The ability of East African countries to compete on the global market is being hindered by high taxes, insecurity, poor physical and social facilities and corruption, the World Economic Forum has said in a report.

In its 2014 Global Competitive Report, WEF ranked Rwanda as the most competitive in the region followed by Kenya, Tanzania, Uganda and Burundi. It said the region now boasted much greater political stability, attracting huge investments in regional infrastructure.

Rwanda ranks favourably in its ability to attract and retain foreign investment compared with its peers, at position 62 globally and position three within sub Saharan Africa.

Tanzania dropped from 120 to 121, Uganda 123 to 129 and Burundi dropped four positions to 146. Kenya is sixth in Africa and 90 globally.

Rwanda’s position is a reflection of the various efforts by President Paul Kagame’s government to improve the quality of life of citizens and foster a business-friendly environment.

The 2013 World Bank’s annual Doing Business report ranked Rwanda highly because it enjoys a macroeconomic stability, has accessible health care thanks to a public health insurance system.

However, Rwanda still faces infrastructure limitations, limited access to finance and insufficient capital for innovations.

In an interview with Xinhua, Rwanda’s Minister for Finance and Economic Planning, Claver Gatete, said the country emerged best in the region because it has maintained an impressive growth rate, a policy the government has been working on for the past decade.

“Our aim has been to accelerate our country’s growth. We are aiming higher for better and more sustainable results that will benefit every Rwandan. We are now focusing on infrastructure development to match other global leaders in competitiveness.” Gatete noted.

Rwanda is also upgrading its energy and infrastructure facilities. Plans are underway to increase the current power output on the national grid.

Last year, the Energy, Water and Sanitation Authority was split into two wings, one in charge of energy issues and the other water and sanitation. The country is also addressing its infrastructure challenges through several projects including the reconstruction of the Kigali-Gatuna highway, the envisaged Mombasa-Kigali standard gauge railway and the soon-to-be constructed Bugesera International Airport.

READ: Rwanda economy grew by 7pc in first quarter

According to the report, Kenya’s overall competitiveness is held back by low secondary and tertiary enrollment rates, inadequate and expensive electricity, a weakening fiscal position and poor health services.

“Despite its challenges, Kenya showed a major improvement ranking at 90, up six places from 96 in 2013, registering improvements in 11 out of 12 pillars, most notably in the areas of market efficiency,” says the report.

The Vision 2030 Delivery Board (VDB) chairman, James Mwangi, said the focus on infrastructural growth will help solidify Kenya’s GCI ranking next year, as a number of on-going flagship projects will have borne fruit.

“The VDB is confident that projects such as the stringent implementation of our new constitution, construction of the Standard Gauge Railway, JKIA Terminal Four, Lapsset, energy infrastructure capabilities, Galana-Kulabu Irrigation scheme and related modernisation at the port of Mombasa will further serve to enhance our global competitiveness,” Mr Mwangi said.

Kenya’s President Uhuru Kenyatta’s move to reduce the number of days and procedures to start a business in the country is seen as an impetus that could further improve the environment for businesses.

In April, Kenya introduced a one-day company registration portal, down from the month long registration process, in order to ease doing business in the country and be at par with global economies.

Trade Development Manager of the Kenya National Chamber of Commerce Peter Biwott said despite the improvement of the country in the GCI index, more needs to be done to improve the business environment especially in the transport and manufacturing sectors.

“We have seen impressive results from the GCI Index and the World Investment Index, but the country continues to perform dismally in the World Bank’s Ease of Doing Business reports. This is because the structures in place are hurting most businesses,” said Mr Biwott.

East Africa Chamber of Commerce CEO Charles Kahuthu said the teething problems in the region are more about policies, which in turn have a mirror effect on other industries.

“We are looking at challenges from unfavourable policies within governments. We have various governmental departments working in an unco-ordinated manner, which results in cumbersome procedures, delayed implementation of business proposals, and slow development,” said Mr Kahuthu.

He added that East African countries have development opportunities if they engage the private sector investment using public private partnerships for economic and social development.

“Kenya and Rwanda are now leading in using PPPs, but Uganda and Burundi are still facing big challenges in protecting foreign investors. They need policies formulated to encourage investments,” he said.

Even though Tanzania’s inflation rates returned to single digit this year, its fiscal indicators remain relatively high. Tanzania’s institutions, the report says, have been deteriorating over the past several years, although government regulation is not seen as overly burdensome.

According to last year’s report by the United Nations Conference on Trade and Development, Tanzania and Uganda attract the highest level of foreign direct investments (FDI) in East African followed by Kenya, Rwanda and Burundi.

Uganda’s FDI jumped 92.51 per cent to $1.721 billion from $894 million in 2011, and Tanzania attracted $1.706 billion in 2012, a 38.81 per cent increase from the previous year’s $1.229 billion. Kenya’s FDIs dropped by 27.04 per cent to $259 million from $355 million.

Rwanda witnessed a rise in FDIs by 50.94 per cent to $160 million last year from $106 million, while Burundi, which attracted $1 million, a 66.67 per cent decrease from $3 million in 2011.

In total, the EAC countries received a combined $3.9 billion in FDIs last year, a 48.71 per cent rise from the $2.6 billion registered in 2011.

To investors, the greatest concern in Tanzania has been corruption, opaque policymaking, underdeveloped infrastructure, poor roads and ports and an unreliable electricity supply.

Tanzania has one of the world’s lowest enrollment rates at secondary and university levels, and within East Africa, its goods market remains inefficient, characterised by low domestic and foreign competition.

According to Price Waterhouse Coopers, the recent natural gas discoveries and regional integration, supported by an extension of transport infrastructure projects, are expected to make Tanzania one of the fastest-growing economies in the world.

“Tanzania’s infrastructure performs fairly well compared with its African peers, but the quality is still poor and has a negative impact on the economy’s productive capacity.

“However, in the past few years, infrastructure in Tanzania has witnessed impressive investment; transport and utilities infrastructure projects worth $19 billion are in the pipeline,” PwC said.

Uganda and Burundi however continue to perform dismally. Uganda’s poor ranking at position 129 has been attributed to corruption, government bureaucracy, high prices, poor quality of education, infrastructural challenges, low access to financing, inflation, harsh tax regulations and the impact of malaria and HIV/Aids on business.

It is expected that Uganda’s recent oil find, which will earn the country more than $2 billion a year in oil revenues when production starts, will accelerate its infrastructure development.

The government is building a $4.6 billion oil refinery in Kabale-Buseruka, which is set to be commissioned in 2015. The country is also part of the multibillion dollar standard gauge railway project.