US embassy cable - 05MASERU527

C O N F I D E N T I A L SECTION 01 OF 02 MASERU 000527 
 
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 
 
MASERU 00000527  002 OF 002 
 
 
group of Ministers (Malie included) once she is back in the 
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.