Sunday, 27 November 2011

In textiles we trust

What is it about the textiles industry that convinces governments around the world that it is some sort of economic development silver bullet? Is there some sort of secret memo doing the rounds - and, predictably, reaching Southern African governments last? Lesotho's government this week announced a plan to invest 100 million maloti (US$12.7 million) to rescue the failing textiles industry. The industry is a relatively big contributor to Lesotho's small economy. It developed at the confluence of two development-financing support schemes - AGOA's duty-free US market access scheme and SACU's credit certification scheme that allowed textile-exporting companies to earn rebates on duties they paid on imports used for production. Countries were rewarded for creating and supporting textile businesses. Many of which - and this is really important - are foreign owned anyway.

So the economic policies of poor countries were set up to support textile industries. Industries set up to compete with China. China, population 1 billion. Lesotho, population 1.8 million. Textiles are not a natural comparative advantage for Lesotho. The only advantage to having a thriving textiles industry is that it allows the country to access development support schemes. The development of this industry is incentivised not by market opportunities but by development schemes obsessed with textiles.

Meanwhile, another report this week from IPS has highlighted the dire situation of child poverty in Lesotho, with 3 in 5 children growing up in poverty. A quarter of all children in Lesotho are orphaned, one of the highest proportions of orphans in the world, according to UNICEF.

Countries like Lesotho need real, sustainable economic development options that go beyond imported industries that fail as soon as the development support schemes that incentivised their existence disappear. Quick fix, one-size fits all economic development will always fail the children of Lesotho. International aid groups need to start taking sustainable local economic development seriously when incentivize certain industries with the casual design of their assistance programmes.

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