Using a decision support model to identify export opportunities for Rwanda
Expanding exports has become an urgent government priority in Rwanda in order to reduce a growing trade imbalance, ensure non-farm job creation, and improve economic growth. This is also reflected in Rwanda’s strategic plans, with the national export strategy for 2015-18 proposing a 20% annual rate of export growth (MINICOM, 2015). The main objective of this project is to identify new opportunities for exporting Rwandan goods and services using a new approach (also endorsed by the WTO) and tool called the ‘Decision Support Model’ (DSM) to map out easy-to-access markets with low barriers to entry.
The Decision Support Model (DSM) is an analytical tool, incorporating a thorough screening process that facilitates systematic export market selection through the identification of realistic export opportunities for firms wanting to expand their sales reach into foreign markets. It also offers alternatives to exporters where they are facing saturation and/or declining growth in their traditional markets. The DSM methodology takes into consideration all possible worldwide product-country combinations and, using four filters, progressively eliminates less promising markets until those with the greatest prospects of success are revealed:
- Filter 1 of the DSM assesses countries from the point of view of their political and commercial risk, and macroeconomic size and growth performance.
- Filter 2 assesses the market potential of the various product groups for the remaining countries, as determined by the size and growth of import demand.
- Filter 3 examines the accessibility of the remaining countries in terms of their different barriers to entry (including shipping time and cost, logistical efficiency, and tariffs and non-tariff barriers) and degree of market concentration).
- Filter 4 categorises the final round of potential export markets according to the “home” market’s (in this case Rwanda) current export performance in these markets compared to the performance of the top six competitors in each market. An “unconstrained” potential export value is also assigned to each identified product-market combination with a view to prioritising the shortlisted export opportunities.
The identification of new markets for export promotion and domestic market recapturing may feed into the upcoming revision of a number of strategic plans by the Ministry of Industry and Trade, including the National Industrial Policy and the Small and Medium Enterprise (SME) Development policy.