Wednesday, 3 June 2015

Do foreign owners help Rwanda export?

Foreign ownership of companies isn't always popular.  Their working standards are sometimes criticised, both within the host country and the source country, and profits may not stay in the host.  However, there's one area where foreign ownership seems very likely to be advantageous, and that's exporting.  A foreign owner will probably have more knowledge of their own country and its demands than an owner from the host country, and they can use that knowledge in exporting.

In Rwanda there's evidence that companies owned by non-nationals do export more.  The table shows the average percentage of sales earned by exports, reported by the origin of the largest owner.  Rwandan owned companies in Rwanda earn 2 percent of their income internationally.  Companies in Rwanda owned by people from the Middle East export a bit more of their income, while Indian owned companies export four times as much.  The biggest exporters are European owned companies, with almost 12 percent of their income earned outside Rwanda.

Source: World Bank Enterprise Surveys

I haven't allowed for the type of company owned.  It may be that foreign owned companies are larger, and large companies export more, rather than foreign owners bringing more international expertise.  So it is difficult to say that a foreign owner will certainly export more, other things being equal.  In future, I will look at what sort of companies are preferred by foreign owners.

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