Lesotho info pack: Overview of textile and apparel industry

o Preference Erosion: there are 2 issues. 1. arising from the WTOs Doha Ministerial it was agreed to further reduce industrial tariffs (Non-Agricultural Market Access (NAMA)) on a worldwide basis. If the industrial most-favoured-nation (MFN) tariffs of the rich states (which have extended tariff preferences to Lesotho) reduce it will undermine the preferences that Lesotho enjoys when its apparel products enter their economies. Currently Lesothos exports enjoy significant tariff preferences as a consequence of AGOA. If the USA were to drop their MFN tariffs on clothing it would mean that the value of the 0% duty preference enjoyed by Lesotho would diminish. 2. The WTO (Hong Kong 2005) decision which compels rich states to grant duty & quota free (DFQF) access to all products from LDC states by 2008 will ensure that Lesotho made goods face very stiff competition from Bangladesh and Cambodia.

o Infrastructure: Lesotho has managed to market itself so successfully that there is a growing queue of value chain investors that want to establish themselves in Lesotho (and some of the existing investors want to expand. Unfortunately they are unable to house these investors as there is no physical infrastructure that can locate them (factory shells; waste water recycling facilities; etc). Lesotho needs to find resources to build more physical infrastructure.

Addressing Problems Proactively

Lesotho Stakeholders Have Worked Hard To Proactively Address Problems Facedby Its Textiles & Garment Industry

The GoL and a range of other stakeholders have attempted to improve circumstances for the industry, to this end they have done the following :

o Inter-Ministerial Textile & Apparel Industry Task Team (IMTT): in June 2004, on the basis of concerns raised by the private sector, the Lesotho Prime Minister directed that an IMTT should be established to work on industry concerns. The IMTT (comprising the GoL, the private sector, organised labour) finalised its deliberations in Sept. 2004. Its report covered a range of issues, including: tax collection, industrial incentives, speeding-up import and export transactions, the issuance of work & residence permits, improving security in industrial area, and a range of infrastructural issues. The IMTT has had considerable success in achieving positive outcomes. The IMTT (led by the Lesotho trade minister) now meets about every 2 weeks to monitor progress in implementation, and to address new issues. This has been / will be a key structure for driving changes to the industry.

o Improving Firm Competitiveness : continual firm level performance improvement is vital if Lesotho garment firms are to remain in the global garment trade. It is encouraging to note that Lesotho firms have now started to invest in the training of their staff some trainings have had spectacular results (one ComMark co-financed programme has resulted in a firm improving output by about 35%).

o Investment Promotion : the LNDC has initiated plans to attract further sector investments to Lesotho. These investment promotion trips have been spectacularly successful. There has been a regional (SADC) explosion of interest in Lesotho as a destination where one can locate textile and garment production units. In addition in order to ensure that Lesothos USA garment exports remain strong, a multi-stakeholder delegation (led by the Minister of Trade) has visited the USA twice in order to cement relationships with the USA Brands that purchase (and do not purchase) Lesotho garments.

o Tax Concessions : the GoL, cognizant of the problems being faced by the existing industry, and in an effort to give the LNDC a significant tool to attract more industry, announced (Feb. 2006) a reduction in the corporate manufacturing tax rate from 15% to 0% for those that export out of SACU, and to 10% for those that sell product within SACU.

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