VZCZCXRO4040
RR RUEHBZ RUEHDU RUEHJO RUEHRN
DE RUEHMR #0079/01 0731523
ZNR UUUUU ZZH
R 131523Z MAR 08
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC 3607
INFO RUCNSAD/SADC COLLECTIVE
RUEHMR/AMEMBASSY MASERU 4022

UNCLAS SECTION 01 OF 02 MASERU 000079 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR AF/EPS (JANET POTASH, TAWANNE DAVIDSON); EEB/TPP 
(MIKAEL LURIE); DRL (KAREN GILBRIDE); AF/S 
 
E.O. 12958: N/A 
TAGS: ETRD ECIN LT
SUBJECT: LESOTHO: INPUT FOR 2008 PRESIDENT'S REPORT ON AGOA 
 
REF: STATE 20082 
 
MASERU 00000079  001.2 OF 002 
 
 
¶1.  In accordance with reftel, post submits the following 
information for the President's 2008 report on the African 
Growth and Opportunity Act (AGOA). 
 
------------------------- 
AGOA Trade and Investment 
------------------------- 
 
¶2.  Lesotho's exports to the United States under AGOA and 
Generalized System of Preferences (GSP) provisions were 
approximately $443 million in 2007, accounting for 90% of the 
nation's total exports to the United States.  These exports 
supported roughly 47,000 jobs, which experts estimate support 
350,000 of Lesotho's two million citizens.  As nearly one out of 
four Basotho are infected with HIV/AIDS (and nearly half of the 
working-age adults), the health services provided by textile 
factories as well as the wages paid to workers are a critical 
lifeline to very vulnerable populations. 
 
--------------------------------- 
Market Economy, Economic Reform, 
And Elimination of Trade Barriers 
--------------------------------- 
 
¶3.  Economic Situation:  Lesotho's current macroeconomic 
situation is positive and stable largely due to large customs 
revenue transfer payments from the Southern African Customs 
Union (SACU) over the past four years.  This has allowed Lesotho 
to build foreign currency reserves and repay some of its 
external debt.  Diamond production, which Lesotho reinvigorated 
in 2004, helps to diversify the nation's exports slightly and 
led to increased growth rates of 7.2% in 2006 and 5.1% in 2007. 
The GOL projects a GDP growth rate of 6.5% in 2008-2009 due to 
further expansions of the diamond industry, continued recovery 
of the textile from external shocks in 2005, and rising public 
investment.  Also due to SACU revenue sharing, Lesotho achieved 
a current account surplus of 4% of GDP in 2006 and 2.7% in 2007. 
 On the negative side, the continued vulnerability of the 
textile sector to external shocks and the predicted decline in 
future SACU revenue sharing payments will likely temper an 
otherwise strong macroeconomic situation. 
 
¶4.  Trade Liberalization:  The GOL has made serious recent 
efforts to reduce the cost of doing business in Lesotho, 
including: 1) the creation of a "one stop shop" within the 
Ministry of Trade to reduce the number of steps required to 
register and license companies; and 2) the streamlining of 
procedures to obtain import and export permits (reducing wait 
times from several days to several minutes) through bringing 
Lesotho Revenue Authority and Ministry of Trade officials under 
one roof.  Exporters now need not apply for VAT refunds on a 
"per item" basis, and manufacturing license applications have 
been reduced from 16 to two pages. 
 
------------------------------ 
Rule of Law, Political 
Pluralism, and Anti-Corruption 
------------------------------ 
 
¶5.  The Lesotho Government is a constitutional monarchy. The 
Prime Minister, Pakalitha Mosisili, is head of government and 
has executive authority. The King serves a largely ceremonial 
function; he has only limited executive authority and does not 
actively participate in political initiatives.  In the nation's 
February 2007 National Assembly election, the Lesotho Congress 
for Democracy (LCD) retained its control of the the National 
Assembly (the lower house of parliament), with the All Basotho 
Congress (ABC), the Basotho National Party, the National 
Independent Party, and the Lesotho Workers Party among the 9 
opposition parties represented.  The upper house of parliament, 
called the Senate, is composed of 22 principal chiefs whose 
membership is hereditary.  The King, acting on the advice of the 
prime minister, appoints an additional 11 senators. 
 
¶6.  There were isolated reports of government corruption during 
the year.  However, the GOL took serious action to combat it. 
Anti-corruption legislation passed in 1999 was implemented 
through the creation of an autonomous anti-corruption unit, the 
Directorate on Crime and Economic Offenses (DCEO).  This unit 
actively prosaecutes corruption cases at various levels of 
authority.  For example, Principal Secretary for the Ministry of 
Justice and Human Rights Pontso Lebotsa was arrested for fraud 
in 2007 by DCEO and is currently awaiting trial on 
corruption-related charges. 
 
----------------- 
Poverty Reduction 
----------------- 
 
 
MASERU 00000079  002.2 OF 002 
 
 
¶7.  The country's first Poverty Reduction Strategy (PRS) was 
approved by the World Bank in 2004 and officially expired in 
¶2007.  The GOL's official PRS review concluded that although the 
country achieved significant economic growth during the 
2004-2007 period, the PRS indicators in the areas of health, 
water, and education were not encouraging.  As a result, the 
government formulated a second poverty strategy, named the 
Lesotho Strategy for Growth and Poverty Reduction (LSGPR).  The 
LSGPR, covering a five-year period from 2008 until 2013, aims to 
reduce poverty through broad-based economic growth designed to 
create jobs, generate income, and empower citizens to make 
investment decisions that will increase their quality of life. 
 
¶8.  The GOL signed a $362.5 million compact with the United 
States Millennium Challenge Corporation (MCC) in July 2007.  The 
compact aims to reduce poverty through urban and rural water 
infrastructure development, enhancing health care 
infrastructure, and stimulating private sector development keyed 
to the creation of private sector-led growth. 
 
----- 
Labor 
----- 
 
¶9.  Lesotho's employers operate under the Labor Code Order of 
1992 which nationally regulates terms of employment and 
requirements for worker health, safety, and welfare.  It was 
amended in 2004 to address HIV/AIDS policies in the workplace. 
Unionization is permitted.  In 2001, Lesotho ratified ILO 
Convention 182 on the Prohibition and Elimination of the Worst 
Forms of Child Labor and Convention 138 on Minimum Age of 
Admission to Employment. 
 
¶10.  The labor code contains statutory prohibitions against the 
employment of minors in commercial, industrial, or other 
nonfamily enterprises involving hazardous or dangerous working 
conditions. The government effectively enforced these statutes. 
The legal minimum age for employment in commercial or industrial 
enterprises is 15 years, or 18 years for hazardous employment. 
Children under 18 may not be recruited for employment outside 
the country. 
 
¶11.  Embassy Maseru's primary contact on AGOA issues is Public 
Diplomacy, Economic, and Political Officer Christopher Smith 
(smithcm3@state.gov). 
NOLAN