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."