Resource information
World Bank demographic and country
characteristic statistics identify 16 small landlocked
countries that are similar to Lesotho. The authors attempt
to determine what useful policy information can be derived
from the recent trade performance of these
"comparators." Among questions they pose are
whether the trade profiles of the comparators suggest
potentially promising export ventures for Lesotho, do they
indicate directions for a geographic diversification of
trade, or do they suggest products in which Lesotho might
acquire a comparative advantage. The authors also use U.S.
partner country statistics to evaluate Lesotho's export
performance in this major market. The U.S. data indicate
Lesotho lost competitive export shares for about
three-quarters of its major clothing products during the
late 1990s. The data show these losses were primarily to the
North America Free Trade Agreement (NAFTA) countries in the
Caribbean. Lesotho was competing on basically equal terms
and did not fare well. But it is generally held that the
most efficient clothing exporters are in the Far East and
not Latin America. Lesotho's difficulties in competing
with the latter have worrisome implications for its ability
to compete with East Asian exporters when the Multifiber
Arrangement is phased out. The comparative advantage
profiles of the landlocked comparator countries suggest
Lesotho's options for a greatly needed export
diversification may be wider than is assumed. One or more of
the comparator countries developed a comparative advantage
in 110 four-digit SITC (non-clothing) manufactures which are
generally labor-intensive in production. Many of these goods
should also be suitable for production and export by
Lesotho. International production sharing often involves the
importation and further assembly of components in developing
countries. This activity can significantly broaden the range
of new products in which a country can diversify. Statistics
show many landlocked comparator countries have moved into
component assembly operations, and it appears this activity
could contribute to Lesotho's export diversification
and industrialization. But the quality problems associated
with Lesotho's trade statistics makes it impossible to
determine the extent to which local production sharing is
occurring. A special effort is needed to tabulate reliable
statistics on Lesotho's current involvement in this
activity. Finally, the authors attempt to determine how the
commercial policy environment in Lesotho compares with that
in other countries. Policymakers previously had difficulty
in addressing this issue, but several recent efforts to
compile comprehensive cross-country indices of the quality
of governance and commercial policies now provide relevant
information. These statistics suggest domestic commercial
policies make Lesotho relatively less attractive to foreign
investment than many other developing countries. Less than
20 percent of all Latin American countries have a domestic
commercial environment judged to be inferior to that in
Lesotho, while the corresponding share for East Asia is
under 30 percent. Overall, almost 70 percent of all
developing countries appear to pursue commercial policies
that make them as, or more, attractive to foreign investment
than Lesotho.
