Identifier
Created
Classification
Origin
07MASERU545
2007-09-28 12:31:00
UNCLASSIFIED
Embassy Maseru
Cable title:
LESOTHO: TEXTILE AND APPAREL PRODUCTION
how-toVZCZCXRO1084 RR RUEHBZ RUEHDU RUEHJO RUEHRN DE RUEHMR #0545/01 2711231 ZNR UUUUU ZZH R 281231Z SEP 07 FM AMEMBASSY MASERU TO RUEHC/SECSTATE WASHDC 3354 INFO RUCNSAD/SADC COLLECTIVE RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEHMR/AMEMBASSY MASERU 3753
UNCLAS SECTION 01 OF 02 MASERU 000545
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 00000545 001.2 OF 002
UNCLAS SECTION 01 OF 02 MASERU 000545
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 00000545 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 00000545 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
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 00000545 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 00000545 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