In interviews, managers of manufacturing firms in Rwanda indicate that proximity and lower transport costs is their “comparative advantage” and hence they focus on domestic trade or exports to Burundi. This might be surprising at first, because manufacturing exports are more diversified across firms and idiosyncratic demand shocks might be more important. However, many of the additional exporters in the manufacturing sectors are likely to be only marginal exporters. They are much more likely to only clear the lowest export thresholds, for the closest, most accessible markets, consistent with the generalization of the Melitz-model to multiple countries in Chaney (2008). It is also important to keep in mind that manufacturing exports started from a very low base at the start of the sample. The greater importance of richer, but more distant sub-Saharan African countries with more developed manufacturing sectors, like Kenya and Uganda, only in later years coincides with the boom in manufacturing exports.

The importance of African countries as trading partners contrasts sharply with the limited exports going to sub-Saharan African countries, as reported in Van Biesebroeck and Mensah (2019). Using sectoral input-output data from EORA, they find that in 2015 the average country exports 23% of its manufacturing exports within the region. For Rwanda specifically, the EORA data shows that only 2% of manufacturing output is exported. More than 80% of exports are recorded as going to the “rest of the world” and only 8.2% are exported within Africa. This seems highly implausible and suggests that one should be careful with the rest of the world residual category in the EORA dataset.

As has been mentioned a few times already, the results in Table 1 also suggest that a more stable situation in the DRC could really help Rwanda. From 2010 to 2014, as its neighbor was booming, manufacturing exports grew from 3.5 million USD to 45 million USD. At the same time, the share of manufacturing exports going to the DRC averaged 80%. The end of the growth spurt in the DRC in 2016, and the unstable situation in its border region with Rwanda, had an adverse impact on the manufacturing sector in Rwanda and in particular reduced exports.

Figure 1 summarizes for manufacturing the differential exposure of small versus large exporters to nearby versus distant export markets. In order to consider all countries neighboring Rwanda, we consider all top-10 export destinations, which includes all four neighbors in all years. In order to show the specialization of firms that are relatively small even in light of the lack of development of Rwanda’s manufacturing sector, we now set the large versus small exporter distinction already at a threshold of 100 000 USD global exports per year.

The pattern that emerges is that exporter size and destination distance are inversely correlated, consistent with economic theory. Moreover, the correlation has become stronger over time. One could interpret these as the results of falling market access barriers (fixed costs of exporting), which are likely to affect small firms and nearby markets the most.

Among the four categories—two exporter size classes and two types of destinations— growth has been the fastest for large exporters to neighboring countries (the solid blue line). Those neighbors are, in order of importance as export destination, the DRC, Burundi, Uganda, and Tanzania. From 2008 to the maximum value attained in 2013, exports for this group increased 20-fold. Sales of large exporters in more distant countries (the solid red line) also 19