TRADE and DSM help Rwanda to boost exports

Marelize Santana -- Thu, 11/09/2017 - 14:22

TRADE and DSM help Rwanda to boost exports

Rwanda is striving to reach its export market potential, with help from the team from the research focus area Trade and Development (TRADE) at the North-West University (NWU). 

Using an innovative approach called the Decision Support Model (DSM), Rwanda’s export potentials have been mapped in detail, both in terms of the most promising export products and a detailed overview of which markets currently demand such goods. The TRADE team, headed by Prof Wilma Viviers, has achieved many successes with the DSM and their achievements in Rwanda continue that trend.

Helping Rwanda aim higher
By stimulating new exports and attracting foreign direct investment, policymakers can drive structural transformation, especially if they transfer resources from traditional activities to new, high-growth ones. However, it can often be difficult for government to plan and prioritise which sectors deserve support to realise such goals.

Key aspects for a national export strategy to consider include which new markets to target, what such market demand looks like in the medium term, and how accessible such markets are given a country’s trading and tariff conditions. Similarly, this strategy should also consider which new products to produce with new technologies.

Understanding the underlying employment, skill and technology requirement of producing new export markets should be another key consideration. Policymakers further need to use the right tool for the right policy question, since policies aimed at diversifying export products differ significantly from diversifying destination markets.

The main objective of this study was to identify new opportunities for exporting Rwandan goods and services using the DSM approach, endorsed by the World Trade Organisation. Governments can use this tool to identify which markets have the biggest potential to diversify their countries’ exports. It also allows them to inform exporting firms which foreign markets they could target to expand their sales.

Where opportunities lie
The DSM analysis for Rwanda indicates where more than 80% of the potential value of product-market combinations is contained. In descending order of potential value, the most lucrative markets are in Western Europe, Eastern Asia, North America, Southern Europe, South-Eastern Asia and Northern Europe – not within the direct geographic vicinity of Rwanda.

In fact, Rwanda’s regional markets in Central, Eastern and Southern Africa offer a relatively small scale of export value and a low number of overall export product opportunities. This finding indicates that while regional integration offers some potential, the biggest opportunities for Rwanda lie in international markets, where it should devote most of its attention.

A “portfolio” of focus products and markets was also created, offering a range of options that are broadly in line with Rwanda’s National Export Strategy. This includes a focus on processed agricultural products, foods, beverages and agrochemicals, specialised textiles and garments, construction materials, metal and wood products. Here, the added-value of the DSM approach is that for each target product, it provides a detailed overview of which markets currently demand such goods, and what Rwanda’s additional export potential is (taking into consideration factors such as trade cost and import tariffs). This offers an important evidence-based complement to Rwanda’s existing National Export Strategy.

The analysis also offers new, unexplored areas of export diversification including aeronautical maintenance, mining and drilling maintenance, and manufacturing of plastics.

To further inform strategic decisions, more detailed investigation and evaluation is required of each of the opportunities identified for Rwanda. However, the current outcomes help point the way for policymakers.