Identifying realistic export opportunities for Rwanda based on the TRADE-DSM approach

Abstract

Stimulating new exports is one of the most efficient ways that policymakers can drive structural transformation, by transferring resources from traditional activities to these new ones with the aim of uplifting and advancing the overall economy. 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 also be a key consideration. Policy-makers 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 a ‘Decision Support Model’ (DSM) approach, endorsed by the World Trade Organisation. The DSM was specifically designed to assist with the selection of export markets for a given country to assist in planning and assessing export promotion activities. For the purpose of informing this study a purpose-built DSM for Rwanda was developed. The purpose of this paper is not to be exhaustive nor authoritative, but rather to illustrate how the outcomes from the DSM approach can be applied for economic planning in Rwanda. Outcomes from the analysis based on the DSM model for Rwanda indicates that more than 80 percent of the identified potential in terms of value of market-product line combinations are contained (in descending order of potential value) in Western Europe, Eastern Asia, Northern America, Southern Europe, South-Eastern Asia and Northern Europe – not within the direct geographic vicinity of Rwanda. As a relative share of export opportunities, Rwanda’s regional markets in Central, Eastern and Southern Africa offer a relatively small size of export value (1.4%) and a low number of Rwanda’s overall export product opportunities (7.7%). A “portfolio” of focus products and markets was created, which offer a range of options that are widely in line with Rwanda’s National Export Strategy, including processed agricultural products, foods, beverages and agrochemicals, specialised textiles and garments, and construction materials, metal and wood products. The added-value of the DSM approach here 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 aeronautic maintenance, mining and drilling maintenance, and manufacturing of plastics. These further highlight the innovative nature of this approach. To further inform strategic decisions, more detailed investigation and evaluation of each of the opportunities identified for Rwanda by the DSM approach is required. However, the current outcomes help point the way in which policy makers could focus.