396
Tales from the Development Frontier
Figure 9.5 Real Effective Exchange Rate, Lesotho Loti and Chinese Yuan, 1990–2011 160 140
index, 2005 = 100
120 100 80 60 40 20
19
90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11
0 year Lesotho
China
Source: Data of International Financial Statistics (database), International Monetary Fund, Washington, DC, http://elibrarydata.imf.org/FindDataReports.aspx?d=33061&e=169393. Note: The rate is based on the consumer price index.
potential areas of collaboration and decided to stay on and set up a retail shop. Lesotho, a mountainous kingdom, has no industry other than textiles. Surrounded entirely by South Africa, Lesotho benefits from that country’s good logistics. Textile and apparel production facilities in Lesotho have been largely foreign owned and export-oriented. In the early 1980s, South African investors established facilities in Lesotho to evade the sanctions imposed on South African manufactured goods in Lesotho. In the early 1990s, industrialists from Taiwan, China, invested in Lesotho, bringing valuable capital and skills. Many of the investors faced growing competition at home, where their outdated technologies were reducing their efficiency. Under apartheid, the South African government had offered incentives for firms to locate in the Bantustan industrial zones, and many of them moved to Lesotho in the mid-1990s when Lesotho was liberalizing its investment regime to attract FDI to the textile sector.