VZCZCXRO3306
RR RUEHBZ RUEHDU RUEHJO RUEHRN
DE RUEHMR #0114/01 0611239
ZNR UUUUU ZZH
R 021239Z MAR 07
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC 2687
INFO RUCNSAD/SADC COLLECTIVE
RUEHMR/AMEMBASSY MASERU 3036

UNCLAS SECTION 01 OF 02 MASERU 000114 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR AF/S, AF/EPS, AND EB/CBA 
 
E.O. 12958: N/A 
TAGS: ETRD ECIN ECON EINV LT
SUBJECT: LESOTHO'S INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA 
 
REF: STATE 22438 
 
MASERU 00000114  001.2 OF 002 
 
 
¶1.  SUMMARY: In response to REFTEL, Embassy Maseru provides the 
following input for the 2007 President's Report on AGOA. 
Two-thirds of Lesotho's export revenues are dependent on AGOA, 
and the textile industry spawned by AGOA is now the largest 
formal sector employer in the nation.  Lesotho is a democracy 
with a free market economy which is struggling to address the 
problems of economic diversification, poverty, and HIV/AIDS. 
Lesotho stands as an AGOA success story, and is poised to 
continue to take advantage of its status under this trade 
legislation in the years to come.  END SUMMARY. 
 
------------------ 
Lesotho Under AGOA 
------------------ 
 
¶2.  The following information was requested REFTEL: 
 
STATUS: 
AGOA eligible including apparel and textile benefits 
 
AGOA TRADE AND INVESTMENT: 
The United States remained the largest recipient of Lesotho's 
exports in 2006, accounting for 67% of total exports.  Lesotho's 
2006 exports under AGOA and its GSP provisions were valued at 
$327 million, representing about 95% of the country's exports to 
the United States.  Apparel and textile manufacturing is the 
largest formal sector employer in Lesotho. 
 
MARKET ECONOMY/ECONOMIC REFORM/ELIMINATION OF TRADE BARRIERS: 
Lesotho has a free market economy.  Diversifying the economy is 
the top goal for economic reform.  Financial infrastructure 
shortcomings have also been identified as one of the technical 
barriers to trade.  In 2006, the Central Bank of Lesotho 
embarked upon modernization of the country's payment and 
settlement system (the "Lesotho Wire System") as a way of 
strengthening the nation's financial infrastructure and 
maintaining financial stability.  The benefits of this system 
include improving Lesotho's credit rating, which will in turn 
improve the country's international investment position. 
 
RULE OF LAW/POLITICAL PLURALISM/ANTI-CORRUPTION: 
Lesotho's ruling party, the Lesotho Congress for Democracy 
(LCD), won a controlling majority of seats in the National 
Assembly in the February 17, 2007 national election.  Eleven 
political parties will be represented in the National Assembly 
when the Parliament opens for its first session on March 9, 
¶2007.  The LCD will have a strong majority in the 120-seat lower 
house, holding 61 seats from constituency elections and an 
additional 21 seats from proportional representation due to its 
alliance with the National Independent Party (NIP).  The All- 
Basotho Convention (ABC) will be the largest parliamentary 
opposition, with 17 constituency seats plus 10 proportional 
representation seats due to its alliance with the Lesotho 
Workers Party (LWP).  The government wages a credible battle 
against corruption, including regular prosecutions. 
 
POVERTY REDUCTION STRATEGY: 
The country's Poverty Reduction Strategy Paper, approved by the 
World Bank in 2004, is currently under review.  In 2006, Lesotho 
finished implementing free primary school education nationwide. 
The Ministry of Education is increasing resources available at 
secondary school level to absorb the graduates of the newly free 
primary schools.  The Ministry of Health and Social Welfare has 
completed the second phase of upgrading health care facilities 
in the Lesotho's main hospital.  The Government has also scaled 
up HIV/AIDS care and treatment services to combat new HIV/AIDS 
infections and bring those infected with the disease back into 
the productive work force. 
 
LABOR/CHILD LABOR/HUMAN RIGHTS: 
Lesotho has ratified all core International Labor Organization 
(ILO) standards, including the ILO Convention on minimum age and 
ILO Convention 182 regarding the worst forms of child labor. 
Workers in the private sector have the right to form and join 
trade unions.  As a result of the impact of HIV/AIDS on the 
adult work force, child labor does exist in the informal sector. 
 Increasing numbers of HIV/AIDS orphans are at risk of informal 
sector employment including child prostitution.  Lesotho is 
participating in two regional USDOL programs to mitigate the 
incidence of child labor.  The government generally respects the 
human rights of its citizens. 
 
------------------ 
Lesotho Needs AGOA 
------------------ 
 
¶3.  COMMENT:  Over 40,000 Basotho workers in the textile 
industry depend on trade conducted under AGOA for their 
livelihood.  Considering the effects of this economic activity 
on a small nation of two million with approximately 50% 
 
MASERU 00000114  002.2 OF 002 
 
 
unemployment, the true nature of AGOA's huge impact on the 
Mountain Kingdom comes into focus.  We look forward to 
continuing to help Lesotho diversify its export base and to 
further expand the benefits of AGOA in this nation.  END COMMENT. 
PERRY