AGOA: time to act is now

Lesotho Times - - Leader -

AT­TRACT­ING for­eign di­rect in­vest­ment and di­ver­si­fy­ing the econ­omy rank highly among the gov­ern­ment’s pri­or­i­ties. This is rightly so given that the coun­try’s high un­em­ploy­ment rate and un­de­vel­oped econ­omy have re­sulted in high lev­els of poverty among the pop­u­lace.

In ad­di­tion to the afore­men­tioned ini­tia­tives, Le­sotho also needs to har­ness all its com­pet­i­tive ad­van­tages so the coun­try can ben­e­fit while they still last. One such com­pet­i­tive ad­van­tage is the Africa Growth and Op­por­tu­nity Act (AGOA), which gives Le­sotho and other el­i­gi­ble African coun­tries pref­er­en­tial treat­ment in trad­ing with the United States.

AGOA has helped cre­ate em­ploy­ment for more than 40 000 peo­ple in the coun­try’s tex­tile fac­to­ries since the early 2000s.

Those ben­e­fits are at risk not just be­cause of the threat that AGOA might not be re­newed – af­ter the Amer­i­cans ex­pressed “se­ri­ous con­cerns” about the gov­ern­ment’s al­leged fail­ure to ad­here to gov­er­nance cri­te­ria -- but also our fail­ure to make full use of the fa­cil­ity in its life­span.

While the leg­is­la­tion was re­newed for 10 years by US law­mak­ers last June, it is yet un­clear whether an­other sim­i­lar fa­cil­ity is in the off­ing af­ter that pe­riod. In any case, it al­ready faces a threat from the Trans Pa­cific Part­ner­ship (TPP) agree­ment be­tween the United States and Pa­cific Rim coun­tries which, if con­sum­mated would re­duce tar­iffs and trade rules among the coun­tries in­volved.

It would also al­low very com­pet­i­tive economies such as Viet­nam to do more busi­ness with the US un­der the same priv­i­leges AGOA ben­e­fi­cia­ries cur­rently re­ceive.

While the TPP mech­a­nism is likely to be dif­fer­ent, many Viet­namese gar­ment ex­ports to the United States would re­ceive sim­i­lar ben­e­fits like those in AGOA’S third coun­try fab­ric pro­vi­sion.

Omi­nously, US Pres­i­dent Barack Obama told Viet­namese en­trepreneurs yes­ter­day dur­ing his Asia tour in Ho Chi Minh City that he hopes to see the trade pact rat­i­fied this year. Time is cer­tainly run­ning out for Le­sotho with no plan B in sight.

In this edi­tion, a vet­eran in­vestor in the tex­tile sec­tor has urged Le­sotho to make hay while the sun shines with re­gards to AGOA, say­ing in­vest­ing in up­stream in­dus­tries is the only way to go to re­main com­pet­i­tive.

Thet­sane In­dus­trial Area-based Sun Tex­tiles (Pty) Lim­ited Pres­i­dent Feng Fu Lung said the gar­ment in­dus­try had not evolved from the cut, make and trim mode it be­gan with 20 years ago, and was now slowly but surely los­ing its com­pet­i­tive edge.

Mr Lung said Le­sotho needed to es­tab­lish a knit fab­ric mill to im­prove the coun­try’s com­pet­i­tive edge among other tex­tile man­u­fac­tur­ing na­tions. He said a knit fab­ric mill would en­able lo­cal tex­tile firms to avoid the ex­pense of im­port­ing their raw ma­te­ri­als.

As we noted in the story, the Le­sotho Na­tional Devel­op­ment Cor­po­ra­tion (LNDC) has com­mit­ted to es­tab­lish­ing a knit fab­ric mill by the 2017/18 fi­nan­cial year in its strate­gic plan for 2015-2017.

How­ever, their tar­get might be too lit­tle too late given that the time Le­sotho can lever­age the AGOA fa­cil­ity is shrink­ing by the day. In­vest­ment in up­stream in­fra­struc­ture should no longer be merely en­vis­aged but im­ple­mented as a mat­ter of ur­gency.

This should be cou­pled with a stated com­mit­ment by the gov­ern­ment to ad­dress the con­cerns raised by the Amer­i­cans to en­sure Le­sotho is el­i­gi­ble for AGOA in 2017. For most, if not all, the tex­tile man­u­fac­tur­ers in Le­sotho, the non-re­newal of AGOA would be a deal breaker con­sid­er­ing they al­ready had other op­er­a­tional con­cerns.

The con­se­quences of non-re­newal are not only mon­u­men­tal but also gen­er­a­tional. For the past 20 years, a large sec­tion of this coun­try’s pop­u­la­tion and their de­pen­dents has sub­sisted on the tex­tile sec­tor.

The epic catas­tro­phe of thou­sands of fac­tory work­ers end­ing up on the streets should pro­vide a sober­ing con­text for the gov­ern­ment’s de­ci­sions.

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