Announced -- Education: Education Spending Announced -- ICT Issues: Kigali Protocol Goes into Force -- Environmental Issues: - Joint Conservation Program Launched - Heavy Rains Destroy Crops -- Development Issues - Development Deal Signed with South Korea - IMF Review Completed COMMERCIAL NEWS: -------------- ¶2. Mobile Phone Industry Heats Up: Rwandatel, a telephone and internet provider, signed a USD 35 million deal with Huawei Technologies, the largest telecom vendor in Chinese market, to expand infrastructure support of Rwandatel's Global System for Mobile Communication (GSMC) and 3G Universal Mobile Telecommunications System(UMTS) network services. The announcement of the deal came one week after Rwandatel's main competitor, MTN Rwanda, reduced mobile phone fees on local and international calls by 35 percent and 60 percent respectively. ¶3. New Stock Exchange Continues to Grow: The Rwanda Over the Counter Market (OCTM),which opened last month, continues to grow. Four Kenyan stockbrokers, Faida Investment Bank, African Alliance, Dyer and Blair and Tsavo Securities, have acquired licenses for membership SIPDIS to Rwanda Stock Exchange (RSE) in order to trade stocks on the OTCM. The GOR has announced that a third treasury bond will be offered by the National Bank of Rwanda. While the first two bonds were offered for a two year maturity period at eight percent, the new bond will have a three year maturity at 8.25 percent. ¶4. Property Registration Fees Change: Rwanda replaced a six percent mortgage registration fee with a flat fee of Frw 20,000 (USD 40). This came in response to claims that the percentage registration fee was exorbitant, resulting in fewer property transfers. The move is also part of the GOR's ongoing effort to improve Rwanda's ranking in the World Bank's Doing Business report. INVESTMENT NEWS: -------------- ¶5. Bilateral Investment Treaty Signed: President Bush and President Kagame of Rwanda signed the Bilateral Investment Treaty (BIT) on February 19, underscoring the two countries commitment to open investment and trade policies. The treaty is expected to bring more investment and increase trading partnerships. Bilateral trade between the two countries increased by 40 percent in 2007, totaling over USD 29 million. U.S. imports from Rwanda were valued at USD 13 million during this period, up 43 percent from 2006. U.S. exports to Rwanda totaled USD 16 million in 2007, up 37 percent from 2006. REGIONAL ISSUES: -------------- ¶6. Kenyan Crisis Continues to Impact Economy: Several sectors continue to feel the effects of the Kenyan crisis. The Rwandan company Bralirwa increased product prices because the brewer has been forced to switch from Qprices because the brewer has been forced to switch from cheaper furnace oil to diesel to fire its boilers. Many Rwandan businesses continue to move their transportation route to Dar-es-Salaam from Mombasa. Transportation costs are up 25 percent since the start of crisis, caused by a fall in the number of operators, increased in fuel prices and the increased distance of the transportation route caused by switch to Dar-es-Salaam. Prices are expected to increase even more as the Kenyan Ports Authority will increase cargo tariffs starting March 1. ¶7. Cross-border trade post finished: Rwanda and Burundi have finished building a multi-million, one-stop border post at Nemba. The post is designed make trade and travel easier between the two countries by cutting down on immigration and customs processing time. Customs, security and immigration officials of the two countries will work together to run the post which is scheduled to open in March. MACRO ECONOMIC INDICATORS -------------- ¶8. Monetary Policy Announced: Finance Minister Musoni presented Rwanda's 2008 Monetary Policy Statement to the public on February 21. He noted that real growth of the GDP was up half a percent to six percent in 2007. Gains in the industrial, construction and services sectors helped compensate for an agriculture sector hurt by poor rainfall. While the Minster pointed out that headline inflation only jumped 0.2 percent in 2007, he did note that underlying inflation jumped to 9.7 percent from 4 percent in 2006. EDUCATION -------------- ¶9. Education Spending Announced: President Paul Kagame announced at the American Association for Advancement of Science (AAAS) Conference in Boston that his government will invest five percent of Rwanda's GDP by 2012 to boost the country?s science and technology capacity. Kagame said he instructed his ministers to work with AAAS to tap into the American network of scientists and educators that can help rebuild Rwandan institutions. ICT ISSUES -------------- ¶10. Kigali Protocol Goes Into Force: Malawian President Dr Bingu Wa Mutharika signed a protocol on policy and regulatory framework for the NEPAD Broadband Infrastructure Network - known as the Kigali Protocol - on February 13. Malawi was the seventh of the twelve signatory countries to ratify the Protocol, providing the majority needed to bring the protocol into force. Developed to provide quality and affordable telecommunications connectivity to Eastern and Southern Africa, the NEPAD ICT Broadband Infrastructure Network will now start to be implemented with officials hoping to complete the work before the 2010 FIFA World Cup. ENVIRONMENTAL ISSUES -------------- ¶11. Joint Conservation Program Launched: Rwanda, Uganda and the DR Congo have publically launched the tri- national secretariat for the Central Albertine Rift Strategic Plan (CARSP) on February 28 in Kampala. CARSP is a massive joint conservation program in the Central Albertine rift, a region where more than 50 percent of birds, 39 percent of mammals, 19 percent of amphibians and 14 percent of reptiles and plants of mainland Africa are found. CARSP is supported by the Netherlands government and the Buffer Foundation. ¶12. Heavy Rains Destroy Crops: Days of heavy rains left killed three people and left many residents of Muhanga province homeless. Twenty five percent of the crops within the affected districts' farmlands have been destroyed. District leaders have down played the impact Qdestroyed. District leaders have down played the impact of the rains on food security and farmers' income in the long run, but some residents insist the rains may lead to increased food prices and food insecurity in the affected districts. DEVELOPMENT ISSUES -------------- ¶13. Development Deal Signed with South Korea: Officials from South Korea and the GOR have signed a deal for a one year development integration plan worth half a million USD. Under the deal, five experts from South Korea will work with the GOR to reform and strengthen five GOR policy areas: industrial policy, investment and export promotion, human resource development, agriculture and energy. The deal will be funded by South Korea and is designed to help the Rwandan economy move away from its dependence on agriculture. ¶14. IMF Review Completed: On February 29 the IMF Executive Board completed its review of the Rwanda?s performance under the three-year Poverty Reduction and Growth Facility (PRGF) arrangement. Upon completion of the review, IMF is able disburse USD 1.8 million, which would bring total disbursements so far under the arrangement to USD 7.2 million. Mr. Murilo Portugal, IMF Deputy Managing Director and Acting Chair, labeled Rwanda's 2007 economic performance as "satisfactory." Mr. Portugal stated that the GOR?s greatest challenge in 2008 will be managing the impact of a grant-financed fiscal expansion without jeopardizing macroeconomic stability."