International Business: Rwanda Republic Essay

Question:

Discuss about the International Business for Rwanda Republic.

Answer:

PESTEL Analysis of Rwanda Republic:

Political Environment:

The Rwanda Republic is a presidential republic type of governmental system where the President is both the head of the state and the primary decision maker with the Cabinet, implementing the right of mercy, authoritative of the armed forces, negotiating and endorsing treaties, and taking presidential decisions. The official Presidential elections are conducted after every 7 years. The Prime Minister and other cabinet ministers are also appointed at the same time. The prime duty of appointment of Supreme Court Judges also relies on the President and the Senate. The political system and structure reflects the Belgian and German civil law systems and customary law. Despite its political turmoil in past and severe violation of human rights during Rwanda Genocide in 1990, the government has taken positive measures for stabilizing political situation within the country. The Human Rights Watch has praised the efforts and progress of the Rwanda government in marinating peace, harmony and justice in the country, which includes the abolition of death penalty.

Economic Environment:

The Rwandan economy is mainly based on agriculture and agricultural products. The major exported agricultural product from Rwanda is coffee and tea. The tourism is also another sector which is developing fast and attracting visitors globally because of its natural resources and mountain gorillas. The countries industrial sector is one of the most prominent and fastest growing sectors which contribute about 14.3% of the total GDP in 2010 (Singh, et al. 2012). The primary products those are produced in Rwanda special economic zone manufacturing zone are cements, soaps, furniture, plastic materials, mattresses and beddings, agricultural products, shoes, textiles, small scale beverages, etc. After the economic depression and post genocide, the government of Rwanda has taken several initiatives to strengthen its economy. The current Rwandan has strengthened with a per-capita GDP of about $1,592 in 2013 which was earlier $416 in 1994. The primary exporters of Rwandan goods are Germany, China and USA. The Rwanda currency is directly managed by Central Bank of Rwanda and it is known as franc which current exchange rate is 835.66 Rwandan Franc is equal to 1 US dollar. In 2007, a big initiative was taken by joining the East African Community and recently the East African Community has planned to launch a common East African currency (Rusuhuzwa and Baricako, 2009). Despite this, the economic reformation in the Rwandan economy is still under practice and positive initiatives have been taken by the Rwandan government to keep peace and harmony for promoting harmonised economic environment in the country by initiating a business-friendly atmosphere for FDI (Abbott, et al. 2012).

Social Environment:

The root of the Rwanda society goes back to pre-historic tribes and the country was ruled by Germany in the colonial era. The Rwandan society has experienced as number of violence and uprising during the colonial era and ultimately in 1962 it gained its independence separating from Burundi. In 1990, the country faced the worst genocide in human history. After that the government took control of the situation and after that the Rwanda society is growing under the guidance of Rwandan government. The government has increased its national budget in the year 2000 prioritising the water supply development in the country (Musonera, et al 2014). As a result, the country experienced a gradual increase in right to access of safe water for industrial as well as for domestic purposes. The primary linguistic and ethic group of the country is the Banyarwanda and the largest language which is spoken in the country is Kinyarwanda which is also the national language along with French and English. The most widely practiced religion of the country is Christianity followed by a small percentage of Muslims (4.6 %) and only a 0.1 percentage of people following indigenous religion. The temperate to subtropical climate condition of the country also attracts industrial initiative in the country. The country experiences a shortage of both skilled and unskilled labour due to its low population rate. The country has a relatively younger population with a 42.3% of people below the age of 14 years and the elderly population constitute a small percentage of 4% only (Boniface Nzioki Mutua, et al. 2014). This indicates that the population rate has been growing steadily in the recent years but the working class population is still low than its dependent population. The country is situated in the great lake region of the area and is often affected by the unstable condition in the region specifically in its neighbouring country of Congo, from where a large number of refugees take refuge in the country.

Technological:

One of the most promising and prominent area of development in the country of Rwanda is its technological improvements. The country has produced most of its electric supply resources from the hydroelectric sources that is available from Lakes Burera and Ruhondo which fulfils most of the country’s energy needs. The Rwandan government have taken initiatives to provide free primary and technological education to its population. The primary objective is to increase the number of technologically skilled labour in the country. The telecommunication is one of the fastest growing information technology sectors in Rwanda. The government have been taking positive approach towards developing business process outsourcing and IT enabled business services in the country. Both infrastructure and technological sector of Rwanda has been developed under government initiatives to develop e-government applications (High, 2009).

Environmental:

Rwanda is situated in the situated in the great lake region in African continent and is ranked as the 149th country in terms of its size. It is a very diverse country in terms of bio-diversity, with adequate availability of natural resources like minerals, natural gasses, etc. The bio-diversity richness of Rwanda attracts a number of tourists every year globally as a result the tourism sector of Rwanda has experienced a rapid development in the current years (Kamuzinzi, et al. 2015). The country has a large population of mountain gorilla. To hold its natural bio-diversity the government has taken serious actions but exploring its natural resources like investments in mining and gas industry has directly effecting the environmental conditions of Rwanda.

Legal:

Regardless the strong political conditions present in the country, there are some government inference within the judicial system like exploitation of prosecutorial authority, politically motivated selection and appointments of judicial judges which sometimes forces the judicial systems to take particular decisions in favour of political environment in Rwanda. Thus, in legal analysis it has been observed that even though the Rwandan government is taken positive steps in promoting foreign direct investment business environment within the country still a large portion of the judicial and legal power withheld in the hand of the President of the country (Balinda, 2016).

Suggested Mode of Entry in Rwanda Special Economic Zone:

In the above analysis the report examines that the Rwanda has come a long way in the last two decades with a more stable and safe territory with a business friendly environment to flourish. In 2010, the world bank as stated Rwanda as one of the most reformed countries globally. The country has Vision 2020, where it wants to reach the middle income status and position itself as a developing country in the East African Community (Negatu, 2014). There is a lot of opportunity in the foam and bedding industry in the region as with the growing economic conditions the living conditions of the population will increase. Thus for a better living people will opt for good bedding and mattress and the Rwanda Foam limited is offering good customer experience and excellent customer service. Despite its small domestic market, it has been showing relative increase in demand. The country has a substantial trade deficit as a result most of the consumer goods are exported from other countries. In this scenario, locally produced goods will find a good market share in the country because of its relatively cheaper price in comparison to its competitive products. The Rwanda is a landlocked country as a result the high transportation cost also gives a expected security for the foreign investors. Thus investor’s who are already familiar with East African Community regions would find it more suitable to invest in the country (Pillay and Khan, 2015). The Rwandan government is highly motivated and committed towards serving the economic development of the country. It has been listed as the least corrupted country in the region and business registrations are comparatively easy as a business can be registered and legally established just within 48 hours (Veit and Streege, 2012). As a result Rwanda has been ranked as the eighth in terms of business friendly country according to World Bank. The country has also a low crime rate compared to its neighbours. Thus in the current industrial analysis, the report finds Rwanda a suitable destination for foreign direct investment for potential business growth. So, after examining the current business scenario and environment the author suggests that the organization should adopt the strategic alliance mode of entry in Rwanda with Rwanda Foam Ltd. This will give the opportunity to forming joint venture with minimal equity participation and also present in the global competition.

Reference:

Abbott, P., Malunda, D. and Festo, N., 2012. European report on development: Rwanda case study.

Balinda, S.N., 2016. Factors Attracting Foreign Direct Investments (FDIs) in Rwanda: The Case of Selected Companies. Transportation, 7(8.6), pp.94-2.

Boniface Nzioki Mutua, D., Mung’atu, J.K. and Kule, W.J.,. 2013, Business environment and the growth of foreign direct investments in the information and communication technology sector in Rwanda in 2012–2013.

High, T.C., 2009. To Rwanda and Back: A Study Examining the Feasibility of Successful Foreign Direct Investment in Rwanda (Doctoral dissertation, University of Arkansas Fayetteville).

Kamuzinzi, P.K., Shukla, J. and Ndabaga, E., 2015. The Effectiveness of Rwanda Development Board Tourism Revenue Sharing Program towards Local Community Socio-Economic Development: A Case Study Of Nyungwe National Park. European Journal of Hospitality and Tourism Research, 3(2), pp.47-63.

Musonera, E., Karuranga, E. and Nyamulinda, B.I., 2014. Institution fitness, investment and economic growth in Rwanda. The Journal of International Business Research and Practice (JIBRP) Volume 8, 2014, 8, p.117.

Negatu, Z., 2014. Focus and Determination Behind Rwanda's Transformation. African Business, (408), 127.

Pillay, P. and Khan, F., 2015. Public Policy and Corruption in a Globalised World: Case Studies from South Africa and Rwanda. Public Policymaking in a Globalized World, p.202..

Rusuhuzwa, T. and Baricako, J., 2009, November. The Global Finacial Crisis, Sslowing Private Capital Inflows and Economic Growth in Rwanda and Burundi. In Africa Economic conference 2009: Fostering Development in an Era of finical and Economic Crisis.

Singh, S., Mwitirehe, V., Assey, C. and Egesa, K., 2012, May. Foreign Direct Investment in Rwanda: The role of Institutions: where to from here. In Peer-Reviewed Proceedings of the 13th Annual Conference of the International Academy of African Business and Development (IAABD).

Veit, W. and Streege, C., 2012. Determinants of a Business Environment Reform Agenda in Rwanda. World, 2(2), pp.96-111.

How to cite this essay: