MINISTER OF TRADE POSITIVE ON INVESTMENT, FTA AND ARTICLE

C O N F I D E N T I A L SECTION 01 OF 02 MASERU 000526

SIPDIS

DEPT PASS TO MILLENNIUM CHALLENGE CORPORATION (MCC)

DEPT FOR AF/S

E.O. 12958: DECL: 10/17/2015
TAGS: ETRD ECON EINV PREL LT KICC MCC
SUBJECT: MINISTER OF TRADE POSITIVE ON INVESTMENT, FTA AND ARTICLE
98

REF: MASERU 492

CLASSIFIED BY: JUNE CARTER PERRY, AMBASSADOR, EXEC, STATE.
REASON: 1.4 (b),(d)



CLASSIFIED BY: JUNE CARTER PERRY, AMBASSADOR, EXEC, STATE.
REASON: 1.4 (b),(d)
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SUMMARY
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1. (C) The Ambassador met October 12 with Minister of Trade and
Industry Mpho Malie to exchange views on several high profile
issues: the U.S. - SACU Free Trade negotiations; the status of
pending legislation important for Lesotho's Millennium Challenge
Account (MCA) proposal; and Article 98. Also discussed were
the results of the Minister's trade promotion trip to the U.S.
in June. Malie was positive about prospects for significant
foreign investment in Lesotho. The FTA discussions were again
on track, in his view, and the Minister echoed the promising
comments by MFA Moleleki (Ref) regarding Article 98 in the near
future. Ambassador Perry stressed the importance the USG
attaches to an Article 98 agreement and the passage of certain
legislation to improve gender equality and the business
environment in Lesotho. She referenced potential submission of
a shorter-term MCA proposal for Lesotho while work continues on
interim technical support per June 4 609g Agreement and a future
Environment and Social Impact Assessment (ESIA) on the Metolong
Dam proposal. Also attending the meeting were MOTI Principal
Secretary David Rantekoa and DCM (note taker). END SUMMARY

SIPDIS

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FOREIGN INVESTMENT POSSIBILITIES; TRIP TO U.S.
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2. (U) The Minister and Ambassador had not met since his travel
to the U.S. and elsewhere in recent months. Malie described
several promising investment possibilities. An Italian shoe
manufacturer was exploring doing production in Lesotho, for
example. Also, the GOL believed that sizeable clay deposits
here could be used to establish a ceramics sector using multiple
small-scale producers. Products from the ubiquitous spiral aloe
also had potential.


3. (U) The Minister noted that an American businessman whom he
had met during his trade promotion trip to the U.S. in June had
entered into a joint venture with a Lesotho company for
sandstone quarrying and processing. In general, the visit to
the U.S. had been very worthwhile, he commented. In addition to
the businessman/investor, Malie said he established good links
with the tourism industry in Atlanta; there was interest in
promoting group tours to Lesotho.

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STATUS OF AND OPTIONS FOR MILLENNIUM CHALLENGE PROJECT
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4. (SBU) Ambassador Perry described the state-of-play regarding
Lesotho's proposal for MCA funding (design and construction of
the Metolong Dam intended to provide a larger, more reliable
source of water to the greater Maseru area) and other potential
options for MCA support. As it now appears that the EISA
required for Metolong would take one year, the Millennium
Challenge Corporation (MCC) and the GOL could consider other,
shorter-term activities while evaluation for the dam proposal
continues. (Note: Potential funding for a separate dam
proposal would be contingent on outcome of the ESIA.) Upgrading
and repairing the dilapidated water distribution system,
expanding irrigation systems, and developing a more vibrant
housing and mortgage sector might be possible areas based on
initial recommendations of the Finance and Foreign Affairs
Ministers, but would require a formal request from the GOL and
country-wide consultations. The success of any effort, as well
as Metolong, depended, however, on several important legal
reforms, especially regarding land tenure and gender equality.
(Currently, married women have the legal status of minors.)
Ambassador Perry noted USG interest in making substantial
progress on the MCC for Lesotho to alleviate poverty if the GOL
had supportable national proposals.


5. (U) Malie agreed on the importance of the legislation.
Action on the land tenure reform bill was imminent, he claimed.
The Minister of Local Government (who has responsibility for the
bill) intends to examine the draft legislation with a small
group of Ministers (Malie included) once she is back in the

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country. This would smooth the way for Cabinet approval and
then presentation to the National Assembly before the current
session ends in December. The Minister promised to check with
the Ministry of Justice on the status of the Equality of
Marriage Act (which would, among other things, eliminate the
inferior legal status of married women).

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ARTICLE 98
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6. (C ) Reaching an agreement with Lesotho on Article 98 was
also a high USG priority, Ambassador Perry stressed. Malie
echoed the recent positive comments of MFA Moleleki (Ref),
noting that the GOL was revisiting the issue. He hoped there
would be significant positive developments before November.
(Note: based on past discussions with Malie and other GOL
officials on this issue, the Minister is one of several strongly
in favor of an Article 98 agreement.)

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U.S. - SACU FTA
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7. (SBU) Malie agreed with the Ambassador's point about the
importance of concluding an FTA by the revised deadline of 2006.
The preparations for and results of national elections in
Lesotho in the first half of 2007 could complicate the
negotiations if still ongoing. Malie saw the FTA as beneficial
not only for SACU, but in the long-term also for SADC,
especially when a customs union is in place. He credited the
July Deputies meeting in Geneva with providing the impetus for
the resumption of negotiations. Both sides, the Minister felt,
recognized the strain on resources involved in the negotiating
process process; hence, there is a mutual desire to return to
the bargaining table with a clear approach and timeline to reach
agreement. PS Rantekoa concurred, stating that the Gaborone
session's most important accomplishments were establishment of a
schedule of negotiations, agreement on the order of topics to be
covered (starting with NAMA) and general discussions on "second
generation" issues, such as services and intellectual property,
before formal negotiations on them commence. The SACU Ministers
hope to assess progress on the negotiations at a side meeting
during the Hong Kong WTO Ministerial, he added.

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COMMENT
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8. (C) Malie clearly concurs with the importance we attach to
the issues raised and understands how they affect the U.S. -
Lesotho relationship. Being one of the best-informed and most
capable members of the Cabinet, his support is critical in
trying to make progress on many issues. His comments on
Article 98 are additional grounds for cautious optimism that
this long-standing matter can be resolved. Under Malie's
leadership, Lesotho has been and will continue to be an engaged
and constructive party to the FTA and WTO negotiations. Malie,
a tireless and effective promoter of business investment in
Lesotho, was very receptive to the idea of a Corporate Council
for Africa trade delegation to Lesotho if at all possible. END
COMMENT.