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NEWS FROM THE MINISTRY |
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A STATEMENT TO
PARLIAMENT ON GRANT AGREEMENT BETWEEN THE KINGDOM OF LESOTHO
AND THE MILLENIUM CHALLENGE CORPORATION OF THE UNITED STATES
GOVERNFMENT BY HONOURABLE THIMOTHY THAHANE MINISTER OF
FINANCE AND DEVELOPMENT PLANNING AT THE NATIONAL ASSEMBLY,
MASERU, LESOTHO IN JUNE, 2005.
On 4th June, 2005, the Government of the Kingdom of Lesotho
and the Millennium Challenge Corporation, an agency of the
United States of Government, signed an agreement of USD $
1.4 Million. The grant is to finance activities and policy
reforms that will facilitate the finalization of a larger
Compact Grant in six to nine months. The purpose of the
policy reforms is to improve Lesotho’s investment climate
and business competitiveness.
Honourable members will recall that Lesotho was one of the
17 countries selected from amongst 82 low income developing
countries as eligible for support from the Millennium
Challenge Account. During this period, the United States
Government allocated USD $2.5 Billion into this account.
The Millennium Challenge Account (MCA) was established by
President Bush following the UN Conference on Financing
Development, that was held in Monterey, Mexico in 2003. Its
objective is to support developing countries to accelerate
economic growth and reduce poverty by providing grants. It
is administered by the Millennium Challenge Corporation (MCC).
The selection criteria was based on the overall performance
in the following three main categories:
1) Ruling Justly
Lesotho scored well in this category. The world noted the
transparent all-inclusive multi-party parliament that
allowed different parties to participate in the legislative
process. This democratic governance paved the way for the
prevailing peace and stability, accountability, respect for
the rule of law, human rights and fundamental freedoms. The
recent local elections have deepened this democratic process
further.
2) Investing in People
Lesotho’s commitment to investing in its people was clearly
demonstrated through the introduction of free primary
education in 2000. Today Lesotho is left with only one year
for standard seven to make all primary education free, and
funds permitting, would consider moving free education up to
secondary school level. In 2004, Lesotho also introduced old
age pension as a poverty relief measure targeted at the
needy and vulnerable group in our society. Lesotho has also
made considerate progress in the field of primary
healthcare.
3) Implementing policies that sustained economic growth
During the last decade, Lesotho had enjoyed growth rates
that averaged over 4% per annum; exports that grew from $100
million in 1999 to over $450 million in 2004 and textile
employment that rose from about 10,000 to over 50,000 in the
same period. Lesotho became the number one Textile exporter
to the U.S. under African Growth and Opportunity Act.
This economic performance made President Bush select Lesotho
to benefit from the Millennium Challenge Account. The
objective is to make this growth sustainable and to reduce
poverty.
How was the Proposal Selected and Prepared?
Madam Speaker,
The selection of Lesotho to compete for Millennium Challenge
funds presents not only an honour and recognition of past
performance but also a challenge to do better in the future
by accelerating growth on a sustainable basis, reducing
poverty and creating jobs.
This requires us to select a project proposal that will
contribute to these three objectives in a clear and
measurable manner as well as be ready for implementation
within a relatively short time. To ensure sustainability, it
required Government to select projects that would be
prepared consultatively with the sector and NGOs which must
form an engine of high economic growth.
The Right Honourable the Prime Minister therefore set up a
Cabinet Sub-committee to oversee the preparation of a
Proposal that would form the basis of a Compact between
Lesotho and the United States. A steering committee of
Principal Secretaries directed a joint technical team of
Government officials, private sector and NGOs.
The proposal which was selected and submitted to MCC was
based on the resources which Lesotho has in abundance –
water. The project is for the construction of a dam at
Metolong that will supply water to the industries at Ha
Tikoe in Maseru and to about 95, 000 people in Maseru.
The pre-compact grant will finance the upgrading of economic
and technical feasibility studies and costs; the policy
reforms that will make the enterprises competitive and
provide potable water to many households in Maseru, Roma and
Morija.
These policy reforms fall into four broad categories: the
financial sector; the judicial sector; land property rights;
and institutional capacity building by providing training
and equipment.
The Financial sector
Under financial sector, the policy reforms will seek to
remove discrimination against women in banking, conducting
business and accessing credit without the permission of
their husbands. Many of our successive Micro, Small and
Medium Enterprises are women. The reforms cover
institutional changes aimed at creating a framework for
access to credit, business training for SMMEs in marketing,
preparing business plans and establishment of a credit
bureau.
1. The Judicial Sector
A few years ago the Government created a Commercial Court to
speed up decisions on commercial cases. To date that Court
has not decided any cases. Reforms in this sector will focus
on how to make this Court effective; how to decide on small
claims quickly and how to speed up foreclosures and
liquidation. The grant will also assist the Government in
creating a data-bank of all cases and their tracking; a
better system of case management and court recording. There
are many Police dockets documents that go missing. We need
to correct this situation.
Other reforms will include streaming of the registration and
licensing of companies which currently takes up to 91 days
compared to two days in other countries. Our immigration and
customs procedures and works permits system will also be
streamlined. These improvements will help Lesotho compete
with other nations for investment funds both local and
foreign.
2. Land Reforms
The Report of the Commission of Land by Honourable Justice
Ramodibeli was recently adopted by this Honourable House.
Proposed Reforms will give effect to the various
recommendation of the Commission. But urgent attention will
be given to development of mortgage financing for housing,
speedy transferability of Titles and Leases and proper
system of registration of these leases and titles.
3. Capacity Building
Clearly there will be great needs for training. The grant
will finance Technical Assistance, use of local consultants
and training of staff. Assistance will also be provided for
institutions that support the private sector such as the
Lesotho Chamber of Commerce and restructured or revitalized
BEDCO.
Madam Speaker,
In conclusion, allow me to commend all those who have worked
hard to ensure our realization of this milestone. However,
the path ahead remains challenging. This interim grant,
whist an opportunity, it also carries responsibility. We
have a responsibility to implement the funded activities in
time, and our performance will determine if we ultimately
agree on a Compact with the MCC and receive funds to finance
the Metolong Dam.
I would like to acknowledge the support of the Arab Bank for
economic Development in Africa (BADEA) which financed the
Metolong feasibility study.
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