Lesotho
Executive Summary
Lesotho has experienced impressive economic growth over the past decade, with a Compound Annual Growth Rate of 3.6 per cent annually since 2007 and a real gross domestic product (GDP) per capita growth of 25 per cent in the last decade.1 This growth was largely supported by increased diamond exports. The country is exploring economic diversification in a handful of sectors, such as mining, quarrying, textiles, and apparel.
Preface
The eTrade for all Initiative, launched at the fourteenth Ministerial Conference of UNCTAD in July 2016, is a practical example of how to harness the digital economy in support of the 2030 Agenda for Sustainable Development, notably Sustainable Development Goals (SDGs) 5, 8, 9, and 17. The initiative seeks to raise awareness, enhance synergies, and increase the scale of existing and new efforts by the development community to strengthen the ability of developing countries to engage in and benefit from e-commerce by addressing seven relevant policy areas.
Conclusion
The present assessment was requested at an opportune moment; with the NSDP II close to adoption, the Government of Lesotho will invest a significant amount of effort in putting the necessary framework together to guide the use of e-commerce and the digital economy in the country's economic and social development.
Acknowledgements
This Rapid eTrade Readiness Assessment of Lesotho was prepared by Paul Baker, UNCTAD Consultant, in close collaboration with a team comprising Cécile Barayre, Iris Macculi, and Marian Pletosu, under the overall guidance of Torbjörn Fredriksson. The in-country technical and coordination support of UNCTAD national consultant, Makuena Leboela, was instrumental in ensuring the substantive depth of this assessment. Pablo Quiles and Kananelo Makoetlane provided strong research support to the team.
The investment framework
Lesotho is largely open to FDI and treats foreign investors well. However, FDI policy and the legal framework are not well developed and improvements are recommended. Business taxation, land regulation, work and residence permits,industrial and trade licensing,competition policy and aspects of foreign exchange control are also priorities.
Methodology of international tax comparisons
The ComparativeTaxation Survey compares taxation on investment in several sectors in Lesothowith taxation in other selected countries – neighbours and countries elsewhere that have succeeded in attracting FDI to the sectors concerned. These comparisons enable Lesotho to assess the competitiveness of its taxation.
Introduction
Lesotho is a small, land-locked,least developed countrywith a rugged, mountainous terrain and few endowments other than the natural beauty of its environment, water, cheap labour, and some deposits ofminerals and diamonds. Yet, Lesotho has been able to attract foreign direct investment, thanks to trade preferences allowed by the development provisions of theWTOAgreements.
Conclusions and recommendations
Lesotho has done far better than most other LDCs in attracting FDI, and is unique among African LDCs in attracting predominantly export-oriented FDI. Apparel TNCs have generated significant employment and foreign exchange; they have also created industrial and exporting skills that, though narrow in scope, could provide a base for longer-term FDI and industrial development. There is also a trickle of South African FDI relocating labourintensive processes, and this offers good prospects for long-term growth. There is little resource-based FDI,but it should be able to attract investors in the foreseeable future.
FDI in Lesotho: Trends and impact
Lesotho,a land-locked least developed country, has a paucity of locational advantages which could attract FDI. However, owing, to Government efforts combined with trade privileges, since the mid- 1990s Lesotho has been quite successful in attracting increased inflows of FDI. More importantly, and unusually for an LDC, these inflows have been concentrated in export-orientedmanufacturing, producing growth, foreign exchange revenues, newjobs (mainly for femaleworkers) and sources of income and, contributing to poverty reduction. The challenge is thatmost of its FDI is dependent on temporary trade privileges. Lesotho has little time to prepare itself for full global competition once trade privileges are withdrawn.
Preface
The UNCTAD Investment Policy Reviews are intended to help countries improve their investment policies and to familiarize governments and the international private sectorwith an individual country's investment environment. The reviews are considered at the UNCTADCommission on Investment, Technology and Related Financial Issues.