RWANDA ECONOMIC REVIEW

UNCLAS KIGALI 000077

SENSITIVE
SIPDIS

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


1. (U) This edition of the Rwanda Economic Review covers:

-- 2008 Tourism revenues up 55 percent over 2007, but slow
start to 2009
-- Economy grows 10 percent in 2008
-- Rwandatel to invest $45 million to expand market share,
MTN launches BlackBerry
-- Construction begins on new Hydro Power Project
-- Rwanda Trade with India grows 59 percent
-- Electricity roll-out plan needs $300 million in new
investment



2. (U) Tourism: In 2008, tourism to Rwanda increased
significantly both in numbers of tourists and in total
tourism revenue. The overall number of visitors (including
leisure, transit and business) increased from just over
800,000 in 2007 to over 1 million in 2008. Total revenues
also increased by 55 percent from $138 million in 2007 to 215
million in 2008. Leisure tourists -- high-end visitors to
Rwanda's national parks -- increased an impressive 150
percent from 21,000 in 2007 to 53,000 in 2008. Leisure
tourists accounted for only five percent of overall tourist
numbers in 2008, but represented over 30 percent of total
tourism revenues.


3. (U) Anecdotal information from hotel and tour operators
may indicate a possible drop in tourism for the first half of

2009. High-end Virunga Lodge reported only filling 100 bed
nights for January compared to 180 last year. Tour operators
attributed the drop to the global financial crisis and to
concerns about instability in nearby Democratic Republic of
the Congo (DRC).


4. (U) Economy Grows 10 percent: Rwanda Minister of Finance
James Musoni reported that the country's gross domestic
product (GDP) grew 10 percent last year. Agriculture,
representing 30-40 percent of GDP, recovered from poor
harvests in 2007 to grow by 14 percent in 2008. The
industrial and services sectors also registered strong growth
at around 8 percent. However, the government's real GDP
growth estimates may be inflated as they are based on an
estimated annual inflation rate of 15 percent. Inflation
accelerated to 29 percent by the end of 2008 indicating that
the average annual inflation rate may have been higher than
the 15 percent used in the government's calculations.
Previously, the IMF reported estimated GDP growth for 2008 at
8.5 percent.


5. (U) Telecom: Rwandatel, Rwanda's second largest telecom
provider announced it will invest $45 million in 2009 to
expand services and consolidate a shift from CDMA technology
to GSM 3G. Since moving to GSM technology, Rwandatel has
attracted 40,000 new subscribers weekly, according to CEO
Patrick Kariningufu. Rwandatel is 80 percent owned by
Libyan-owned LAP-Green and is seeking to increase its market
share from 10 to 50 percent. Meanwhile MTN, Rwanda's telecom
market leader, announced the launch of BlackBerry solution.
BlackBerry solution enables wireless access via BlackBerry
smartphones to multimedia, email and other corporate data.
MTN Chief Operations Officer Andrew Rugege told reporters
that the company wants to double its subscriber base from one
to two million subscribers and will increase capital
expenditures from $60 million in 2008 to $100 million in 2009
to achieve this target.


6. (U) Hydro power: Construction has started on the 28MW
Nyabarongo hydro power plant. The project is scheduled to be
completed in four years at a cost of $100 million. India's
Qcompleted in four years at a cost of $100 million. India's
Axim Bank is funding $80 million of project costs and two
Indian companies, Bharat Heavy Electricals Ltd and Angelique
International Ltd will execute the construction. State
Minister for Energy Albert Butare noted that 330 hydro sites
have been identified in the country and construction has
already started on 25. Butare told reporters that
construction of a joint Rwanda-Tanzania-Burundi 62 MW hydro
power project in Rusumo will begin in 2010.


7. (U) Rwanda-India Trade: Trade between Rwanda and India
increased substantially in 2008 over 2007. Indian exports to
Rwanda jumped 59 percent from $22 million in 2008 to 33.6
million in 2007. Rwandan exports to India grew from less
than $500,000 in 2007 to $7 million in 2008. On January
19-20, President Paul Kagame led a five nation East African
Community delegation to New Delhi to attend the India-Africa
Business Partnership Summit. In his keynote Summit address,
Kagame pressed for expanded collaborative partnerships
between Africa and India and noted that the East African
market offered enormous investment opportunities for Indian
companies in priority sectors such as IT, energy,
infrastructure, construction, mining, agriculture and
financial services. During the Summit Kagame also openly
supported India's bid for a permanent seat on the UN Security
Council.


8. (U) Electricity Distribution Plan: On February 4, GOR
consultant Castalia presented a draft prospectus to the GOR
and donors to expand electricity distribution from six
percent of the population currently to 16 percent by 2012.
The consultant said the plan is technically feasible but will
need $310 million in capital investment and technical
assistance to achieve this goal. The national power grid
currently only reaches 110,000 households (6 percent of the
population),21 percent of schools, 74 percent of health
centers and 70 percent of administrative offices. By 2012,
350,000 households will be connected, 50 percent of schools
and 100 percent of health centers and administrative offices,
according to the plan. The consultants estimated the cost
per household connected at $1,300 and said current tariffs
would cover operating costs but that 80 percent of capital
costs would need to be funded by the Government and
development partners. The plan also proposes $25 million for
solar panels and $50 million in micro-hydro generators to
provide power to schools and clinics outside the reach of the
proposed grid.

9 (U) Development partners at the meeting questioned whether
sufficient funds were allocated to technical assistance and
capacity building, noting if implementation capacity was
lacking the project would not achieve its targets. Donors
also stressed the importance of a "self-financing" component
to the proposed expansion and requested a tariff study to
evaluate if current tariffs are "cost reflective".

SYMINGTON