Memoire Online - The role of supply and use/input output tables in the perspective analysis of economic development of Rwanda

THE ROLE OF SUPPLY AND USE/INPUT OUTPUT TABLES IN THE PERSPECTIVE ANALYSIS OF ECONOMIC DEVELOPMENT OF RWANDA DEVELOPMENT OF RWANDA

A dissertation submitted for the partial fulfilment of an award of Bachelor's degree in Applied Statistics.

Declaration

I, HABYARIMANA Jean Baptiste, hereby declare that, the work presented in this dissertation entitled «THE ROLE OF SUPPLY AND USE /INPUT OUTPUT TABLES IN THE PERSPECTIVE ANALYSIS OF ECONOMIC DEVELOPMENT OF RWANDA» is my original work and has never been presented elsewhere for any academic award.

Dedication

Acknowledgement

The success of this research work cannot be solely attributed to the effort of one person. In fact, there must be combined efforts to make such exercise a success. It is therefore on this ground that other people deserve my sincere thanks and gratitude.

I thank in advance the National University of Rwanda and the Government of Rwanda for having formed me and supported this study.

I extend my sincere gratitude to my director RURANGA Charles for his help and active role he played towards the success of this work.

Thanks to my family, relatives and friends for their help either materially or morally, especially to NTAKIRUTIMANA Eric my colleague.

I would like to address my special thanks to anyone who directly or indirectly contributed to the success of my study.

Dedication...........................................................................................ii

List of Abbreviations........................................................................vii

2.3.1. System of Economic and Social Accounting Matrix and Extension (SESAME) 11

2.3.3. SUT model that would help in promoting economic development progress of Rwanda 12

4.7. Data interpretation «SUT/I-O Tables and Economic Development of Rwanda» 36

List of Tables and Graphics

Table 1. Gross Domestic Product by Kind of Activity Deflators (2006=100)......................18

Table 2. Gross Domestic Product by Kind of Activity Current Prices (2006=100)...........24

Table 3. Gross Domestic Product by Kind of Activity at Constant 2006 Prices...............25

Table 4. Environment........................................................................................................... .29

Table 6. Linkage application «Example for Rwanda»...........................................................32

Table 7. Human Development Index.....................................................................................42

Graph 1. National Accounting in Economic Development....................................................5

Graph 2. Conceptual framework of the study.......................................................................14

Graph 3. GDP Deflator.................................................................. .............................18

Graph 4. GDP Deflator trend (2006=100) 10 Years forecasted...........................................19

Graph 5. GDP by Kind of Activity at current prices............................................................21

Graph 6. GDP Current Prices................................................................................................24

Graph 7. GDP Current Prices Trend Projection in 10 Years................................................24

Graph 8. GDP Constant 2006 Prices.....................................................................................25

Graph 9. GDP Constant 2006 Prices trend Projection in 10 Years......................................26

Graph 10. Human Development Index Trend..............................................................27 & 42

Graph 11. Human Development Index and GDP per Capita.................................................28

Graph 12. Human Development Index Trend Projection in 30 Years...................................28

Graph 13. GDP Current and Constant 2006 prices................................................................34

Graph 14. GDP Current and Constant 2006 prices projection in 10 Years...........................35

Graph 15. Expenditure on GDP in Constant 2006 Prices....................................................41

List of Abbreviations

Preface

The economy of a country is controlled by several factors, namely: population size, industrial activities, agriculture, policies of the government, culture of people, education system, infrastructure facilities. The policy and guidelines of both central and state governments facilitate the integration, coordination and control of all activities of the nation with the objective of maximizing growth towards the development of the nation. Hence, it is clear that each entity of the nation is forced to have a competitive role to maximize its productivity for its survival. The productivity of different institutions sectors can be improved through several research studies. Each research study is an organized set of activities to study and develop a model or procedures to analyze results of a realistic problem supported by literature and data such that its objectives are optimized and further make recommendations.

In the process of satisfying basic needs (food, shelter and clothing) people engage themselves in various activities such agriculture, housing and textile. Each of the above industries is backed by other various industries. A Major portion of the product of each of the industries is consumed domestically by households and government sectors as final consumption, and used by domestic industries as intermediate consumption, and the surplus portion is consumed by the rest of the world (export) or if there is a need in products non locally produced the nation in question buy its needs from the rest of the world (import).

In additional to these activities, there are many services organization, namely: health, transport, environmental, postal, legal insurances, banking ... catering to the needs of the society.

In fact, all nations around the world are striving for economic development, this, is viewed in different programs that has been elaborated such as Agenda 21 in 1972 and Millennium Development Goals in 2000, and Rwanda does not ignore this assertion because on its part Vision 2020 has been implemented and Rwandan have experienced its sound through RSSP and EDPRS and eight targets of MDGs are all consolidated in these programs.

Abstract

In this study, the objective is to show the role of supply and use tables/Input-Output table in economic development of Rwanda in order to build a coherent model that can be useful for Rwanda's National Accountants in analyzing possible effects of alternative economic policies over different segments of the society. As necessary and reliable statistics are difficult to obtain for compiling a social accounting matrix for Rwanda, this work has limited to the analysis of SUT, I-O table, and Satellite Accounts and economic development of Rwanda. A consistent and comprehensive analysis has reached due to the analysis of GDP on the period of 1999 to 2009 and Human Development Index ranging on the period of 1985 to 2010. Furthermore the objective of this study is to construct relationship between SUT and Economic Development which can be employed by modellers in construction of relevant models for Rwanda's economy.

With the policy of IMIDUGUDU, AGASOZI INDATWA, rural access index has been improved regarding investment done. Almost all basic needs for development have been made available such as school, health centres, roads electricity. These changes towards development as explained above are increasing as public and private sector decide to increase investments, and those investment are captured by the SUT as GFCF which include public and private sectors. Therefore, the increase in GDP due to the increase in GFCF can push Rwanda towards economic development.

For many reasons GFCF has direct effect on development. With education, and health serves, the impact of infrastructure services measured by GFCF in SUT on human development is direct. The impact is also indirect through economic growth.

Rwanda's economy has recovered from 1999 compare to the slowdown of 5 years before 1999. Gross domestic product rose 6% more than a full percentage point higher than in 2008. The recovery has been widespread throughout rural areas, with the creation of cooperatives, privatization, education...which affect different mode of economic development such as mode of production and value added on different product produced locally, mode of consumption, mode of investment, mode of exportation and mode of taxation. And all those modes are the main components of SUT and I-O table on which different analysis and policies for development are based.

Chapter I. INTRODUCTION

1.1. General introduction

The simplest possible economy cannot exist without producing and consuming, so clearly we need account for these two fundamental activities, even a very primitive economy, however, needs to set aside some of its current production for the activity of accumulation. And we must recognize the fact that virtually no economy can supply all its needs from its own resources, so we need another account for the activity of foreign trade (V.Bulmer-Thomas 1982 2).

At present, the starting point of National Accounts compilation is often the estimation of an Input-Output Tables or Supply and Use tables (SUT). Those tables provide an excellent framework for combining the so-called production approach and expenditure approach to the computation of Gross Domestic Product (GDP). However, only cursory attention can be paid to the third approach, the income approach. Expanding such tables in Social Accounting Matrix (SAM) remedies this short coming of income of various Institutional Sectors, and by providing a check on these income data through a comparison with detailed expenditure figures for the same sectors (Steven 1996; 146)

Again, every individual, each society and every country strives for establishing a self sustained economic development, and Rwanda does not make exception to this rule. For a sustained economic development , a system of Economic and Social Accounting Matrix and Extension (SESAME) and a National Accounting Matrix include Environmental Accounts (NAMEA) are needed and are largely dependent on reliable information necessary to depict the past and the present economic situation, so that future efforts can be assessed. The supply and use tables (SUT) information, thus, is a key factor decision making in such effort.

Thus, each country needs adequate information in its efforts of providing welfare of their members. This idea has been emphasized by Welsch & Short (1987:5), when they mentioned, «The dynamic and successful society depends on the ability of each organization to measure and report its accomplishments, to undergo critical self analysis, and, through sound decision, to renew itself and grow. In this way, individual and social objectives are sewed best».

For its economic development, Rwanda needs such information system that helps in providing reliable information upon which economic activities and economic decisions can be taken. This information system is nothing other than information from SUT/I-O Table, SAM, NAMEA and SASEME within the System of National Accounts.

1.2. Background to the study

The presentation of economic activities in accounts was first established by William Petty (1676) and Gregory King (1696). And; François Quesnay (1758) published a table of total economy based on economic activities. Therefore, the term supply and use table is not new. The first Supply and Use Tables known as Input-Output Presentation or Leontief's Model was invented by Wassili Leontief. This presentation became very useful in determining the inter-industrial exchanges, and has been adopted in System of National Accounts to view economic performance and prevision (Jean-Paul PIROU 2006; 5).

On the other hand, the roots of SAM go back to the pioneering work in social accounting by Gregory King in 1681.However modern social accounting include SASEME and NAMEA which are largely inspired by the work of Stone in connection with the Cambridge growth model in the 1950s and 60s .

In 1953, United Nation Organization created an International System of National Accounts (ISNA), which was revised in 1968, and European Community created the European System Accounts in 1969.

In 1993, for the purposes of economic evolution and economic information the ISNA was revised, and became System of National Accounts (SNA93). In 1993 the System of National accounts has been defined with two main identities which identify the efficiency of circular flow of income and expenditure in economy:

(P: Production, M: Imports, CM: Commercial Margins, T: Transport Margins, TP: Tax on Products, SP: Subvention on Products, IC: Intermediate Consumption, FC: Final Consumption, FCFG: Fixed Capital Formation Gross, ?inv: Changes in Inventory, EX: Exports)

Today those two identities are more used in Supply and Use Tables to understand the economy of a country during the whole year, and reports on Input-Output Tables show that Developed Countries have achieved their development through the use of it.

1.3. Problem Statement

For the last decades, SNA principles, procedures, and practices have not been well defined and applied in Rwanda ,and SUT has been largely viewed only as being GDP tool oriented, in addition, the lack of professional macro-accountants and sufficient information constrains Rwandan Institution Sectors (Non financial corporations, Financial corporations, General government, Household, Non-profit institutions serving households and Rest of the world) to introduce and use macro-accounting information, and to compile Input-output Tables in the process of economic development. However the role of SUT and I-O Table in this process has not been considered with attention, also no formal system of accounting, practices and principles were adopted to Rwandan situation to help disclose information used in this process. Furthermore, comprehensive literatures in the field of National Accounting and Economic Development are few and poor in Rwanda. Still there is a remarkable problem of recognition of SUT/ I-O Table and their utilization in the process of Economic Development in Rwanda.

1. The development of Supply and Use Tables/Input-output Table has a significant role in the perspective analysis of economic development of Rwanda.

2. Supply and Use tables/Input-Output Table have significant role in economic analysis and prevision, decision taking, and policy making for a sustained economic development of Rwanda.

1. Is it possible that development of SUT/I-O Table exerts an influence on economic development? If yes, how a country like Rwanda can have an access to this development?

2. Is it necessary to develop SUT/I-O Table in order to attain economic development? And what are the functions of SUT/I-O Table in the perspective analysis of economic development?

1.5. Objectives of the study

1. To identify an extended statistical information system for monitoring and analyzing the interaction between SUT/I-O Table and Economic Development in social changes ;

2. To determine the new insight into economic and social dynamic provided by a comparative analysis of SUT/I-O Table and other different Satellite Accounts.

3. And to identify an empirical presentation of previous themes in economic development in the case of Rwanda.

From the achievement of the above stated objectives, the research facilitates to depict how the rational use of Supply and Use Tables/I-O Table's practices and principles in Rwanda in a proper manner can contribute in economic prevision and economic flows control in realizing the ultimate goal of economic development of its population.

1.6. Scope of the study

The scope of the study is limited to the Supply and Use Table/Input-Output Table in relationship with economic development of Rwanda. The study focuses on the use of national accounts data as cyclical indicators and indicators ratios that are used to the maximum extent to analyze not only the past but also how trends observed in the past can have consequences for the future while attempting to project economic development of a country.

1.7. Justification of the study

As far as Rwanda is concerned, our references are based only on the structure of SUT/I-O Table of SNA, and Satellite Accounts and Sustained Economic Development and a specific emphasis was drown on improvement of SNA structures procedures and methods that fit the needs, aims, economic structure and skills of a developing country like Rwanda. And in addition, the researcher is justified to undertake this study on the base of the following justifications:

2. Related to above factor, a national account may use indicators ratios such as input-output ratio to estimate value added if only output data are available and vice versa.

3. The identification of the role of SUT in Economic Development through SNA helps other researchers and somewhat, Rwandan population is awoken.

Chapter II: LITERATURE REVIEW

2.1. National Accounting in Economic Development

National accounts and cyclical indicators development for past, present and future economic development are based mainly on the data containing in the economic core of the 1993 SNA, which deal with analysis of production, income, and saving. It includes aggregates SUT data and also Integrated Economic Account (IEA) data for the mains sectors of the SNA covering the production, income, and use of income and capital accounts.

The indicators analysis focuses, however on assessing development in the past, and SNA model within SUT extends this analysis, by using relation between development and corresponding data in the past as a means of projecting the development and data to the future, in this, for socio-economic indicators ,indicators ratios are used as basis for projecting past development to the future.

The above diagram shows how indicators and macro-accounts could play a central role in statistical development and policy formulation .The arrows in diagram represent the interaction between the deferent elements. Thus, policy formulation could be based on the use of indicators measuring past and present trends [a], and may also take into account future developments that are based on alternative values of indicators in the future [b]. The use of indicators in projection is reflected in direct link with the indicators measuring past trends [c].

In order to define statistical development that would support policy formulation, links are needed to translate policy formulation into indicators [d], indicators into the design and compilation of macro-accounts [e] and macro-accounts into statistical development [f]; the derivation of values of indicators are represented by reverse links between statistics and the compilation of Marco-accounts [g], and between the macro-accounts data and the derivation of indicators values [h].

The diagram shows also the three uses of indicators in Assessment [a], Compilation [g], and projection [c] interact with one another.

2.1.1. Definition and nature of SNA information for economic development

The SNA is a comprehensive, consistent and flexible set of macroeconomic accounts intended to meet the needs of government and private sectors analyst, policymakers and decision takers.

The SNA provides information not only about economic activities, but also about the levels of an economy's productive asset and the wealth of its inhabitants at particular point of time and also includes links between national economy and the rest of the world.

This information is drawn in a comprehensive accounting framework within which economic data can be compiled and presented in a format that is designed for purposes of economic analysis .In practice the accounts are compiled for succession of time periods, thus providing a continuing flow of information that is indispensable for monitoring, analysis, and evaluation of the performance of an economy over time.

National accounts are estimated by economic activities which are classified according to the International Standard Industrial Classification (ISIC) of all activities and this is used alongside the United National Central Product Classification (CPC) that is linked to the Harmonized System (HS) used for classifying international trade

All these, are adopted to Rwanda`s development level keeping their framework as much as possible (KAREN Wilson 2004, pp 1-24).

2.1.2. Supply and Use Tables (SUT)

The SNA93 recommended that national accounts estimates should be compiled in a supply and use framework. Such framework enables estimates of supply to be confronted with the estimates of use. The SUT serves for statistical and analytical purposes .They provide a framework for checking the consistency of statistics on flows of goods and services obtained from quite different kinds of statistical sources, industrial survey, household expenditure inquiries, investment surveys, foreign trade statistics and other statistics compiled in so called Input-Output Table(KAREN Wilson 2004, 2).

2.1.3. SUT concept, linear model, and GDP derivation

The SUT proper, include two matrices, that are, an Output matrix and an Intermediate consumption or Input matrix (O-I) (Hand book of NA 2002; 65).These two matrix derived directly from differences in detail and structure of ISIC and CPC and also from the definition of establishment unit used in classifying industries, as defined in SNA may be linearly modelled for being merely used in different flied (mathematics, economics, statistics etc)

Because trade and transport margins may be used to estimate value of output of the trade industry, the identity becomes;

CM and TM disappear because P now represents the value of the production of all branches included trade and transport.

Because, a part of resources was absorbed as intermediate consumption, and for the efficacy of this identity we have to subtract IC from each part.

The VA is measured on basic price because it is for P .The summation of VA with TP nets of SP implies that VA at acquisition price equal to Gross Domestic Product (GDP).

This final identity is very synthetic identity which describes operations of goods and services of an economy.

GDP is an important indicator for economic development ,first is used in (GDP per capital ,Gross National Income (GNI), Gross National Disposable Income (GNDI) , GDP Deflator (an index for average price level of an economy's production related to a base year , etc...).Second ,is very used in combination with other socio-economic indicators to identify economic development and economic development projection (Human Development Index , Headcount Index , Human Poverty Index , Poverty Weighted Index , etc...).

2.1.4. The role of SUT in decision making, projection and planning

In order to make SUT information useful, it is better to learn how to present the right information in the right way at the right time. SUT is expected to have this quality. Therefore the objectivity of decision making depends on how in selecting at least one of the alternative actions the degree of uncertainty surrounding this decision is reduced, and the outcome of this decision is improved.

While the tradition application of SUT was to provide historical growth or decries of GDP of an economy, today the trends have been moving toward emphasizing the economic decision making function because of the utilization of SUT data for planning and projecting future economic activities (Brody A. & Carter A.P., 1971, pp 44-60).

2.1.5. What SUT can do in developing countries?

SUT have over years, been serving the economic systems that have became increasingly complex. In these complex economic systems, SUT plays a significant role in providing reliable information upon which economic activities and decision can be taken of. Again SUT permit policy makers to design practical development planning from which productive investment is attained .This enables the passage from stagnation to intensive development. A long this process of intensive development, SUT information can lead to decision not only about production but also the efficient utilization of scarce resources of the society.

As most of developing countries suffer from a lack of information for stating the annual GDP, for computing other different indicators, SUT may fill this gap as a synthetic and very easy model to use for planning, programming, budgeting and financing economic development activities. This research proposes that, this highlight function of SUT could also be applicable to Rwanda. So why, this study will pay attention on its role as an answer to economic development of Rwanda (Bulmer-Thomas V., 1982; pp 256-278).

2.2. Economic Development Concept

2.2.1. Introduction

The economic development is one of the newest concept, most exciting, and most challenging branches of the broader fields of economics and political economy. Although one could claim that Adam Smith was the first «development economist» and that his Wealth of Nations, published in 1776, was the first treatise on Economic Development.

2.2.2. Measures related to Economic Development

2.2.2.1. Traditional measures of economic development.

In strictly economic terms, development has traditionally meant the capacity of a national economy, whose initial economic condition has been more or less static for a long time, to generate and sustain an annual increase in its national income at rate of 5% to 7% or more.

The World Bank use per capita income to view development of countries (Low Income Countries are those having a per capital gross national income in 2003 of $765 or less, Rwanda falls in this group with $300 per capita income; Lower Middle Income countries have income between $766 and $3,035; Upper Middle Income countries have income between $3.036 and $9,385; and High Income Countries have a per capita income of $9,386 or more).

2.2.2.2. Human Development Index

The most ambitious attempt to analyze the comparative status of socio-economic development has been undertaken by the United Nation Development Program (UNDP) in its annual report `Human Development Reports' in 1990 with Human Development Index which attempts to rank all countries in scale of 0(lowest Human Development) to 1(highest Human Development) based on three goals or ends products of development:

o Knowledge as measured by a weighted average of adult literacy (2/3) and mean year of schooling (1/3).

2.2.2.3. Poverty Weighted Index.

Is a welfare index in which income gains for lower income groups are given greater weighted than gains for upper income groups [Todaro & Smith 2006;824].

2.2.2.4. Headcount Index

This index measures the proportion of a country's population below the poverty line.

Absolute poverty may be measured by the number or «head-count H» of those whose incomes fall below the absolute poverty line «Y», when the head count is taken as a fraction of the total population «N» we define the headcount index as H/N ( Todaro & Smith 2006;815)

2.2.2.5. Human Poverty Index

Is an index measuring deprivation in basic human development in a country? Variables used are percentage of people expected to die before age 40, adult literacy rate, percentage of people without access to health services and safe water, and percentage of under weighted children 5 years of age.

2.2.3. Sustainable development and environment accounting

Environmentalists use the term sustainability to characterize the desired balance between economic growth and environment preservation. Sustainability generally refers «meeting the needs of the present generation without compromising the needs of the future generation»(Todaro & Smith 2006; 471).Therefore, it is important that development policy maker incorporate some form of environmental accounting into their decision. Thus policy maker may set a goal of no net loss of environmental assets

2.2.4. Three objectives of development

Through some combination of social, economic, and institutional processes, a society secures the means for obtaining a better life. Whatever the specific components of this better life, development in all societies must have at least the following three objectives (Todaro & Smith 2006; 22);

o To increase the availability and widen the distribution of basic life-sustaining.

o To increase the level of living (income, jobs, education, culture and values).

o To expend the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence.

2.3. From SUT to economic development

Economic activities have strong impact on the environment, and vice-versa. However until recently, environmentally related data have been given little attention in National accounting system .As Bartelmus at al. (1993) pointed out, the SNA fails; consider (a) new scarcities of natural resources that could threaten the sustained production of the economy and (b) the degradation of environmental quality caused mainly by pollution and its effects on human health and welfare.

To overcome these short coming ,the United Nations begin to revise the SNA in 1993.The revised version contains special satellite accounts for the environment as supplement to the central system (United Nations 1993 a.b).In addition to the UN's effort in revising the SNA , a few other studies on integrating environmental accounts with economic accounts have been seen in the literature .For the SAM in particular, studies on incorporating pollution emission and environmental impacts in a SAM framework emerged recently.

Keuning (1993) proposed a extended SAM called the National Accounting Matrix including Environment Accounts (NAMEA) .The NAMEA integrates economic accounts with accounts for pollutants and environmental impacts. In the NAMEA economic flows in monetary terms and pollution effects in physical terms are combined into a single information framework .Pollution emissions from production, consumption, storage, imports and exports (SUT's variables) are presented in emission account and further allocated into a set of environmental themes.

2.3.1. System of Economic and Social Accounting Matrix and Extension (SESAME)

SESAME is statistical information in matrix format from which a set of core economic, environmental and social macro-indicators is derived (Steven 1996; 2) .SESAMEs macro-indicators can be seen as tips of a big iceberg. The general public, the media and busy policy makers are and will be satisfied with a picture in which only these tips emerge.

In this, SESAME serves as a useful extension of present day national accounts, in two aspects. First, the SAM «a Social Accounting Matrix (SAM) is a matrix presentation of a sequence of monetary accounts that each shows a certain economic process and its relation to other economic process (Steven 1996; 9)»- part of a SESAME improves the compilation of national accounts because it integrates more basic sources at meso-level. Secondly SESAME is apt to integrate all kinds of social and environmental statistics (Steven 1996; 145).

2.3.2. Supply and Use table as a SAM building-block

In analogy with the inverse of Input-Output Table or Supply and Use Table, the inverse of endogenous part of a SAM provides a framework for a single, linear model .However a SAM-based inverse enables a more complete analysis of employment multipliers, of exogenous changes in government expenditure and foreign trade (Steven 1996; 151).

Therefore from, a simple, linear model SAM is embedded into a so-called Applied General Equilibrium (AGE) model. These economic-wide models take account of price-quantity interrelation. They apply micro-economic insight and income distribution of a range of policies, from trade liberalization measures to tax rate changes and structural adjustment packages.

2.3.3. SUT model that would help in promoting economic development progress of Rwanda

SUT is used as a simplified description that captures the essential elements of an economy and allows analyzing them in a logical way. Professionals' National accountants depend on economic data. To understand economic development and to be able to give useful advice to policymakers macro-accounts simply must have up-to-date and accurate data.

In the broadest form, SUT development encompasses the development of SUT standards, SUT procedures and practices, development of SUT legislation, development of SUT professionals and the development of SUT code of ethics that govern the SUT professionals.

This development has an important influence on the preparation of accounting information needed by different Policymakers and Decision takers to enhance economic development within individual entities (micro-level) and within aggregate entities (macro-level) and more further political leaders and policymakers also need economic data to help them in their decision and planning.

Chapter III: METHODOLOGICAL APPROACH TO THE STUDY

It is primary intended to make a description and an analysis study of the role of SUT/I-O Table in the perspective analysis of economic development of Rwanda .For this reason, it bears an exploratory aspect, especially because there has not been a similar study before.

The exploratory aspect of this study is understood in the context of a description that was made in order to study the application and applicability of SUT/I-O Table in the process of economic development of Rwanda. This description was adopted because without it, it cannot be possible to make an analysis of the role of SUT in Economic Development.

Then, the analysis helps the researcher to couple the results found regarding the use of SUT information with the need to implement an SNA framework that facilitates a sustained economic development process.

3.1. Methodology

The methodology comprises an intellectual process, an orderly system of arrangement that enables one to reach the aspects of knowledge. It is a conceptual process that coordinates a set of investigation operations and techniques. Contemporary English Dictionary (1995; 927) defines methodology as a set of methods and principles that are used when studying subject or doing a particular kind of work.

3.2. Sources of data

To reach the objectives of this research, secondary source of information were used because most required information concerning economic development is mainly of two categories (Quarterly records and/or annually records) and due to the constraint of time I was not be able to collect my own data.

In order to collect, organize, and tabulate data a simple form of tables were used. These tables contain Gross Domestic Product by kind of activity from 1999 to 2009 at current, constant 2006 prices and the GDP deflators 2006 base year.

Further more, I gathered also data related to the usefulness of SUT in economic development and the focus was made on the use of SUT/I-O Table in decision making and policies making.

3.3. Conceptual framework of the study

Sources: Brody A. & Carter A.P., 1971, Input-Output Techniques, Geneva. PP 44-60

Nicolas C,Vincent K, Bruno T, 2005, Economic Forecasting, London, United Kingdom PP 46-50

Bulmer-Thomas V., 1982, Input-Output Analysis in Developing Countries, London PP 256-278

3.4. Model designing for the purpose of analysis

3.3.1. Logistic Regression Analysis

Before making comparative study of GDP between years due to increase or decrease in Agriculture production, Industry production, Services production, and Adjustment (VAT and other taxes on product less imputed bank service change) based on Logistic Regression I will transform my available data using Natural Logarithmic transformation. The regression analysis of GDP will help to understand the progress of GDP basing on production approach.

The increase in GDP indicates the good life of the economy and GDP is also use in the computation of Human Development index.

3.3.2. SUT linear model Analysis

Due to technical reasons that include huge informal and non-monetary (about 65% of the economy in 2006) and data availability among others, in Rwanda, National accounts are only compiled using the out-put/ production approach. On other hand as far as the expenditure approach is concerned, it is only the final household expenditure that can not be measured on yearly basis.

Along this study SUT linear model will be developed in order to perform the above Analyses. This SUT linear Model will be analyzed under Supply and Use Identity using two derivable Linear Models «Unit of measurement Billion Frw»:

· Gross Domestic Product By Kind of Activity at Current and Constant 2006 prices.

3.3.3. Human Development Index Analysis

This analysis will show trend of HDI from 1980 to 2010. The HDI depends on Gross National Income per capita, literacy, and life expectancy.

To the link of Supply and Use Tables, GNI per capita is the fruit of SUT (GNI=GDP- Transfers), literacy and life expectancy are also influenced by the GDP. The analysis of HDI will lead to the general conclusion, because this indicator is a composite indicator includes population impact.

A link from National accounts to satellite accounts will be made using System of National Health Accounts where life expectancy will be taken into account, Education satellite Account where Literacy level will be taken into account and Environment Satellite Account where Tourism and Environment pollution will be taken into account. This analysis will use also indicators ranging in the period of 1980 to 2009, such as Gini coefficient, Human poverty index, Population in Good Hygienic Conditions and, Urban population.

Chapter IV: DATA PRESANTION, INTERPRETATION, AND ANALYSIS

4.1. Description of economic environment of Rwanda

In the effort to analyze the role of SUT/I-O Table in the process of economic development of Rwanda, it is necessary to proceed with the examination of economic environment of Rwanda. Economic environment of Rwanda is permanently changing due to its structure composed by political and social framework, technology, market structures, which in somehow indicate the progress to development of Rwanda.

4.1.1. Physical characteristics of Rwanda

Rwanda is a land locked eastern African nation in the Great Lakes region. It shares international borders with Uganda, Burundi, Tanzania and the Democratic Republic of Congo. Despite lying on the equatorial belt, the country enjoys a cool climate due to the presence of lower mountains and a huge forest region. Rwanda is home to abundant wildlife. Mountain gorillas are one of the most sought after endangered species found in the region. Wildlife tourism has become a significant addition to Rwanda's economy. Rwanda has a population above 10 million, based on 2009 estimates 57% of the population lives below the international poverty line (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition, 2).

4.1.2. Economic Environment of Rwanda

Rwanda's economy primary depends on agricultural productivity. Almost 90% of the population thrives on farming and livestock rearing. Unlike other Africa nations, Rwanda does not have mineral deposits or measurable natural resources. The industry and Service sectors are not entirely developed to push towards higher growth.

The Rwandan economic profile suffered a serious setback during the 1994 genocide. The genocide resulted in the destruction of the emerging industrial sector. It caused widespread unemployment and population displacement. It also hampered the efforts towards attracting foreign investment. In the early 2000s, the economy began to revive. According to 2009 figures, Rwanda has an annual GDP (Purchasing power parity) of US$10.39 billion.

The budget of Rwanda is still being dependent on donors and the public debt constrains the development of Rwanda. Moreover the GDP Deflator base year 2006 shows that it has increased from 62% in 1999 to 137% in 2009. This disparity shows also the trend of general prices on the market in Rwanda (NISR: Statistical Yearbook 2009 Edition, pp 94-142).

GROSS DOMESTIC PRODUCT BY KIND OF ACTIVITY DEFLATORS (2006=100) (in Billion of Frw)
YEARS	GDP	Agriculture	Industry	Services	Adjustments
1999	62	51	68	71	54
2000	63	52	69	74	51
2001	64	53	70	73	56
2002	61	46	69	73	60
2003	74	64	76	82	76
2004	84	77	87	87	89
2005	92	86	96	94	96
2006	100	100	100	100	100
2007	111	108	111	113	114
2008	125	116	129	129	139
2009	137	130	143	139	144

Source: Republic of Rwanda, NISR, GDP Annual Estimates for 2009 based on 2006 benchmark.

The period of the study shows that if nothing is done, the GDP Deflator will continue to grow (2006=100), this grow in GDP Deflator will cause a obstacle to policymakers due to price fluctuation. The following graph states GDP deflator trend within the period of the study and 10 years beyond the period of the study.

Regardless those constraints, public investment and saving have increased from 1999 to 2009 but it is still low, and this constraint hindering economic progress; a part from public investment and saving, private activities and investment in Rwanda are progressing on low rata. Most of the private activities are concentrated in service and construction sectors.

Industrial activities are mainly Import-Substitution oriented towards the local markets for basic products. Even though, industries like Nyabisindu, Inyange, Nirangarama and others alimentary industries Food Processing is particularly weak compared to the opportunities available in Rwanda.

The role of development of private sector has been to establish the relevant legal and commercial framework, by promoting foreign investment and delivering necessary infrastructures for competitive private activities. Concerning natural resources, in Rwanda there is scarcity of natural resources that are necessary for the industry, and those available are not economical exploited. Cassiterite, Colombo-tantalite and Wolframite are the main extracted resources but at a low quantity and without any value added. The export of these mining goods brought US$1 million in 1999; say 1% of the total exports.

Wood however remains the main natural resource. Rwanda has about 90 ha of wood that make Nyungwe forest. Wood provides 97% of source of energy in Households. But it serves in artisan and in bricks processing.

Another natural resource is the Gas Methane found in KIVU Lake. This gas is estimated to be 55 billion of cm³ and represents US$156 billions, which makes it one of the most prominent in Rwanda. If it were rationally exploited, this gas could solve the problem of energy scarcity for Rwanda by increasing the capacity of industries oriented to the export, and as the export is improved the SUT also is improved. The improvement of SUT in this case is viewed where the trade balance tends to be balance but at low sped.

4.1.3. System of National Accounts of Rwanda

Due to technical reasons that include huge informal and non-monetary sectors (about 65% of the economy in 2006) and data availability among others, in Rwanda National Accounts are only compiled using the Out Put/Production approach. On the other hand as far as the expenditure approach is concerned, it is only the final household expenditure that cannot be measured on a yearly basis. Hence in this case it can then be calculated by subtracting as a balancing item from the output approach (Republic of Rwanda, NISR, 2010, GDP Annual Estimates for 2009 based on 2006 benchmark).

Therefore finally GDP estimates of both the production and expenditure approaches are computed annually in Rwanda. National Accounts are estimated by economic activities which are classified according the International Standard Industrial Classification of all economic activities (ISIC). This is used alongside the United Nations Central Product Classification (CPC) that is linked to the Harmonized System (HS) used for classifying international trade (Republic of Rwanda, NISR, 2010, GDP Annual Estimates for 2009 based on 2006 benchmark).

All these, are adapted to Rwanda's development level keeping their framework as much as possible. The Industries include: A.Agriculturea.- Food cropb.- Export cropc.- Livestockd.- Forestrye.- FisheriesB.- Industrya.- Mining and quarryingb.- Manufacturingc.- Electricity, gas and waterd.- ConstructionC.- Servicesa.- Whole sale and retail tradeb.- Hotels and restaurants. Transport, storage and communicationd.- Finance, insurancee.- Real estate, business servicesf.- Public administrationg. Educationh.- Healthi.- Other personal services (trade unions, religious activities, sporting, hair dressing, domestic services, visiting national parks etc) (Republic of Rwanda, NISR, 2010, GDP Annual Estimates for 2009 based on 2006 benchmark).

In Rwanda, national accounts are estimated on an annual basis by the National Institute of Statistics of Rwanda and from time to time the estimation methodology is revised due to reasons that include: improvement in data sources and systems and changes in the national economic structure. In this regard the first benchmark of 2001 was done in 2003 and now the National Institute of Statistics of Rwanda is in the process of rebasing the benchmark to 2006. The rebasing exercise is practically possible two years after the intended base year which in this case is 2006. This allows for the use of final approved data for 2006 base year and 2007 current year.

4.1.4. Rwanda's Economic Emergency

In 2009 Rwanda's gross domestic product (GDP) grew by 4.5% and is projected to recover moderately in 2010 to 5.1%. The impressive growth that the country has experienced over the last six years has largely been driven by the good performance of the agricultural sector. However, the government is making efforts to diversify the economy as a long-term strategy for sustaining long-term growth.

In particular, Rwanda is the second most densely populated country in sub-Saharan Africa after Mauritius with a population density of 384 inhabitants per square kilometer in 2008. While practical steps have been taken to address environmental challenges stemming from population pressures, which threatened agricultural productivity, further productivity growth in agriculture is likely to require higher investment levels than has been the case before. In addition, 28% of Rwandans are food-insecure in spite of improvements in this field. The country also remains highly dependent on foreign aid, which accounted for more than 45% of the government budget in 2009.

In view of the country's land-locked location and its limited natural resources, the services sector is considered a strategic one, with a potential to spur long-term growth and transform the economy. This process should be driven by technology and knowledge-based activities, yet currently the country has a shortage of skilled labor.

Rwanda is taking steps to address the developmental challenges. In this context, its medium-term development strategy, the Economic Development and Poverty Reduction Strategy (EDPRS) and the long-term strategy Vision 2020 Umurenge provide the policy framework and government priorities for economic and social development. Vision 2020 prioritizes expansion of non-farm activities that increase efficiency in service delivery and better targeting of social safety nets.

Building on its previous policies, Rwanda has scored major successes. The country has been identified as the top reforming economy in Africa. The business environment and governance indicators have also improved and Rwanda has a lean and efficient public administration structure. Policy reforms are expected to continue following the success of the coalition under the ruling Rwandan Patriotic Front (FPR) in the parliamentary elections in 2008.

Furthermore, the current government has pursued macroeconomic stability as one of its major objectives. The spike in year-on-year inflation above 22% at the end of 2008, caused by fuel and food price increases, had fallen to below 6% by the end of 2009. This sharp drop in inflation in 2009 was a result of many factors, including, among others, falling international fuel and food prices, the domestic credit crunch and prudent monetary policy.

The policy reforms, however, have not yet brought about the structural changes that are necessary to achieve significant poverty reduction and lower levels of unemployment, with agriculture still dominating the overall growth outcomes. In addition, the slow pace in job creation in the formal sector has resulted in a large informal sector estimated to have contributed 48% to GDP in 2008. This large informal sector has posed serious challenges to tax revenue mobilization in spite of the increase in tax collection and tax efficiency over the past three years. As a result, Rwanda still faces a challenge in widening its tax base.

Continuing efforts to improve the business environment and intensification of tax education should help increase tax compliance and a widening of the tax base. More importantly, economic diversification supported by a vibrant private sector, attracting formal business investors in labor-intensive activities, should be part of the strategy aimed at reducing poverty and unemployment.

4.2. Availability of goods and services due to SUT improvement

Obviously, as the SUT improves and that the GDP increases, Rwandans are likely to possess more and better goods and services (after all that is the SUT model to economic development measures). On average, like the GDP of Rwanda is increasing, Rwandans tend to enjoy larger, better constructed, and more comfortable homes, higher quality food and clothing, a greater variety of entertainment and cultural opportunities, better access to transportation and travel, better communications and sanitation, and other advantages.

Through 10 years ago, Rwandans have made tremendous sacrifices and taken great risks to secure a high standard of living themselves and their families. In fact this initiative is viewed in SUT structure year by year and improvement of satellite accounts data which have ameliorated Rwanda's economic development indicators such as HDI, Life expectancy, people living in good hygienic conditions.

GROSS DOMESTIC PRODUCT BY KIND OF ACTIVITY CURRENT PRICES (in Billion Frw)
YEARS	GDP	Agriculture	Industry	Services	Adjustments
1999	607	227	88	257	34
2000	676	251	92	298	35
2001	742	277	105	317	42
2002	797	282	11	352	53
2003	993	380	127	421	65
2004	1206	465	167	497	77
2005	1440	553	202	596	89
2006	1716	660	236	720	100
2007	2046	729	285	912	119
2008	2579	834	382	1198	164
2009	2992	1012	430	1365	185

GDP trend projection in 10 years beyond the period of the study shows that GDP Current Prices will increase continually.

Beyond an abundance of consumer goods, the increase of GDP brings other basic advantages. Those advantages include some important indicators of well-being, including life expectancy, reduce in infant and child mortality rates, number of doctors, measures of nutrition and education opportunity , all those factors are captured in satellites accounts « education account, Health account, Environmental account» and compiled with GDP from SUT.

GDP of Rwanda is related to economic well-being. One may conclude from the list of important factors omitted from the official figures that GDP is useless as a measure of income welfare. But as explained above GDP has a closer relationship with Socio-Economic Well-being of Population.

GROSS DOMESTIC PRODUCT BY KIND OF ACTIVITY AT CONTANT 2006 PRICES (In Billion Frw)
YEARS	GDP	Agriculture	Industry	Services	Adjustments
1999	983	447	130	363	64
2000	1066	480	132	405	69
2001	1156	523	149	432	75
2002	1308	611	160	482	87
2003	1337	592	167	515	85
2004	1437	603	193	568	87
2005	1571	642	211	636	93
2006	1716	660	236	720	100
2007	1849	677	258	809	105
2008	2064	721	297	929	118
2009	2187	776	301	982	128

GDP trend projection in 10 years beyond the period of the study shows that GDP Constant 2006 Prices will increase continually.

Clearly, in evaluating the effects a proposed economic policy, considering only the likely effects on GDP is not sufficient. Planer must also ask whether the policy will affect aspect of economic well-being that is not captured in GDP. Environmental regulations may reduce the production of some products as wood, fish, and pottery for example, consequences decrease of GDP; but that factor is not sufficient basis on which to decide whether such regulations are good or bad. The right way to decide that question is to apply cost benefit principle.

Although looking at the effects of proposed policy on GDP is not a good enough basis on which to evaluate a policy, GDP per capita in Rwanda does not tend to be positively associated with many things people value, including a high material standard of living, better health and expectancy, and better education.

Those components show that SUT indicators are improved when they are combined with other indicators from satellite accounts and all both provide efficient indicators to measure economic development of Rwanda, by noting that SUT is the causal model.

4.3. Human Development Index Analysis

HDI trend deceased from 1985 to 1994 due to war. This decease was explained by the low GDP per capital, decrease in life expectance and low literacy level, Low investment, Low Export and high Import, Low productivity in Agricultural sector, and this period was characterized by Gini coefficient of 28.9 (1980- ) which shows how the income was unequally distributed among pupation.

HDI has increased from 1995 with the economic rehabilitation and reorientation, from since economic activities were boosted and the production begins to increase. These policies caused an increase in GDP per capita and the recent figures show that GDP per capita was 213.9 current $ in 2000 and 258.8 Current $ in 2005 to reach 458.5 current $ in 2008. The Gini coefficient increase from 28.9 in 1980 to 46.8 in 2007, with the life expectance at birth of 51 years in 2009, and in Education data of 2005-2008 show a Primary-Secondary gross enrolment ratio of women and men per 100 of 89.7 and 98.6 respectively.

But, even though HDI experienced improvement, Rwanda is steal classified in Low Human Development Index at Rank 167 in 2006 with HDI lower than 0.5.

The Urban population growth from 2005 to 2009 is estimated at 4.2% against 2.4% in rural areas. These figures show that many persons in Rwanda are concentrating in town where they are expecting good life (Sanitation and Hygiene), and due to those factors in 2007 18% of population of Rwanda lived in urban areas.

Those changes had been caused by the improvement in sectors like Agriculture, Industry and Services sectors, and this contributed in GDP growth ,where by the Gross Fixed capital formation was increased, the recent figures show that the gross fixed capital formation Percentage of GDP was 18% in 2000 to reach 22.7% in 2008, and in most of cases these sectors are well developed in town rather than in rural areas here in Rwanda. For different reasons these sectors provided job to population, this caused improvement in Gini Coefficient and as consequences the Human Poverty index decreased rapidly and was 32.9% in 2007.

If the HDI in Rwanda continue to increase as it was increasing last 30 years, the HDI of Rwanda can exceed value of 0.5 in 25 beyond the period of the study. But some changes can increase HDI as shown in graph above such as the improvement of Agriculture sector which cover the important part of Rwanda population, improvement of Industry sectors by increasing their capacity of making value added on different products especial agro-products and this factors has a significant role in increasing Export and reducing Import which contrasts the economic development of Rwanda.

4.4. Environment quality and resource depletion

Rwanda has recently experienced tremendous growth in GDP current prices. But in expending its manufacturing base, it also has suffered a severe decline in water and forest reserves. Increased pollution certainly detracts from the quality of life, but because water and air are not sold in markets, the GDP of Rwanda does not reflect this downside of their economic growth. The exploitation of finite natural resources also tends to be overlooked in GDP.

A number of efforts have been made to incorporate factors like air quality and resource depletion into a comprehensive measure of GDP. Doing so has been difficult, since it often involves placing a monetary unit value on intangibles, like having clean river as it is the policy of Rwanda by eradicating erosion, planting bamboos at least in 50 m from rives or lakes and resource conservation are hard to measure even though forests conservations are being developed by creating Nation Park to promote Tourism in Rwanda.

Environment
Threatened species	2009	53
Forested area (% of land area)	2007	21.7
CO2 emission estimates (000 metric tons and metric tons per capita)	2006	795/0.1
Energy consumption per capita (kilograms oil equivalent)	2007	19
Rainfall, total mean (millimetres)		1028

4.5. Estimating the quality of life with input-output table

The concept of the «Quality of Urban life» is decomposed into specific measurable indicators of urban quality. And those indicators are expressed in two kinds of quality of life estimates that can be made with I-O data given a level and mix of economic activity in the area:

2. What expenditures are being made, and by whom, to produce the by-product or, in the case of negative valued by-product, to abate their production or reduce their current levels?

And they are three different ways in which I-O can be used to make these estimates:

4.5.1. The Linkage Technique

The linkage technique is addressed to the question of how much of the by-product is being produced, and by whom. It can estimate the quantity of by-product being produced in their physical or value terms.

In Rwanda, the linkage method for indicators of water, air, and land, that can incorporate nonlinearities when they are joined with the usual industry, can be developed.

4.5.2. The Activity Specification Technique

The activity specification technique to estimate input-output sector expenditures directed toward influencing the quality of urban life. Such expenditures are often used directly as indicators of quality of life, or as quantitative approximations to the efforts of specific sectors to improve quality (Brody A. & Carter A.P., 1971, 52).

For example the indicators relating to health, recreation, pollution and accident and crime prevention (Republic of Rwanda, EDPRS 2008-2012; National Health Accounts Rwanda 2006)

4.5.3. The Dummy Sector Technique

In contrast to linkage and activity specification, a dummy sector analysis allows explicit calculation of expenditures required to achieve a predetermined «target» level of indicators.

The potential application of these techniques to planning for regulation, control, abatement, and incidence of indicator production and some of its short-comings may be stated as follow:

The techniques are relevant to indicators in the natural, community services, and infrastructural environments. The community services tend to measure input quality rather than output quality; linearity assumptions seriously weaken indicators measurements in the infrastructure and natural environment; many externalities are not included in natural environment indicators, relative price assumptions weaken the economic environment indicator measurements; and finally difficulties rise because while many indicators involve stock concepts, input-output analysis estimates many changes rather than indicator level (Brody A. & Carter A.P., 1971, 46).

I-O is designed primarily to describe the important relationships among markets and to measure their consequences. When we are interested in the quality of life in a given area, the regional model is probably more appropriate (Brody A. & Carter A.P., 1971, 46). Also, there are issues concerning the type of activities that should be included in the «structural» part of I-O. At the national level, identifying household, government, and investment in final demand has generally proved effective.

For urban analyses, however, strong arguments can be made for including local government, household and investment as part of the endogenous structure. Additionally, there are questions regarding the kind of sectoring that are most appropriate for urban input-output tables. A number of sectors in the usual I-O tables are directly related to the quality of life in the sense that their «output» measures correspond to specific quality of life indicators (Brody A. & Carter A.P., 1971, 47).

For example, household incomes and welfare expenditures can readily be translated into indicators of quality of life (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition).

Quality of life indicators can be viewed as outcomes or by-products associated with the production and consumption activities represented by the inter-industry transactions. Some of these outcomes represent a social cost, as in the case of pollution. Other outcomes such as sector-provided or healthcare represent positive contribution to the welfare of urban residents.

4.5.4. Applying The Techniques To Specific Quality Indicators

4.5.4.1. Linkage application

The application of the linkage technique to economic indicators in Rwanda would be considerably enhanced by the disaggregating of the household sector into income groups. These disaggregated data could then be used directly by linkage technique. For example, numbers of high, medium, and low income workers, average and medium income, proportion of workers above some poverty line can be obtained by using the estimates of the levels of output of the producing sectors (Agriculture, Industry, and Services) in combination with the appropriate coefficients showing the type of labours used by each sector.

Source: Republic of Rwanda, NISR, GDP Annual Estimates for 2009 based on 2006 benchmark.

Applying linkage to community service indicators requires desegregation of the government sector into specific functional activities. Indicators can be linked to expenditures on these functional activities:

Examples of this type are: Pupil per teacher, Student by class room, Hospital and Clinics per unit of population. However, as public service output quality measurements are improved they can be used in place of the input quality measurements by linking them to functional expenditures.

4.5.4.2. Dummy technique application

In Rwanda dummy sector technique can be used for analyses of land pollution, land degradation, and land use. For the land pollution dummy sector combines coefficient that measure the amount of solid wastes disposed of by the using sector into landfills or dumps with coefficients measure the amount of input used in the land reclaiming or cleaning sector.

To estimate land use, policymakers in Rwanda have to create two land related sector:

With knowledge of the space currently available, the level of conversion of raw land into sector-usable land in the aggregate and separately for each producing sector, household, and government can be estimated, given the final demand specification. Such information can be useful also in showing the relative amount of land used in the provision of housing services, recreation, commercial enterprises, and transportation facilities.

The linkage technique can allow planers in Rwanda to identify the producing sector and the kind of final demand sales that significantly influence the rate of by-product output flow. Such information is relevant particularly to taxation and regulation policies.

Planers would like to know the expenditure that various sectors make in seeking to control the by-product flow. Often these expenditures are not distinguishable from the sectors purchases required for the sectors goods and services production. The specification technique can provide some such information and permits calculation of how these expenditures would change as final demand changes.

Planers would like also to know the feasibility, in terms of expenditures and resources required, of achieving alternative rates of by-product output flow; the dummy technique can provide some such information necessary of economic development of Rwanda. For example by stipulating target levels of allowable pollution and estimated deliveries to final demand, the dummy technique allows calculation of the level of resources that must be committed to pollution suppression activities. Such information is useful particularly for situation in which the government is seeking to reduce pollution directly to rough its own programmatic expenditure (Bulmer-Thomas V., 1982, PP 256-278).

4.5.5. Quality of life, poverty and economic inequality

Some desirable features that one may think of are reflected in GDP: Spacious, well constructed homes, good restaurants and stores, a variety of entertainment and high quality medical services. However other indicators of good life are not sold in market so may be omitted from GDP.

In Rwanda absolute poverty has been declining. Today many families whose income is below to days' official line is 57% and own their health insurance and in some cases their own homes, and cow due to the one cow one family project by which living conditions of poor families has been improved and malnutrition has been reduced.

But, even though absolute poverty seems to decrease in Rwanda, inequality of income has not generally well improved. In contrast, because GDP focus on total production rather than on the distribution of output, it does not capture the effects of inequality.

4.6. GDP and economic well-being

Data show that GDP current prices had increasingly increased from 1999 to 2009, but even though there had been increasing in GDP Current prices, GDP Constant 2006 Prices had declined from 2006 to 2009. This means that there has been inflation regardless the increase in GDP current. The gap between GDP current and constant right side cross section of those covers shows how the inflation intensity from 2006 to 2009 was.

The following graph shows that GDP current prices will continue to increase over GDP Constant 2006 Prices. This is view by making projection in 10 Years beyond the period of the study. This mean that the GDP Deflator will increase continually if anything is done to stop this disparity in GDP Current and GDP Constant 2006 Prices. The gap between GDP current and constant right side cross section of those covers shows how the inflation intensity from 2006 will be in the following 10 years of projection.

GDP is at best an imperfect measure of economic well-being. Among the factors affecting well being omitted by the real GDP are the availability of leisure time, non-market services such as unpaid homemaking and volunteer services, environmental quality and resource conservation, and quality of life indicators such as low crime rate. The GDP also does not reflect the degree of economic inequality in country; because real GDP is not the same as economic well-being, proposed policy should not be evaluated strictly in terms of whether or not they increase the GDP.

Although the GDP is not the same as economic well-being, it is positively associated with many things that people value, better homes , better life, better health, higher life expectancy, higher rate of literacy.

This relationship between real GDP and economic well-being tend to evaluate economic development of Rwanda and this relationship has led Rwanda to the improvement of their way of producing, saving and consuming, health and education in search of better life and has motivated policymakers in Rwanda to try to increase the rate of economic growth oriented to economic development of Rwanda through out many strategic policies such as EDPRS, RSSP.

4.7. Data interpretation «SUT/I-O Tables and Economic Development of Rwanda»

Achieving the millennium development goals will require an open, rule-based global economy in which all Rwandans rich and poor participate.

Rwanda is in the middle of a major demographic transition. Its population continues to grow every year, but the pace of growth has slowed as fertility rates decline (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition, 2).

As Rwanda population growth slows, the age structure of Rwanda population is changing, with the share of the youth declining and that of the elderly growing. This changing in age structure has important implications for economic and social policies and hence for sustainable economic development (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition, 2).

4.7.1. Environment

Development and economic growth have improved the quality of life for many people in Rwanda, but the gains have been uneven and economic growth has often had negative environment consequences, with profound impact on rural people.

Using environmental wisely is crucial for reducing poverty. Many rural people in Rwanda depend on environment for their livelihoods. Because rural people control far fewer natural and produced resources, environmental degradation affects them disproportionately.

Environmental indicators in Rwanda which measure environmental resources and goods and services produced from them, help to establish the link between growth and environmental change and pointing the way towards sustainable development.

4.7.2. Environmental change and their impacts

Another macroeconomic question concerns the impact or economic growth on environmental quality. Do high rate of growth that is, increase in GDP of Rwanda, implies greater environmental degradation or might the opposite be true? It is to note that «some pollution increases during the early stages of a country's development and then begins to diminish as country gain adequate resources to tackle pollution problems».

This happen because at low incomes' people tend to value development over environmental quality, but as the country achieves greater wealth it willing to devote greater resources to environmental quality improvements. This is a matter of greater importance for Rwanda.

Several years ago, when problems of environmental quality were widely regarded as one of the factors to development, industrial development of Rwanda was associated with air and pollution.

Rwanda however, was thought to have fewer environmental problems because their reindustrialized technology was more environmental benign, and it had no yet committed itself to a materialistic style of life.

Ideas have changed, however. For one thing, it has become clear that massive environmental degradation has occurred in Rwanda; rural areas have seen large-scale soil erosion and water-quality deterioration, deforestation and declining in soil productivity. But the government of Rwanda is trying to rehabilitate all those constraints towards economic developments.

Rwanda's urban areas have experienced seriously diminished air and water quality. Further more, this environmental deterioration in Rwanda is not just a matter of aesthetics or quality of life, but rather a more serious issue involving the diminishment of economic productivity and the acceleration of social dislocation. Environmental problems in Rwanda are much more likely to be matters of life and death and climate change threatens to further undermine long-term development and the ability of many poor people to escape poverty, especially those involved in agriculture sector. Rwanda has tried with some success to attract pollution intensive firms with the provinise of lower pollution-control standards, in the hope of bolstering their rates of economic development.

Income derived from the environment is a major source of livelihoods for many people, particularly for the rural population. Despite rapid urbanization in most provinces of Rwanda (8% in 1999 and 20% in 2009), almost 80% of Rwanda's population still lives in rural areas. In many provinces of Rwanda excluding Kigali more than 90% of people live in rural areas and in Kigali less than 20% do. The sustainability and proper management of natural resources are crucial for maintaining rural livelihoods and safety net in difficult times.

At the same time, the environment is a source of vulnerability. Increasing use of fossil energy, mainly by industrial sector and the resulting climate change add to rural population vulnerability. The adverse impact of environmental change will be most striking in rural areas and particularly among the poor, because of their high dependence on natural resources, their limited resources to remedy the impact of such changes to implement mitigating policies.

Population growth in Rwanda will put further pressure on agriculture as rising demand for food requires more land and more forests to be turned to agriculture use. Greater number of rural population is forced to live and work on marginal and fragile lands. This has particularly an impact on food production and food security especially, and in rural areas where food production barely keeps up with population.

This has a negative impact on domestic product and on GDP of Rwanda and cause also health problem like malnutrition, environmental degradation which constraint development.

At its turn, it disequilibrate the SUT and I-O Tables where by Rwanda population increases demand for food particularly in that is not domestically produced, and this increases import which deteriorates trade balance, and decline growth in agriculture productivity has the main cause of deforestation even though there are established policies to protect environment.

4.7.3. Population policy as environmental policy

Many policymakers in Rwanda feel that the only effective way to control environmental destruction is to control the number of people by population control policies. This is explained by the total environmental impact:

Total environmental impact = environmental impact per person * number of people.

Therefore it is clear that total environmental impact can be increased as a result of increases in their or both these factors.

4.7.4. Health and Development

Some health costs are captured in SUT as expenditure and are also induced in GDP but they are some others which are not captured by SUT but by health satellite accounts.

The health system is also taken into account for development; the following state some analysis on health and development:

«Keeping mothers alive and healthy is good for women, their families, and society. Prioritizing women's health is helping Rwanda to meet many of the millennium development goals: first improvement of maternal and child health then reduced poverty, universal education and gender equality. In Rwanda rural people tend to have large families, suffer disproportionately from illness, and use fewer health services due to its low income and some time ignorance. Reproductive health care in Rwanda is enhancing rural people's overall health care and helping families to escape the poverty impact of having many children».

Due to deferent policies for development in Rwanda, financial resources and benefit are being divided among fewer family members; more is left for education, health care and saving, decreasing vulnerability and insecurity.

This important link between reproductive health and development outcomes has been articulated in Rwanda since many years.

4.7.5. Tourism

The movement of population across national borders is another mark of integration and development. In Rwanda some of expenditures on tourism sector are captured by SUT through investment or gross fixed capital formation induced by private sector or government. And some others are captured in Tourism satellite accounts.

Receipts from tourisms were 6.5% of export in 20009. The receipts from tourists has increased the capacity of Rwanda's economy and improved also the Rwanda's rest of the world account. More further, due to development of tourism Rwanda's gross saving had increased from 25 billion Frw in 1999 to reach 404 billion FRw in 2009 (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition; Republic of Rwanda, NISR, GDP Annual Estimates for 2009 based on 2006 benchmark).

4.7.6. Movement to Urban Region

The large wage gap between rural and urban population, especially for unskilled and semiskilled labour, indicates that dramatic increase in number of people living in urban areas in Rwanda.

The flow of formal transfers from people living in urban areas back to their rural region of origin has been increased rapidly and has become the larges source of capital for many rural areas in Rwanda.

4.7.7. Infrastructure for Development

As term, infrastructures are captured in SUT/I-O Tables by the Gross fixed capital formation, and in this case is being analyzed as a path to development of Rwanda.

Infrastructures had increased in Rwanda GFCF value 13% in 1999 to reach 22% in 2009 proportion of GDP, and this increase has affected Rwandans in many ways: mode of production and consumption, mode of heating and lighting homes, mode of travelling to work, to schools, or to visit friends and families, and mode of communicating, sharing information. And the profitability and competitiveness of businesses are depending on the cost and availability of infrastructure services (Republic of Rwanda, NISR, GDP Annual Estimates for 2009 based on 2006 benchmark).

In Rwanda since 2000 with the implementation of IMIDUGUDU policy, physical isolation has been removed out. Before 1999 the government of Rwanda saw that physical isolation was a strong contribution to poverty.

Populations without reliable access to social and economic services were poorer that those with reliable access. Problems of access were particularly severe in rural areas far from roads used regularly for motorized transport services and hospitals.

In the way of removing out this physical isolation, Rwanda's Gross Capital formation has been increased as stated above, therefore the figures in SUT have also been increased, and this indicates in some part the growth of GDP by production approach and expenditure approach.

In Rwanda, increasing agricultural productivity is central to rural development and poverty reduction strategies. Because Rwanda has invested in improving infrastructures, improved rural transport in Rwanda makes rural development and poverty reduction easier for farmers to obtain input and advice at reasonable cost and to sell their products at good prices (Republic of Rwanda, EDPRS, 2007).

With the policy of IMIDUGUDU, AGASOZI INDATWA, rural access index has been improved regarding investment done. Almost all basic needs for development have been made available, such as schools, health centres, roads electricity.

These changes towards development as explained above are increasing as public and private sector decide to increase investments, and those investment are captured by the SUT as GFCF which include public and private sectors. Therefore, the increase in GDP due to the increase in GFCF can push Rwanda towards economic development.

Also the development of infrastructure basing on AGASOZI INDATWA and IMIDUGUDU has a significant positive effects on school attendance and on health improvement, that is why Rwanda's Human Development index is improving year after year (Republic of Rwanda, NISR: Statistical Yearbook 2009 Edition) .

HUMAN DEVELOPMENT INDEX
YEAR	VALUE
1980	0.357
1985	0.361
1990	0.325
1995	0.306
2000	0.402
2005	0.449
2006	0.455
2007	0.46
2010	0.4765

As the private sector of Rwanda is improving the SUT/I-O Tables also experience improvement, the role played by the private sector is at almost the investment which increases GFCF and those investments provide infrastructures oriented to the development of rural or urban areas of Rwanda in all corns of Rwanda.

Chapter V: SUMMARY, RECOMMENDATIONS, AND CONCLUSION

5.1. Summary

The purpose of this study was to analyze the role of SUT/I-O Tables in economic development of Rwanda.

SUT/I-O Tables were understood (for the purpose of this study) as a system information that produces and supplies adequate, reliable, and timely information used for planning, programming, and financing economic activities. On the other hand, economic development implies the process of capital accumulation of funds from several sources and its use to transform the economy from one whose growth is small to one which is a significant self-sustained rate of increase is permanent long run feature.

The study found that SUT/I-O Tables in Rwanda as developing country can serve the purpose of setting short-run and long-run range planning, cost determination, taxation system, operational control, perform advanced analyses, and provision of basic information for decision-making, accumulation of capital formation, national planning, price control, planning and programming economic development.

But the lack of professional accountants in national accounting constrains Rwanda entities to introduce and use SUT/I-O information in the process of economic development. Thus the role of SUT in the process of economic development has not considered with attention.

The analysis shows that the economic environment of Rwanda has been recovering since 1999 by some structural projects such as RSSP and EDPRS in the program of Vision 2020.

However, to maintain this progress towards economic development, the researcher proposed to promote skilled personnel including accountants and other economic planners in order to design plans and programs that aim at enhancing the economy. In addition to this; social, commercial and credit conditions should be accessible for farmers. In addition Supply and use identity serves as a basis for various interconnection with satellite accounts such as labour statistics, linkage with physical flows (land use, energy), linkage with other physical flows related to environmental issues (emission of CO2, waste, sewage) and other form of satellite accounts system for tourism, transport, health, and education.

5.2. Recommendations

Rwanda National Accountants have to make an effort and introduce the income approach to compute GDP, because this approach could help in Social Accounting Matrix designing.

The use of SUT and SAM should allow to evaluate the relative burden of taxation across households types and should also allow to consider how best to use taxation and transfers system to alleviate poverty. Through this, the government should collect taxes and spends the funds on public projects and on transfers to poor segments of the population.

In Rwanda the youth occupies an important portion of the total population. Even though, policy should focus not only on youth's opportunities but also on their capabilities and second chances. This will increase the productivity capacity of Rwanda, transformation initiative which also will increase value added on goods and services which are domestically produced for final consumption or for export.

The government of Rwanda should make the services work. Making services work requires changing the institutions relationship among key sectors.

Rwanda's economic growth «a major determinant of human development outcomes» would need to be substantially faster than it has been in last 10 years to make dramatic improvements of economic development of Rwanda.

The government of Rwanda should build blocks of economic growth, human capital, empowerment, and social protection. The blocks are mutually dependent. And these blocks are all captured in SUT/I-O tables through salaries as remittances of human capital, empowerment and social protection through investment and economic growth through GDP.

SUT/I-O Tables should be used to forecast and predict the development of Rwanda. Basing on data in SUT/I-O tables it is possible to visualize the behaviour of SUT/I-O Tables in previous years. SUT/I-O Tables Should also be used to foster balance of payment by improving investment for promoting export.

In Rwanda environmental protection activities should be carried out by all sectors. They should be concentrated, however in three sectors which sell protection services: a) Government, b) Trade and transport and c) other services which provide private waste disposal services, environmental consulting and recycling.

5.3. Conclusion

The reason why I have combined SUT/I-O Analysis with the Economic Development of Rwanda is because SUT/I-O analysis has a key role to play in the perspective analysis of Economic Development of Rwanda. Much analysis of economic development of Rwanda needs to be on economy wide basis (e.g. development planning) and this suggests the need for macro-economic approach; most macro-models however are so highly aggregated that they must perforce assume a degree of resource mobility which is just not present in Rwanda. The only answer seems to be SUT/input-output analysis, which is macro in terms of its coverage and get «micro» in terms of its approach.

The interface of SUT and economic development is one of the most exciting and most challenging fields of system of National Accounting. It involves relevant aspects such as planning, budgeting, auditing, taxation, finance, programming, capital formation, project appraisal, and yet others which pertain the overall aim of economic development at both micro and macro levels.

This study was designed to highlight the role of SUT and its wider range of responsibilities imposed on accountant in developing country like Rwanda, and how it demands a high level of intellectual calibre, knowledge and capacity, and determination so that the accountant responds to the needs of economic development process of Rwanda.

However, a vast amount of work is still ahead. It is a challenge to which national accountants are able to respond effectively and which can best be accomplished by our commitments, evaluation and coordination of our capacities and cooperation. Underlying these should be a profound and clear understanding of the relationship between SUT and satellite accounts and their socio-economic environment, and their impacts on economic development of Rwanda.

The high growth throughout rural areas was due in part to the implementation of Vision 2020 throughout RSSP and EDPRS. The implementation of vision 2020 has increased the capacity of rural and urban population by helping them to improve their living conditions, income, and all those have a positive impact on productivity and output and lead to the improvement in SUT and increasing in GDP.

The combination of GDP with living conditions indicators or social well-being indictors are used to measure economic development of Rwanda. Therefore the HDI remain the perfect model to measure economic development and the role of SUT in this model has been analyzed in the 2^nd chapter of methodology and along the 4^th chapter.

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The role of supply and use/input output tables in the perspective analysis of economic development of Rwanda