VZCZCXRO1085
RR RUEHBZ RUEHDU RUEHJO RUEHRN
DE RUEHMR #0547/01 2711232
ZNR UUUUU ZZH
R 281232Z SEP 07
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC 3357
INFO RUCNSAD/SADC COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHMR/AMEMBASSY MASERU 3756

UNCLAS SECTION 01 OF 02 MASERU 000547 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR EEB/TPP/ABT (GARY A. CLEMENTS), AF/S, AF/EPS; 
PASS TO USTR FOR CAROLYN MILLER; 
DOC FOR ITA/OTECA (MARIA D/ANDREA) 
 
E.O. 12958: N/A 
TAGS: ECIN ECON ETRD LT
SUBJECT: LESOTHO: TEXTILE AND APPAREL PRODUCTION 
 
REF: STATE 114799 
 
MASERU 00000547  001.2 OF 002 
 
 
¶1.  SUMMARY:  Despite taking a battering from intensifying 
global competition, Lesotho's textile sector remains vital for 
Lesotho's economy -- directly employing approximately 45,777 
people in 2007.  This sector has strongly contributed to 
aggregate demand (supported by strong consumption spending) in 
this nation, which has significantly driven the country's 
economic growth over the last three years.  However, the removal 
of textile quotas worldwide threatens the sector's productivity, 
as decreased demand for Lesotho's products in the U.S. market 
has led to a significant decline in orders and prices.  The end 
result has been changes in employment conditions to reduce wages 
costs and the closure of two factories.  There has been no GOL 
response to this situation, but this may soon change as the 
textile sector is politically sensitive in the Mountain Kingdom. 
 END SUMMARY. 
 
 
 
--------------------------------------- 
 
Stiff Competition, Two Factory Closures 
 
--------------------------------------- 
 
 
 
¶2.  Lesotho's textile industry weathered the 2005 expiration of 
WTO Multi-Fiber Agreement and even subsequently recovered most 
of its work force.  The industry, however, has experienced a 
continuing erosion of its competitiveness in recent years.  This 
erosion has resulted in a reduction in production output and 
prices.  In conversations with seven local factories, managers 
noted decreases in orders under AGOA ranging from 40% to 65% 
between 2004 and 2007.  A decreasing general demand for textile 
products in the United States also exerted an downward pressure 
during this same period.  Many employers in the textile industry 
reported changing employees from fulltime to short-term 
contracts to reduce wages costs.  These trends indicate the 
sector's high vulnerability to global competition - competition 
which will only increase as more quotas are removed on Chinese 
textiles next year.  Thus far, two firms have closed due to 
insufficient orders (one in Maseru and one in Maputsoe). 
However, there are advanced plans to open an additional denim 
mill in Lesotho. 
 
 
 
------------ 
 
Data Details 
 
------------ 
 
 
 
¶3.  The following data on Lesotho's textiles sector details the 
shift from 2006 (full year data) to 2007 (data from January to 
August only): 
 
 
 
                                        2006     2007 
 
                                   (full year)  (1/07-8/07) 
 
 
 
Total Industrial Production             1446      898 
 
    (Mil USD$) 
 
Total Textile/Apparel Production         434      269.5 
 
    (Mil USD$) 
 
Textile/Apparel share of imports          17 %     19 % 
 
 
 
Textile/Apparel share of exports          55 %     51 % 
 
 
 
Exports in textile and apparel to U.S.   387     188.5 
 
    (Mil USD$) 
 
 
MASERU 00000547  002.2 OF 002 
 
 
Total manufacturing employment        47,467  50,605 
 
 
 
Total textile/apparel employment      45,000  45,777 
 
 
 
 
 
¶4.  Currently, the GOL has not announced any policy designed to 
deal with dislocation of workers in the textile sector. 
However, efforts aimed at enhancing Lesotho's reputation as an 
"ethical source country" for textiles continue.  One of these 
initiatives, "Better Work Lesotho," is a five-year program aimed 
at enhancing firms' economic performance and improving their 
compliance with the ILO Declaration on Fundamental Principles 
and Rights at Work in the Textile/Apparel and Footwear Sectors. 
Joint efforts between government and industry to improve 
Lesotho's general investment climate continue.  Two projects on 
private sector competitiveness - one implemented by the Ministry 
of Trade and Industry and another by the Millennium Challenge 
Corporation (MCC) - are also forthcoming. 
 
 
 
---------------- 
 
Worries Dominate 
 
---------------- 
 
 
 
¶5.  COMMENT:  The future erosion of AGOA trade preferences, 
especially with the possibility of duty-free quota-free status 
for all LDCs, dominates local conversations regarding the future 
of Lesotho's textile industry.  The industry seems to now 
understand that producing the lowest price commodity garments 
based on low labor rates is not sustainable in the long run, and 
that distinguishing the local industry as an "ethical source" 
may be a way to preserve some of the nation's declining market 
share.  END COMMENT. 
NOLAN