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An Analysis of the Policy Framework for Investment in Infrastructure of the Kingdom of Lesotho and Its Impact on Tourism-Related Infrastructure

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AN ANALYSIS OF THE POLICY FRAMEWORK FOR INVESTMENT IN INFRASTRUCTURE OF THE KINGDOM OF LESOTHO AND ITS IMPACT ON TOURISM-RELATED INFRASTRUCTURE CAPSTONE PROJECT FINAL REPORT MASTER OF PUBLIC AFFAIRS, SCIENCES PO, PARIS AUG 9, 2011 CAPSTONE REPORT RESEARCHERS Anna Amalina IMAM BAWEH Chris LO Brendan SNOW Jonathan WERNER 1 This report is the result of the work carried out for the Capstone Project by Master degree students of the MPA programme of Sciences Po, Paris. A Capstone Project is a requirement for all second year MPA students. It is a client-based consultancy whose subject is a concrete policy issue and that is carried out by small groups of students (between three to five students). It is based on a series of parallel and complementary activities: research, tutoring, policy study visits, and a professional outcome or “deliverable”. This project is a professional group experience that demands effective team work. Each group receives a collective grade. The learning experience of a Capstone Project consists of managing the sometimes difficult interaction within the group, as much as applying in practice the theory learnt in the courses. A Capstone Leader supervises, advises and monitors the work of the students and their exchange with the representatives of the client organisation. Each Capstone Leader meets regularly with the students and guides them throughout the project: from the initial research, to the fieldwork and contact with the client. The authors are responsible for the choice and presentation of the facts contained in this report and for the opinions expressed therein, which are not necessarily those of the MPA and do not commit the Programme. Table of Contents 1. Acknowledgements.................................................................................................................7 PART I - INTRODUCTION .........................................................................................................9 2. Introduction ............................................................................................................................9 3. Relevance of the Research Project ......................................................................................11 PART II - METHODOLOGY.....................................................................................................12 4. Research Methodology.........................................................................................................12 PART III – DEVELOPMENT CHALLENGES IN LESOTHO..............................................16 5. The Landlocked Setting and Dependence on South Africa is a Challenge......................16 6. Vulnerable Economy and Aid Dependence: Implications for Investment ......................20 7. Lesotho’s Cooperation Policies on Trade and Investment ...............................................29 8. Analyzing and Addressing Development Challenges ........................................................35 PART IV – INVESTMENT IN INFRASTRUCTURE IN LESOTHO ...................................43 9. Investment Climate For Infrastructure Development ......................................................43 10. Tourism-Related Infrastructure in Lesotho ....................................................................48 11. Policy Framework of Investment in Infrastructure in Lesotho.....................................70 PART V – IMPROVING POLICY FRAMEWORK FOR INVESTMENT IN INFRASTRUCTURE...................................................................................................................75 12. Case Study: Findings and Recommendations ................................................................75 13. Assessing the Role of Public-Private Partnerships (PPPs) in Lesotho ..........................89 PART VI – POLICY RECOMMENDATIONS AND CONCLUSION...................................96 14. Key Policy Recommendations and Implementation Strategies .....................................96 15. A Final Note – Foster Sustainable Cooperation with South Africa...............................99 16. Conclusion ........................................................................................................................101 PART VII – REVIEWING DTIS and PRSP ...........................................................................102 17. Reviewing Policy on Investment in TRI Via DTIS Action Matrix ..............................102 18. Updates on PRSP Indicators...........................................................................................115 PART VIII – BIBLIOGRAPHY ...............................................................................................121 Annex I: Project Questionnaire For Donors...........................................................................138 2 Annex II: Project Questionnaire For Government Ministries and Agencies.......................144 Annex III: Project Questionnaire For Private Sector............................................................149 Annex IV: Highlight of Some Key Project Findings ..............................................................156 Annex V: GATS Schedule of Specific Commitment of Lesotho............................................164 Annex VI: List of Project Interviews.......................................................................................166 3 ACRONYMS ABC All Basotho Conference ACP African, Caribbean and Pacific Group of States AfDB African Development Bank AGOA African Growth and Opportunity Act BCP Basotho Congress Party BOS Bureau of Statistics, Government of Lesotho CA Cotonou Agreement CET Common External Tariffs CHAL Christian Health Association of Lesotho (CHAL) CMA Common Monetary Area CPI Consumer Price Index CTB Central Tender Board DCA Department of Civil Aviation DFI Development Finance Institution DOE Department of Environment DTIS Diagnostic Trade Integration Study EBA Everything But Arms Agreement EIA Environmental Impact Assessment EIF Enhanced Integrated Framework EPA Economic Partnership Agreements EU European Union FIRST Financial Sector Reform and Strengthening FIP Finance and Investment Protocol FTA Free Trade Agreement GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GNI Gross National Income GSP Generalized System of Preferences IDI Information and Communication Technology Development Index IF Integrated Framework IFI International Financial Institution IFAD International Fund for Agricultural Development IFC International Finance Corporation IFMIS Integrated Financial Management Information System ILO International Labour Organisation IMF International Monetary Fund IPPF NEPAD Infrastructure Project Preparation Facility ITU International Telecom Union LAE Lesotho Association of Employers LCA Lesotho Communications Authority 4 LCCI Lesotho Chamber of Commerce and Industry LCD Lesotho Congress for Democracy LIA Lesotho Institute of Accountants LDCs Least Developed Countries LHDA Lesotho Highlands Development Authority LHWP Lesotho Highlands Water Project LLDCs Landlocked Least Developed Countries LLSS Lesotho Lowlands Supply Scheme LNDC Lesotho National Development Corporation LRA Lesotho Revenue Authority LSL Maloti LTDC Lesotho Tourism Development Corporation LWSPU Lowlands Water Supply Project Unit MCA Millennium Challenge Account (Lesotho) MCC Millennium Challenge Corporation MDGs Millennium Development Goals MIGA Multilateral Investment Guarantee Agency MHA Ministry of Home Affairs, Government of Lesotho MITCM Lesotho Ministry of Industry & Trade, Cooperatives & Marketing MLE Ministry of Labour and Employment, Government of Lesotho MNR Ministry of Natural Resources, Government of Lesotho MOFDP Ministry of Finance and Development Planning, Government of Lesotho MOHSW Ministry of Health and Social Welfare, Government of Lesotho MPA Master of Public Affairs, Sciences Po MTEC Ministry of Tourism, Environment and Culture, Government of Lesotho MTICM Ministry of Trade and Industry, Cooperative and Marketing NDP National Development Plan (Lesotho) NEPAD New Partnership for Africa’s Development NES Lesotho National Environment Secretariat NEC Lesotho National Environment Council NIU National Implementation Unit NSDP National Strategic Development Plan ODA Overseas Development Assistance OECD Organisation for Economic Co-operation and Development OSS One Stop Shop PFI Policy Framework for Investment PIDA Programme for Infrastructure Development in Africa PPAD Procurement Policy and Advice Division PPR Public Procurement Regulations PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Plan PSIRP Public Sector Improvement and Reform Programme PTAs Preferential Trading Arrangements 5 RUFIP Rural Financial Intermediation Programme SACU Southern African Custom Union SADC Southern African Development Community SMME Small, Micro and Medium Sized Enterprise SPV Special Purpose Vehicle SSA Sub-Saharan Africa TB Tuberculosis TDCA Trade, Development and Corporation Agreement TRI Tourism-Related Infrastructure TRIMs Trade-Related Investment Measures TRIPs Trade-Related aspects of Intellectual Property Rights TRTA Trade-Related Technical Assistance TSA Tourism Satellite Account UNCITRAL United Nations Commission on International Trade Law UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNECE United Nations Economic Commission for Europe UNWTO United Nations World Tourism Organization US United States of America WASA Lesotho Water and Sewerage Authority
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