Foreign direct investiment and socio-economic development of Rwanda

Many developing economies have endeavored to encourage foreign Direct Investment (FI) in a bid to facilitate economic growth. Rwanda has remained ahead of several other African economies in offering incentives and creating a favorable environment for foreign investors. In spite of the discouragement caused by the genocide of 1994, foreign investors still find Rwanda a favorable place for investment. The methodology employed based on descriptive research using both qualitative and quantitative types of data and both primary and secondary data were used in this research to come up coherent and justifiable data, various instruments in research were also used such as questionnaires, interviews and documentary review to gain more information from different sources. This has been enhanced by the government’s efforts to attract investors through many favorable investment policies. Foreign Investment usually has significant effects on any economy and this research presents a case study of the impact of Foreign Investments companies in Rwanda with an emphasis on social economic development. It presents answers to the questions of; what the level of FI is in Rwanda, how many people are employed in the foreign companies, the type of foreign investments in the country as well as which sectors receive most investment. However, there is a conflict in the findings of the impact of FDI in the Rwandan labor market as the gathered information varies, thus questioning the validity of the data, and the fact that there is still a need for 5 million jobs to be created, implying that FI is not the sole solution for economic development through employment generation. The study indicated a strong positive correlation between FDI and socio-economic development of Rwanda ranging from employment creation, Infrastructure development, business development, Export growth and tax base enlargement. Furthermore this study suggests that a range of factors need to be taken into consideration to understand the impact of FDI on the Rwandan economy. The quality of labor, standard of living, skills, human resource retaining capacity of the local market, wages, etc. determine the success of employment generation. The study concludes that additional valid primary data should be gathered to answer the research questions satisfactory as there seems to be conflicts in perspectives of its effects on local employment. Nevertheless, this study should provide a point of departure for further research on the topic.