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Cablegate: Agoa Country Eligibility Review - Rwanda

VZCZCXYZ0004
PP RUEHWEB

DE RUEHLGB #0708/01 2811215
ZNR UUUUU ZZH
P 071215Z OCT 08
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC PRIORITY 5663
INFO RUEHDS/AMEMBASSY ADDIS ABABA 0201
RUEHBS/AMEMBASSY BRUSSELS 0311
RUEHJB/AMEMBASSY BUJUMBURA 0410
RUEHDR/AMEMBASSY DAR ES SALAAM 1222
RUEHKM/AMEMBASSY KAMPALA 1993
RUEHKI/AMEMBASSY KINSHASA 0548
RUEHLO/AMEMBASSY LONDON 0324
RUEHNR/AMEMBASSY NAIROBI 1325
RUEHFR/AMEMBASSY PARIS 0582

UNCLAS KIGALI 000708

SENSITIVE
SIPDIS

PASS TO AF/EPS ABREITER, GMALLORY

E.O. 12958: N/A
TAGS: ECON EINV ETRD PGOV RW
SUBJECT: AGOA COUNTRY ELIGIBILITY REVIEW - RWANDA

REF: STATE 79630

1. (U) This cable responds to queries in reftel.


Country Background Summary
--------------------------

2.(U) With 85 percent of its population engaged in
subsistence agriculture, Rwanda's economic priorities include
poverty alleviation, encouraging private investment and
infrastructure development. Small handicraft businesses are
exporting to the U.S., but on the whole, Rwanda still has
significant steps to take before it can be considered as a
success story. A land-locked post-conflict nation still
recovering from the 1994 genocide, Rwanda joined the Common
Market for Eastern and Southern Africa (COMESA) in 2004 and
joined the East African Community (EAC) in 2007. President
Kagame currently chairs the EAC. Rwanda has a strong labor
code, but enforcement remains weak. There continue to be
human rights concerns in Rwanda. Since August 2004, Rwanda
has deployed troops to Darfur under the auspices of the
African Union-led protection force and the United Nations.


3.(U) Market-based Economy/Elimination of Barriers to Trade
--------------------------------------------- -----------


A. Major Strengths Identified:

- U.S.-Rwanda relations are strong. The U.S. has been the
largest bilateral donor to Rwanda since 2005, and has
designated Rwanda as one of 15 focus countries to receive
targeted assistance under the President's Emergency Plan for
AIDS Relief (PEPFAR). Rwanda received USD 17 million in 2007
to fight malaria under the President's Malaria Initiative
(PMI). In 2008, the Millennium Challenge Corporation (MCC)
approved a $24.7 million MCC Country Threshold Plan (TCP) for
Rwanda.

- The International Monetary Fund (IMF) estimated Rwanda's
GDP growth rate for 2007 at 6 percent, and inflation at 9.1
percent. In 2008, the IMF projects that GDP will grow to 8
percent and inflation will rise to 15 percent (however the
most recent inflation numbers reported by the Rwandan Central
Bank of 18.3 percent in July and 20 percent in August suggest
inflation will be higher than the 15 percent projected by the
IMF for the year).

- The Rwandan currency and exchange rate have remained
stable for the past few years. By the end of 2006, most
bilateral donors and multilateral institutions had forgiven
Rwanda's debt. However, these debt forgiveness initiatives
limit Rwanda,s ability to take on future debt such as loans
for major infrastructure projects.

- Through the Rwanda Investment and Export Promotion Agency
(RIEPA) and the Private Sector Federation (PSF), Rwanda has
been proactive in encouraging foreign investment by producing
comprehensive information materials, holding trade fairs at
home and abroad, and establishing investment promotion
offices in Rwanda to encourage and assist investors.

- A law on the use and management of land was enacted in
September 2005. A new investment code and related customs
law incorporating investment and customs tax incentives were
enacted in June 2006.

- Rwanda joined the Common Market for Eastern and Southern
Africa (COMESA) in 2004, the East African Community (EAC) in
2007 and has applied for membership in the British
Commonwealth. One of the end goals in joining these
organizations is to diversify Rwanda's economy and promote
Qorganizations is to diversify Rwanda's economy and promote
export-oriented jobs through foreign direct investment.

- Rwanda has value-added taxes (VAT--18 percent) and some
tariffs on imported goods. These sources of revenue are an
important part of the GOR's overall budget, although Rwanda
must eventually reduce customs tariffs to standardize with
the East African Community. Foreign investment is
encouraged. RIEPA set up a "one-stop center" for both
foreign and Rwandan investors in 2000 and it became fully
operational in 2004, although it has yet to record many
success stories.

- The Rwandan Private Sector Federation is an influential
organization funded in part by the government that advocates
on behalf of the private sector.

- Small-scale cloth, textile, and basketry handicraft
businesses are starting to export their products to the U.S.
under AGOA.

- The Embassy, USAID, and its USAID-East and Central Africa
(ECA) Global Competitive Trade Hub partners are working
diligently to assist Rwanda in expanding its AGOA
opportunities.


B. Major Issues/Problems Identified:

- Rwanda's economy remains fragile and is heavily dependent
on foreign aid (approximately 50 percent of the government's
budget, according to the IMF).

- Macro-economically, Rwanda's current account has been
worsening in recent years due to low exports and increasing
imports. The IMF projects the current account deficit will
grow to 20 percent of GDP in 2008 from 15 percent in 2005.

- Local and foreign businesses have difficulty in accessing
credit.

- Costs of production, primarily due to geographic location,
a small local market, poor infrastructure and high energy
costs, make doing business in Rwanda very challenging.

- There is a widely held perception that the government and
the predominant political party, the Rwanda Patriotic Front
(RPF), either dominate or have significant influence
throughout the private sector.


4. (U) Political Reforms/Rule of Law/Corruption
--------------------------------------------- ---


A. Major Strengths Identified:

- In September 2008, national elections were held for the
Chamber of Deputies with the RPF winning an overwhelming
majority in a peaceful and orderly election.

- The GOR senior leadership maintains a consistent policy of
combating corruption.

- According to Transparency International's 2007 annual
survey of business leaders, citizens, and experts, Rwanda's
ranking improved by 10 places from 121 to 111 out of 178.

- The Parliament takes an active role in investigating
public officials accused of corruption and, in concert with
the Ombudsman's Office established in 2003, has exposed
corrupt public officials.

- The Government adopted a code of conduct and rules of
disclosure for public officials.

- In 2008, the government implemented a new commercial court
system to address the backlog of commercial disputes.

- The GOR implemented significant judicial reforms over the
last several years aimed at addressing a large backlog of
cases, increasing the independence of judges, and increasing
training across the judicial sector.

- The GOR has plans to increase the numbers of lawyers
throughout the country (currently only 305, based mostly in
the capital) to improve access to legal services and to
establish circuit courts throughout the country, especially
in the rural areas, to reduce the backlog of pending civil
cases (approximately 39,000 in 2007).


B. Major Issues/Problems Identified:

- Citizens' right to peacefully change their government
remains effectively restricted. In 2007 the government
passed legislation allowing political parties to organize
down to the lowest administrative level. Parties took
advantage of this change in preparation for the 2008 Chamber
of Deputies elections albeit with little impact on the
political landscape -- the RPF won 79 percent of the vote in
these elections. The 2008 Chamber of Deputies elections were
peaceful and orderly but National Electoral Commission (NEC)
rulings during the twenty-one day electoral campaign period
restricted the ability of opposition parties to effectively
spread their message. The national ballot tally lacked
transparency with some election observers prevented by NEC
and other government officials from monitoring the ballot
counting above the polling station and polling center level.

- While the judiciary suffers from inefficiency and a lack
of resources, the government is making substantial efforts to
improve the legal sector which collapsed during the war and
genocide of 1996.

- Prolonged pretrial detention remains a problem, although
the incidence has significantly declined. There are
insufficient numbers of lawyers to provide defense counsel in
what are otherwise fair public trials. Constraints on the
judiciary's independence have lessened in recent years.

- The 2007 Department of State's Human Rights Report cited
arbitrary arrest and detention by the National Police as
problems.

- Gacaca courts serve as the government's primary judicial
process for addressing the huge numbers of genocide cases.
The great majority of cases had been adjudicated by the end
of 2007. Most observers agree that the gacaca courts are
providing a much-needed measure of justice for the country.
There remain concerns, however, that there are limited due
process protections and that some persons have used the
gacaca system to settle scores.

- Prison and detention center conditions are harsh.
Over-crowding lessened considerably by the end of 2007,
however, as the government released many persons to serve the
initial portion of their sentences at home. There are now
approximately 59,000 persons in Rwanda,s 14 prisons.

5. (U) Poverty Reduction
-------------------------

A. Major Strengths Identified:

- The GOR enacted a Poverty Reduction Strategy Program in
2000. A final version of its current Economic Development
and Poverty Reduction Strategy (EDPRS) was completed in 2008.

-A framework law on the use and management of land was
enacted in September 2005, but some key implementing laws
remain pending in parliament.

-The Government established the Fund for Assistance to
Genocide Survivors to help with education and health care
costs.


B. Major Issues/Problems Identified:

- Poverty remains a major problem in Rwanda, with nearly
56.9 percent of the population living under the poverty
level, which is set at RFR 250/day - about $0.45.

- More than 85 percent of the population is involved in
subsistence farming and annual per capita income is
approximately $350 according to recent IMF estimates.

- Only 64 percent of the population has access to potable
Q- Only 64 percent of the population has access to potable
drinking water.

- Obstacles in the fight against poverty include poor energy
production and distribution, limited access to capital, and a
government and workforce with limited administrative and
managerial capacity.

- Agriculture in Rwanda, largely subsistence farming,
remains vulnerable to weather, market fluctuations, and a
rapidly expanding population. The average plot size is
approximately a half hectare.


6. (U) Workers' Rights/Child Labor/Human Rights
--------------------------------------------- ---


A. Major Strengths Identified:

- Rwanda has signed all International Labor Organization
(ILO) conventions relating to workers rights and has a strong
labor code.

- The law provides for the right to create professional
associations and labor unions, and the government is
supportive of this right. Some workers exercise this right
in practice.

- The government sets minimum wages in all modern sectors,
according to the nature of the job. The GOR regulates hours
of work and occupational health and safety standards in the
modern wage sector.

- The GOR prohibits forced or bonded labor, and the Ministry
of Labor has a plan to combat the worst forms of child labor.
There is a National Advisory Committee on child labor, the
GOR employs labor inspectors in each of its thirty districts,
and some districts established by-laws preventing child
labor. Child labor reduction benchmarks were integrated into
district performance contracts and local government child
development committees were trained on child labor
monitoring.

- Except for subsistence agriculture, the GOR prohibits
children under the age of 16 from working without their
parents' or guardians' permission.

- The GOR also prohibits children under 16 from
participating in night work or any work deemed hazardous or
difficult, as determined by the Minister of Labor. Since the
majority of Rwandans engage in subsistence agriculture, many
children worked as laborers on family holdings.

- There is no specific anti-trafficking law, but laws
against slavery, prostitution by coercion, kidnapping, rape,
and defilement are available to prosecute traffickers. The
GOR has labor inspectors in each district and police receive
training on identification of potential trafficking victims.

- The government makes efforts to address continuing
problems of societal violence and discrimination against

women.

B. Major Issues/Problems Identified:

- While Rwanda has a strong labor code it does not have the
capacity to effectively enforce the law and government
inspectors do not consistently enforce occupational health
and safety standards.

- The law specifically excludes civil servants from
organizing, and although the law provides workers the right
to negotiate collective bargaining agreements, this right was
severely limited in practice.

- The law prohibits unions from having political
affiliations and from publicly expressing their political
opinions.

- Child labor remains prevalent, but statistics are

difficult to verify. According to a 2006 UN report, 36
percent of children aged 5 to 14 are engaged in child labor.

- In addition to poverty, there is a common belief that
children must work to help ensure family survival and Rwandan
law does not specifically prohibit forced and compulsory
labor by children.

- Although the law provides for the right to strike, public
service workers and workers in the broadly defined "essential
services" were not allowed to strike. In addition, the
process required for workers to conduct a legal strike
essentially prohibits strikes (there was one strike during
the year). A union's executive committee must approve any
strike, and the union must first try to resolve its
differences with management according to steps prescribed by
the Ministry of Public Service and Labor.

- Anti-union discrimination is prohibited by law, but there
are neither functioning labor courts nor other formal
mechanisms to resolve complaints involving anti-union
discrimination. There has been an improvement in the
government's attitude toward the rights of unions and in
respect for workers' rights and safety, but many employers
were still opposed to the idea of trade unions operating
freely. Government-associated entities own shares in some of
these companies.

- Child prostitution, trafficking in persons (including in
children), and child abuse were problems, according to the
2007 Human Rights Report.

- Prisoners volunteer for work details. While national
prison policy prohibits work at private residences and
businesses, informal arrangements are sometimes made to do
so. Prisoners may receive some pay in return for their work.

- The 2007 human rights report cited reports of unlawful
killings by police and local defense forces; these diminished
in 2008 particulary by the police. Reports of the use of
torture and excessive force by security forces have
diminished considerably in recent years.

- The 2007 human rights report cited restrictions on
freedoms of speech, press, assembly and association as
problems. Restrictions on civil society were also cited.

7. (U) International Terrorism/U.S. National Security
--------------------------------------------- ---------

A. Major Strengths Identified

- The government has been responsive on efforts to combat
terrorism financing and has increased its border control
measures to identify potential terrorists.

- Rwanda established an intergovernmental counterterrorism
committee and has an antiterrorism section in its police
intelligence unit.

- Laws exist for commercial banks to report large deposits
from abroad.


B. Major Issues/Problems Identified:

- None currently identified.
SIM

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