Lesotho. A. Definitions and sources of data

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1 Lesotho A. Definitions and sources of data The Central Bank of Lesotho collects data on foreign direct investment (FDI) in the country. The institution is the sole agency collecting statistics on FDI in the country. The Central Bank defines FDI in accordance with the fourth edition of the balance of payment-manuals published by the International Monetary Fund (IMF). The IMF also provided data on FDI in Lesotho in its balance-of-payments statistics. Lesotho adheres to a strong commitment to private investment and is generally welcoming to FDI, especially in export manufacturing; labour-intensive manufacturing and import substitution activities. Additional sectors have been opened to FDI as steady progress is made in privatizing state-owned enterprises. Lesotho has neither foreign investment law nor foreign ownership restrictions in the sectoral licensing laws. There are no incentives specifically for foreign investors and no performance requirements are imposed on foreign investors only, as a condition of investment. However, there are foreign investment restrictions in licensing of business and consumer services and in a de facto form of FDI screening for very small-scale manufacturing. FDI entry restrictions in business and consumer services were introduced in 1999 into Lesotho's ubiquitous trade licensing system. Trading licenses are required for a wide range of services. FDI is not permitted in designated services that require a reserved trading license. No foreign ownership of any level or even board directorship by a non-citizen is permitted in reserved trading license businesses. All manufacturing businesses employing over 10 people or utilizing machinery of more than 25 horsepower require an industry license. Lesotho has a standard and good practice of treatment and protection of foreign investors. There are no foreign investment laws. The country has only a small number of bilateral investment treaties (BITs). The specific standard of treatment and protection currently afforded to foreign investors are: national treatment; non-discrimination; funds transfer; expropriation; dispute settlement and under the BITs, a United Kingdom investor may take a dispute with the Government to international arbitration but the German treaty is silent on this issue. Lesotho is a member of the Multilateral Investment Guarantee Agency and has acceded to the Convention on the Settlement of Investment Disputes between States and Nationals of other States. Lesotho is a member of the South African Common Monetary Area through a trilateral Agreement with South Africa, Swaziland and recently Namibia. There are no restrictions on imports from other members of the Southern African Customs Union (SACU) namely South Africa, Botswana, Swaziland and Namibia. Licensing of imports from other countries outside SACU is similar to that of the Republic of South Africa. There are no controls on exports, except for diamonds for which a license is required. Lesotho is a full and eligible member of a number of key groupings including the African Union, New Partnership for Africa's Development and the Southern Africa Development Community. Lesotho is also eligible member of the market access initiative for African countries by the United States - the Africa Growth and Opportunity Act, European Union led Everything But Arms (EBA) and the new Cotonou Agreement for the negotiation of the trade links between the African, Caribbean and Pacific countries with the European Union. Posted November 2006

2 B. Statistics on FDI and the operations of TNCs

3 UNCTAD WID Country Profile: LESOTHO Page 3 of 12 Table 1. Summary of FDI Variable Inward Outward 1. FDI flows, (annual average) FDI flows as a percentage of GFCF, (annual average) FDI stock, FDI stock as a percentage of GDP, Source: Based on tables 3a, 4 and UNCTAD, FDI/TNC database.

4 UNCTAD WID Country Profile: LESOTHO Page 4 of 12 Year Equity Table 3a. FDI flows, by type of investment, Inward investment Reinvested earnings Intracompany loans Total Equity Outward investment Reinvested Intracompany earnings loans Total Source : UNCTAD, FDI/TNC database. Note : FDI inflows: IMF for and Central Bank of Lesotho for The Lesotho Highland Water Project is excluded from its FDI statistics as it is not considered as foreign investment. FDI outflows: IMF for 1988, proxy based on investments reported by France for 1997, and Central Bank of Lesotho for

5 UNCTAD WID Country Profile: LESOTHO Page 5 of 12 Year Equity Table 4. FDI stock, by type of investment, Inward Investment Reinvested earnings Intracompany loans Outward Investment Total Equity Reinvested earnings Intracompany loans Total Source : UNCTAD, FDI/TNC database. Note : FDI inward stock: Estimated by accumulating inflows since FDI outward stock: Estimated by accumulating inflows since 1988.

6 UNCTAD WID Country Profile: LESOTHO Page 6 of 12 Table 6. FDI flows in the host economy, by geographical origin, Economy France Germany United States Source : UNCTAD, FDI/TNC database. Note: Data are based on information reported by the economies listed above Table 9. FDI flows abroad, by geographical destination, 1997 Economy 1997 France 2 Source : UNCTAD, FDI/TNC database. Note: Data are based on information reported by France Table 12. FDI stock in the host economy, by geographical origin, Economy South Africa United States Source : UNCTAD, FDI/TNC database. Note: Data are based on information reported by the economies listed above Table 15. FDI stock abroad, by geographical destination, Economy South Africa Source : UNCTAD, FDI/TNC database. Note: Data are based on information reported by South Africa Tables 23, 30, 45 and 50. The number, assets, sales and value added of affiliates of United States TNCs in Lesotho, (Number and millions of dollars) Table no. Variable Number Assets Sales Value added a Source: UNCTAD, FDI/TNC database. Note: Data are based on information reported by the United States a Majority-owned affiliates of United States TNCs.

7 UNCTAD WID Country Profile: LESOTHO Page 7 of 12 Table 88. Largest affiliates of foreign TNCs in the host economy, 2004 (Millions of dollars and number) Company Home economy Industry Sales Employees A. Industrial Lesotho Oxygen Company United Kingdom Chemicals and chemical products.... B. Tertiary C. Finance and Insurance Assets Employees Lesotho Bank South Africa Finance Nedbank United Kingdom Finance a Sources: The Banker's Almanac, 2003 (London, Reed Information Services Ltd, 2003); Thomson Analytics ( Who Owns Whom database ( a 2000.

8 UNCTAD WID Country Profile: LESOTHO Page 8 of 12 C. Legal frameworks for transnational corporations Lesotho had adopted a number of national, bilateral and multilateral legal instruments to regulate the activities of transnational corporations and foreign direct investors. The key instruments applicable in the country include: I. National framework Pioneer Industries Encouragement Act No. 19 of 1969; effective on 1,All icr 1'36& Source: Lesotho Government Gazette, vo1. X:V, No, 19 of 1964, p. 62. Amendment: Pioneer Industries Encouragement Order 1987; effective on 9 June Source: Lesotho Government Gazette (Extraordinary), vol. XXXII, No. 25 of 9 June 1987, p. 168, Pioneer Industries Encouragement Regulations 1969 (Legal Notice No. 21 of 1969); effective on 18 July Source: Lesotho Government Gazette, No.35 of 1969, p Lesotho National Development Corporation Act No. 20 of 1967: effective on 2 June Source: International Center for Settlement of Investment Disputes (ICSID), Investment Laws of the World, August 1981, (1), p. 5, Amendment: Lesotho National Development Corporations Act No. 18 of Effective: upon promulgation Source: Lesotho Govemment Gazette, No. 44 of I December 1978, Supplement No. l. The Industrial Licensing Act 1969; effective on upon notification in the Official Gazette. Source: Lesotho Government Gazette, vol. XIV, No. 27 of 1969, p Amendment: The Industrial Licensing Act No. 15 of 1979; effective on 23 November 1979 Source: Lesotho Government Gazette, No. 39 of 23 November 1979, Supplement No. 2. Industrial Licensing Regulations 1969 (Legal Notice No. 22 of 1969); effective on 18 July Source: Lesotho Government Gazette, No. 35 of 1969, p Trading Enterprises Order No. 10 of 1987; effective on 24 October Source: Lesotho Government Gazette, No. 47 of 23 October 1987, Supplement No. 1. Amendment: Trading Enterprises, Order No. 22 of 1988; effective on 21 October Source: Lesotho Government Gazette, No. 74 of 21 October 1988, Supplement No. 1. Trading Enterprises Regulations No. 30 of 1988; effective on 13 February 1988 Source: Lesotho Government Gazette, No. 8 of 12 February 1988, Supplement No. 5. Companies Act No. 25 of 1967; effective on 3 July Source: Lesotho Government Gazette, vol. XII of 1967, p Amendment: Companies Act 1984; effective on 1 March Source: Lesotho Government Gazette, vol. XXIX, No. 35 of 1984, p Income Tax Act No. 7 of 1981; effective on 1 April Source: Lesotho Government Gazette, No. 38 of 16 October 1981, Supplement No. 1. Amendment: Income Tax, No. 3 (Order No. 30 of 1986); effective (Section 8) on 1 April 1981; remainder: 1 April Source: Lesotho Government Gazette, No. 13 of 13 March 1986, Supplement No. 1. The Employment Act No. 22 of 1967; effective on upon notification in the Official Gazette. Source: Lesotho Government Gazette, Lesotho Government Gazette, No.20 of 1967, Supplement (reprinted in August 1971). Amendment: Employment (Amendment) Act No. 14 of 1977; effective on 14 October 1977 Source: Lesotho Government Gazette, vol. XXII of 1977, p. 49.

9 UNCTAD WID Country Profile: LESOTHO Page 9 of 12 Regulation of Wages and Conditions of Employment Act No. 35 of 1969; effective on 14 November Source: Lesotho Government Gazette, No. 53 of Wages and Conditions of Employment Order, 1978 (Legal Notice No. 5 of 1978); effective on 1 April Source: Lesotho Government Gazette, No. 12 of 31 March 1978, Supplement No. I. Amendment: Wages and Conditions of Employment (Amendment of Schedule) Order, 1989 (Legal Notice No. 54 of 1989); effective on 1 April Source: Lesotho Government Gazette, Extraordinary, No. 19 of 2 March 1989, p Workmen's Compensation Regulations, 1980 (Legal Notice No. 5 of 1981). Source: Lesotho Government Gazette, No. 4 of 23 January 1981, Supplement No. 11. Patents: Industrial Property Order No. 5, May 1989: Part II: Patents (sections 3 to 16, in force in May 1989) (F) IP/PI, May Industrial Property Order (Commencement) Notice, Legal Notice No. 84, May Rectification of Errors Orders L.N. Nos. 137 and 138, August Industrial Property (Amendment) Order No. 22, April Industrial Property Regulations, Legal Notice No. 85, May 1989(in force in January 1990) (F) IP/PI, May Industrial Property Regulations (Commencement) Notice, Legal Notice No. 1, January Industrial Property Amendment Act of Source: WIPO ( Trade Marks: Industrial Property Amendment Act 1997, June 1997, Sections 3 and 4 came into force in April Merchandise Marks Regulations, High Commissioner s Notice No. 83, April Industrial Property Order No. 5, May 1989: Part V: Marks, Collective Marks and Trade Names (sections 26 to 33) (in force on May 1989) (F) IP/PI May Source: WIPO ( Industrial Property Order No. 5 of 1989: Part III: Industrial Designs (sections 20 to 25) (in force on May 1989) (F) IP/PI, May Source: WIPO ( Copyright Order No. 13, May Industrial Property Order No. 5 of 1989: Part III: Utility Model Certificates (sections 17 to 19) (in force in May 1989) (F) IP/PI, May Industrial Property Order No. 5 of 1989: Part VI: Acts of Unfair Competition (section 34) (in force in May 1989) (F) IP/PI, May Source: WIPO ( Employees Inventions: Industrial Property Order No. 5 of 1989: Part II: Employee Inventions (sections 6(5) to 9 and 21(5) to (9)) (in force in May 1989) (F) IP/PI, May Source: WIPO ( II. International Framework A. Lesotho is a party to the following multilateral and regional instruments: Paris Convention for the Protection of Industrial Property of 1883 (Revised at Brussels in 1900, Washington in 1911, The Hague in 1925, London in 1934, Lisbon in 1958 and Stockholm in 1967, and as amended in 1979). Signed in 1994.

10 UNCTAD WID Country Profile: LESOTHO Page 10 of 12 Convention on the Settlement of Investment Disputes between States and Nationals of other States of Entered into force on 14 October 1966 Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which entered into force on 7th June Convention Establishing the Multilateral Investment Guarantee Agency of 1985, entered into force on 12 April Marrakesh Agreement Establishing the World Trade Organisation of 15 April Entered into force on 1 January Agreement on Trade-Related Investment Measures. General Agreement on Trade in Services. Agreement on Trade Related Aspects of Intellectual Property Rights. Treaty Establishing the Market for Eastern and Southern Africa (COMESA), Fourth ACP - EEC Convention (Lome IV) of 1989, entered into force on 1st March Charter on a Regime of Multinational Industrial Enterprises (MIEs) in the Preferential Trade Area for Eastern and Southern African States. Southern Africa Development Community (SADC): Countries include Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe, creating a potential market of about 200mn people. Partnership Agreement between the Members of The African, Caribbean and Pacific Group of States, of the one part and the European Community and its member states, of the other part signed in Cotonou, Benin on 23 June B. Bilateral treaties 1. Bilateral investment treaties for the protection and promotion of investments: United Kingdom 1981, Germany Bilateral treaties for the avoidance of double taxation: United Kingdom 1949, South Africa 1959, South Africa 1995, Mauritius 1997, United Kingdom 1997.

11 UNCTAD WID Country Profile: LESOTHO Page 11 of 12 D. Sources of information A. Official Central Bank of Lesotho ( B. Secondary Auetragual, A. (2002). Kingdom of Lesotho: Mushroom Production (Geneva). Economist Intelligence Unit (2002a). Country Profile 2001/2002: Lesotho (London: EIU Ltd.). (2002b). Country Report: Lesotho (London: EIU Ltd.), September. (2005a). Country Profile 2001/2002: Lesotho (London: EIU Ltd.). (2005b). Country Report: Lesotho (London: EIU Ltd.), September. Government of Lesotho (2001). Lesotho Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, February. Hyvarinen, A. (2002). "The garment industry in Lesotho: International competitiveness (Geneva: International Trade Center). International Monetary Fund (IMF) (2006). IMF's Sub-Saharan Africa Regional Economic Outlook, March 10, (Washington D.C.: IMF). Lall, Sanjaya (2003). "FDI, AGOA and manufactured exports from a land-locked, least developed African economy: Lesotho", QEH Working paper series QEHWPS109. Mapetla, E and Rembe, S. (1989). Decentralisation and Development in Lesotho (Maseru: National University of Lesotho). Multilateral Investment Guarantee Agency (MIGA) (1999). "Report of mission to Lesotho on Investment Promotion Unit", draft (Washington D.C.: MIGA). Salm, A., W.J. Grant, T. J. Green, J. R. Haycock and J. Raimondo (2002). Lesotho garment industry subsector study for the development of Lesotho (London: UK Department of International Development), January. Schwab, K. et al. (2000). The Africa competitiveness Report 2000/2001 (Oxford: Oxford University Press for the World Economic Forum). Sechaba Consultants (2000). Poverty and Livelihoods in Lesotho (Sechaba: Maseru). Soderbom, M. and F. Teal (2004). "Size and Efficiency in Africa Manufacturing firms: Evidence from Firm-Level Panel Data." Journal of Development Economics, 73. pp Tan, H. W. and Batra, G. (1995). Enterprise training in developing countries: Incidence, productivity effects, and policy implications (Washington D.C.: World Bank, Private Sector Development Department). United Nations Conference on Development and Trade (UNCTAD) (2002). FDI in the Least Developed Countries at a Glance (Geneva: UNCTAD/ITE/IIA/6).

12 UNCTAD WID Country Profile: LESOTHO Page 12 of 12 (2003). Investment Policy Review: Lesotho (Geneva: UNCTAD/ITE/IPC/MISC.25/Corr. 1). (2005a). Investor-Disputes Arising from Investment Treaties: A Review. UNCTAD Series of International Investment Policies for Development (UNCTAD/ITE/IIT/2005/4). (2005b). A Survey of Support by Investment Promotion Agencies to Linkages. Advisory Studies No. 18 (UNCTAD/ITE/IPC/2005/12). (2005c). FDI in least developed countries at a glance: 2005/2006 (UNCTAD/ITE/IIA/2005/17). United States Trade Representative (2006) Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the Africa Growth and Opportunity Act: The Sixth of Eight Annual Reports, May (Washington D.C.: US Government). World Bank (2002). Lesotho Integrated Framework: Diagnostic trade integration study (Washington D.C.: World Bank). World Trade Organization (WTO) (1998). "Trade-Related Technical Assistance Needs-Assessment presented by Lesotho", integrated responses by IMF, ITC, UNCTAD, UNDP, World Bank and WTO (Geneva: WTO/COMTD/IF/21, committee on Trade and Development, integrated framework for Trade-Related Technical Assistance) February. (2002). "Tariff analysis of Lesotho under the Southern African Customs Union", background paper for Lesotho Diagnostic Integrated Framework Study (Geneva: WTO), May.

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