Archive for September, 2011


Sunday, September 4th, 2011

DATE     2010-02-01 00:00:00
ORIGIN     Embassy Bridgetown


E.O. 12958: N/A

REF: 09 STATE 124006



1. (U) Barbados is open for business. The Government of Barbados, through Invest Barbados, strongly encourages foreign direct investment in Barbados, particularly in industries that create jobs and earn foreign currency.

2. (U) The Government offers special incentive packages for foreign investments in the hotel industry, manufacturing, and offshore business services. For example, International Business Companies (IBCs) have a maximum tax rate of 2.5 percent on income and exemption from foreign exchange controls.

3. (U) The services sector holds the largest potential for growth, especially in the areas of financial services, e-commerce, medical transcription, tourism, educational, health, and cultural services. In agriculture, the slow demise of the sugar industry has opened up land for other agricultural uses, and investment opportunities exist in the areas of agro-processing, alternative and renewable energy, and hydroponics. In the financial services sector, Government has improved its regulatory oversight, and the industry is thriving under better regulatory standards, designed to prevent money laundering and tax evasion.

4. (U) Telecom liberalization is bringing an end to the longstanding monopoly of LIME formerly Cable and Wireless, and has introduced competition, lowered the cost of international telecommunications, and enhanced the telecom infrastructure. Since 2000, the Government has gradually allowed more companies to compete in the sector, and by early 2005 there was full competition in wireless and long distance service. The Government has established policy with respect to Voice over Internet Protocol (VoIP) regulations, which was approved on August 15, 2007. To prepare a workforce skilled in advanced IT services, the Government and educational institutions such as the Barbados Community College and the University of the West Indies have undertaken educational and training initiatives.

5. (U) Foreign nationals receive the same legal protections as local citizens. The police and court systems are efficient and unbiased in commercial matters, and the government operates in an essentially transparent manner.

6. (U) Local enterprises generally welcome joint ventures with foreign investors in order to access technology, expertise, markets, and capital. Barbados’ economy is small, however, and new enterprises that might compete with entrenched local establishments, especially in the retail and restaurant sector, may face a de facto veto of their license by local interests. In the past, the government did not approve, or considerably delayed, licenses for importers of U.S. ice cream and poultry products, and some U.S. fast food franchises. Improvement has been made in this area as Government seeks to open the economy to this type of US led investment.



7. (U) Companies can freely repatriate profits and capital from foreign direct investment if they registered with the Central Bank of Barbados at the time of investment. The Central Bank may limit or delay conversions depending on the level of international reserves under the bank’s control.

8. (U) The Ministry of Finance controls the flow of foreign exchange, and the Exchange Control Division of the Central Bank executes fiscal policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of USD 3,750 per year for personal travel and up to a maximum of USD 25,000 for business travel. To convert any amount over these limits, one must apply to the Central Bank.



9. (U) The Barbados Constitution and Companies Act contain provisions that permit the Government to acquire compulsorily property for public use upon prompt payment of compensation at fair market value. The Embassy is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.



10. (U) Barbados bases its legal system on the British common law system. The Attorney General, the Chief Justice, Puisne Judges, and Magistrates administer justice in Barbados. The Caribbean Court of Justice (CCJ) replaced London’s Privy Council as the highest court of appeal for Barbados in 2005.

11. (U) The United States and Barbados are both parties to the World Trade Organization (WTO). The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes. The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980), which recognizes the 1958 New York Convention on the Negotiation and Enforcement of Foreign Arbitral Awards, contain provisions for arbitration of investment disputes. Parliament has written The New York Convention’s provisions into domestic law, but has yet to ratify the convention.

12. (U) Barbados is also a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention. Additionally, individual agreements between Barbados and multilateral lending agencies have provisions calling on Barbados officials to accept recourse to binding international arbitration to resolve investment disputes between foreign investors and the state.



13. (U) While there are no formal performance requirements, government officials will more likely approve investments they believe will create jobs and increase exports and foreign exchange earnings. There are no requirements for participation either by nationals or by the Government in foreign investment projects.

14. (U) There is no requirement that enterprises must purchase a fixed percentage of goods from local sources, but the Government encourages local sourcing.

15. (U) Companies must meet export performance requirements to take advantage of certain tax incentives. For example, “enclave enterprises” must produce goods exclusively for export outside the CARICOM region. Foreign investors must finance their investments from external sources or from income that the investment generates. When a foreign investment generates significant employment or other tangible benefits for the country, the authorities may allow the company to borrow locally for working capital.

16. (U) There is no requirement that locals own shares of a foreign investor’s enterprise, but some restrictions may apply to share transfers. The Companies Act does not permit bearer shares. Foreign investors do not need to establish facilities in any specific location, although there are zoning restrictions.

17. (U) Most investment incentives in Barbados are tax incentives, although there are some special programs for manufacturers. Potential investors should contact a licensed accountant and/or lawyer in Barbados to find out which incentives fit best with their goals.

18. (U) In the manufacturing sector, the Barbados Investment and Development Corporation (BIDC) has established ten well-equipped industrial parks with subsidized rent. The BIDC may also supply limited training grants and free technical assistance through two programs with a focus on developing local businesses: the Export Grant and Incentive Scheme and the Technical Assistance Program. The former helps both locally and foreign-owned companies (but only those foreign companies with management or marketing branches in Barbados) by defraying export costs such as the preparation and shipment of samples and the development of marketing materials. The latter helps companies solve a range of operational problems.

19. (U) The BIDC also offers local small businesses access to its Small Business Development Center, with conference room facilities, communications services, short-term office space, and a commercial library. To further help manufacturers, the Central Bank of Barbados has established an export credit guarantee scheme, covering pre-shipment financing requirements and post-shipment credit risks for manufacturing companies.

20. (U) The Fiscal Incentives (Amendment) Act (2001) provides a maximum 15-year tax holiday to any manufacturer of an approved product, provided that it meets the definition of an enclave enterprise: manufacturing exclusively for export outside of CARICOM; manufacturing approved products containing a specified percentage of local value added; or being highly capital intensive. Under the Fiscal Incentives Act, such enterprises may import duty-free equipment, spare parts, and raw materials from outside CARICOM. Dividends and other distributions to shareholders during the tax holiday are also exempt from the payment of income tax. Non-resident shareholders liable to tax in their country of
residence are subject to Barbados withholding tax at a lower rate. To qualify for these incentives, the enterprise must apply to the Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce.

21. (U) Enterprises not obtaining benefits under the Fiscal Incentives (Amendment Act (2007)and generating export profits (other than from exports within CARICOM) may receive an export allowance expressed as a rebate of corporation tax (between 35-93 percent) on those profits. The maximum rebate of 93 percent applies if more than 81 percent of an enterprise’s profits result from extra-regional exports. The Export Development Allowance permits a company to deduct from taxable income an additional 50% of what the company spends in developing export markets outside CARICOM.

22. (U) Initial Allowances or Investment Allowances of up to 40 percent on capital expenditure are available for businesses making capital expenditures on machinery and plants, or on an industrial building or structure. Annual depreciation allowances on such expenditures are also available.

23. (U) Barbados’ method of calculating export allowance is as follows:




—————————- ——————-

Up to 20 percent 35 percent

21 percent, but under 41 percent 45 percent

41 percent, but under 61 percent 64 percent

61 percent, but under 81 percent 79 percent

81 percent and over 93 percent

24. (U) In the tourism sector, a Market Development Allowance allows a company to deduct an additional 50 percent of what it spends encouraging tourists to visit Barbados. Under the Tourism Development Act of 2002, businesses and individuals that invest in the tourism sector can write off capital expenditure and 150 percent of interest. They are also exempt from import duties, the value added tax, and environmental levies on furniture, fixtures and equipment, building materials, supplies, and equity financing. The Act expands the definition of tourist sector to include not just accommodation, but restaurants, recreational facilities, and services. The Act encourages the development of attractions that
emphasize the island’s natural, historic, and cultural heritage, and also encourages construction of properties in non-coastal areas. The Minister of Tourism must approve all projects under this legislation.

25. (U) Regarding taxation, Barbados has entered into double taxation treaties with the United States, Canada, CARICOM, China, Cuba, Finland, Luxembourg, Norway, Sweden, SWITZERLAND, the United Kingdom, Botswana, Mauritius, Malta, and Venezuela. A new amendment to the tax treaty between the U.S. and Barbados went into effect on January 1, 2005. The revised tax treaty strengthens measures to prevent U.S. companies from using Barbados as a tax shelter on income earned in the United States.

26. (U) Offshore businesses may operate either free of income tax (e.g., captive insurance) or with a tax rate from 1 to 2.5 percent. An International Business Company (IBC) must by the terms of its incorporation export 100 percent of its services or products in order to enjoy the following tax rates on gains and profits:


——————— ——————

Up to USD 5 million 2.5 percent

USD 5-10 million 2.0 percent

USD 10-15 million 1.5 percent

Over USD 15 million 1.0 percent

27. (U) An IBC may import machinery and equipment into Barbados free from certain taxes and customs duties. IBCs also are exempt from withholding tax and tax on the transfer of their assets and may also make certain foreign exchange transactions free of exchange controls. IBCs in the information services sector receive a special tax rate of 2.5 percent on profits, full exemption from import duties on production-related equipment, including computers, full and unrestricted repatriation of capital, profits, dividends, rental of subsidized office space, and training grants to subsidize worker training.

28. (U) International financial service companies also enjoy several tax incentives. Under the Exempt Insurance Act, a company incorporating with a minimum capital of USD $125,000 and at least one Barbadian director is eligible for taxation on profits at zero percent for the first fifteen years, and 2.5 percent on the first USD $250,000 of profits thereafter, as well as an exemption from a withholding tax on royalties and exchange control restrictions. Its beneficial shareholders also must not be persons resident in CARICOM. In 1998, legislation allowed companies involved in the international insurance business to register as Qualifying Insurance Companies, entitled to: a tax rate of 2.8 percent, after deducting a foreign currency earnings allowance, and exemption from withholding taxes and exchange controls.

29. (U) The International Trust Act allows non-residents to create trusts for the benefit of non-residents, with no minimum capital requirements and no withholding taxes, but subject to 40 percent tax on profits earned in or remitted to Barbados. Exempt Societies of Restricted Liability, which may not acquire land in Barbados or transact business with CARICOM residents, enjoy certain concessions for up to 30 years, including exemption from exchange controls and withholding tax on dividends, royalties, interest, or other interest paid to non-residents. The European Union’s 2001 WTO challenge to the U.S. Foreign Sales Corporations (FSC) has eliminated the exemption to U.S. taxes previously enjoyed on profits derived from FSC export sales.

30. (U) The Shipping Incentives Act of 1982 provides concessions to shipping companies engaged in the operation of passenger ships, leasing of ships, shipbuilding, maintenance or repair. The concessions include a ten-year exemption on tax and custom duties on materials connected with the shipping activities.



31. (U) There is a constitutional right for nationals and non-nationals to establish and own private enterprises and private property in Barbados. These rights also pertain to the acquisition and disposition of interests in private enterprises.

32. (U) No industries are officially closed to private enterprise, although the Government reserves the right not to allow certain investments. Some activities, such as telecommunications, utilities, broadcasting, banking, and insurance, require a license from the Government. There is no percentage, or other restrictions, on foreign ownership of a local enterprise or participation in a joint venture.

33. (U) The Government of Barbados has been engaged for the past several years in efforts to strengthen the private sector by divesting itself of a number of costly and often unprofitable state-owned enterprises. Since 1992, the Government has sold over USD 120 million of its commercial property to private investors through the sale of shares in Barbados External Telecommunications (to Cable & Wireless of the U.K.), Barbados Telephone Company (to Cable & Wireless), Barbados Mills (to Archer Daniels Midland), the Arawak Cement Company, Barbados Dairy Industries, Barbados National Oil Company, and Heywoods resorts. In July 2003, the Government sold its controlling stake in the Barbados National Bank to Republic Bank of Trinidad.



34. (U) The Barbados Government has improved the legal regime for property rights. Civil law protects physical property and mortgage claims. Barbados signed the Paris Convention on Intellectual Property Rights (IPR), the Madrid accords, and is a member of the United Nations World Intellectual Property Organization (WIPO). The Government of Barbados adopted a new Copyright Act in August 1998, and amended it in 2004 to provide for tougher penalties. The Government also approved legislation in September 1998 for Integrated Circuits Topography and Protection against Unfair Competition and Geographical Indications. In addition, the Government recently revised The Trademark and Industrial Designs Acts to meet world standards. Article 45 of the Protocol Amending the Treaty that established CARICOM commits all 15 members to implement stronger IP protection and enforcement.

35. (U) IPR infringement in most areas is small-scale, although video stores sell and rent pirated DVDs and videos, and other stores sell illegal copies of computer software, designer items, and music.



36. (U) Barbados uses transparent policies and effective laws to foster competition and establish clear rules for foreign and domestic investors in the areas of tax, labor, environment, health, and safety. The regulatory system can be slow at times, and some companies have complained that the Ministry of Finance does not give adequate justification for rejecting a license.

37. (U) In the past, obtaining a work permit could be a difficult and time-consuming task. However, the International Business Customer Charter launched on November 26, 2007, provides for the processing of long and short term work permits in two to four weeks (2-4) weeks provided that the application is completed in totality. Work permits are of two types, short-term (for six months or less) and long-term (usually for no more than three years). To receive a work permit for senior management, the company must show that a Barbadian national or resident does not possess the skill set to fill the position.

38. (U) The principal regulatory agencies are the Ministry of Finance and the Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce.. The Ministry of Finance regulates the Exchange Control Authority of the Central Bank of Barbados, including inward investment, registration of foreign capital, currency accounts, and repatriation of capital and earnings. Local on-shore companies must meet fairly stringent exchange control requirements, but the Government welcomes investment by non-residents with external sources of financing.

39. (U) The Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce administers the Companies Act and other statutes dealing with company affairs. The Companies Act is modeled on the Canada Business Corporations Act, and creates flexibility and simplicity for the incorporation and operation of companies in Barbados.

40. (U) Companies using or manufacturing chemicals must obtain approval of their environmental and health practices from the Barbados National Standards Institution and the Ministry of Health’s Environmental Division.

41. (U) The Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce on rare occasions imposes price controls, listed in the Official Gazette. The Government controls gasoline prices.

42. (U) Barbados enacted legislation in 2000 to create the Fair Trading Commission (FTC) to provide consumer protection in telecommunication and utility services. There is no specific antitrust legislation in Barbados.

43. (U) The Minister of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce or the Minister of Finance must approve foreign investment. The Chief Town Planner must approve new construction or changes in land use. Zoning restrictions protect agricultural land, and the Government pursues policies to ensure environmental integrity.

44. (U) The Central Bank must approve real property purchases for non-residents. If a non-resident uses foreign funds and pays for the property in Barbados, the Central Bank will normally approve the transaction. When they sell the property, non-residents need to pay the 2.5 percent Property Transfer Tax in addition to brokerage and legal fees. The Commissioner of Land Tax charges an annual fee based on the assessed property value. The Government taxes hotels on 50 percent of the improved value at 0.65 percent, and residential properties are taxed as follows:

Up to USD 62,500 0 percent

USD 62,500 up to 112,500 0.1 percent

USD 112,500 up to 250,000 0.45 percent

USD 250,000 up to 425,000 0.75 percent


——————————————— —–

45. (U) Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, unless there is a shortage of funds. The Government has, in the past, intervened in the local credit market to control interest rates, limit the volumes of funds available for borrowing, and borrow on the local market. However, the Central Bank has raised interest rates in the past without any government intervention. There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.

46. (U) The Government has implemented a continuous review process for legislation in the financial sector in an effort to strengthen and improve the regulatory regime in order to attract and facilitate retention of foreign portfolio investments. A self-assessment undertaken by the Bank Supervision Department of the Central Bank found their on-shore and offshore sectors in general compliance with the Basel Core Principles of Effective Banking Supervision, utilizing the Basel Committee’s Core Principles Methodology. The International Financial Services Act, which replaced the Offshore Banking Act in June 2002, incorporates the Basel standards, and provides for on-site examinations of offshore banks. This allows the Central Bank to augment its offsite surveillance system of reviewing anti-money laundering policy documents and analyzing prudential returns.

47. (U) Under the authority of the Money Laundering and Financing of Terrorism Prevention and Control Act, Cap 129, the Government established the Anti-Money Laundering Authority and its operating arm, the Financial Intelligence Unit, in 2000. The Bank Supervision Department of the Central Bank of Barbados, in conjunction with the Anti-Money Laundering Authority in 2001, issued in 2001 the Anti-Money Laundering Guidelines for Licensed Financial Institutions, which were revised in 2006.

48. (U) The Barbados domestic financial sector consists of two indigenous and four international commercial banks, two of which operate merchant banks and one a trust company. There are also 35credit unions and one money remitter. The offshore sector includes 3,361 international business companies, 221 exempt insurance companies and 50 offshore banks (December 2006 figures). Starting in 2001, the Government required Barbados institutions and legal entities to reveal the identity of beneficiaries receiving dividends and/or interest.

49. (U) Assets of commercial banks totaled USD 5.7 billion in October 2009, and remained relatively consistent throughout the year. The reserve requirement for commercial banks was 2 percent of deposit liabilities, and the minimum deposit rate was 3.0 percent at the end of October 2009. The weighted average interest rate was 4.06 percent on deposits and 10.25percent on loans for the same period.

50. (U) Domestic deposits expanded by USD 131.4 million. Accounts of private individuals, financial institutions and statutory bodies, , recorded growth of USD 125 million, USD 6.95million, USD 14.2 million, , and USD 21.8 million, respectively. Deposits for business firms declined by USD 60.7 million which was largely attributed to the decline in the construction and manufacturing sector while Government deposits declined by USD 11.2 million.

51. (U) Credit to the non-financial private sector expanded by USD 248.7 million well above the USD 110.3 million increase recorded for 2007. Lending to the personal sector, professional and other services, construction, tourism, transportation and distribution industries, increased by USD 100.8 million, USD 60.4 million, USD 36.8 million, USD 13.9 million, USD 6.6 million and USD 6.25 million, respectively. Commercial bank lending for industrial and commercial mortgages averaged USD 64.8 million at the end of October 2009, whereas commercial bank lending to residents and non-residents averaged USD 83.3 million and USD 8.2 million respectively.

52. (U) The Securities Exchange Act of 1982 established the Securities Exchange of Barbados (SEB), which was re-incorporated as the Barbados Stock Exchange (BSE) in 2001. The 1982 Act was replaced by the Securities Act, Cap 318A, which removed regulatory responsibility for the securities market activity from the BSE. This Act helped to strengthen the regulatory framework and development of the capital market. In 1997, the BSE began trading corporate stocks and fixed income securities, including Government bonds (not commercial paper). Activities on the BSE include regional cross-border trading arrangements for shares listed on the Trinidad and Jamaica stock exchanges.

53. (U) The BSE operates a two-tier electronic trading system comprised of a Regular Market and a Junior Market. Companies applying for listing on the Regular Market must observe and comply with certain requirements. Specifically they must inter alia have assets of not less than USD 500,000 and adequate working capital based on the last three years of their financial performance, as well as three-year projected performance. Companies must also evidence competent management and be incorporated under the laws of Barbados or other regulated jurisdiction approved by the Securities Commission. Applications for listing on the Junior Market are less onerous, requiring minimum equity of one million shares at a stated minimum value of USD 100,000. Reporting and disclosure requirements for all listed companies include interim financial statements, and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the Central Bank of Barbados to trade securities on the BSE.

54. (U) The Barbados Stock Exchange (BSE) is moving to full immobilization of traditional share certificates where clearance and settlement is fully computerized through a Central Securities Depository. However, investors requiring a traditional certificate can be accommodated for a small fee and the transfer is adjudicated by the Securities Commission under the Property Transfer Tax Act. Mutual Funds are also regulated by the Securities Commission in accordance with the Mutual Funds Act, Cap 320B.

55. (U) The Barbados Stock Exchange (BSE) recorded its second consecutive decrease in 2009.. This downturn was reflected in the Composite Index, which decreased by 14.5% These declines were reflected in market capitalization values that dropped by similar percentages over the quarter, as the general slowdown in economic activity during the year and the repurchase of 87,551 shares by West Indies Rum Distillery Limited in June depressed market capitalization values. In 2009, the BSE made significant strides towards becoming the first CARICOM securities exchange to launch an international trading facility, having received Board approval earlier in the year. The BSE intends to attract international
business companies to list on the international securities market in order to raise capital on the Barbados market. This move would offer greater support to the international business community and complement existing bilateral trade agreements. If approved by the regulators, the international trading facility could attract four types of listings: companies that would have their primary listing in Barbados; companies that would use Barbados as a dual or secondary listing; fixed income securities; and, mutual funds.



56. (U) Barbados has not experienced political violence since riots in the 1930s.



57. (U) Corruption is not a major problem in Barbados, but some U.S. companies have reported unfair treatment by Barbados’ Customs and Excise Department.



58. (U) Barbados has no bilateral investment treaty with the United States, but has a double taxation treaty and tax information exchange agreement. Barbados has bilateral investment treaties with Canada (CARIBCAN), China, Cuba, Germany, Italy, Luxembourg, SWITZERLAND, the U.K., and Venezuela.



59. (U) In 1999, the U.S. Government’s Overseas Private Investment Corporation (OPIC) signed with Citibank to establish a USD $200 million Investment Facility for the Caribbean and Central America, as one means of encouraging investment and stimulating economic development. The Caribbean Development Bank, which is based in Barbados, administers this program. OPIC provides financing and political risk insurance to viable private sector projects, helps U.S. businesses invest overseas, and fosters economic development in new and emerging markets.



60. (U) In 2009, Barbados’ labor force was approximately 142,000, distributed in the following sectors: commerce, tourism, government, manufacturing, construction, agriculture, and fishing. The total average unemployment rate toward the end of 2009 was approximately 10.1 percent.

61. (U) Wages in Barbados are among the highest in the Caribbean. Minimum wages for only a few categories of workers are administratively established and enforced by law. The minimum wage for shop assistants, USD 2.50 per hour, is only marginally sufficient to meet minimum living standards. The Ministry of Labor and Immigration recommended that companies use this as the de facto minimum wage, and most employees earned more than the minimum wage. The Labor Department within that ministry was charged with enforcing the minimum wage. The standard legal workweek is 40 hours in five days, and the law requires overtime payment for hours worked in excess. The law prescribes that all overtime must be voluntary. Workers are guaranteed a minimum of fourteen days of annual leave and are covered by unemployment benefits legislation and National Insurance (social security) legislation.

62. (U) Trade unions, and the leaders of the trade union movement, enjoy a strong voice in the labor and economic affairs of the country through their participation in Barbados’ Social Partnership, a tri-partite consultative mechanism. Approximately 25 to 30 percent of the labor force belongs to trade unions, but this small percentage belies the power and importance of unions in Barbados; all key sectors are unionized, with all private and public employees in agriculture, tourism, and at the airport and seaport belonging to a single union confederation.

63. (U) The major unions recognize the advantages accruing to Barbados from foreign investment and foreign expertise, and they are generally flexible and accommodating in their dealings with employers. However, local labor leadership is sensitive when it perceives a lack of respect for Barbadian laws and customs by large, visible foreign employers. It is generally cooperative with management in unionized shops.

64. (U) Barbados does not have labor legislation that mandates a legal process necessary for unions to achieve status as bargaining agents, and employers have no legal obligation to recognize unions under the Trade Act of 1954, but most employers do so when a majority of their employees desire representation. While there is no specific law that prohibits discrimination against union activity, the courts provide a method of redress for employees who allege wrongful dismissal. The courts commonly awarded monetary compensation but rarely ordered reemployment.

65. (U) The law provides for the right to strike, and workers exercised this right in practice. All private and public sector employees are permitted to strike, but essential workers may strike only under certain circumstances and after following prescribed procedures. In July 2009,the island’s largest telecommunications firm announced the closure of its Call Centre and the subsequent lay-off of 115 workers. The Union intervened and the termination notice was rescinded after an intervention by the Government. There were long-running negotiations between the Union and the telecommunications company regarding the reinstatement of the workers. To date, this issue seems to be resolved as the workers have been reincorporated in other departments. Early contact and rapport with Labor Ministry officials and union leaders by foreign investors may be helpful in terms of fostering labor harmony.

66. (U) The law provides for a minimum working age of 16, and this provision generally was observed in practice. Compulsory primary and secondary education policies reinforced minimum age requirements. The Labor Department had a small cadre of labor inspectors who conducted spot investigations of enterprises and checked records to verify  compliance with the law. These inspectors may take legal action against an employer who is found to have underage workers. Additionally, legislation to address termination of employment and benefits and to prohibit sexual harassment is pending.

67. (U) Parliament passed core regulations to implement the 2005 Occupational Safety and Health at Work Act, but the government had not implemented them by year’s end. The Labor Department enforced other health and safety standards and followed up to ensure that management corrected problems cited. The law requires that in certain sectors firms employing more than 50 workers create a safety committee that could challenge the decisions of management concerning the occupational safety and health environment. Trade union monitors identified safety problems for government factory inspectors to ensure the enforcement of safety and health regulations and effective correction by management. The Labor Department’s Inspections Unit conducted several routine annual inspections of government-operated corporations and manufacturing plants. Workers had the right to remove themselves from dangerous or hazardous job situations without jeopardizing their continued employment.



68. (U) There are no foreign trade zones or free ports in Barbados.



69. (U) The Government of Barbados compiles statistics on Foreign Direct Investment (FDI) in the areas of branches, subsidiaries, undistributed earnings, and other investments. The Barbados Investment and Development Corporation (BIDC) reported that since 1995, FDI has increase on average by USD 1.6 million, but in 2003 alone shot significantly upward by more than USD 80 million from the previous year. FDI in 2006 totaled approximately USD 91.5 million, up from USD 62 million in 2005.



70. (U) American Airlines; Barbados Mills (Archer Daniels Midland);;;; Chevron Texaco;;; Citicorp Merchant Bank; JetBlue Airways; C F Caribbean Flavors; Delta Airlines; Ecolab Barbados Ltd. (joint venture); Ernst & Young; Exxon Mobil; Federal Express; Lenstec Ltd.; Pricesmart Inc.; SC Johnson; TGI Fridays; Hilton

Worldwide Resorts; PriceWaterhouseCoopers; United Parcel Service (UPS); U.S. Airways; and IBM World Trade Corp.

An American Chamber of Commerce (AmCham), Barbados, has made attempts at formation, but has not met regularly.

For further information, please contact the Economic/Commercial Section at the U.S. Embassy.

Jake Aller

Commercial Officer

US Embassy, Bridgetown, Barbados

Tel: 246-277-4274

Jonelle M. Watson

Commercial Assistant

US Embassy Bridgetown, Barbados

Tel: 246-277-4052



71. (U) The following are contacts for investment related inquiries:

Invest Barbados

Trident Insurance Financial Centre
Hastings, Christ Church

Tel: 246-626-2000

Fax: 246-626-2099



Invest Barbados – New York Office

800 Second Avenue, 2nd Floor

New York, New York 10017-4709

Tel: 212-551-4375

Fax: 212-682-5496



72. (U) Additional web resources include:


Invest Barbados website:;
and The Industry and International Business Unit of the Ministry of Economic Affairs and Development Website:


Foreign Commercial Service, U.S. Department of Commerce:; and

Foreign Agricultural Service, U.S. Department of Agriculture:; and


DE RUEHWN #0070/01 0321257
R 011257Z FEB 10


ADDED 2011-09-04 03:35:00
STAMP 2011-09-04 03:35:00


IAEA’s Budget Working Group Fulfills a Promise – But Little Else

Sunday, September 4th, 2011

SUBJECT     IAEA’s Budget Working Group Fulfills a Promise – But Little
DATE     2010-02-01 00:00:00



E.O. 12958: N/A
SUBJECT: IAEA’s Budget Working Group Fulfills a Promise – But Little

REFS: A) 09 STATE 119320 B) 09 UNVIE 541 C) UNVIE 4

1. (SBU) SUMMARY: The Budget Working Group (BWG) January 13-15 allowed a refreshingly non-polemical discussion on IAEA programs, but fell short of Geneva Group hopes to identify programs for emphasis or de-emphasis in the IAEA’s 2011 budget. In contrast to Geneva Group readiness, the G-77 did not meet until after the BWG had already started, and therefore managed to produce nothing more than the same statement (nearly word-for-word) the Group had issued during last year’s budget negotiations over the 2010 level. As a result, little was accomplished, and Finnish BWG Chair Ambassador Rasi polished off the proceedings in two-and-a-half days (half the allotted time). Disappointed as we were at the lack of substance, the process was at least educational (more so, than, say, the Future of the Agency discussions). We also witnessed some significant softening in the hard-line positions of some of the “budget hawks” (Canada and France) and a much more open UK. Most importantly, the BWG represented the culmination of last year’s budget deal, in which Geneva Group Members agreed to discuss Safeguards Financing and other topics of interest to the G-77 in exchange for G-77 support for a significant budget increase in 2010. Viewed in this light, the BWG was small pain for great gain. END SUMMARY.

2. (SBU) Under the efficient chairmanship of Finnish Ambassador Marjatta Rasi, the Budget Working Group (BWG) met January 13 – 15 to discuss programmatic priorities for the 2011 budget. Sluggish from the holidays and ill-prepared for in-depth discussions, outgoing G-77 chair Argentina delivered a rote group statement (but not until the third day of the proceedings) and otherwise took a back seat in the discussion. Even Egypt and Pakistan seemed caught unawares. Brazil was silent. Only Iranian Ambassador Soltanieh remained energized throughout, but his politically-motivated ramblings prompted a private scolding from Rasi.

3. (SBU) Fortunately for the U.S., the BWG revealed a softening of positions among major contributors and a greater willingness to think creatively about financing the Agency. France and Canada in particular expressed solid support for upgrades in the Safeguards Analytical Laboratory. The UK, normally a vocal budget hawk, was conspicuously silent (in part, a UK delegate admitted privately, because of the low level of contention). Spain, Italy, Mexico, Australia and Germany – all staunch budget hawks during last year’s negotiations – spoke little or confined their comments to programmatic priorities. At one point Canada, while expressing appreciation for the informational value of the process, pointed out
bluntly that nobody had yet said, “we should sunset this or that.” SWITZERLAND, another budget hawk, complained on the sidelines of the BWG that nothing had really changed in the budget process, and that discussions over the 2011 level would wind up the same as for 2010 – a fight over the overall level.

4. (SBU) The Secretariat will release an update of the 2011 draft budget proposal in late February, followed by an informal meeting of the Program and Budget Committee in early March, near or alongside the March 1 – 5 meeting of the Board of Governors. The Finns will hold informal consultations with Member States in March regarding the overall 2011 levels, followed by a formal meeting of the Program and Budget Committee on May 3.

5. (SBU) The Finns will recommend the continuation of the BWG when negotiations over the 2012-2013 biennium begin. They will also recommend that 2012-2013 negotiations begin in the fall (November) in order to influence the Secretariat’s proposal and bring greater transparency to the process (this is several months earlier than in the past, when budget negotiations did not begin until February). Finally, the Finns would like to confine the mandate of the BWG to priorities within each MP, rather than branching into philosophical discussions about the relative value of each of the Agency’s “pillars” (safety, verification, science) and the resources they should command. Instead, these philosophical questions should be ironed out in the Medium Term Strategy. Ambassador Rasi reportedly enjoyed her stint at the podium as BWG chair, and may even consent to continue chairing the MTS process.

6. (SBU) NOTE: BWG has become shorthand for open-ended, informal budget negotiations. The same process took place last year under the chairmanship of Ambassador Feruta. In other words, budget negotiations, no matter what their name, follow a similar format. END NOTE.

7. (SBU) According to the head of the IAEA’s program and budget office, Carlo Reitano, there have been no signs that Director General Amano intends any major overhaul of the 2011 budget proposal, submitted by Amano’s predecessor ElBaradei. But that proposal does yield an 11 percent nominal increase unless substantial voluntary funding can be mobilized for the Safeguards Analytical Laboratory (SAL). The bulk of the proposed 2011 increase is for capital investment, not for ongoing operations. For example, other than a healthy injection to MP 3 for Nuclear Security, no Major Program would receive more than a percentage point or two over the 2010 level. Instead, the 2011 proposal focuses on raising 30 Million Euros for major capital investment projects, principal among them SAL modernization and the Agency-wide Information System for Program Support (AIPS).

8. (SBU) The BWG was organized by a discussion of each of the IAEA’s six Major Programs, with Deputy Directors General or their colleagues kicking off discussion with a short presentation about how they had implemented the 2010 increase and where they needed additional resources (rarely did the presenters suggest programs to phase out). Coached by the Finns in advance, each presentation was brief and focused. Rasi then turned over discussion to Member States, who frequently asked informational questions about the programs and subprograms within each Major Program. (Iranian Ambassador Soltanieh was an exception, dominating the floor with anecdotes and accusations reminiscent of his recent performance during “Future of the Agency” discussions.)

9. (SBU) On Major Program 1, Nuclear Energy DDG Sokolov, explained how the emphasis over the past five years had switched to the operation of facilities and innovative techniques. Egypt and Russia complained that MP 1 was proportionally disadvantaged in the 2010 budget increase, despite its work on popular initiatives such as INPRO (Innovative Nuclear Reactors and Fuel Cycles) and collaboration on technical cooperation projects. The U.S. highlighted the Agency’s role in technology transfer (as opposed to development) and offered broad support for MP 1 that nonetheless should include a critical look at programs that could be retired.

10. (SBU) On Major Program 2, Nuclear Sciences and Applications, DDG Burkart gave the day’s most polished presentation that reflected Director General Amano’s philosophy of sound management and focused priorities. He laid out his main objectives for 2011: fighting cancer, understanding and responding to climate change, increasing
efficient delivery of programs through partnerships, enhancing impact and delivery by concentrating efforts on fewer areas. Burkart even noted where MP 2 could do less (on pesticide measurements) and, in response to a question from the U.S., suggested that Member States review his chapter in the Budget Blue Book (GC(53)/5, pages 119-162) to see where completed and phased-out activities are listed (including dam safety). In part due to Burkart’s robust performance, Member States had little to critique on MP 2.

11. (SBU) Things did not go so well for DDG Taniguchi on Major Program 3, Nuclear Safety and Security. In response to a question from Canada, Taniguchi was forced to defend the Incident and Emergency Center, explaining that emergency response was a national responsibility but that the IAEA had a role in supporting Member State efforts to build that capacity. Taniguchi was also forced to fend off an attack by Iran on the statutory relevance of Nuclear Security and the logic of placing it in the same department as Safety. Taniguchi patiently explained that more and more developed countries were co-locating safety and security under the same regulatory agency, because of the obvious synergies. Iran continued to worry that the Agency’s work on nuclear security would lead an intrusion into national security issues and warned the Secretariat against ignoring the G-77 position on Nuclear Security.

12. (SBU) Safeguards Operations A Division Director Marco Marzo did a creditable job of presenting Major Program 4, Safeguards, in the absence of DDG Heinonen. Most positively, there was considerable rhetorical support among Geneva Group members for upgrades in the Safeguards Analytical Laboratory. Secretariat staff from Safeguards and the budget office fumbled somewhat their pitch for SAL, however, by stating contradictory figures on SAL funding needs in 2011. Russia aired the contradiction for anyone who missed it, embarrassing some members of the Secretariat. The U.S. intervention noted that although the establishment of the Major Capital Investment Fund in 2010 was a significant accomplishment, it was, as yet, an unfunded “empty shell” that could not yet address the needs of SAL and AIPS. The U.S. asked the Secretariat to be more forthcoming about SAL needs in 2011 to keep the modernization on track. Regarding integrated safeguards, the U.S. asked how the upfront costs would diminish over time, and when Member States might
see the results of economizing efforts.

———– ———————- ————
13. (SBU) DDG Waller on Major Program 5, Management, parried questions about procurement reform and Program Support Costs. Waller took care to take special note of the packed governance agenda in 2010, including budget negotiations and the Medium Term Strategy. DDG Cetto on Major Program 6, Management of Technical Cooperation, took several spears during her difficult session. Her assertion that the budget increases for 2010 barely covered the human resources requirements to manage the growing Technical Cooperation program unleashed a vigorous series of interventions from Canada regarding the large overhead of MP 6 relative to the monies and projects it disbursed. In a tacit rejection of G-77
claims that technical cooperation is undervalued at the IAEA, Canada asked incisive questions about resource flows from other MPs that in fact support the implementation of technical cooperation. In response to a debate over performance indicators, the U.S. asked how the Secretariat would report on the number of projects in the current cycle that had been completed on time and have met their objectives. Pakistan and others queried Cetto for information on a move by the Secretariat to establish regional offices, the tone of which was generally critical.

14. (SBU) Following the examination of Major Programs, the BWG delved into other topics as instructed in the budget deal approved by the last General Conference. These topics included capital investment, safeguards financing (i.e., shielding), incentive schemes for on-time payment of contributions, the methodology for price adjustments, and other topics. Again, the G-77’s failure to prepare for the BWG resulted in little more than perfunctory comments. One flare-up occurred when Egypt eloquently linked increasing safeguards costs to the G-77 perception that technical cooperation was falling behind. Pakistan clumsily proposed to freeze the process of de-shielding for six years. The U.S. weighed in strongly regarding NPT safeguards, their critical underpinning of the non-proliferation regime that protects all Member States, and the insistence that everyone pay their fair share. In a soft-spoken threat, Egypt mused that the original de-shielding arrangement must have occurred against the backdrop of a successful NPT Review Conference.

15. (SBU) COMMENT: The BWG absorbed much preparation by both UNVIE and Washington, work which did not immediately bear fruit during the meetings. The UK delegation reminded us, however, that in a basic sense the BWG was a victory: It fulfilled the budget deal worked out in 2009, in which the G-77 had insisted on a discussion of safeguards financing (de-shielding) in exchange for the 2010 increase. The BWG paid a debt, even if its remaining value was little more than educational.

16. (SBU) Looking forward to March negotiations over the general 2011 level, Mission notes that the draft proposal is very much in line with U.S. priorities. Nuclear Security, SAL and AIPS represent top U.S. priorities, to the point where the budget proposal appears practically tailor-made to meet U.S. goals. That said, the proposal will not survive in its current form. If early voluntary

commitments do not sufficiently reduce the SAL-related capital investment request in the budget update, the overall proposal will come under attack by the European budget hawks for its gross size (11 percent) and by the G-77 for its operational plus-up for Nuclear Security. All the same, the 2011 proposal cleaves nicely to U.S. priorities in all the major areas and merits our support as a basis for opening negotiations once we see how DG Amano and his team adjust the levels inherited from his predecessor. END COMMENT.

17. (U) A detailed summary of statements from the BWG are available from Steven Adams (



DE RUEHUNV #0026/01 0321445
P 011445Z FEB 10


ADDED     2011-09-04 03:35:54
STAMP     2011-09-04 03:35:54
TWEETS     0



Sunday, September 4th, 2011

D     10COLOMBO72
DATE     2010-02-01 00:00:00
ORIGIN     Embassy Colombo




E.O 12958: N/A

REF: 09 STATE 124006

1. Per reftel, below is the investment climate statement for Sri Lanka for 2010. (NOTE: Hyperlinks were altered in the cable version to permit transmission, but were sent as requested in the Word version. END NOTE.)


The end of Sri Lanka’s long-running civil war in May 2009 should usher in an era of sustained positive economic growth. Sri Lanka can still be a difficult place to do business, however, with an erratic policy environment and cumbersome bureaucracy. Nonetheless, compared to other South Asian countries, Sri Lanka is relatively open to foreign investment. It offers a relatively open financial system, moderately good infrastructure, and generally capable workers. Some U.S. and other foreign investors have realized worthwhile returns on investment in Sri Lanka; others have tried and departed frustrated.

Sri Lanka is a lower-middle income developing nation with a gross domestic product of about $42 billion in 2009. This translates into a per capita income of just over $2,000, among the highest in the region.

The Sri Lankan economy is remarkable for its resilience. Despite the 1983-2009 civil war, GDP growth averaged around 5% in the last ten years. Even the December 2004 Indian Ocean tsunami failed to dent GDP growth, which was over 6% in 2005-2008, due in part to tsunami reconstruction. While inflation soared in 207 and 2008, it has dropped to 5% in 2009.

Despite directing resources to end the civil war, Sri Lanka saw its gross domestic product (GDP) grow by an estimated 3.5% in 2009. Main contributors to growth were government services, fisheries, food and beverage, telecommunications, banking, and transport. Sri Lanka’s trade deficit narrowed sharply as both imports and exports declined, but imports fell much faster than exports, mainly due to lower oil prices. The trade deficit was fully offset by workers’ remittances estimated around $3 billion. The current account recorded a small surplus after many years. Overall, the Balance of Payments (BOP) is expected to record a surplus of about $2.7 billion, the highest ever, thanks partly to heavy government borrowing. FDI was much lower than previous years with only about $350 million in the first nine months.

While Sri Lanka’s exposure to the global financial crisis is limited due to controls on its capital account, Sri Lanka experienced capital flight in early 2009 by foreign investors who had invested in government debt instruments. Central Bank reserves declined sharply in early 2009. However, business confidence rebounded with the end of the war and an IMF agreement in July 2009, allowing gross official reserves to increase to a historic high of $5.2 billion as of November 2009, providing 6.3 months of imports cover. The rupee has stabilized around Rs 114.50 to the dollar. Credit ratings were revised upward to stable.

2010 will be an important year for the Sri Lankan economy. The Central Bank expects the economy to grow by 7% in 2010, aided by growth in agriculture, manufacturing, construction, tourism and other services, and the Central Bank forecasts inflation to remain at single digit levels. The government has postponed the presentation of the 2010 budget until after the parliamentary elections in March/April. The Government fiscal situation will be a concern in 2010 especially due to spending on two national elections as well as numerous promises to woo voters. However, defense expenditures should decline. Furthermore, the potential loss of the EU’s GSP Plus trade benefit could further hinder Sri Lanka’s economic growth.

Sri Lanka is a stable parliamentary democracy. In 1978, it shifted away from a socialist orientation and opened to foreign investment, although changes in government have often been accompanied by reversals in economic policy. Of the two major parties, the more pro-business United National Party has been in opposition in recent years. When it last held power, from 2002 to 2004, it pursued privatization and regulatory reform welcomed by domestic and foreign investors.

Currently, the ruling Sri Lanka Freedom Party has a more statist economic approach, guided by President Rajapaksa’s 2005 election manifesto Mahinda Chintana (“Mahinda’s Thoughts”). Mahinda Chintana seeks to reduce poverty by steering investment to disadvantaged areas; developing small and medium enterprises; promoting agriculture; and expanding the already enormous civil service. The Rajapaksa government has halted privatization and advocates state control of what it deems “strategic” enterprises such as state-owned banks, airports, and electrical utilities. There are also private banks which compete with the state owned banks. The government has increased direct and indirect taxation to fund increased government
expenditure. The government has adopted import substitution strategies and has increased taxes on imports to protect local industries.

Multinational companies complain that increasing government bias in favor of local businesses is harming the local investment climate.
Though many multinational companies perform better than the local private sector, international MNCs and SMEs feel the government is blatantly biased towards local companies. Some investors believe, and are concerned, that Sri Lanka is becoming a highly nationalistic environment where the government often blames foreigners for its economic and social ills.

Other impediments to investment in Sri Lanka are workers’ declining English language skills, inflexible labor laws, overburdened infrastructure, and its unreliable court system. Sri Lanka boasts a 90% literacy rate in the local Sinhala and Tamil languages, but English, which was once widely spoken, is now far less prevalent.
Sri Lanka’s labor laws include many model protections, but can make it nearly impossible for companies to lay off workers even when market conditions fully warrant doing so. The cost of dismissing an employee in Sri Lanka is, percentage-wise, one of the highest in the world. Sri Lanka has not invested in infrastructure to keep pace with its growth. Its roads are narrow and congested. With the conclusion of the war, Sri Lanka is renovating and constructing roads in the North and East. Multi-year projects to expand the ports in Colombo and Hambantota are underway.

Sri Lanka’s electricity supply is generally reliable but can fail to meet peak demand in years of low rainfall and is priced higher than in other Asian countries. Businesses in Sri Lanka also face high interest rates, although rates have come down in the past few months. Sri Lanka’s courts cannot be relied upon to uphold the sanctity of contracts. The courts are not practical for resolving disputes or obtaining remediation, because their procedures make it possible for one side in a dispute to prolong cases indefinitely.
Aggrieved investors (especially those dealing with the government of Sri Lanka on projects) have frequently pursued out-of-court settlements, in hopes of speedier resolution. In late 2008, the Supreme Court, in an interim order, halted payments to five international and local banks involved in oil hedge contracts with the government. One of the involved banks is American. The case is now proceeding to international arbitration.


According to preliminary data for 2009, Sri Lanka’s exports (mainly apparel, tea, rubber, gems and jewelry) were $6.9 billion and imports (mainly oil, textiles, food, and machinery) were $9.6 billion. Exports to the United States, Sri Lanka’s second largest market, are projected around $1.6 billion in 2009, or 23% of total exports. The United States is Sri Lanka’s second biggest market for garments, taking about 40% of total garment exports. India is Sri Lanka’s largest supplier, with exports of over $3.8 billion. The United States’ exports to Sri Lanka are projected at $180 million in 2009. U.S. exports consist primarily of wheat as well as industrial machinery, medical instruments, aircraft parts, lentils, paper, specialized fabrics and textiles for use in the garment industry, fruits and pharmaceuticals.


The Board of Investment (BOI) (, an autonomous statutory agency, is the primary government authority responsible for investment, with a focus on foreign investment. The BOI is authorized to manage a number of export processing zones which feature business-friendly regulations and improved infrastructure for foreign investors. The BOI is intended to provide “one-stop” service for foreign investors, with duties including approving projects, granting incentives, and arranging services such as water, power, waste treatment and telecommunications. It also assists in obtaining resident visas for expatriate personnel and facilitates import and export clearances.
The Public-Private Partnership Unit, a new division of BOI, has responsibility for coordinating all public-private infrastructure projects. The BOI has special investment incentives for investors interested in the post conflict Northern and Eastern sections of Sri Lanka.

BOI incentives are attractive and real, but the BOI is not the “one stop shop” it aspires to be. Although it is relatively effective in assisting investors who want to establish operations within its industrial processing zones, it is less effective in facilitating and servicing large investments outside these zones. Sri Lanka’s large, inefficient, and dated bureaucracy often works at cross-purposes with BOI authorities and commitments. Additionally, major investments in Sri Lanka, such as infrastructure projects, require approval from the full cabinet, a process which is not transparent and which can politicize even the most urgently needed investments. Registration of foreign company branch offices in Sri Lanka can be cumbersome as well.

Although there are cases in which it appears that the BOI has been used for political purposes, generally the treatment given to foreign investors is non-discriminatory. However, even with incentives and BOI facilitation, foreign investors face difficulties operating in Sri Lanka. Problems range from difficulty clearing equipment and supplies through customs speedily to difficulty obtaining a factory site. Legal challenges to environmentally sensitive projects have been burdensome, even when objections are unfounded. Slow and indecisive application of bureaucratic requirements has also obstructed investment. In part to avoid these delays, and to overcome land allocation problems, the BOI encourages investors to locate their operations in BOI-established industrial processing zones. Investors locating in industrial zones also get access to relatively better infrastructure facilities such as reliable power, telecommunication and water supplies.


The principal law governing foreign investment is Law No. 4, created in 1978 (known as the BOI Act), as amended in 1980, 1983 and 1992, along with implementation regulations established under the Act.
The BOI Act provides for two types of investment approvals. Under Section 17 of the Act, the BOI is empowered to grant concessions (see details below) to companies satisfying certain eligibility criteria on minimum investment, exports and in some cases employment. Investment approval under Section 16 of the Act permits entry for foreign investment to operate under the “normal” laws of the country and applies to investments that do not satisfy eligibility criteria for BOI incentives. Other laws affecting foreign investment are the Securities and Exchange Commission Act of 1987 as amended in 1991 and 2003, and the Takeovers and Mergers Code of 1995 revised in 2003. A new Companies Act came into effect in 2007 replacing the Companies Act of 1982. The new law aims to improve trade and commerce as well as corporate governance in the business sector. It features simplified regulations concerning company formation; provisions specifying the duties of company directors; provisions to prevent the abuse of powers by directors; provisions to protect creditors; and a dispute board to settle disputes among directors. Various labor laws and regulations also affect investors. See sections below.


The government allows 100% foreign investment in the following services: banking, finance, insurance, stock-brokering, construction of residential buildings and roads, supply of water, mass transportation, telecommunications and information technology (software development and business process outsourcing), energy production and distribution, professional services, and the establishment of liaison offices or local branches of foreign companies. These services are regulated and subject to approval by various government agencies. The screening mechanism is non-discriminatory and, for the most part, routine.

Investment in other sectors is restricted and subject to screening and approval on a case-by-case basis when foreign equity exceeds 49%. The affected sectors are: shipping and travel agencies; freight forwarding; fishing; timber-based industries; growing and primary processing of tea, rubber, coconut, rice, cocoa, sugar and spices; and the production for export of goods subject to international quota. Foreign investment restrictions and government regulations also apply to international air transport; coastal shipping; lotteries; large-scale mechanized gem mining; and sensitive industries such as military hardware, dangerous drugs and currency.

Foreign investment is not permitted in the following businesses: non-bank money lending; pawn-brokering; retail trade with a capital investment of less than $1 million (with one notable exception: the BOI permits retail and wholesale trading by reputed international brand names and franchises with an initial investment of not less than $150,000); coastal fishing; and the awarding of local university degrees. Foreign degree courses can be offered in Sri Lanka by affiliating with foreign universities. However, there is no system to monitor the quality assurance or accreditation of the foreign courses offered in Sri Lanka.


The current Government has halted privatizations, preferring to maintain state-owned enterprises. Government treatment of foreign investors in past privatization processes has been largely non-discriminatory. In 2003, however, the government sold part of the retail operations of state-owned Ceylon Petroleum Corporation to Indian Oil Corporation without a formal tender process. In 2008, the Supreme Court cancelled a privatization of a government-owned bunkering company, done in 2002, citing it was illegal. In 2009, the Supreme Court cancelled a 2003 sale of a government-owned large insurance company.

Labor unions in state-owned enterprises are often opposed to privatization and restructuring and seem particularly averse to foreign ownership. In the past, this made the privatization of government entities problematic for new foreign owners.

Measure Year Index/Ranking

TI Corruption Index 2009 3.1/97
Heritage Economic Freedom 2009 56/111

World Bank Doing Business 2010 N.A/105
MCC Gov’t Effectiveness 2008 0.50/92%

MCC Rule of Law 2008 0.88/98%
MCC Control of Corruption 2008 0.63/94%
MCC Fiscal Policy 2008 -7.1/8%
MCC Trade Policy 2009 62.2/27%

MCC Regulatory Quality 2008 0.35/87%
MCC Business Start Up 2009 0.96/85%
MCC Land Rights Access 2009 0.60/47%
MCC Natural Resource Mgmt 2009 89.79/100%


In accordance with its Article VIII obligations as a member of the International Monetary Fund (, Sri Lanka has liberalized exchange controls on current account transactions. In times of balance of payments difficulties the government tends to impose controls on foreign exchange transactions. Most recently, in October 2008, the Central Bank required importers to keep a 100% deposit on letters of credit on a range of imports. The deposit requirement on the import of cars was 200% of the value of the import. These restrictions were later lifted.

Exporters must repatriate export proceeds within 90 days to settle export credit facilities. Other export proceeds can be retained abroad in a local bank’s correspondent bank. Currently, contracts for forward bookings of foreign exchange are permitted for a maximum period of 180 days for the purposes of payments in trade.

There are no barriers, legal or otherwise, to the expeditious remittance of corporate profits and dividends for foreign enterprises doing business in Sri Lanka. Remittance of business fees (management fees, royalties and licensing fees) is also freely permitted for companies with majority foreign investment approved under Section 17 of the BOI Act. Repatriation of funds for debt service and capital gains of companies exempted by the BOI from exchange control regulations is permitted. Other foreign companies remitting funds for debt service, business fees and capital gains require Central Bank approval.

The average delay period for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties and management fees through normal, legal channels is in the range of 1 to 4 weeks. All stock market investments can be remitted without prior approval of the Central Bank through a special bank account. Investment returns can be remitted in any convertible currency at the legal market rate.

While controls on capital account (investment) transactions usually prohibit foreigners from investing in Sri Lankan debt instruments, the government allows limited access to foreigners to invest in government rupee bonds and treasury bills. The Central Bank’s dollar-denominated bond issues in the local market are also open to foreign investors. Local companies require Central Bank approval to invest abroad. The process of granting approval for such investments was streamlined in 2002, resulting in a substantial increase in approvals.

The government is planning to relax existing controls on capital account transactions. The proposed plans include permission for Sri Lankans to open foreign bank accounts and invest in shares and short term debt of foreign companies; foreign nationals to invest in debentures of local companies; insurance companies to invest funds in foreign assets; Sri Lankan companies to list in foreign stock exchanges; foreign tourists to open Sri Lanka Rupee accounts; and relaxation of import payment mechanisms.


Since economic liberalization policies began in 1978, the Sri Lankan Government has not expropriated a foreign investment. The last expropriation dispute was resolved in 1998.


Sri Lanka’s legal system reflects diverse cultural influences. Criminal law is fundamentally British. Basic civil law is Roman-Dutch. Laws pertaining to marriage, divorce, and inheritance are communal. Sri Lankan commercial law is almost entirely statutory. The law was codified before independence in 1948 and reflects the letter and spirit of British law of that era. Its amendments have, by and large, kept pace with subsequent legal changes in the U.K. Several important legislative enactments regulate commercial matters: the Board of Investment Law, the Intellectual Property Act, the Companies Act, the Securities and Exchange Commission Act, the Banking Act, the Industrial Promotion Act and Consumer Affairs Authority Act. Most of these laws were revised recently.

Sri Lanka’s court system consists of the Supreme Court, the Court of Appeal, Provincial High Courts and the Courts of First Instance viz. district courts (with general civil jurisdiction) and magistrate courts (with criminal jurisdiction). The provincial high courts have original, appellate and reversionary criminal jurisdiction.
The Court of Appeal sits as the intermediate appellate court with a limited right of appeal to the Supreme Court. The Supreme Court exercises final appellate jurisdiction for all criminal and civil cases. Citizens may apply directly to the Supreme Court for protection if they believe any government or administrative action has violated their fundamental human rights.

All commercial matters exceeding the value of Rs 3 million (approximately $26,000) fall within the jurisdiction of the Commercial High Court of Colombo. There are also a number of tribunals which exercise judicial functions, such as the Labor Tribunals to hear cases brought by workers against their employers.
Until recently, the court system was largely free from government interference. There are allegations that the judiciary is sometimes subject to political influence, but this has not been evident in commercial litigation so far. Litigation can be slow and unproductive, though. Monetary judgments are usually made in local currency. Procedures exist for enforcing foreign judgments.

In late 2008, acting on a fundamental human rights petition, the Supreme Court, in an interim order, halted payments to five international and local banks involved in oil hedge contracts with the government. One of the banks involved is American. The banks are taking the case to international arbitration.


The Companies Act and the Insolvency Ordinance provide for dissolution of insolvent companies, but there is no mechanism to facilitate the re-organization of financially-troubled companies.
Other laws make it difficult to keep a struggling company solvent. The Termination of Employment of Workmen Act (TEA), for example, makes it difficult to fire or lay off workers who have been employed more than six months for any reason other than serious, well-documented disciplinary problems. The Labor Commissioner’s approval or the affected employee’s consent is required to fire workers. The government has introduced a standard compensation formula under the TEA to facilitate termination for other than disciplinary reasons. Employers protest that compensation is excessive compared to similar formulae in the Asian region, with terms in Sri Lanka about twice as generous as the East Asian average. (See section on “Labor” for further details.)

In the absence of proper bankruptcy laws, extra-judicial powers granted by law to financial institutions protect the rights of creditors. When a company cannot meet the demands of a creditor for a sum exceeding Rs 50,000 (approximately $440) the creditor may petition for the company to be dissolved by the court. Lenders are also able to enforce financial contracts through powers that allow them to foreclose on loan collateral without the intervention of courts. However, loans below Rs 5 million ($435,000) are exempt from the application of the law. Additionally, a judgment ruled that these powers would not apply with respect to collateral provided by guarantors to a loan. These two moves have weakened creditors’ rights. Financial institutions also face other legal challenges as defaulters obtain restraining orders on frivolous grounds due to technical defects in the recovery laws. Also, for default cases filed in courts, the judicial process is extremely slow.

The new Companies Act of 2007 introduced a “solvency test” to determine the financial health of a company. There are provisions relating to the responsibilities of a company’s directors in cases of serious loss of capital. The solvency test is intended to prevent companies without sufficient assets from obtaining loans and to protect rights of creditors.

The Companies Act does not provide for the revival of struggling companies. However, as in the past, it is expected that the courts would take a liberal attitude towards any restructuring plans that may be of benefit to a company.


In principle, foreign investments are guaranteed protection by the Constitution of Sri Lanka. The government has entered into 24 investment protection agreements with foreign governments (including the United States) and is a founding member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank. Under Article 157 of the Constitution of Sri Lanka, investment protection agreements enjoy the force of law and no legislative, executive or administrative action can be taken to contravene them. The government has ratified the Convention on Settlement of Investment Disputes, which provides the mechanism and facilities for international arbitration through the World Bank’s International Center for the Settlement of Investment Disputes (ICSID).

The U.S.-Sri Lanka Bilateral Investment Treaty (BIT) was ratified by both governments in 1993 (


The Arbitration Act of 1995 gives recognition to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Arbitral awards made abroad are now enforceable in Sri Lanka. Similarly, awards made in Sri Lanka are enforceable abroad.
A center for arbitration known as the Institute for the Development of Commercial Law and Practice (ICLP) ( has been established in Colombo for the expeditious, economical, and private settlement of commercial disputes. However, the ICLP appears unlikely to become involved in disputes involving the Sri Lankan Government, which is often a party to disputes involving foreign investors.

Sri Lanka’s first commercial mediation center was established in 2000 and became operational in mid 2001. Commercial mediation is conducted under the Commercial Mediation Act. Interest in mediation is still low.

The Labor Department has a process involving labor tribunals for settling industrial disputes with workers or unions, and arbitration is required when attempts to reconcile industrial disputes fail. The Labor Commissioner typically becomes involved in labor-management mediation. Other senior officials, including the Labor Minister, and the President, have intervened in particularly difficult cases.

The government record in handling investment disputes is problematic. Disputes often become politicized, causing the government to put political interests ahead of its respect for the sanctity of contracts. For example, in 2006, the Indian Oil Corporation’s petroleum retailing subsidiary in Sri Lanka temporarily closed its operations when the government failed to honor its commitment to reimburse the company for fuel sold at the government-controlled price.


U.S. companies have experienced problems with payment of valid contracts; implementation of agreements with the government; and inexplicable failure to secure contracts, despite demonstrated superior performance, high value, and competitive bids.

A U.S. power company producing electricity in Colombo has been unable to obtain payment since 2004 for power that it produced under a temporary, more costly, operating mode following a fire in its plant. The company had intended to suspend operations to conduct repairs following the fire, but agreed to the government’s request that it keep producing power even at a higher cost. However, the government withheld payment on the basis of a questionable Attorney General finding that the higher than usual electricity price was imposed on the government “under duress.”

As mentioned previously, the Ceylon Petroleum Company (CPC) entered into a contract with five banks on an oil hedging contract. Once the international price of oil rose substantially, the CPC and Government of Sri Lanka (GSL) refused to honor the oil hedging contracts. One American bank is involved. The GSL has not resolved the case, and the banks have filed for international arbitration.


The Board of Investment specifies certain minimum investment amounts for both local and foreign investors to qualify for incentives. Firms enjoying preferential incentives in the manufacturing sector in most cases are required to export 80% of production, while those in the service sector must earn at least 70% of income in foreign exchange. Sri Lanka complies with WTO Trade Related Investment Measures (TRIMS) obligations.

Sri Lanka encourages foreign investment in information technology, electronics assembly, light engineering, automobile parts and accessories manufacturing, industrial and information technology parks, rubber based industries, information and communication services, tourism and leisure related activities, agriculture and agro processing, port-related services, regional operating headquarters, and infrastructure projects. Foreign investors are generally not expected to reduce their equity over time, nor are they expected to transfer technology within a specified period of time, except for build-own-transfer or other such projects in which the terms are specified within pertinent contracts.

In some BOI-approved enterprises, businesses are required to maintain certain levels of employment to enjoy incentives. In addition, privatization agreements generally prohibit new owners from dismissing workers, although the owners are free to offer voluntary retirement packages to reduce their workforce. Some foreign investors have received political pressure to hire workers from a particular constituency or a given list, but have successfully resisted such pressure with no apparent adverse effects.

Foreign investors who remit at least $250,000 can qualify for a one-year resident visa, which can be renewed. Employment of foreign personnel is permitted when there is a demonstrated shortage of qualified local labor. Technical and managerial personnel are in short supply, and this shortage is likely to continue in the near future. In the past, foreign employees attached to BOI-approved companies received preferential tax treatment for an initial period. This concession was withdrawn in April 2008. BOI is planning to appeal to the Finance Ministry to reverse this decision. Foreign employees in the commercial sector do not experience significant problems in obtaining work or residence permits.


The Board of Investment ( has various incentives, with such investments typically requiring prior approval by various ministries. Please see the note at the end of this section on proposed changes to the incentive programs listed:


Qualifying industries:

-Non-traditional manufacturing exports and companies supplying to exporting companies. Minimum investment of $500,000(a);
-Export oriented services. Minimum investment of $500,000;
-Manufacture of industrial tools and/or machinery. Minimum investment of $150,000;
-Small-scale infrastructure. Minimum investment of $500,000;
-Research and development. Minimum investment of $100,000;
-Agriculture and agro processing industries. Minimum investment of $150,000;
-Export trading houses of rural sector. Annual turnover of $5,000,000.

Incentives: Currently, the above industries qualify for a five-year tax holiday. A preferential tax of 10% in the 6th and 7th years follows the tax holiday for some industries. Some of these industries qualify for duty-free imports (generally, during the life of the project for export-oriented projects, and during the project implementation period for others). Exporting companies and export-oriented services will be exempted from exchange control regulations. They will also qualify for free repatriation of profits and dividends and free transferability of shares. An Economic Service Charge (ESC) at 0.25% of income applies to all companies including BOI-approved companies with tax holidays. A three year tax holiday is available for investments between $250,000 and $500,000.


Qualifying Industries:

-Information technology (IT) or information technology enabled services. Minimum investment of $150,000. Minimum employment levels apply;
-Information technology training institutes. Minimum invest of $100,000. Minimum number of students applies;
-Business Process Outsourcing (BPO). Minimum investment of $150,000. Minimum employment levels apply;
-Regional operating headquarters providing the following services to related businesses outside Sri Lanka: administration, business planning, sourcing raw materials, research and Development, technical support, financial and treasury management, marketing and sales promotion. Minimum investment of $250,000.

Incentives: Currently, IT services, IT training institutes, and BPO firms qualify for tax holidays of 5-12 years provided they meet minimum employment and student levels. Otherwise, a preferential tax of 10% applies for 2 years. Regional operating headquarters qualify for a tax holiday of 3 years. A preferential tax of 10% will apply in the 4th and 5th years. From the 6th year onwards, a preferential tax of 20% will apply for IT training institutes while a tax of 15% will apply for others. Capital goods for these projects will be exempted from import duty for above investments.
An Economic Service Charge at 0.25% of income applies to BOI-approved companies enjoying tax holidays, from the fourth year of operation.


The BOI has a separate incentive program to promote regional development, with the aim of establishing new factories or service companies (such as hotels, hospitals, or training institutes) in the regions outside the capital Colombo. The incentives include 10-20 year tax holidays for investments in Northern and Eastern Provinces and 2-10 year tax holidays for investments located in other provinces. In addition, imports of machinery and equipment are exempted from both customs duty and the value-added tax. Minimum investment levels apply.


Investments in the Northern and Eastern Provinces receive generous tax incentives including 10-20 year tax holidays. Incentives are targeted at producers of textile and apparel, food, wood, paper, rubber and plastic products, fishing gear and fishing boats. In addition, hotels, agriculture-based industries, and fisheries are also entitled to these incentives. Exporting companies can import raw material, capital goods and construction material free of import duty under this program. Companies producing for the local market can import capital goods and construction material without duty. In addition, state lands will be made available at concessionary rates for these projects.


Companies acquiring existing companies in petroleum, power generation, transmission, development of highways, seaports, airports, railways, water services, public transport, agriculture and agro processing and other infrastructure projects approved by the BOI will qualify for tax holidays ranging from 5 to 8 years depending on the magnitude of investment. A preferential tax of 15% will follow after the tax holiday period. These companies will also qualify for duty free imports of capital goods. A minimum investment of $12.5 million is required.

Large-scale new infrastructure projects in power generation, transmission and distribution; development of highways, seaports, airports, public transport and water services; establishment of industrial parks, and other infrastructure projects approved by the BOI will qualify for tax holidays ranging from 6 to 15 years depending on the size of the investment. A preferential tax of 15% will follow the tax holiday. They will also qualify for duty free imports of capital goods. A minimum investment of $12.5 million is required.


-Industrial estates. Minimum investment of $500,000 to $75 million; tax holidays ranging from 3 to 15 years;
-Textile fabric manufacturing, processing. Minimum investment of $500,000 to $10 million; tax holidays ranging from 5 to 15 years.

For further information on investment incentives and other investment-related issues, potential investors are encouraged to contact the Board of Investment directly. The BOI can be found at and, or reached via e-mail at The BOI has introduced an investor matchmaking service via the BOI website. Information regarding this service can be found at


A preferential trade agreement, the Indo-Lanka Free Trade Agreement (ILFTA) ( between Sri Lanka and India, is now in effect. Under this agreement, most products manufactured in Sri Lanka with at least 35% domestic value addition (if raw materials are imported from India, domestic value addition required is only 25%), qualify for duty free entry to the Indian market. Tariff concessions for Sri Lankan products include zero tariffs on 4,235 items; 50 to 100% reduction for tea and garments under quota; 25% reduction for 553 textile items; and no reduction for 431 items on India’s “negative list.” Discussions are underway to reduce the negative lists of both countries. The two countries are also discussing services sector liberalization, under a proposed Comprehensive Economic Partnership Agreement (CEPA). Other areas potentially covered by the CEPA are investment and economic cooperation. Because production constitutes a portion of value addition, ILFTA and the proposed CEPA enables foreign firms operating in Sri Lanka to gain preferential entry into the Indian market. The CEPA negotiations have stalled, however, and it is not clear that Sri Lanka is interested in finalizing the deal.

Some U.S. companies currently avail themselves of the ILFTA by adding at least 35% value in Sri Lanka and getting import duties into India reduced from as much as 15% to as little as zero. The American Chamber of Commerce in Sri Lanka, in a study on the ILFTA, identified agro-processing, food preparation, tea, rubber products, coconut products, spices, furniture, ceramic and confectionary as having growth potential in India. The study also found vehicles and vehicle parts, aircraft parts and motorcycles to be possible attractive sectors for U.S. manufacturers under the Indo-Lanka Agreement.

Sri Lanka’s Board of Investment promotes the following product sectors under ILFTA: beverages, confectionary, rubber products, plastics, coconut products, footwear, paper, textiles and garments, artificial plants, ceramics, glassware, jewelry, iron and steel products, aluminum extrusions, machinery and mechanical appliances, electronics and electrical products, automobiles and spare parts, furniture, and doors.

The 2005 Sri Lanka-Pakistan Free Trade Agreement (SLPKFTA) ( provides duty-free entry into Pakistan for almost all Sri Lankan exports except those on the negative list. Pakistan’s negative list contains 541 items with no duty concessions. Sri Lanka’s Board of Investment promotes the following product sectors under SLPKFTA: spices, coconut based products, animal or vegetable oils, confectionary, processed food, rubber products, ceramics, jewelry, iron and steel, copper and aluminum articles machinery and mechanical appliances, electronics and electrical appliances, medical instruments, and automobiles and spare parts.

Sri Lanka and six other South Asian nations belonging to the South Asian Association for Regional Cooperation (SAARC) agreed in 2004 to establish a South Asian Free Trade Area (SAFTA) (, which began operation on July 1, 2006. SAFTA offers regionalized tariff reductions for imports from member countries. Stated goals of SAARC members under SAFTA are to reduce duties for imports from member countries to between zero and 5% over a period of 7-10 years. The SAARC trade talks have had limited effect to date on trade and investments.

These agreements could help make Sri Lanka a gateway to South Asia for foreign investors.

Sri Lankan exports to the European Union (EU) are also duty free under the “GSP-Plus” incentive agreement in effect since July 2005. Under this program, 7,200 Sri Lankan products meeting rules-of-origin criteria can enter the EU duty free. The GSP Plus scheme for Sri Lanka was renewed in January 2009 for a period of three years, subject to the results of  an on-going investigation of the government’s actions at the end of the civil war. Depending on the findings of the investigation, benefits could be withdrawn by July 2010.


Private entities are free to establish, acquire, and dispose of interests in business enterprises. Private enterprises enjoy benefits similar to those granted to public enterprises, and there are no known limitations to access to markets, credit, or licenses. Foreign ownership is allowed in most sectors. Private land ownership is limited to fifty acres per person. The government owns about 80% of the land in Sri Lanka, including the land housing most tea, rubber, and coconut plantations. The government has leased most of these plantations to the private sector on 50-year terms. Although state land for industrial use is usually allotted on a 50-year lease, 99-year leases may also be approved on a case-by-case basis, depending on the nature of the project. There are also substantial land disputes arising from the end of the war, as the Government regains control of areas after many years of war.

While foreign investors can purchase land from private sellers, the government has imposed a 100% tax on land transfers to foreigners. For this purpose, Sri Lanka has defined foreign investment to involve as little as 25% foreign ownership – a definition that can be particularly difficult for companies listed on the Colombo Stock Exchange since on any particular day, their ownership characteristics may vary. Apartments above the third floor of condominium buildings, land for the development of large housing schemes, hospitals and hotels with a minimum investment of $10 million, exporting companies with a minimum investment of $1 million, and large infrastructure projects with a minimum investment of $50 million are exempted from the tax. Regulations regarding these exceptions have been published in Gazette No 1386/18 dated March 30, 2005.


Secured interests in property are recognized and enforced. The legal system is nondiscriminatory and protects and facilitates acquisition and disposition of property rights by foreigners, although it has recently become subject to political influence. A fairly reliable registration system exists for recording private property including land, buildings and mortgages. There are likely to be difficult land disputes in the recently freed northern and eastern regions of the country, following the end of the war. However, there are problems due to fraud and forged documents.


Sri Lanka is a party to major intellectual property agreements including the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement for the Repression of False or Deceptive Indication of Source on Goods, the Nairobi Treaty, the Patent Co-operation Treaty, the Universal Copyright Convention, and the Convention establishing the World Intellectual Property Organization (WIPO). Sri Lanka and the United States in 1991 signed a Bilateral Agreement for the Protection of Intellectual Property Rights. Sri Lanka, a WTO member, is also a party to the Trade Related Intellectual Property Rights (TRIPS) agreement in the
World Trade Organization. Sri Lanka has not acceded to the WIPO Performances and Phonograms Treaty (WPPT); the WIPO Copyright Treaty (WCT); or the WTO Information Technology Agreement.

In November 2003, a new intellectual property law came into force that was intended to meet both U.S.-Sri Lanka bilateral IPR agreement and TRIPS obligations to a great extent. The law governs copyrights and related rights, industrial designs, patents, trademarks and service marks, trade names, layout designs of integrated circuits, geographical indications, unfair competition, databases, computer programs, and undisclosed information. All trademarks, designs, industrial designs and patents must be registered with the Director General of Intellectual Property. Sri Lanka introduced regulations to regulate the commercial use of local creations in 2008.

Infringement of intellectual property rights (IPR) is a punishable offense under the law. Intellectual property rights come under both criminal and civil jurisdiction. Recourse available to owners includes injunctive relief, seizure and destruction of infringing goods and plates or implements used for the making of infringing copies, and prohibition of imports and exports. Penalties for the first offence include a prison sentence of 6 months or a fine of up to Rs 500,000 ($4,425), but smaller penalties are the norm. Penalties can be doubled for a second offense. Aggrieved parties can seek redress for any IPR violations through the courts, though this can be a frustrating and time-consuming process.

Since the passage of the 2003 IPR law Sri Lanka has slowly begun enforcing its provisions. The Police occasionally raid counterfeit CD/VCD stores as well as counterfeit garment sellers. However, it is rare for the police to act without a formal complaint and assistance from an aggrieved party. Several offenders have been charged or convicted by courts. However, the minimal damages and suspended sentences imposed suggest that the court system still fails to recognize the significance of intellectual property rights.

Counterfeit goods continue to be widely available in Sri Lanka. Local agents of well-known U.S. and other international companies representing recording, software, movie, clothing and consumer product industries continue to complain that lack of IPR protection is damaging their businesses. Piracy of sound recordings and software is widespread, making it difficult for the legitimate industries to protect their market and realize their potential in Sri Lanka. Software companies complain of the lack of IPR enforcement within government institutions and even some larger corporations, including several banks. In December 2009, the government of Sri Lanka approved a new Information Technology (IT) policy for the government sector which includes rules on hardware and software procurement. The implementation date of the new policy is not known. The embassy and the American Chamber of Commerce of Sri Lanka are working to pursue more aggressive enforcement and enhance public awareness.


Patents are valid for 20 years from the date of application but must be renewed annually. Patents are granted for inventions, with the following exceptions: discoveries, scientific theories and mathematical methods, plant or animal varieties (other than micro biological processes) and essential biological processes for the production of plants and animals (other than non-biological and microbiological processes), business rules and methods, methods of treatment by surgery or therapy, and diagnostic methods practiced on a human or animal body. The law also permits compulsory licensing and parallel imports of pharmaceutical products. Compulsory licensing will allow the government to grant licenses to manufacture certain patented drugs, overruling patent licenses in a national emergency. The parallel imports will allow the import of a branded drug from an alternative source.

Copyrights are not registered. A work is protected automatically by operation of law. Original literary, artistic, and scientific works including computer programs and databases are protected under the new law. There are enforcement limitations applying to copyrights, including software.

Sri Lanka recognizes both trademarks and service marks. The exclusive right to a mark is acquired by registration. A mark may consist of words, slogans, designs, etc. Protection also is available to well known marks not registered in Sri Lanka. Registered trademarks are valid for ten years and renewable. The law also recognizes both certification marks and collective marks.


The Board of Investment strives to inform potential investors about laws and regulations that may affect operations in Sri Lanka. Laws are in place pertaining to tax, labor and labor standards, exchange controls, customs, environmental norms, and building and construction standards. However, some of the laws and regulations are difficult to access.

Foreign and domestic investors often complain that the regulatory system is unpredictable due to outdated regulations, rigid administrative procedures, and excessive leeway for bureaucratic discretion. Effective enforcement mechanisms are sometimes lacking, and coordination problems between the BOI and relevant line agencies frequently emerge. Lethargy and indifference on the part of mid- and lower-level public servants compound transparency problems. Lack of sufficient technical capacity within the government to review financial proposals for private infrastructure projects also creates problems during tendering. An example of weakness in regulations occurred in mid-2006, when police and government
agencies closed two satellite television broadcasting stations for not possessing required licenses. The two stations remained closed for over five months, before various government agencies reauthorized their operations.

In 2005-2009, the Government awarded several key infrastructure projects to Chinese companies outside the tender process. They included a 300 megawatt coal power project, a fuel bunkering project, and a large port construction project and an airport project in the southern district of Hambantota. In addition, the Government has promised oil exploration rights to India and China outside the tender process. Similarly, in 2008, the government-owned Ceylon Petroleum Corporation signed an agreement with the government of Iran to finance the expansion of the country’s oil refinery. The government had previously signed a Memorandum of Understanding with an American company to negotiate an agreement for the same project. Despite the purported agreement with Iran, the refinery project is still on hold.

Although many foreign investors, including U.S. firms, have had positive experiences in Sri Lanka, some have encountered significant problems with government practices and regulations. Some multinational firms have experienced extensive unexplained delays in trying to reach agreement on investment projects. Others have had contracts arbitrarily canceled without compensation, even though the Sri Lankan Cabinet had approved those contracts.

Proposed laws and regulations are generally made available for public comment. However, occasionally they are published without public discussion.


Retained profits finance about 70% of private investment, with short term borrowing financing a further 20% of investment. The stock market and corporate securities market have not been significantly used to raise capital. Foreign direct investment (FDI) finances about 4% of overall investment. Foreign investors are allowed to access credit on the local market. They are also free to raise foreign currency loans.

The state consumes over 50% of the country’s domestic financial resources and has a virtual monopoly on the management and use of long-term savings in the country. This inhibits the free flow of financial resources to product and factor markets. For 2009, the government’s net borrowing from the local market is forecast to be Rs 183 billion ($1.6 billion). Due to high inflation and increased government borrowing, interest rates were high in 2007 and 2008. Most companies cite high interest rates as a major impediment to doing business and investment in Sri Lanka. With the decline in the rate of inflation in 2009, the Central Banks reduced key interest rates. Consequently, lending rates to blue chip companies declined to 12% in January 2010 from about 20% in January 2009. Other companies including SME’s face higher rates.


Commercial banks are the principal source of bank finance. Bank loans are the most widely used credit instrument for the private sector. Financial institutions also raise syndicated bank loans to fund large-scale investment projects undertaken by the private sector.

The domestic debt market in Sri Lanka is still at a nascent stage. The first credit rating agency in Sri Lanka was Fitch Rating Lanka (, which opened an office in Colombo in 1999. Fitch Ratings Lanka is a joint venture between Fitch Ratings Inc, International Finance Corporation (IFC), the Central Bank of Sri Lanka, and several leading local financial institutions. Credit ratings are now mandatory for all deposit-taking institutions and for all varieties of debt instruments and have helped numerous Sri Lankan companies raise funds through debt markets.

Sri Lanka received its first sovereign credit ratings in December 2005, with a “BB-minus” from Fitch Ratings and a “B-Plus” from Standard and Poor’s (S&P). Current ratings are “B-Plus” (Fitch) and “B” (S&P). Fitch has assigned a stable rating outlook for Sri Lanka. S&P’s rating outlook is positive.


There is an active and fairly competent accounting profession, based on the British model. The source of accounting standards is the Institute of Chartered Accountants of Sri Lanka (ICASL), and standards are constantly updated to reflect current international accounting and audit standards adopted by the International Accounting Standards Board (IASB). In addition, Sri Lanka is following the worldwide move to adopt International Financial Reporting Standards (IFRS) for financial reporting purposes set by the IASB. The proposed full convergence is expected to be in 2011 for financial periods on or after January 1, 2012. A significant change is expected with full convergence. Due to the lack of an adequate enforcement mechanism, problems with the quality and reliability of financial statements still exist.

Sri Lankan accounting standards are applicable for all banks, stock exchange listed companies and all other large and medium-sized companies in Sri Lanka. Accounts of such business enterprises are required to be audited by professionally qualified auditors holding ICASL membership. ICASL has published accounting standards for small companies as well. The Accounting Standards and Monitoring Board (ASMB) is responsible for monitoring compliance with Sri Lankan accounting and auditing standards. British professional accounting bodies are quite active in Sri Lanka. The Chartered Institute of Management Accountants (CIMA), a leading professional accounting body based in the UK and spread over the Commonwealth, has its largest overseas presence in Sri Lanka. CIMA UK suspended the Sri Lanka divisional council over a governance issue in December 2008 and a new council was appointed in January 2010. CIMA programs and operations in Sri Lanka continued undisrupted during this period.


The Securities and Exchange Commission (SEC) regulates the securities market in Sri Lanka. The SEC law was revised in 2003, enhancing the SEC’s coverage and investigative powers. The SEC now covers stock exchanges, unit trusts, stock brokers, listed public companies, margin traders, underwriters, investment managers, credit rating agencies and securities depositories.

Foreign investors can purchase up to 100% of equity in Sri Lankan companies in numerous permitted sectors. In order to facilitate portfolio investments, country funds and regional funds may obtain Ministry of Finance approval to invest in Sri Lanka’s stock market. These funds make transactions through share investment external Rupee accounts maintained in commercial banks.


The Colombo Stock Exchange (CSE) has fully automated trading, clearing and settlement systems. The CSE maintains a rolling settlement period of 3 days. Twenty one local and foreign joint venture brokers currently operate at the CSE. Foreign stockbrokers are permitted to hold up to 100% equity in stock brokerage firms operating at the CSE. The SEC has a settlement guarantee fund with an initial capital of Rs 100 million ($88,500), which aims to guarantee the settlement of trades between clearing members of the exchange. There are 232 companies listed on the stock exchange with the top ten positions by market capitalization held by conglomerates, telecommunication companies, banks, and food and beverage companies. The CSE, which suffered in 2007-2008 due to increased conflict-related violence and the global financial crisis, was the second best performing market in the world after Russia in 2009. The market gained 125% in 2009. The post-war optimism led to a surge in investor interest.

The CSE suffered somewhat after insider trading charges were filed in the U.S. against Raj Rajaratnam of Galleon fund, but quickly recovered. The U.S. based Galleon fund was a major investor in the CSE, and held shares in over 70 companies. Galleon has now exited from most of the CSE companies. Investors have also been discouraged by various Supreme Court decisions negatively impacting businesses in 2008-2009. One ruling, citing bias by government officials in favor of the eventual contract winner, reversed the 2002 privatization of a bunkering unit to a large conglomerate listed in the stock exchange. A similar case reversed the sale of a large government-owned insurance company to another listed
conglomerate. In yet another case, the Supreme Court temporarily stopped payments due to local and foreign banks for oil hedging contracts. Other issues include lack of liquidity and limited market size.

Improvements are also needed in corporate governance, accountability, and public disclosure. The Accounting and Auditing Standards Monitoring Board, the Ceylon Chamber of Commerce, the Colombo Stock Exchange, and professional accounting bodies are taking initiatives in these areas.

Acquisition of companies through mergers and acquisitions is governed by the Takeovers and Mergers Code of 1995 made under the Securities and Exchange Commission of Sri Lanka Act. This law applies only to companies listed on the Colombo Stock Exchange. It is modeled on the lines of the London City Code on Takeovers and Mergers. Acquisition of more than a 30% stake of a listed company requires the buyer to make an offer to all other shareholders. The articles of association of a few listed companies restrict foreign equity to certain levels.


Sri Lanka has a fairly well diversified banking system. There are 23 commercial banks – eleven local and twelve foreign. In addition, there are 14 local specialized banks. Citibank NA is the only U.S. bank operating in Sri Lanka.

In late 2008, the Central Bank dissolved the board of directors of a private local bank, Seylan Bank, and appointed the state-owned Bank of Ceylon to carry on the business of the bank. This was done to ensure stability in the overall financial sector following a financial scandal at a non regulated large finance company connected to the bank.

Since then, the Seylan Bank has been restructured with equity from new shareholders. The bank has returned to normal business activity with a board of directors appointed by the new shareholders.

The Central Bank also took control of several non-bank finance companies connected to the failed finance company. These companies are being restructured through mergers. The Central Bank also launched a stimulus package for finance and leasing companies with the aim of avoiding a crisis in them. However, weaknesses in smaller finance and leasing companies exposed to real estate remains a concern.

Sri Lanka experienced its first bank failure in December 2002 when the Central Bank took action to revoke the license of a small licensed specialized bank as it approached insolvency. There was no fallout for other banks from this incident. Two other small troubled banks were restructured under Central Bank guidance.

The Central Bank is responsible for supervision of all banking institutions. It has driven improvements in banking regulations, provisioning, and public disclosure of banking sector performance. Since 2004, credit ratings have been mandatory for all banks operating in Sri Lanka. In 2006, the Central Bank introduced higher capital requirements for commercial banks to further stabilize the banking system, promote consolidation, and facilitate entry of larger banks. Notable progress in 2008 includes mandatory provisioning on performing loans and acceptance of the Basel II standardized approach framework. In addition, the Central Bank issued corporate governance rules for banks. The new rules are
aimed at promoting the safety and soundness of the banking system. In 2009, the Central Bank carried out capacity building programs on Basel II. The Bank issued regulations for service providers of payment cards regulations. The Central Bank will regulate all payment card systems. The Central Bank has also developed a road map for the full  implementation of International Accounting Standards on Financial Instruments for banks by January 1, 2011. In addition, the Central Bank plans to introduce new Sri Lanka accounting standards to the banking sector in 2011. Nevertheless, the Central Bank still suffers from lack of autonomous authority, especially with regard to the large state owned banks.

Sri Lanka has enacted laws to deal with money laundering and terrorist financing. The Bank Supervision Department of the Central Bank supervises and examines financial institutions for compliance with anti-money laundering and terrorist financing regulations. A Financial Intelligence Unit (FIU) was created in 2006, and operates under the Central Bank. The Financial Intelligence Unit has issued instructions to banks, finance and insurance companies, and the securities industry regarding anti-money laundering and terrorist financing regulations and, in 2008, extended it rules on “know your customer” and “customer due diligence” to insurance companies and the securities industry.


Total assets of commercial banks stood at Rs 2,200 billion ($19 billion) as of December 31, 2008. The two state-owned commercial banks, Bank of Ceylon and People’s Bank, with assets of Rs 492 billion ($3.3 billion) and Rs 416 billion ($3.6 billion) respectively, are still important players, accounting for about 40% of all assets.

The two state banks are inefficient and have accumulated extensive bad debt. However, as these banks are implicitly guaranteed by the state, their problems have not harmed the credibility of the rest of the banking system. Progress has been made in restructuring the two banks — their nonperforming loan ratios declined from 18% in 2003 to 5-7% in 2008, while provisioning and profitability have improved. Nonetheless, both these banks have significant exposure to the state and state-owned companies, which are treated as performing loans.


Private commercial banks and foreign banks operating in Sri Lanka generally follow more prudent credit policies and, as a group, are in better financial shape. Foreign banks tend to make provisions in line with international best practices, as most foreign bank branches are subject to host country supervision in addition to that of the Central Bank of Sri Lanka.

Non-performing loans to total loans ratio increased from 4.9% in 2007 to 6% in 2008. It is estimated to have increased sharply in 2009, with significant variations among individual banks. There are concerns regarding credit exposure to housing and consumer sectors, impact of high interest rates and the impact of prevailing economic conditions on the banking system.


Sri Lanka adopted capital adequacy standards set by the Basel Committee on banking regulations and supervisory practices in 1993. The minimum capital adequacy ratio required by the Central Bank is 5% for core capital (Tier I) and 10% for risk weighted assets (Tier I and Tier II). The Central Bank adopted Pillar 1 of Basel II capital adequacy standard for all banks in 2008.

Risk-based capital adequacy in the banking sector was 13% in 2008. The Bank of Ceylon’s capital adequacy ratio is well within Central Bank requirements. Following a capital injection from the Ministry of Finance, People’s Bank reported core and total CAR ratios of 6.48% and 10.46%, under the Basel II framework in 2008.


SOE’s are active in transport (bus and railways, ports and airport managements, air line operations), utilities such as electricity, petroleum imports and retail, water supply, and telecommunications, TV and Radio broadcasting, newspaper publishing, banking and insurance.

Directors of SOE’s are appointed by the cabinet or a line Ministry. They report to line Ministries. The board seats are allocated to both senior government officials and politically-affiliated individuals. Senior management positions such as the post of CEO are most often allocated to politically-affiliated individuals.

Sri Lanka does not currently have a sovereign wealth fund (SWF).


Leading companies in Sri Lanka are actively promoting CSR. Some SME companies have also started to promote CSR. The Ceylon Chamber of Commerce (CCC), the largest business chamber in Sri Lanka, has a CSR section promoting CSR among its membership. CCC also has an annual “Best Corporate Citizens” award to encourage CSR activities. In addition, a professional accounting body has a program to promote sustainability reporting. Internationally, some of Sri Lanka’s leading companies have joined the UN Global Compact initiative. In fact, Sri Lanka won the Asia Award 2009 for the “best performing global compact principles by a local network.” The apparel industry, Sri Lanka’s largest export industry, has a specially designated CSR program for the industry under the title “Garments without Guilt” ( The ethical sourcing and sustainable development practices under the program aim to empower women and their communities through poverty alleviation and opportunities for education and personal growth. In addition, it also endeavors to promote sustainable eco-friendly manufacturing practices in the apparel industry. Firms who pursue CSR are viewed favorably by Sri Lanka’s business sector resulting in positive media attention.


The Sri Lankan government’s military campaign against the Liberation Tigers of Tamil Eelam (LTTE) ended in May 2009 with the defeat of the LTTE. Prior to that, from January 2008 to June 2009 fighting between the Sri Lankan military, paramilitary groups and the LTTE increased. Bomb attacks in densely populated areas killed dozens of civilians, including in some areas frequented by foreign tourists. LTTE conducted several air attacks in Colombo during this period. There were a series of other incidents throughout the country targeting armed forces personnel, politicians and civilians in 2007-2009.

In 1997, the United States designated the LTTE as a Foreign Terrorist Organization (FTO). In 2007, the United States froze the assets of, and blocked transactions with, the Tamils Rehabilitation Organization (TRO), a U.S.-registered non-profit group, on the grounds that it provided support for the LTTE.

During the two and half decades of war, foreign tourists and foreign business representatives were not LTTE targets, but they were injured in attacks on other targets. In 2001, the LTTE attacked Colombo’s international airport and destroyed commercial and military aircraft. Sri Lankan Airlines lost several commercial aircraft in the attack. Prior to 2001 the LTTE attacked several foreign-flagged commercial ships in the waters off the north and east of the country. The LTTE also bombed Colombo’s financial and business districts, causing numerous casualties and extensive damage to property.

Currently, Sri Lanka is included in the Lloyds Joint War Risk Committee’s war, strikes, terrorism and related perils areas list. Insurers have the option of imposing war risk premiums on ships using Sri Lankan ports. Lines which call on Sri Lanka regularly are not charged the war risk charge now, but could affect new businesses.


Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.

The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.


In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at:


It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental in the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Antibribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. Sri Lanka ratified the UN Anti-Corruption Convention in 2004. Sri Lanka has signed but not ratified the UN Convention against Transnational Organized Crime. Sri Lanka became a signatory to the OECD-ADB Anti-Corruption Regional Plan in May 2006.


The OECD Antibribery Convention entered into force in February 1999. As of December 2009, there are 38 parties to the Convention including the United States (see Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD Antibribery Convention through the U.S. FCPA. Sri Lanka is not a party to the OECD Convention.


The UN Anti-Corruption Convention entered into force on December 14, 2005, and there are 143 parties to it as of December 2009 (see treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anti-corruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anti-corruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention
contains transnational business bribery provisions that are functionally similar to those in the OECD Antibribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Sri Lanka is a party to the UN Convention.


In 1996, the Member States of the Organization of American States (OAS) adopted the first international anti-corruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption, provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of December 2009, the OAS Convention has 33 parties (see Sri Lanka is not a party to the OAS Convention.


Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption
standards. Currently, GRECO comprises 46 member States (45 European countries and the United States). As of December 2009, the Criminal Law Convention has 42 parties and the Civil Law Convention has 34 (see Sri Lanka is not a party to the Council of Europe Conventions.


U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.


The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at In Sri Lanka, this service is provided by the Economic and Commercial Section at the U.S. Embassy (

The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report A Trade Barrier” Website at


The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the antibribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at More general information on the FCPA is available at the Websites listed below.

Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.


Public sector corruption, including bribery of public officials, remains a significant challenge for U.S. firms operating in Sri Lanka. While the country has generally adequate laws and regulations to combat corruption, enforcement is weak and inconsistent. U.S. firms identify corruption as a constraint on foreign investment, but, by and large, it is not a major threat to operating in Sri Lanka – at least once a contract has been won. Corruption appears to have the greatest effect on investors in large projects and on those pursuing government procurement contracts.

There is a consensus that corruption is rampant in Sri Lanka. In Transparency International’s Corruption Perception Index for 2009 Sri Lanka ranks 97th with a score of 3.1 out of a possible 10 points. The World Bank Control of Corruption Index which ranges from -2.5 to +2.5 has shown an improvement to -0.13 in 2006 and 2007 from -0.26 in 2005. In a 2006 USAID Democracy and Governance assessment, anecdotal evidence from the private sector indicated that the percentage of a public sector contract paid in bribes nearly tripled. According to Transparency International, corruption is perceived as most pervasive in political appointments to government institutions and in government procurement awards, as well as in high frequency/low value transactions. The police force and the judiciary are perceived to be the most corrupt public institutions. Corruption is also a persistent problem in customs clearance and enables wide smuggling of certain consumer items, to the detriment of legitimate manufacturers and importers.

In 2008-2009, the Supreme Court, examining public interest litigations against the sale of three government properties, faulted a former President and the Secretary to the Treasury for wrongdoing. Both were fined. The Supreme Court also reversed the sales. Also in 2008, the Supreme Court also removed the Secretary to the Treasury from his position and ruled that he cannot hold any public office in the future. However, in 2009 the Supreme Court chaired by a new Chief Justice allowed the former the Treasury Secretary to resume his duties, thereby reversing the 2008 decision.

In January 2007, a parliamentary Commission found evidence of serious and widespread waste, fraud, and abuse in the management of Sri Lanka’s numerous government enterprises. Privatization of a handful of government enterprises between 2001 and 2004 also appears to have been done in a corrupt manner. The mismanagement and corruption reviewed by the Commission have cost Sri Lanka an estimated USD 1.3 billion. However, the government has taken little concrete action to date to address the Commission’s findings, and it later replaced the Commission’s chairman and some of its members; one new appointee is the President’s brother. Following the Commission’s report, several other large scale corruption incidents and frauds materialized, including at the government’s tax office.

Sri Lanka ratified the UN Anti-Corruption Convention in 2004. Sri Lanka has signed but not ratified the UN Convention against Transnational Organized Crime. Sri Lanka became a signatory to the OECD-ADB Anti-Corruption Regional Plan in May 2006.


The Bribery Commission is the main body responsible for investigating allegations of bribery and corruption. The function of the Commission, under Act No 19 of 1994, is to investigate allegations brought to its attention and to institute proceedings against responsible individuals in the appropriate court. The law states that a public official’s offer or acceptance of a bribe constitutes a criminal offense and carries a maximum sentence of seven years imprisonment and a fine at the discretion of the courts. A bribe by a local company to a foreign official is not covered by the Bribery Act.

Although highly publicized, efforts to investigate bribery and corruption by the Bribery Commission and Presidential Commissions have failed, damaging public confidence in such processes. In February 2008, the President removed the Bribery Commission’s Director General, the sole individual able to serve indictments and appointed a new Director General.

Several other government entities try to address corruption, the most important being the Auditor General’s Department. However, there is a confusion of mandates and these institutions frequently interpret their mandates narrowly, inhibiting their effectiveness.


Some useful resources for individuals and companies regarding combating corruption in global markets include the following:

Information about the U.S. Foreign Corrupt Practices Act (FCPA), including a “Lay-Person’s Guide to the FCPA” is available at the U.S. Department of Justice’s Website at:

Information about the OECD Antibribery Convention including links to national implementing legislation and country monitoring reports is available at:,3355,en_2649_34859_1_1_1_1_1,00. html. See also new Antibribery Recommendation and Good Practice Guidance Annex for

General information about anticorruption initiatives, such as the OECD Convention and the FCPA, including translations of the statute into several languages, is available at the Department of Commerce Office of the Chief Counsel for International Commerce Website:

Transparency International (TI) publishes an annual Corruption Perceptions Index (CPI). The CPI measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is available at: TI also publishes an annual Global Corruption Report which provides a systematic evaluation of the state of corruption around the world. It includes an in-depth analysis of a focal theme, a series of country reports that document major corruption related events and developments from all continents and an overview of the latest research findings on anti-corruption diagnostics and tools. See

The World Bank Institute publishes Worldwide Governance Indicators (WGI). These indicators assess six dimensions of governance in 212 countries, including Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption. See The World Bank Business Environment and Enterprise Performance Surveys may also be of interest and are available at:

The World Economic Forum publishes the Global Enabling Trade Report, which presents the rankings of the Enabling Trade Index, and includes an assessment of the transparency of border administration (focused on bribe payments and corruption) and a separate segment on corruption and the regulatory environment. See

Additional country information related to corruption can be found in the U.S. State Department’s annual Human Rights Report available at

Global Integrity, a nonprofit organization, publishes its annual Global Integrity Report, which provides indicators for 92 countries with respect to governance and anti-corruption. The report highlights the strengths and weaknesses of national level anti-corruption systems. The report is available at:


The Government of Sri Lanka has signed investment protection agreements with the United States (which came into force in May 1993) and with the following other countries:

1. Belgium
2. People’s Republic of China
3. Denmark
4. Egypt
5. Finland
6. France
7. Germany
8. Indonesia
9. India
10. Iran
11. Italy
12. Japan
13. Korea
14. Luxembourg
15. Malaysia
16. Netherlands
17. Norway
18. Romania
19. Singapore
20. Sweden
22. Thailand
23. United Kingdom


A bilateral treaty between Sri Lanka and the United States to avoid double taxation was ratified and entered into force on June 12, 2004.

Foreign investors not qualifying for Board of Investment incentives such as tax and exchange control exemptions or concessions are liable to pay taxes on corporate profits, dividends, and remittances of profits. They are also liable to pay a Value Added Tax on goods and services. The government has also imposed a tax of 0.1% on debits to any current or savings account maintained at any bank in Sri Lanka. Debits made to accounts of government and international organizations are excluded. Accounts maintained at Foreign Currency Banking Units, accounts maintained for stock exchange transactions (SIERA), and resident and non-resident foreign currency accounts are exempted from the tax.

An Economic Service Charge (ESC) at 0.25% of income applies to BOI-approved companies enjoying tax holidays. The Embassy encourages prospective U.S. investors to contact an international auditing firm operating in Sri Lanka to assess their tax liability.


The United States and Sri Lanka concluded in 1966 (and renewed in 1993) an agreement that allows the Overseas Private Investment Corporation (OPIC) to provide investment insurance guarantees for U.S. investors. OPIC currently provides coverage to banking and power sector investments in Sri Lanka. Sri Lanka’s membership in the Multilateral Investment Guarantee Agency (MIGA) offers the opportunity for insurance against non-commercial risks.

The U.S. Embassy and other U.S. Government institutions spend over $13 million annually in Sri Lanka. This amount can potentially be utilized by OPIC to honor an inconvertibility claim; however, no such claims have been made to date in Sri Lanka. The Embassy purchases local currency at the financial rate.


Sri Lanka’s labor force is literate (particularly in local languages) and trainable, although weak in certain technical skills and the English language. The average worker has eight years of schooling. Two-thirds of the labor force is male.

In 2009, 7.6 million Sri Lankans were employed, with 43% in services, 25% in industry and 32% in agriculture jobs. Overall, 41% of the workforce is in the private sector and 16% in the government. Self employed workers constitute 30% of all employed while another 11% were unpaid family workers. About 61% of the employed are in the informal sector.

The unemployment rate has declined in recent years to around 5%. The rate of unemployment among women and high school and college graduates, however, has been proportionally higher than the rate for less-educated workers. Youth and entry-level unemployment and underemployment remain a problem. A significant proportion of unemployed people seek “white collar” jobs. However, most sectors seeking employees offer manual or semi-skilled jobs or require technical or professional skills such as management, marketing, information technology, accountancy and finance, and English language proficiency. The construction, plantation and apparel industries report a shortage of workers. Some investors have faced problems in finding sufficient employees with the requisite skills.

The government has initiated educational reforms it hopes will lead to better preparation of students and better matches between graduates and jobs. The government declared 2009 to be the year of English and Information Technology. More computer, accounting and business skills training programs and English language programs are becoming available. But the demand for these skills still outpaces supply.


There are an estimated 1.5 million Sri Lankan workers abroad. Remittances from migrant workers, at around $3 billion, are one of Sri Lanka’s largest sources of foreign exchange. The majority of this labor force is unskilled (housemaids and factory laborers) and located primarily in the Middle East, but Sri Lanka is also losing many of its technically and professionally qualified workers to more lucrative jobs abroad. Despite the global slowdown, remittances from migrant workers abroad actually increased in 2009. At least one labor importing country, South Korea, temporarily stopped importing labor from Sri Lanka in 2009.


Labor is available at relatively low cost, though it is priced higher than in some other South Asian countries. Productivity lags behind other countries in Asia. Child labor is prohibited and is virtually nonexistent in the organized sector, although child labor occurs in informal sectors. The minimum legal age for employment is set at 14. Most permanent full-time workers are covered by laws pertaining to maximum hours of work, minimum wage, leave, the right of association, and safety and health standards.

Many believe that Sri Lanka’s labor laws and its numerous official holidays dampen productivity. The full moon day of each month (sacred in the Buddhist faith), if it falls on a weekday, is a paid holiday. There are eight other public holidays. The public sector and banks enjoy additional holidays. These statutory holidays are in addition to 21 days of annual/casual leave and approximately 21 days of sick leave (the number of days for sick leave is at the discretion of the management). Further, female employees are entitled to 84 days fully paid maternity leave for the first two pregnancies. Female workers are permitted 60 hours of overtime work per month.

The Government continues to interfere with private sector wage setting. In October 2005 the Government, through an act of Parliament, took steps to mandate a wage increase (of approximately Rs 1,000 ($8.85) per month) to private sector workers. The private sector is concerned about such interference in wage setting, which could damage competitiveness in certain sectors.


The Termination of Employment of Workmen Act (TEA) makes it difficult to fire or lay off workers who have been employed more than six months for any reason other than serious, well-documented disciplinary problems. Disputes over dismissals can be brought to a labor tribunal administered by the Ministry of Justice. The labor tribunals have large backlogs of unresolved cases. Certain labor disputes founded upon fundamental rights (allegations of termination/transfers based upon discrimination, etc.) can be brought directly to the Supreme Court. Recent amendments to the Industrial Disputes Act (IDA) include labor dispute resolution rules to expedite the dispute process.

The government has introduced a standard compensation formula under the TEA to facilitate termination. The compensation formula takes into account the number of years of service and offers 2.5 months’ salary as compensation for 1 year of service, 12.5 months’ salary for 5 years of service; 38 months for 20 years and up to a maximum of 48 months’ salary for 34 years service. According to the World Bank’s Doing Business 2009 report, Sri Lanka’s firing cost is among the highest in the world. For example, Sri Lanka’s firing cost for 20 years of service, at 38 months, compares with Pakistan and Nepal’s 22.5 months, India’s 19.6 months, Malaysia’s 18.5 months, China’s 13.2 months and Bangladesh’s 11.7 months. The Labor Commissioner’s approval or the affected employee’s consent is required to fire workers. The Labor Commissioner’s approval is often subject to delays of around 6-7 months. Employers complain that the package is excessive, especially compared to international norms. They have also pointed out that higher compensation could adversely affect companies requiring restructuring, and discourage investment.


About 20% of the 7 million-strong work force is unionized, but union membership is declining. There are more than 1,900 registered trade unions (many of which have 50 or fewer members), and 19 federations. About 15% of labor in the industry and service sector is unionized. Most of the major trade unions are affiliated with political parties, creating a highly politicized labor environment. In many cases several unions, affiliated with different political parties, work together at state-owned enterprises. This is not the case for private companies, which only have one union or perhaps a workers’ council to represent the employees. Several trade unions with affiliations to major political parties have formed themselves into an organized group, the National Association for Trade Union Research and Education (NATURE), to promote education and training among trade unionists.

All workers, other than police, armed forces, prison service, and

those in essential services, have the right to strike. By law, workers may lodge complaints to protect their rights with the commissioner of labor, a labor tribunal, or the Supreme Court. The president retains the power to designate any industry as an essential service.

Unions represented workers in many large private firms, but workers in small-scale agriculture and small businesses usually did not belong to unions. Public sector employees were unionized at very high rates. Labor in export processing zone enterprises tends to be represented by non-union worker councils.

Unions have complained that the Board of Investment and some employers, especially in the BOI-run export processing zones, prohibit union access and do not register unions on a timely basis. Employers allege that the JVP, a Marxist political party opposed to private enterprise, could provoke labor to strike under the pretense of trade union activity. Due to the JVP’s violent past, employers are generally not in favor of it or its trade union arm, the Inter-Company Trade Union.

In BOI enterprises, including those in the export processing zones, worker councils composed of employees generally engage in labor and management negotiations. These worker councils have functioned well in some companies in providing for worker welfare. The BOI has requested that companies recognize trade unions and accept the right to collective bargaining. According to the BOI, where both a recognized trade union with bargaining power and a non-union worker council exist in an enterprise, the trade union will represent the employees in collective bargaining.

The International Labor Organization’s (ILO) Freedom of Association Committee has observed that Sri Lankan trade unions and employee councils can co-exist, but advises that there should not be any discrimination against those employees choosing to join a union. The right of employee councils to engage in collective bargaining has been held as valid by the ILO. The ILO has, however, noted weaknesses in rules governing operation of employee councils and low prevalence of collective bargaining agreements and requested that the Government address these issues.

In response to these observations, the BOI revised its labor manual in March 2004, requesting that companies located in export processing zones allow union access to zones and provide official time off to union members to attend meetings. Along with this revision, the BOI also issued new guidelines for the formation and operation of employee councils, giving powers to employee councils to negotiate binding collective agreements.

In 2008, the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) submitted a petition to the United States Trade Representative seeking suspension of Generalized System of Preferences (GSP) benefits for Sri Lanka due to alleged labor rights violations in some factories in the export processing zones. AFL-CIO submitted a similar petition in 2002, which was rejected. USTR did not act on the 2008 petition and the AFL-CIO submitted a revised petition in July 2009. The United States Government has not yet made a decision whether to accept the GSP petition for review. If accepted, the governments of the United States and Sri Lanka would enter into consultations. A Sri Lanka trade union made a similar case with the European Union (EU) when Sri Lanka applied for benefits under the special incentive arrangements of the GSP. After an audit, the EU, in January 2004, granted significant benefits to Sri Lanka under EU GSP+ in recognition of the country’s efforts to implement core labor standards. The EU, however, urged improvements in freedom of association. The current review of GSP+ benefits centers on alleged violations of human rights relating to the end of the war and treatment of internally displaced persons, not labor rights.

Key public sector entities such as the Ceylon Electricity Board, Ceylon Petroleum Corporation and the Sri Lanka Ports Authority also have large unions which have protested anticipated moves towards privatization or restructuring. They staged a “work to rule” campaign in 2009 demanding higher wages. They returned to work as the industries were made essential services by the President. The government granted the striking workers salary increases, although not as much as demanded. Trade unions in the plantations also staged a “go-slow” campaign demanding higher wages, when a plantation sector collective bargaining agreement came up for renewal. They were granted a 40% increase.

In July 2006, the Supreme Court broke a port slowdown which had disrupted shipping through the Colombo Port for over a week. However, in response to a challenge lodged by several unions, the ILO Freedom of Association Committee noted that the port “go-slow” action did not disrupt an essential service, i.e. one whose disruption would endanger life, personal safety or health of the whole or part of the population.


Collective bargaining is not yet popular. Employers’ Federation of Ceylon, the apex employers association in Sri Lanka, assists its member companies to negotiate with unions and sign collective bargaining agreements. While about half of the 520 members of the Employers’ Federation of Ceylon is unionized, currently 135 of these companies (including a number of foreign-owned firms) are bound by collective agreements. As of January 2010, there were only four collective bargaining agreements signed in companies located in export processing zones.


Formerly confrontational labor-management relations have improved in the last few years as employers have worked harder to motivate and care for workers. Work stoppages and strikes in the private sector are on the decline, and there were few strikes in 2009. While labor-management relations vary from organization to organization, managers who emphasize communication with workers and offer training opportunities generally experience fewer difficulties. U.S. investors in Sri Lanka (including U.S. garment buyers) generally promote good labor management relations and labor conditions that exceed local standards.


Sri Lanka is a member of the International Labor Organization (ILO) and has ratified 31 international labor conventions. The labor laws of Sri Lanka are laid out in almost 50 different statutes. The Ministry of Labor has published a Labor Code, consolidating important labor legislation. Sri Lanka has ratified all eight of the core labor conventions included in the 1998 ILO Declaration on Fundamental Principles and Rights at Work. ILO Convention 138 on minimum age for admission to employment and Convention 182 on worst forms of child labor were ratified during 2000-2001. Sri Lanka ratified ILO convention 105 on Forced Labor in 2003. The ILO and the Employers’ Federation of Ceylon are working to improve awareness of core labor standards. The ILO also promotes its Decent Work Agenda program in Sri Lanka.


Sri Lanka has 12 free trade zones, also called export-processing zones, administered by the BOI. The oldest, the Katunayake and Biyagama Zones, located north of Colombo near the Bandaranaike International Airport, are fully occupied. The third zone is located at Koggala on the southern coast. Several mini export-processing zones are located in provinces. There are nearly 200 foreign export processing enterprises operating in these zones. There are also two industrial parks that have both export-oriented and non-export oriented factories. They are located in Pallekelle, near Kandy in central Sri Lanka, and in Seethawaka in Avissawela about 60 kilometers from Colombo. In addition, a large private apparel company opened Sri Lanka’s first privately run fabric park in 2007. The company invites local and foreign companies to set up fabric and apparel factories in this eco-friendly park.

In the past, firms preferred to locate their factories near Colombo harbor or airport to reduce transport time and cost. However, excessive concentration of industries around Colombo has caused heavy traffic, higher real estate prices, environmental pollution, and scarcity of labor. The BOI and the government now encourage export-oriented factories to set up in industrial zones farther from Colombo. However, Sri Lanka’s poor roads make these outlying zones less appealing. There have been two garment factories established in Eastern Sri Lanka, for example. The Government has embarked on a substantial plan to improve road infrastructure island-wide.


From 1998-2001, foreign direct investment (FDI) flows to Sri Lanka averaged only about $150 million per year (excluding privatization receipts). In 2007, FDI increased to about $600 million and in 2008 to about $750 million. There was $350 million as of September 2009.


Total cumulative U.S. investment in Sri Lanka is estimated to be in the range of $200 million. Major U.S. investors include: Energizer Battery, Mast Industries, Smart Shirts (a subsidiary of Kellwood Industries), Chevron, Citibank, Caterpillar, 3M, Coca-Cola, Tandon Corporation, Pepsi Co, Sportif, Worldquest, Fitch IBCR, AES Corporation, American International Group (AIG), American Premium Water, Virtusa, Avery Denison, North Sails, Amsafe Bridport, RR Donnelly (through Office Tiger and Revlon (through its Indian subsidiary). Several Sri Lankan-Americans have started IT and BPO companies in Sri Lanka serving the US market. In addition, IBM, Lanier, NCR, GTE, Motorola, Procter & Gamble, Liz Claiborne, Tommy Hilfiger, J.C. Penney, Sun Microsystems, Microsoft, Bates Strategic Alliance, McCann-Erickson, Pricewaterhouse Coopers, Ernst and Young, and KPMG all have branches, affiliated offices or local distributors/representatives. Kentucky Fried Chicken, Pizza Hut, Federal Express, UPS, and McDonald’s are represented in Sri Lanka through franchises. Numerous other American brands and products are represented by local agents.


Leading sources of foreign direct investment in Sri Lanka are Malaysia, the United Kingdom, the United States, Singapore, India, China, the UAE, and Korea. Major non-U.S. investors include: Unilever, Nestle, British American Tobacco Company, Mitsui, Pacific Dunlop/Ansell, Prima, FDK, Telekom Malaysia Bhd, S.P. Tao, HSBC and the Indian Oil Corporation. In 2008/9, India’s Bharathi Airtel invested in mobile cellular services. Leading U.S. and foreign investors that have acquired significant stakes in privatized companies include Chevron, Hanjung Steel of Korea, Mitsubishi Corporation and C. Itoh (A.K.A. Itochu) of Japan, Emirates Airlines of United Arab Emirates, Shell Oil of the UK, and the Indian Oil Corporation.

Web Resources Return to top

Board of Investment of Sri Lanka: or

International Monetary Fund (IMF) Sri Lanka country information:

Article VIII obligations of the International Monetary Fund:

U.S.-Sri Lanka Bilateral Investment Treaty:

Institute for the Development of Commercial Law and Practice:

Indo-Lanka Free Trade Agreement:

South Asian Free Trade Area:

Fitch Ratings Lanka:

Garments without Guilt program of the apparel industry:

Return to table of contents

DE RUEHLM #0072/01 0320841
R 010841Z FEB 10


ADDED 2011-09-04 03:34:39
STAMP 2011-09-04 03:34:39



Sunday, September 4th, 2011

ID     10ASTANA184
DATE     2010-02-12 00:00:00
ORIGIN     Embassy Astana
TEXT     C O N F I D E N T I A L SECTION 01 OF 02 ASTANA 000184


E.O. 12958: DECL: 02/12/2020

REF: A) 09 ASTANA 1762
C) 09 ASTANA 1761

Classified By: Charge d’ Affaires, a.i. Pamela Spratlen: 1.4 (b), (d)

1. (SBU) SUMMARY: Timur Kulibayev, the President’s influential son-in-law and Deputy Chairman of the National Welfare Fund Samryk Kazyna, sued four independent newspapers for publishing articles alleging that he received major kick-backs from the Chinese for oil contracts signed in 2003-05. The court initially sided with Kulibayev, ordering on February 1 the confiscation of all print runs that carried the story and placing a ban on any other articles insulting Kulibayev’s honor and dignity. It reversed its ruling on a technicality after an outcry from civil society leaders and criticism from the Organization for Security and Cooperation in Europe’s (OSCE) Representative on Freedom of the Media. Ousted, self-exiled chairman of Bank Turam Alem (BTA) bank Mukhtar Ablyazov is the source of the corruption allegations. The Financial Police opened an investigation into Ablyazov’s allegations on February 11. END SUMMARY.


2. (SBU) Timur Kulibayev, President Nazarbayev’s influential son-in-law and Deputy Chairman of National Welfare Fund Samryk-Kazyna, filed a libel suit on February 1 against four newspapers — “Respublika,” “Golos Respubliki,” “Vzglyad,” and “Kursiv” — after they published a story accusing him of corruption.
An Almaty district court, acting with uncharacteristic swiftness on the same day, ordered the confiscation of all print runs containing the story and placed a ban on future stories that “insult the honor and dignity” of Kulibayev. The order was immediately delivered to the four newspapers, as well as to other independent news outlets and newspaper stalls across the country.


3. (SBU) The source of the offending story was a letter to media outlets from Mukhtar Ablyazov, the ousted and self-exiled chairman of the Bank Turam Alem (BTA) bank who fled the country following accusations of embezzlement and financial fraud (ref A). In the letter, Ablyazov accused Kulibayev of pocketing a portion of the proceeds from the sale of a government stake in a Kazakhstani oil company to the China National Petroleum Company (ref B) in 2003.
According to Radio Free Europe/Radio Liberty, Ablyazov has documents proving Kulibayev’s illegal machinations. Ablyazov’s accusations appeared in the media at the same time as a story that Dinara Kulibayeva, Kulibayev’s wife and Nazarbayev’s daughter, bought a luxurious villa in SWITZERLAND for a record 74 million Swiss franc (approximately $68.4).


4. (SBU) The court order caused an uproar in civil society. Chief editors and journalists of the four newspapers held press conferences condemning the court decision as an attempt to “completely exterminate independent media in Kazakhstan.” Editor-in-Chief of independent newspaper “Svoboda Slova,” Gulzhan Yergaliyeva, called on the Supreme Court to reverse “this shameful ruling.” Political opposition parties also joined in the protests. The Ak Zhol party — seen by some as an opposition party closest to the government — released an unusually harsh statement criticizing “this selective justice” for “creating a cast of untouchables in Kazakhstan and further legalizing corruption.” International NGOs Freedom House and the Committee to Protect Journalists publicly urged the courts to rescind “the unacceptable gag-order,” declaring that “censorship has no place for the chair of the OSCE.” On February 8, Miklos Haraszti, the OSCE Representative on Freedom of the Media, released a statement condemning libel lawsuits in Kazakhstan (as well as Tajikistan and Hungary) as “dangerous attempts at censorship.”


5. (SBU) The first inklings that not all in the government agreed with the Almaty court ruling appeared on February 8. The Chair of the Supreme Court, Musabek Alimbekov, told journalists that the Almaty judge “may have made a mistake. Judges are human,” he said, “and humans make mistakes.” Alimbekov noted that any potential judicial mistake would have to be addressed in a court of higher instance. General Prosecutor Kairat Mami also said that his office was looking into a case of possible judicial malfeasance, based on a complaint from several journalists.


6. (SBU) On February 9, the court rescinded its own ruling to ban articles that “insult (Kulibayev’s) honor and dignity.” The ruling was based on a technicality — the judge ruled that Kulibayev did not follow proper pre-trial procedures for libel cases when he failed to ask the newspapers to print a retraction before filing suit. Civil society activists greeted the verdict as a temporary victory, but did not exclude the possibility that the President’s powerful son-in-law will find other ways to squelch the story in independent media. In her ruling, the judge said she would consider the plaintiff’s demand for a public apology only if the media outlets refuse to publish a refutation.


7. (SBU) Meanwhile, Ablyazov continued his campaign against Kulibayev. On February 8, he announced that he sent proof of Kulibayev’s embezzlement to the Prosecutor General’s Office, the parliament, and political parties. He also claimed to have sent letters to several leading businessmen in Kazakhstan urging them to share any information on Kulibayev’s wrong-doings, and publicized an email address ( to which people could send complaints against Kulibayev. Activists of the Alga opposition party — widely believed to be financed by Ablyazov — made several attempts to publicly deliver Ablyazov’s letter to the parliament in Astana. On two separate occasions, the group was detained by the police for organizing an unsanctioned rally. On February 11, Kazakhstan’s State Agency for Fighting Economic and Corruption Crimes (Financial Police) announced that it received Ablyazov’s letter and launched an investigation into the case.

8. (C) COMMENT: Ablyazov’s allegations have started a flurry of guessing games about the state of play in the power games among the Kazakhstani elite. Most independent political analysts agree that Ablyazov must have received the incriminating evidence from a third party — either Rakhat Aliyev, Nazarbayev’s exiled former son-in-law, or someone high enough in Kazakhstan’s power echelons to have access to this kind of information. Some allege that Ablyazov is the front man for interests in the oil industry that want to diminish Kulibayev’s far-reaching influence in the energy sector. Others speculate that this is a power play from one of the rival political clans (ref C). All agree, however, that this case is all about power and control. It is also an important test of freedom of expression in Kazakhstan. The fact that the court rescinded its gag-order is a positive sign, and here the strong statement from OSCE’s Haraszti certainly played a role. However, as civil society activists point out, the judge’s ruling leaves open the possibility for Kulibayev to take further legal action if the newspapers refuse to print a retraction. We will continue to watch closely how these power games play out. END COMMENT.


DE RUEHTA #0184/01 0430933
O 120933Z FEB 10


ADDED     2011-09-04 03:51:56
STAMP     2011-09-04 03:51:56
TWEETS     0



Sunday, September 4th, 2011

ID     10BERN56
DATE     2010-02-12 00:00:00
ORIGIN     Embassy Bern




E.O. 12958: N/A


BERN 00000056 001.2 OF 014


(U) SWITZERLAND continued to make progress in its anti-trafficking-in-persons practices and achievements. To further improve the process for gathering statistics on investigations and prosecutions, the 26 cantons decided to harmonize cantonal recording and reporting practices by 2010.
However, these efforts to consolidate national TIP data have thus far proved to be more difficult than authorities anticipated. Swiss officials are still working out apparent anomalies between 2008 case information reported to the Federal Statistics Office and information reported or otherwise available to the Federal Office of Police from the cantons. The government cooperated with other governments in the investigation and prosecution of trafficking and trafficking-related offenses.

(U) Protection: The government enacted new protective measures for TIP victims. Data on the number of TIP victims referred by Swiss authorities to assistance centers for victims of crime in 2008 are not yet available, but expected soon.

(U) Efforts to improve the legal protections of TIP victims continued. In 2008, the government amended the Federal Law on Foreigners, thereby reinforcing the legal framework in which cantons can provide TIP victims stays of deportation proceedings to recover from their trauma and weigh participation in judicial proceedings. The law further allows the federal government to logistically and financially assist trafficking victims and witnesses, for whom a return is acceptable, in the re-integration in their countries of origin. The government also revised the Federal Victims Assistance Law. The revision, which entered into force on January 1, 2009, enhances crime victims’ right to emergency protections and allows cantons to pool resources to establish regional victim assistance centers specializing in certain types of crime (e.g. TIP).

(U) On November 27, the Swiss government submitted to the Parliament a bill for the ratification of the Council of Europe’s Convention on Human Trafficking and for the adoption of a comprehensive witness protection program that enables officials to provide victims of crime with new identities.

(U) Prevention: Swiss government agencies continued to fund several prevention and protection programs abroad.

(U) On September 29, the Federal Office of Police announced that in the previous 12 months, approximately 12 cases of suspected child sex tourism were reported on a Web site it established in 2008 to enable travel agencies and individuals to report suspicious travel. The federal police forwarded relevant information to the competent municipal, cantonal, or international police offices for further investigation.


(U) A. The Swiss Federal Office of Statistics collects data on TIP and TIP-related crimes. Useful NGO information also is available, particularly with regard to assistance provided to victims of TIP crimes.

(SBU) The Federal Office of Police Coordination Unit against the Trafficking of Persons and Smuggling of Migrants (KSMM) also collects TIP data. It is currently working to determine why the Federal Office of Statistics does not have information on as many TIP convictions for 2008 as have been reported to the KSMM by cantonal officials. The KSMM will provide authoritative case information for 2008 as soon as it has resolved these anomalies, and KSMM contacts are aware of the importance of this data to the TIP report process.

(U) B. SWITZERLAND is primarily a country of destination for persons being trafficked, almost exclusively women, but transit also occurs. Trafficking occurs both across borders and within the country. Swiss officials estimate the number of trafficking victims at a few hundred per year. Federal Police assess that the total number of potential trafficking victims currently living in SWITZERLAND is between 1,500 and 3,000. The great majority of trafficking victims are forced into nude dancing and prostitution. Trafficking for the purpose of labor exploitation as domestic servants also occurs but appears to be relatively limited.

(U) Several cantons (states), including Zurich, Geneva, Basel, Bern, Vaud, and Ticino, recorded an increase in the number of registered prostitutes and commercial sex establishments. In the city of Zurich, prostitution reportedly has increased significantly in 2009. According to police estimates, 795 new prostitutes arrived in Zurich in 2009, compared to 605 in 2008. At least 300 prostitutes came from Hungary; many of them were part of the Roma minority and were reportedly particularly vulnerable for trafficking.

(U) C. In some cases, victims are subjected to physical and sexual violence, threats to themselves or their families or both, drugs, withholding of documents, and incarceration. Police estimates suggest that up to 50 percent of illegal prostitutes’ gross income is paid to brothel owners and traffickers who organize the passage and entry to SWITZERLAND. While the majority of TIP victims still are found in Swiss urban areas, in recent years police and NGOs increasingly have encountered TIP victims working in contact bars in more rural areas.

(U) D. Both Federal Police and NGO sources noted a considerable increase in 2009 in the number of young women being trafficked into SWITZERLAND for sexual exploitation from Eastern Europe, particularly Hungary. TIP victims in SWITZERLAND typically come from Eastern Europe and the former Soviet Union (Hungary, Poland, Bulgaria, Slovakia, Czech Republic, Slovenia, Romania, Ukraine, Moldova), Latin America (Brazil, Dominican Republic), Asia (Thailand, Cambodia), and to a lesser extent from Africa (Nigeria, Cameroon). The Zurich-based Information Center for Women from Africa, Latin America, and Eastern Europe (FIZ) reported that roughly 43 percent of the 160 TIP victims counseled in 2008 came from Eastern Europe, another 30 percent from Latin America, about 15 percent from Asia, 9 percent from Africa and the remaining 3 percent from Western Europe.

(U) E. Trafficking into the country is primarily performed by individuals and small groups related through ethnic, clan, or family ties, as well as organized criminals. Federal Police have reported that traffickers are increasingly well organized with far-reaching international networks. Often, the perpetrators and victims are from the same cities and regions. In addition to men, women also play a role in the recruitment, intermediary, or exploitation process. How many trafficking victims were lured into SWITZERLAND under false pretenses and how many were brought in fully aware that they were going to engage in prostitution in SWITZERLAND is unclear, but under Swiss law both are punishable as human trafficking.

——————————————— ——-
——————————————— ——-

(U) A. Government officials at the highest level acknowledge that trafficking is a problem. On November 27, the Swiss government submitted to the Parliament a bill for the ratification of the Council of Europe’s Convention on Human Trafficking and for the adoption of a comprehensive witness protection program that enables officials to provide victims of crime with new identities. With the adoption of the law on a comprehensive witness protection program, SWITZERLAND will reportedly meet the requirements of the Convention.

(U) B. The Federal Office of Police (BAP) is the federal government’s primary actor in anti-trafficking efforts. The BAP’s Federal Criminal Police handles international cooperation and investigations of organized crime; the Service for Analysis and Prevention, i.e. the domestic intelligence service, does strategic analysis of information. The Federal Office of Police also hosts the Coordination Unit against the Trafficking of Persons and Smuggling of Migrants (KSMM), which is the federal government’s interdepartmental body to coordinate and monitor anti-trafficking efforts.
The KSMM develops anti-TIP strategies and policies in consultation with its constituting ministries that retain final responsibility for their implementation.

(U) The prosecution of illegal prostitution (i.e. prostitution without a valid work permit) and trafficking of persons normally falls under the jurisdiction of cantonal police and judicial authorities. However, cases linked to organized crime fall under the authority of the federal authorities to investigate and prosecute. The Federal Office of Migration has the lead in easing the return of trafficking victims and assisting in their re-integration in their home societies.

(U) The following government agencies are represented on the Steering Committee of the KSMM, taking active part in the fight against human trafficking:

Federal Level:

— Ministry of Foreign Affairs
– Political Division IV (Human Security)
– Directorate for International Law
– International Development Cooperation

— Finance Ministry
– Swiss Border Guards

— Ministry for Justice and Police
– Office of the Prosecutor General

– Federal Office for Migration

– Federal Office of Justice
– Federal Office of Police

— Economics Ministry
– Directorate of Labor

Cantonal (i.e. state) Level:

— National Conference of Cantonal Chiefs of Police

— National Conference of Prosecuting Offices

— National Conference of Equal Opportunity Offices

— National Conference of Victims Assistance Centers

— National Conference of Cantonal Migration Offices


— Information Center for Women from Africa, Latin America, and Eastern Europe (FIZ), Zurich

— International Organization for Migration, Bern

— Foundation Terre des Hommes, Lausanne

— Association Libert`, Geneva

(U) C. In general, criminal cases against traffickers are not pursued (for lack of evidence) unless their victims are willing to testify. Federal and cantonal police and immigration authorities follow a policy of granting potential TIP victims a stay of deportation proceedings to give them time to recover from their trauma and to let them freely decide whether to participate in judicial proceedings against their tormentors. On December 17, the Federal Office for Migration issued instructions on the conditions for providing residency permits to victims and witnesses of human trafficking in SWITZERLAND. The instructions state that a “hardship” residency permit may be granted independently of the victim’s willingness to testify.

(U) A number of major urban centers and suburban cantons have established written agreements on a referral process for TIP victims in the context of regular roundtable meetings between NGOs and cantonal justice, police, and immigration authorities. As a direct result of the federal regulations to stay deportation proceedings and the better local cooperation between NGOs and law enforcement officials, the number of TIP victims willing to testify against their traffickers has risen considerably.

(U) D. The Federal Office of Police’s Coordination Unit against the Trafficking in Persons and Smuggling of Migrants (KSMM) is the federal government’s main coordinating and monitoring body of its anti-trafficking efforts. Through its coordinating role, the KSMM keeps abreast of anti-trafficking efforts on all fronts (prevention, victim protection, and prosecution) both at the federal and cantonal level. In addition, its remit includes monitoring of parliamentary ratification of international conventions and offering expert advice on trafficking-relevant legislative reform.

(U) The KSMM has made available its assessment of Swiss anti-trafficking efforts to the Council of Europe, the OSCE, and the UN. The Federal Police’s Service for Analysis and Prevention, i.e. the government’s domestic intelligence service, does strategic analysis of human trafficking in and throughout SWITZERLAND and publishes its findings in the Federal Office of Police’s annual report on homeland security.

(U) E. The Civil Register Office of every municipality is responsible for the registration of births, deaths and marriages as well as acknowledgements of paternity. In SWITZERLAND, all births must be reported to the civil register office of the place of birth.

(U) All foreign nationals desiring to reside in SWITZERLAND must register at the Residents’ Registration Office within eight days of their arrival. The Residents’ Registration Office is responsible for changes of address, temporary or permanent residence permits and issues passports and ID cards.

(U) F. Because SWITZERLAND has a federal system in which 26 cantons have primary and largely independent authority for law enforcement, national data collection is a more cumbersome process than in centralized states. Moreover, data on convictions and sentences often changes until judicial appeals processes have run their course, which can take 18 months or more. To further improve the process for gathering statistics on investigations and prosecutions, the 26 cantons decided to harmonize cantonal recording and reporting practices by 2010.
However, these efforts to consolidate national TIP data have thus far proved to be more difficult than authorities anticipated. Swiss officials are still working out apparent anomalies between 2008 case information reported to the Federal Statistics Office and information reported or otherwise available to the Federal Office of Police from the cantons.

——————————————— —
——————————————— —

(U) A. The Swiss Penal Code has two articles specifically prohibiting trafficking in persons:

Article 182, effective since December 1, 2006, stipulates that anyone acting as the supplier, broker, or buyer in the trafficking of a human being for the purposes of sexual exploitation, labor exploitation, or to remove a body organ shall be liable to imprisonment or a fine, or both. The act of recruiting an individual for the purposes aforementioned also qualifies as trafficking and is liable to the same punishment. If the trafficking victim is a minor under 18 years of age or if the perpetrator repeatedly engages in human trafficking, the minimum penalty is a prison sentence of one year. Article 182 applies universally; traffickers are subject to prosecution in SWITZERLAND even if the act of trafficking was committed abroad, and regardless of whether trafficking is a crime in the foreign country where the act took place.

(U) Article 195 prohibits the promotion of prostitution and states that anyone inducing a person into prostitution by abusing a situation of dependency or promising pecuniary advantage, anyone impairing a prostitute’s freedom of movement by checking on the activities in question or fixing the place, time or extent or any other circumstances of the prostitution, or anyone secluding a person for prostitution shall be liable to imprisonment.

(U) Other forms of trafficking or exploitation of human beings are implicitly covered by the Penal Code’s provisions against threat, coercion, deprivation of personal liberty, and kidnapping (Articles 180, 181, 183). The Immigration and Naturalization Law penalizes facilitating the illegal immigration of foreigners into SWITZERLAND as well as the employment of foreigners without proper work permission. The Constitution implicitly bans forced or compulsory labor. Article 27 provides for economic freedom and explicitly guarantees the right to choose freely one’s profession as well as unrestrained access to and unencumbered exercise of a gainful occupation.
Forced or bonded labor by children is explicitly forbidden under Article 30 of the 1964 Labor Act.

(U) B. The maximum sentence for trafficking in persons for sexual exploitation is a prison term of twenty years (Penal Code Article 182). Coercing someone into prostitution or restricting a prostitute’s personal freedom (Penal Code Article 195) can carry a prison sentence of up to ten years.

(U) C. Under Penal Code Article 182 the penalties prescribed for trafficking for labor exploitation are the same as for trafficking for sexual exploitation. The minimum penalty is a fine; if the victim was a minor under 18 years of age, the minimum penalty is a one-year prison sentence.
Maximum penalty is 20 years in prison. Article 182 explicitly prohibits all acts related to labor trafficking – recruitment, supply, transfer, or the receipt of persons being trafficked. Thus, both the labor recruiters in labor source countries and the employers or labor agents in labor destination countries are subject to prosecution in SWITZERLAND.
Article 182 applies universally; labor recruiters are subject to prosecution in SWITZERLAND, even if the act was committed in a foreign country where labor trafficking may not constitute a criminal offense.

(U) D. The Penal Code also punishes rape, forcible sexual assault, and other sex crimes. Sexual activity with minors (Article 187) and sexual acts with dependent persons (Article 188) are punishable with up to five years imprisonment; sexual coercion (Article 189), rape (Article 190), and sexual violations of mentally or physically incapacitated persons (Article 191) are liable to a maximum ten year prison sentence; sexual acts with detainees (Article 192) and taking advantage of a person’s distress or dependency due to employment or any other condition to induce a sexual act or acceptance thereof (Article 193) carry a maximum penalty of imprisonment for up to three years.

(U) E. The investigation and prosecution of forced prostitution and human trafficking as well as the protection of victims in SWITZERLAND normally fall under the jurisdiction of the cantons, and consolidating national statistics can lag by 12-18 months.

(U) Under SWITZERLAND’s federal structure, the cantons hold jurisdiction over most criminal infractions, and statistical records of reported crime and police investigations vary greatly from canton to canton. In 2007, the inter-cantonal Working Group on Human Trafficking and Migrant Smuggling established a database on the ongoing investigations and prosecutions on suspicion of human trafficking or forced prostitution in the cantons. Cantonal authorities report ongoing investigations/prosecutions on a voluntary basis.

The data base is maintained by the Human Trafficking/Migrant Smuggling Investigative Unit of the Federal Criminal Police, which also coordinates inter-cantonal and international trafficking investigations. According to this developing database, there were at least 26 police investigations or prosecutions during 2008 for human trafficking for the purposes of sexual or labor exploitation.

Year Art. 196/182 Art. 195 Total
1999 7 14 21
2000 5 17 22
2001 2 17 19
2002 2 11 13
2003 7 6 13
2004 2 12 14
2005 12 15 27
2006 5 14 19
2007 18 17 35

(U) (Note: Swiss Federal Police contacts inform us that they are working to resolve anomalies between 2008 TIP conviction data collected by the Federal Office of Statistics and data reported directly to the KSMM by cantonal officials. KSMM contacts are aware of the importance of this data to our TIP reports process and will provide post with the most authoritative data available as soon as possible.)

(U) On January 22, the Lausanne Criminal Court found a Ugandan guilty on charges of human trafficking and aggravated extortion and sentenced him to a prison sentence of four years.

(U) On September 16, the High Court of Zurich upheld a sentence of three and a half years in prison against a Bulgarian who had forced women into prostitution and trafficked some of them.

(U) F. Investigators of the Federal Criminal Police receive specialized training in investigating incidences of organized crime, including human trafficking. Under the 2001 Efficiency Bill, the Federal Criminal Police obtained from the cantons the jurisdiction to investigate and prosecute more complex cases of human trafficking that span several cantons or are linked to organized crime. The Federal Criminal Police also handles international cooperation in the investigation of incidences of human trafficking.

(U) G. The Swiss government readily cooperates with other governments in the investigation and prosecution of trafficking cases. The Federal Criminal Police takes part in the expert working groups of both Europol and Interpol.

(U) SWITZERLAND has a bilateral cooperation accord between Europol and the Swiss Police, allowing the latter to obtain information from Europol’s intelligence files on organized crime, drug trafficking and terrorism. Under the terms of the agreement, Swiss Federal Police have assigned to The Hague a liaison officer whose role is to support and coordinate the cooperation between SWITZERLAND and other EU countries. There is also a Swiss Police liaison at the headquarters of Interpol.

(U) H. Extradition is permitted if the act in question is punishable under Swiss law and the law of the requesting state, liable to a term of imprisonment of at least one year, and no Swiss court is competent in the matter. No Swiss national shall be extradited to a foreign country for penal prosecution or execution of a verdict without his or her written consent. The person in question may revoke consent until the order for the extradition is issued.

A request for extradition is complied with only if the requesting country accords reciprocity. Foreigners may be extradited to another state for offenses punishable under its laws or for serving a term of imprisonment if this state applies for extradition or accepts, upon request of the Swiss authorities, to prosecute the person in question or to execute a verdict cast by Swiss authorities. Swiss Police statistics record extraditions only by country so no extraditions statistics are available for specific criminal offenses. There have been no changes to extradition law.

(U) I. Trafficking is not tolerated in SWITZERLAND, and there are no indications or reports that government officials are involved.

(U) J. N/A

(U) K. There have been no indications or reports that Swiss military or civilian personnel deployed on international peace-keeping missions have engaged in or facilitated severe forms of trafficking or exploited victims of such trafficking. SWITZERLAND pursues a zero-tolerance policy regarding sexual exploitation by personnel participating in international peace-keeping missions.

(U) L. The 2002 partial revision of the Penal Code providing for the extraterritorial coverage of SWITZERLAND’s child sexual abuse laws entered into force on January 1, 2007. Anybody violating Swiss child sexual abuse laws is subject to prosecution in SWITZERLAND under the extraterritorial provisions of the Penal Code regardless of the legislation of the foreign country where the abuse took place.


(U) A. Under the Swiss Victims Assistance LAW (OHG), all TIP victims are entitled to help from government-funded victims assistance centers for abuse victims or women shelters and enjoy special safeguards during criminal proceedings, and cantonal authorities do provide these protections in practice. On November 27, the Federal Government submitted a bill to the parliament on a comprehensive witness protection program that allows authorities to provide victims of crime with new identities. The draft proposed the creation of a centralized witness program agency. The consultation period in the Swiss parliament will last until mid-March 2010.

(U) On January 1, 2009, a revision entered into force, which requires the cantonal victim assistance centers to take into account the special needs of different groups of victims of crime. Under the revised OHG, a canton can pay financial compensation to another canton for counseling services provided to a victim of crime within the latter canton’s jurisdiction. This is meant to provide urban centers additional incentives and resources to establish specialized victim counseling centers, such as a victims’ assistance centers tailored to supporting TIP victims.

(U) In 2007, Parliament adopted a new federal code of criminal trial proceedings that will supplant the existing 26 cantonal codes. The new federal code strengthens the existing witness protection measures under the OHG in order to avoid a perpetrator in a TIP case learning the identity of a prosecution witness and it gives witnesses the right to call on an attorney and/or a confidante during court proceedings. The government plans to put the new federal code into effect on January 1, 2011.
Implementation requires several years because, even under the new federal code of criminal trial proceedings, law enforcement remains the dominion of the cantons. Cantons need time to amend their legislation and adjust cantonal operating modes to the new federal regulations on court proceedings.

(U) B. Under the OHG, TIP victims are entitled to free and immediate material and medical aid as well as psychological, social, and legal assistance.
Local victims assistance centers have to provide TIP victims with a minimum of 14 days of emergency lodging, 14 days of living allowance, 4 hours of consultation with a lawyer and 5 sessions of psychotherapy, with all other expenses for medical treatment, transportation, personal safety, or translation services being covered by the government. If recovery requires more time, the government is obligated to assume the additional cost of longer-term care. The victims’ assistance center may lodge a TIP victim in a shelter for battered women.

(U) According to Swiss federal government statistics, in 2007 (most recent figures available) a total of 128 victims of human trafficking or forced prostitution received help from government victims assistance centers, compared to 90 in 2006. Swiss officials are aware of our interest in this information for TIP reporting purposes, and will provide 2008 data to post as soon as it is available. The NGO FIZ Makasi, a victim assistance center counseling TIP victims, assisted 186 trafficking victims in 2009, compared to 160 in 2008, 167 in 2007, 133 in 2006 and 116 in 2005. FIZ Makasi, which was launched in 2004 by the Zurich-based NGO FIZ, has received some financial contributions from the federal government and several cantons for counseling services offered to TIP victims under their jurisdiction.

(U) Foreign juvenile victims of crime under 18 years of age have to be placed under the protection of the Cantonal Guardianship Office (Vormundschaftsbehoerde) during their stay in SWITZERLAND. In criminal court proceedings, the OHG provides special protective measures for juvenile victims of crime: Questioning by police or the investigative magistrate must occur soon and the testimony is recorded on videotape. Cross-examinations are not allowed. The questioning has to be done by a recognized expert and no more than two sessions are allowed. The law recognizes the special needs of juvenile victims of crime and they may only serve as witnesses of the prosecution if their testimony is indispensable for the conviction
of a suspect.

(U) In case of the repatriation of a juvenile victim of crime (after the end of the stay-of-deportation proceedings or a criminal court procedure), the Federal Office for Migration and cantonal migration offices have to take into account that the person in question is a minor under 18 years of age. Under the law, a return to the country of origin is only permissible if the authorities have ascertained that the juvenile can be placed again in the care of the parents or a close relative, or if there is a satisfactory care structure in place in the country of origin.

(U) C. Federal and cantonal governments provide some funding to NGOs and women shelters that provide services to TIP victims, primarily on the basis of agreed per capita payments for services rendered to victims. Under the 1993 OHG, all cantons are obligated to offer TIP victims the services listed above. Internationally, the Swiss Ministry of Foreign Affairs provides funding to International Organizations and NGOs providing services to TIP victims, primarily through its development aid arm SDC and the rest through its human rights and human security division. Post has requested the MFAQs TIP-related funding statistics for 2009, and will provide that information in a supplemental report.

(U) D. The government does assist foreign victims of trafficking by granting relief from deportation and providing temporary to permanent residency status in cases of serious hardship. Under the Federal Law on Foreigners, effective January 1, 2008, cantonal immigration authorities are expected to grant TIP victims a minimum 30-day stay of deportation proceedings to let them recover from their trauma and weigh participation in judicial proceedings against their traffickers. Cantonal immigration authorities may admit TIP victims willing to cooperate with judicial authorities for up to three months or may issue short-term residency permits (with the consent of the federal authorities) if the criminal investigation takes longer. In 2008, cantonal immigration offices granted the 30-day stays of deportation proceedings to 22 trafficking victims (33 in 2007) and issued 20 short-term residency permits for the duration of legal/court proceedings against their traffickers (6 in 2007).
Post will provide 2009 statistics on stays of deportation proceedings for TIP victims in a supplemental report, when that information is available from Swiss federal authorities.

(U) E/F. The new Federal Law on Foreigners further strengthens the legal status of TIP victims and witnesses, explicitly authorizing the government to waive normal immigration requirements and grant residency permits for victims of human trafficking as well as witnesses in human trafficking cases.
The Federal Office for Migration grants trafficking victims temporary admission in SWITZERLAND if they are at risk of personal harm as witnesses in criminal proceedings or if a return to the country of origin is deemed unreasonable. In 2008, four victims were granted such long-term residency permits on grounds of personal hardship after the end of court proceedings (four in 2007). The law also allows the federal government to logistically and financially assist trafficking victims and witnesses for whom a return is acceptable in their re-integration in their countries of origin. In April 2008, the Federal Office for Migration started a two-year pilot project to assist trafficking victims and witnesses in their return to and re-integration in their home societies. Post will provide 2009 statistics on any residency permits provided to TIP victims in a supplemental report, when that information is available from Swiss federal authorities.

G. The number of TIP victims receiving counseling services from professional assistance centers for victims of crime rose from 90 in 2006 to 128 in 2007. Swiss officials are aware of our interest in this information for TIP reporting purposes, and will provide 2008 data to post as soon as it is available.

(U) Embassy contacts have stressed that statistics available indicate that persons on L-permits do not figure prominently among TIP victims. Police authorities have shared the assessment that the great majority of TIP victims enter the country without any proper documentation.

(U) H. Thirteen out of SWITZERLAND’s 26 cantons have established a formal referral process for TIP victims to improve their protection and security by regulating the procedures for identifying and referring TIP victims for assistance. Four major cantons (Bern, Ticino, Vaud and Zurich) have put in place special police units for screening for trafficking victims involved in the legal commercial sex trade.

(U) I. Under the Federal Law on Foreigners, effective January 1, 2008, cantonal migration authorities are expected to grant TIP victims a stay of deportation proceedings to recover from their trauma and weigh participation in judicial proceedings. The new law further strengthens the legal status of TIP victims and witnesses, explicitly authorizing the government to waive
normal immigration requirements and, in cases of serious hardship, grant residency permits for victims of human trafficking as well as witnesses in human trafficking cases.

(U) The new Federal Law on Foreigners also allows the federal government logistically and financially to assist in the voluntary return to and re-integration of trafficking victims and witnesses in their countries of origin. The Federal Office for Migration in April 2008 started a two-year pilot project to assist primarily victims and witnesses of human trafficking and secondarily cabaret dancers in SWITZERLAND who are in an exploitative situation.
The pilot project is being implemented in co-operation with cantonal bodies assisting returning migrants and the International Organization for Migration. Under the new Federal Law on Foreigners, the beneficiaries of the pilot program receive the same assistance and have access to the same counseling services as are offered to asylum seekers returning voluntarily. This includes financial, material, and medical assistance in the return to the country of origin. The pilot project takes into account the special needs of TIP victims (i.e. risk assessment, rehabilitation programs, etc.). After the pilot phase, the project will be evaluated and potentially slightly modified. It will then be turned into an indefinite TIP victim return assistance program.

(U) J. The Swiss Government encourages TIP victims to assist judicial authorities in trafficking investigations and prosecutions by granting them temporary residency and financial support, and admitting them to stay if a return to their country of origin posed a serious risk of personal harm.
The Swiss Victims Assistance Law (OHG) safeguards TIP victims’ rights in criminal prosecutions with special rules for trial procedures and for compensation and redress. The OHG covers all victims of crimes, including foreigners staying illegally in SWITZERLAND. The OHG provides for the special protection of witnesses’ identity in criminal court proceedings: victims/witnesses may request the trial to take place behind closed doors and avoid confrontation with the defendant. The OHG is a federal law and thus binding on all cantonal codes of criminal trial proceedings. TIP victims may also file civil suits against their traffickers and seek financial compensation. Under the Federal Law on Foreigners, effective January 1, 2008, TIP victims temporarily admitted for the duration of court proceedings against their traffickers may be issued a work permit during their stay. On September 7, the Court of Solothurn sentenced two owners of a brothel in the canton of Solothurn to prison sentences of 4 1/2 years (for the main offender) and 15 months, without requiring the victims to testify.
The Court found that the facts that the victims were in SWITZERLAND illegally, that the victims did not speak any Swiss languages, nor have other sources of support, proved that the victims were totally dependent upon the brothel owners, and that their self-determination was therefore limited to a decisive extent.

(U) Several major urban centers have established a referral process for TIP victims in the context of regular roundtable meetings between NGOs and cantonal justice, police and immigration authorities. As a direct result of the regulation to stay deportation proceedings and the better cooperation between NGOs and law enforcement officials, the number of TIP victims willing to testify against their traffickers has risen considerably.

(U) K. The GOS provides extensive training for government officials in identifying trafficking victims and providing assistance. The Swiss Police Institute in 2009 held specialized five-day anti-TIP workshops for migration and law enforcement officials and border guards. From November 9 to 13, the first course in French was held in the French Speaking part of the country and from November 19 to 20, a special training session for representatives from the judiciary took place in Bern.

(U) The Swiss Department of Foreign Affairs briefs experts and diplomatic personnel about the problem of trafficking in human beings prior to their postings abroad, and draws their attention to a code of conduct drafted by a joint working group on human trafficking. According to these rules, diplomatic staff shall stay clear of any person who can reasonably be suspected of engaging in trafficking in human beings or those who are involved in other criminal activities under the laws of either the host country or of Swiss or international law. The Department of Foreign Affairs also urges its embassies and consulates to develop ongoing relationships with NGOs assisting trafficking victims.

(U) The Federal Department of Foreign Affairs anti-TIP information and prevention program for visa applicants is conducted by all Swiss consulates worldwide. The program consists of the following elements: a personal interview with every first-time L-visa applicant; the signing of a standardized labor contract with a Swiss night club in the presence of a Swiss consular official; a briefing of the L-visa applicant on her or his legal and contractual rights; and an information brochure with the phone numbers and addresses of victim assistance hotlines or drop-in centers in SWITZERLAND for persons in need.

(U) L. N/A

(U) M. The following is a list of IOs and NGOs operating in SWITZERLAND that provide services to trafficking victims:

Terre des Hommes, SWITZERLAND;

Ecpat SWITZERLAND (end child prostitution, child pornography and trafficking of children for sexual purposes);

International Organization for Migration;

International Labor Organization;

Association Libert` (end human trafficking);

Women’s Information Center for Women from Africa, Asia, Latin America and Eastern Europe (FIZ):

counseling, publications/articles,
symposiums/workshops, participation in round tables with aids-prevention and anti-violence groups,
multi-lingual educational radio programs, and
international contact building.

(U) In addition, a number of smaller NGOs counseling women in the sex trade as well as women shelters that exist in most urban centers, deal with the problem of human trafficking. A great number of these organizations are linked in the national network “Prostitution Collective Reflection” (ProKoRe). The major counseling centers and primary points of contact of ProKoRe are FIZ in Zurich, Xenia in Bern, and ASPASIE in Geneva.

(U) The ‘Association Libert`’ started as a joint pilot project of the awareness raising campaign ‘End Human Trafficking Now!’ and ‘Friend of Humanity’ in June 2008 with a specialized hotline for victims of human trafficking in Geneva. The initiators reported that in their first year they assisted 31 victims of human trafficking, which encouraged the initiators in June 2009 to form a local NGO aspiring to fill gaps in French speaking SWITZERLAND in terms of victims’ protection through a comprehensive approach to victims’ assistance. Since then, they concluded a cooperation agreement with the Zurich based TIP counseling center FIZ.

(U) The national organizations and domestic NGOs typically deal with TIP victims, prostitutes, and victims of domestic violence and offer victim counseling, crisis intervention and emergency lodging, legal and medical assistance, and assisted returns to the country of origin. Cooperation with local authorities is varied but typically includes regular meetings and institutionalized information exchange, cooperation in the context of working groups or roundtables, financial support by local communities and cantons, as well as public funding for specific projects.


(U) A. The City of Zurich together with FIZ hosted a symposium on June 11 dedicated to the topic of ‘Women trafficking in SWITZERLAND’ combating strategies. The symposium was held in Zurich and attended by experts from the federal and the cantonal governments, NGOs and multi-lateral organizations. The symposium got wide media coverage throughout SWITZERLAND.

(U) B. SWITZERLAND’s borders are adequately monitored and immigration regulations are stringent. SWITZERLAND’s visa sections in countries of origin inform applicants of “artistic visa” or L-permits about their rights when working in SWITZERLAND.

Information brochures are available in 16 languages. Some embassies have also displayed respective information on their homepage.

(U) Swiss Foreign Affairs Department officials have sensitized visa adjudicators to the problem and have invited NGOs to give training to embassy staff.

(U) The Swiss Border Guards, an administrative unit of the Federal Department of Finance, cooperate closely with the Federal Office for Migration on issues of asylum and migration. Combating irregular migration and the smuggling of migrants is a priority for the Swiss Border Guards. Border Guard officials receive special training to heighten awareness of human trafficking as part of the normal training program. Border guards report all suspicious activities to the cantonal police force of the area, which holds sole authority for further criminal investigations. However, in practice it has proven difficult for border guard officials to spot victims of human trafficking because the latter often give only limited information about themselves and commonly do not denounce their traffickers out of fear of reprisals. The leadership of the Swiss Border Guards, the Federal Office for Refugees, and the Federal Office for Migration are all represented on the KSMM to assure the flow of information and the analysis of immigration patterns for evidence of trafficking.

(U) The Ministry of Foreign Affairs constantly adjusts measures to combat visa abuse, ensuring that procedures are tailored to local conditions. In 2005 the MFA introduced systematic risk assessments and began subjecting Swiss missions to comprehensive inspections every four years. The MFA puts special importance on raising awareness among visa clerks and their line managers and on their careful screening and preparation for the task in high-risk missions.

(U) C. The key office coordinating the anti-trafficking efforts of the various government agencies is the Coordination Unit against the Trafficking of Persons and Smuggling of Migrants (KSMM), which started operations at the beginning of 2003. Formally a part of the Federal Office of Police, the KSMM processes and passes information and coordinates policy within the federal administration as well as between the federal agencies and the cantons (states). It is also the primary point of contact for international inquiries on all issues linked to illegal migration and human trafficking.

(SBU) In February, 2010, the Swiss federal government organized a visit of Swiss police officials to Hungary for a dialogue on TIP prevention and to coordinate on some concrete TIP cases. MFA officials have informed post that the Swiss federal government plans to use this exchange as a model for dialogue and coordination with other countries.

(U) Internationally, SWITZERLAND was one of the initiators of the OSCE Action Plan to Combat Trafficking in Human Beings and has been supporting the OSCE Special Rapporteur since 2000, both financially and with expert secondments.

(U) D. The KSMM seeks to implement the national action plan that its interdepartmental steering committee first adopted in 2003. In keeping with its decentralized structure, the steering committee is the KSMM’s highest organ. The steering committee consists of directorate-level representatives of the federal departments involved in combating human trafficking, delegates from cantonal conferences and associations, as well as representatives from three NGOs and international organizations with a consultative status. The Steering Committee sets targets and the guidelines for the KSMM’s activities and controls the drafting and implementation of measures. The Steering Committee is chaired by the Federal Office of Police.

(U)Specific measures are developed and implemented either by working groups set up for that purpose or by individuals with special support from the KSMM Secretariat.

(U) E. In conjunction with the European Soccer Cup (Euro 08), which SWITZERLAND hosted jointly with Austria in June 2008, the federal government provided $96,000 (100,000 Swiss francs) to NGOs to kick-start suitable public awareness campaigns against trafficking and forced prostitution. The campaign primarily targeted potential ‘clients’ of prostitutes.

(U) F. In summer 2008, the Association of Travel Offices in SWITZERLAND signed an International Code of Conduct related to preventing child abuse abroad.
In coordination with this effort, the Swiss federal police added a form to its internet site where suspected incidents of child sex tourism can be reported to appropriate law enforcement authorities.
On September 29, the Federal Office of Police announced that in the previous 12 months, approximately 12 cases of suspected child sex tourism were reported on the Web site. The federal police forwarded relevant information to the competent municipal, cantonal, or international police offices for further investigation.

(U) G. N/A.


(U) A. On June 24, the Federal Department of Foreign Affairs started a three-year series of round tables on human trafficking for foreign experts in close cooperation with the International Organization for Migration (IOM). The first round table consisted of talks between Swiss experts and a delegation from Hungary (representatives from the Office of the National Coordinator against Human Trafficking in the Hungarian Ministry of Justice, the Hungarian national police force and the police and state prosecutor of the City of Budapest and Interpol).

The talks aimed at sharing experiences and strengthening cooperation, since Hungary was one of the main countries of origin of victims of human trafficking in SWITZERLAND.

(U) B. Post is awaiting update from GOS on the international assistance they’ve provided to other countries to address TIP.

Post POC

Chris Buck, Deputy POL/E Counselor
Tel. [41] (31) 357-7213
Fax. [41] (31) 357-7344

[Note: Post will provide an estimate of the number of hours spent in preparation of this report (and the ranks of the various personnel contributing those hours), when the report has been finalized. End Note]


DE RUEHSW #0056/01 0431152
P 121152Z FEB 10


ADDED     2011-09-04 03:52:31
STAMP     2011-09-04 03:52:31
TWEETS     0



Sunday, September 4th, 2011

DATE     2010-02-18 00:00:00
ORIGIN     Embassy Budapest



E.O. 12958: N/A


BUDAPEST 00000098 001.2 OF 012

The entire cable is sensitive but unclassified; please treat accordingly.


1. We believe the Government of Hungary (GOH) fully complies with the minimum standards for the elimination of trafficking. The GOH has improved its efforts to combat trafficking and followed through on its proposals to address the problem. Notably, the government improved its support for victims, providing $88,500 to NGOs working against trafficking in persons (TIP), up from zero financial support in 2008. Convictions for traffickers increased in 2009, with 87 percent receiving a prison sentence.

A new pilot program established in cooperation between the Office of Justice and National Police Board established three victim support centers to proactively contact and support victims of violent crimes. At the end of December, the GOH signed a contract with an NGO to open a new shelter for trafficking victims. The government referral system, designed in cooperation with the GOH and NGO victims’ assistance centers, continued to work effectively during the year.

Hungary has established a solid anti-TIP framework through its National Strategy but now needs to continue implementing an action plan with the TIP stakeholders. Hungary needs to further support important services for trafficking victims, either directly or through NGOs, and increase training efforts for law enforcement officials, in particular, outside of Budapest.

2. Responses below are keyed to questions posed in para 25-35 of reftel:


— A. Key government agencies, NGOs, and international organizations provided the majority of the TIP-related information to Post. The Ministry of Justice and Law Enforcement (MOJ) is the lead government agency on TIP issues and is the primary point of contact on all related issues. Other government agencies involved were the Ministry of Foreign Affairs (MFA), the Ministry of Social Affairs and Labor (MSAL), and the National Bureau of Investigation (NBI). Several NGOs provided information related to victims assistance, prevention efforts, and government cooperation.
These NGOs included the International Office of Migration (IOM), the Hungarian Baptist Aid (HBA), the Hungarian Interchurch Aid (HIA), the Foundation for the Women of Hungary (MONA) and the European Roma Rights Center (ERRC).

Post considers the sources to be generally reliable. HBA has requested to remain anonymous.

— B. Hungary is primarily a country of origin and transit, and secondarily a destination country for women trafficked for sexual exploitation. There were no official estimates of the actual number of victims trafficked from, to, or through Hungary. Officials reported that 94 trafficking victims, all Hungarian nationals, were identified during 2009 compared to the 75 victims reported in 2008. Abroad, MFA consular officers identified 28 Hungarian trafficking victims.
Officials could not clearly establish how many victims were internally trafficked as traffickers rotated victims internally and internationally.

Internal trafficking for sexual exploitation originates primarily from eastern Hungary and terminates either in Budapest or along the Austrian border. The impact of Hungary’s acceptance into the U.S. visa waiver Program on November 17,2008 is being closely monitored by government officials. MFA reported that three trafficking victims requested assistance from Hungarian consulates in the U.S.

Recent trafficking trends suggest that Hungary is becoming less of a destination country and more of a transit country. Rising poverty rates have increased the supply of domestic victims, thus reducing the demand for international victims. Additionally, the implementation of the visa free Schengen zone has made it easier for traffickers to traffic external victims through Hungary en route to other countries. In December 2009, the EU lifted the visa requirements for citizens from Serbia, Montenegro and Macedonia. Authorities report no increase in trafficking activities resulting from this change. Victims were trafficked internationally from Hungary to the Netherlands, the United Kingdom, Denmark, Germany, Austria, Italy, SWITZERLAND, Spain, Ireland, the United States (U.S.). The Netherlands and SWITZERLAND are increasingly becoming the destination country of choice for Hungarian traffickers. In a September news report, Dutch police claimed that 20-25 percent of the women in Amsterdam’s red light district were Hungarian, mainly from the northeastern city of Nyiregyhaza. Correspondingly, NGOs reported that the trafficking unit in the Zurich police department employed a full-time Hungarian-speaking staff member to respond to the sharp increase in Hungarian trafficking victims following SWITZERLAND’s entry into the Schengen zone in early 2009. These women and girl prostitutes, mainly of Roma ethnicity, were chiefly from Eastern Hungary, notably from the towns of Berettyoujfalu and Puspokladany. The principal countries of origin for victims of trafficking through Hungary were Slovakia, Romania, Ukraine, Moldova, Poland, countries of the former Yugoslavia, and China. Victims trafficked to Hungary included ethnic Hungarians from western Romania for purposes of sexual
exploitation including male minors.

— C. The only trafficking cases within and from Hungary which came to the attention of the authorities were cases of trafficking for sexual exploitation. TIP victims in Hungary are forced to solicit clients on rural roads, city streets, in brothels (disguised as lap-dance bars or massage parlors), and in some cases, apartments or private homes. Traffickers use threats, force and emotional attachment to ensure compliance. Victims are usually housed in apartments owned by traffickers or outbuildings on their property. In most cases, virtually all victims’ earnings (as well as, in cases of trafficking to or from Hungary, the victims’ travel documents) are taken by the trafficker. Many victims are enticed through employment ads promising well paying work, either legal or illegal, but many are also deceived about such false opportunities by personal acquaintances, family friends or family members. While government officials comment that it is not uncommon for trafficking victims to use fraudulent documentation, a significant number travel with bona fide documents, making it difficult to identify victims as they are unaware of their intended victimization.

— D. Victims trafficked within and outside Hungary are trafficked for sexual exploitation. The majority of internally trafficked victims originated in the poorer regions of the eastern part of the country. The high-risk groups included young, rural women mainly of Roma origin and adult female orphans. A large percentage of the victims, especially the underage female victims, originate from orphanages, state care homes and juvenile correctional facilities, either when they leave or are released at age 18, but a number are also trafficked while they are still in these state institutions and homes, according to NGOs. The young women, and sometimes boys, are especially vulnerable to exploitation in prostitution and human trafficking. MONA reported the ongoing and prevalent phenomenon of underage girls in a Budapest correctional facility/state care home, were recruited and prostituted by male pimps during the hours that they were allowed to leave the facility. In turn, the young victims (most between 14 and 16-years-old) recruited and prostituted other girls in the home. When orphans leave
these institutions at age 18 (only some are permitted to stay longer in state homes or apartments, under certain conditions until age 24), the state gives the orphan a one-time average stipend of HUF 500,000 (approximately $2,700). This amount is usually less than what is needed for an apartment lease and living expenses, but more than what they have seen until
then. NGOs claimed that this stipend is a danger factor, as pimps and traffickers aware of the stipend, seek to take it from the newly-released young adults.

There is also a mentorship program available to those over the age of 18, but in practice it is not used very often, and is not viewed by NGOs as very effective. The orphans usually have a lower education level compared to other young adults; have very few employment or higher education options; and often have a very weak or perhaps nonexistent family or support network. As a result, most of these women find themselves indigent and homeless in a matter of weeks. Out of desperation, they often turn to prostitution and quickly find themselves at the mercy of traffickers and/or pimps.

— E. According to government officials and NGOs the majority of traffickers were individuals or small, family-based groups. There is evidence that women are sold into prostitution by their families. This typically happens in very low-income families. The principal recruitment methods used by traffickers included employment ads promising well paying work for waitresses or dancers published in free weekly publications, on the internet, or spread by word of mouth, for instance, at discos. Post has no evidence that bona fide employment, travel agencies, or marriage brokers are fronting for traffickers. However, in two cases where the victims were exploited for their labor in the U.S., authorities assume that Hungarian employment agencies were involved. Some victims know they are being recruited to perform illegal work, but do not expect to have to perform sexual services.

Other methods included ‘boyfriends’ that groomed young girls and women, creating an emotional attachment and buying them gifts, and in the worse cases, raping and threatening them
before prostituting them. Authorities in SWITZERLAND and Italy claim that a high percentage of Hungarian trafficking suspects have Roma ethnicity. While government officials comment that it is not uncommon for trafficking victims to use fraudulent documentation, especially with victims under 18-years-old, a significant number travel with bona fide documents, making it difficult to identify victims as they are unaware of their intended victimization. Traffickers transported victims in cars, trains, planes and buses.
Victims are usually housed in apartments owned by traffickers or outbuildings on their property. Virtually all victims’ earnings (as well as the victims’ travel documents) are taken by the trafficker.


— AQhe government recognizes that trafficking in persons is a problem in Hungary that requires continued law enforcement, prevention, and victim assistance efforts.

— B. The government’s National Strategy Against Trafficking in Persons came into force on April 10, 2008, establishing the framework of cooperation for government agencies involved in trafficking issues. The Ministry of Justice and Law Enforcement had the lead on all trafficking issues and coordinated the government activities through a State Secretary-level national coordinator. Other government agencies involved included the Ministry of Foreign Affairs and the Ministry of Social Affairs and Labor The National Strategy details the Trafficking situation in Hunary and lays the groundwork for the formation of a National Action Plan. It also describes the principle tasks of the National Coordinator position to include the  development of an action plan and a requirement to maintain routine communication with key stakeholders. The inter-ministerial working group invites NGO participation to its quarterly meetings. According to NGOs, the National Coordinator rarely, if ever, attended the working group meetings. The government claimed that the implementation of the Action Plan is ongoing, though NGOs stated that they are still unaware of the Action Plan.

— C. The government reported budgetary limitations in combating TIP. Government ministries fund TIP programs “out of hide” as there was no specific allocation for TIP. During the year, the government spent 245.7 million Hungarian Forints (HUF) (approximately $1.3 million) on anti-trafficking efforts including HUF 229 million (approximately $1.2 million) on prosecution and enforcement resources to include a special TIP investigation unit, a hotline, and crisis centers. In 2009, the government provided HUF 16.7 million (approximately $88,359) to TIP NGOs, HUF 4.5 million (approximately $23,800) for research, HUF 3.2 illion (approximately $17,200) for training, HUF 3 million (approximately $15,800) for prevention, HUF 6 million (approximately $31,700) for shelter support. In 2008, the GOH did not support any TIP NGO. Representatives from the National Bureau of Investigation (NBI) reported that trafficking laws are narrow in scope and fail to fully address the TIP problem. They cited the example of pandering, saying that the law does not treat it as a TIP crime, thus
weakening their ability to combat it. The National Assembly has considered legislation to include pandering as ‘a TIP crime for many years without success. NBI cited that the absence of any special TIP judges or prosecutors, as well as untrained country police officers, as limiting factors.

— D. The National Strategy established a mechanism for the GOH to systematically monitor its anti-trafficking efforts, but there was minimal operational evidence. The national coordination mechanism requires regular communication and meetings with key TIP stakeholders, which occurred 12 times during the year. The GOH replied to external queries from international organizations and took part in elaborating the international and ED documents on trafficking. However, the government did not release regular internal reports on trafficking. The individual agencies involved in anti-TIP efforts operated independently of each other, relying on informal communication channels to share information.

— E. Hungary has a reliable birth registration and citizenship process. The citizenship law is based on the principles of jus sanguinis, meaning that a person acquires citizenship by birth from a parent who is a citizen. Hungary also offers a naturalization path to citizenship. Upon meeting specific criteria, immigrants to Hungary are entitled to a residency permit. It is unknown what percentage of the small immigrant community is undocumented, specifically from the Chinese and Vietnamese population.

— F. All investigative and prosecuting agencies were integrated into the law enforcement database (ENYUBS), which increased data collection. Implemented in late 2008, the database tracks TIP and TIP-related crimes in a centralized crime database. The database allows police officers across Hungary to use it to flag any crime that they believe could have a TIP connection. Officials from the NBI Department of Trafficking in Human Beings have access to the flagged data and can examine it to determine whether there is any connection to a TIP offense.


— A. In 1999, the crime of TIP was specifically introduced into the Hungarian Criminal Code. The definition of TIP was modified in 2001 to harmonize with the UN Convention against Transnational Organized Crimes. Under paragraph 175/B of the Hungarian Criminal Code, any person who sells, purchases, conveys, receives another person or exchanges a person for another person, including the person, or who recruits, transports, houses, hides, or appropriates people for such purposes for another party, is guilty of a felony punishable by imprisonment not to exceed three years. The basic penalty for traffickers is one to five years imprisonment if the criminal act is committed for the following purposes: sodomy or sexual penetration; to subject the victim to forced labor; to the detriment of a person kept in captivity; for the unlawful use of the human body; in criminal conspiracy; or in a pattern of criminal profiteering. The penalty for these offenses increases to two to eight years if it is committed to the detriment of a person who is in the care, custody, supervision, or treatment of the perpetrator, or if it is carried out by force, by the threat of force, by deception, or by tormenting the injured person. The penalty increases to five to ten years if trafficking involves making illegal pornographic material. During this reporting period, the GOH amended article 175/B paragraph 5 of the penal code, which increased the penalty involving victims under 12 years of age, from a minimum of five to fifteen years, to five to twenty years up to life imprisonment. Any person who makes preparations for TIP is guilty of a misdemeanor punishable by
imprisonment not to exceed two years. The law covers both internal and transborder trafficking cases.

The GOH acknowledges that the Hungarian Supreme Court has set strict evidentiary requirements for proving the crime of TIP, which makes successful prosecutions under paragraph 175/8 difficult. Prosecutors must prove that a person was bought and sold. Unfortunately, prosecutors often try traffickers under other criminal statutes, which are related to trafficking and easier to prosecute but carry lighter sentences, in the hopes of providing a greater chance of conviction. The numbers of these “non paragraph 175/B” prosecutions are included in the Unified Statistical System of Investigations and Prosecutions (ENYUBS). These TIP-related statutes may include laws against slavery, kidnapping, promotion of prostitution, living on the earnings of prostitution, pandering, human smuggling, violation of personal freedom, changing the custody of a minor, or changing the family status.

— B. The basic penalty for trafficking people for sexual exploitation is imprisonment between one to five years if the criminal act is committed for the purpose of sodomy or sexual penetration. The penalty increases to two to eight years if it is committed to the -detriment of a person who is in the care, custody, supervision, or treatment of the perpetrator, or if it is carried out by force, by the threat of force, by deception, or by tormenting the injured person. The penalty increases to five to ten years if trafficking for the purpose of making illegal pornographic material is involved. This reporting period, the GOH amended article 175/8 paragraph 5 of the penal code which increased the penalty involving victims under 12 years of age, from a minimum of five to fifteen, to five to twenty years up to life imprisonment.

— C. The basic penalty for labor trafficking offenses is imprisonment between one to five years if the criminal act subjects the victim to forced labor. As with sexual exploitation, the penalty increases to two to eight years if it is committed to the detriment of a person who is in the care, custody, supervision, or treatment of the perpetrator, or if it is carried out by force, by the threat of force, by deception, or by tormenting the injured person. If the victim is under 12 years of age, the penalty is five to fifteen years up to life imprisonment. The law provides for criminal punishment for both recruiters who engage in recruitment of laborers using knowingly fraudulent or deceptive offers that result in workers being trafficked in the destination country, as well as for employers or labor agents who confiscate worker’s passports or travel documents switch contracts without the workers’ consent, or withhold payment of salaries to keep workers in a state of service. If the perpetrator is a Hungarian citizen he/she can be punished for a TIP offense, regardless of the place of the perpetration.
If the offender is not a Hungarian citizen, Hungarian law should be applied. If the perpetration is in another country but the offender has connection to Hungary, Hungarian law can be also applied pursuant to the Hungarian Criminal Code. The GOH did not enact any new legislation on labor trafficking offenses since the last TIP report.

— D. The penalties for rape or forcible sexual assault are similar to trafficking penalties. The basic penalty is between two to eight years imprisonment. The penalty increases to five to twenty years if the victim is under 12, and if the victim is under the care of the perpetrator or if more than one person has sexual intercourse with the victim on the same occasion, knowing about each other’s acts.

— E. The GOH initiated 27 investigations and brought charges against 16 persons suspected of TIP crimes in nine cases during the year. In one case, authorities seized nearly HUF 200 million (approximately $1 million) in cash, cars and other property from two suspects. According to Ministry of Justice and Law Enforcement data, 23 perpetrators were convicted for 31 TIP sexual exploitation crimes. Of the 23 convictions for sexual exploitation, 20 convictions resulted in sentences ranging from eight months to nine years in prison. Twelve of these convictions resulted in prison sentences of less than three years. Three convictions carried a three to four year sentence, while the remaining five were sentenced to more than five years. Of the 23 total convictions, three resulted in suspended sentences. Of these, four sentences included additional fines. Fines in three of the cases were between HUF 300,000 – HUF 500,000 (approximately $1,600 – $2,600). In the other case, the fines were HUF 4 million (approximately $21,164). There was no additional information available to explain the disparity between the fines in these four cases. In one case HUF 351,400 (approximately $1,900) was confiscated.

Compared to 2008, penalties for convicted traffickers were more severe in 2009. In 2008, the 16 reported convictions resulted in only nine prison sentences with seven cases ending in a suspended sentence. Only 56 percent of convicted traffickers received a prison sentence in 2008. By contrast, in 2009, 20 of the 23 convicted traffickers, or 87 percent, received a prison sentence, while only three received suspended sentences. Disturbingly, a breakdown of the conviction data by county revealed that all nine convictions originating in Szabolcs-Szatmar-Bereg County were sentenced to less than three years, with one suspended sentence. This county is the easternmost county in Hungary and is reportedly also from where many internally trafficked victims originate. There is no evidence available to explain why the sentencing patterns appear to be less strict in this county relative to the rest of the country.

— F. The GOH conducted regular training for consular officers destined for overseas assignments. In cooperation with IOM, the GOH elaborated training materials that police personnel deliver to their communities. The material describes the main methods of recruitment tactics and the most common ways of exploitation, including the risks of working or staying abroad. The GOH reported that county police forces delivered regular training for professionals, youth child protection facilities, and churches. However, the NBI reported that it did not receive any additional funds from the GOH to support TIP training for police officers, including victim sensitivity training.

The government provided the HBA and IOM with HUF 3 million (approximately $15,800) for six trafficking-prevention training sessions for the staff of an unaccompanied minor shelter. MONA, the Women’s Rights Association, and the Association of Street Social Helpers (NANE), held three two-day training sessions for police officers and law-enforcement officials. The training provided 55 law enforcement officials with tools to better combat trafficking and assist victims, raise awareness about the connection between trafficking in persons, sexual exploitation and prostitution, and to increase participants’ sensitivity towards victims of trafficking and persons in prostitution.

–G. The government cooperates with other nations, mainly the Netherlands, on a regular basis as most TIP cases have an international component. Most of the cooperation is done with
information exchanges, however there were three cases involving operative cooperation. These cases included Germany and Austria.

— H. The GOH is willing to extradite foreign nationals charged with trafficking, unless the suspect may be subject to the death penalty. Hungary generally does not approve the
extradition of its own nationals. The U.S. – Hungary extradition treaty, for example, includes a provision that allows each country to deny extradition of its own citizens.
In such cases where citizenship is the only reason for denial, the denying country is obligated to conduct a trial within its own justice system. During the reporting period, authorities extradited eight persons from Hungary on trafficking charges, while two persons were extradited from abroad to Hungary.

— I. There is no evidence of government involvement in, or tolerance of trafficking, at the local or institutional level.

— J. There is no evidence that government officials are involved in trafficking.

— K. The GOH investigates, prosecutes, and convicts police officers or military troops working in foreign missions. Police and military officers committing a crime are immediately suspended from office, sent back to Hungary, and prosecuted. The foreign mission and the sending country are notified without delay. According to the information of the Office of the Military Prosecutor there were no criminal procedures launched in TIP cases committed by Hungarian peacekeeping troops during the reporting period.

— L. The GOH and multiple NGOs confirmed that there is no evidence that Hungary is a destination for child sex tourism. However, NGOs and the media reported that Hungary, Budapest
in particular, became a destination for sex tourism, mainly stag parties. Low cost airlines, inexpensive alcohol and prostitution services appealed to Western European male tourists. In flight magazines on routes to Budapest feature strip clubs and ‘massage parlors’.


— A. In 2001, Parliament adopted the Witness Protection Act, which stipulates protection of victims/witnesses of trafficking. The program is available for foreign nationals as well. Endangered witnesses can be moved to a protected residence within Hungary or to another country and their identity can be altered. The state socially and financially supports protected persons. No trafficking victims participated in the Witness Protection Program in 2009.
Additionally, Parliament adopted the Act on Entry and Stay of Third Country Nationals (Act No. 2 which came into force on July 1, 2007. This act grants foreign trafficking victims a reflection period of one month to decide whether they will cooperate with authorities. During this period, victims are entitled to a temporary residence permit and may only be expelled from the country if their continued residence presents a serious threat to national security, public security, or public policy. After the expiry of the reflection period, if they decide to cooperate with authorities, they are entitled to a residence permit valid for six months. The government’s implementing decree (No. 114/2007) ensures that victims of trafficking have access to accommodation, health care, and various forms of financial support during their period of legal stay in the country. Reportedly, no trafficking victims applied for temporary
residence permits.

Several NGOs expressed concern that the government’s legal interpretation of “victim” is often times too narrow to include victims of trafficking, thus making it difficult for these organizations to secure government funding. NGOs also complained that the 30 day reflection period is not long enough for victims to work through the trauma and decide to testify. Hungarian victims are not granted a reflection period, but must decide right away if they will cooperate. No trafficking case is tried without the victim’s testimony.

— B. There were approximately 60 regional and local victim protection offices and 11 regional crisis centers where trafficking victims could receive short-term psychological, social, and legal assistance. The MSAL supports an assistance hotline (the National Crisis Management and Information Telephone Services – OKIT). Among other target groups, this hotline also provides assistance to victims of trafficking in the form of emotional support and referral to the shelter(s) for victims of trafficking. Child TIP victims are placed in state care juvenile facilities, when circumstances do not allow them to return to their families. There are currently two TIP adult victim care facilities operating in Hungary.
One shelter has been owned and operated by an NGO, HBA, since 2005. The government supported HBA’s shelter operations in 2007, providing HUF 13 million (approximately $74,901 at that time). During the reporting period, the NGO operated the shelter exclusively with private donations. In 2009, the HBA shelter provided assistance to 45 trafficking victims during the reporting period, of which nine were referred by the crisis hotline and two were referred by NBI, but the majority from the crisis hotline. The six bed facility offers a range of services to victims, including legal, medical, and psychological assistance, as well as full room and board, repatriation assistance for third country nationals, and reintegration services. Trafficking victims are permitted to stay in the facility for up to six months, though some stay longer. The HBA also provides additional assistance to the victims to make the transition out of the facility. Options include a transfer to another, non-trafficking victim facility, repatriation to their country of origin, transfer to another shelter in the country of origin, or assistance with gaining legal residence in Hungary.

The second shelter is government funded. On December 30, the government signed an initial and renewable six-month contract valued at HUF 6 million (approximately $31,700) with the NGO, HIA, to support a shelter exclusively for trafficking victims. The six-person capacity shelter provides legal, medical, psychological and social services to victims. Due to limited funding, the new shelter will only accept Hungarian victims returning to Hungary from abroad, or Hungarian victims trafficked internally within Hungary.

Some NGOs expressed concern that neither the shelters, nor the government, share information as to what services the shelters provide, what kind of training their staff receives, general data on victims such as the number of victims assisted, from where or to they were trafficked. Some TIP NGOs that refer victims to the shelters have almost no information about what will happen to the victims once they arrive. Some argue that data on victims and their traffickers would help devise better policies and programs to combat trafficking and protect victims.

Some NGOs criticized the government for the lack of transparency in contracting for shelter services in 2009, as it did not release any public tender for support to run a shelter.

— C. All government funding comes from the federal budget but may be administered at the county level. The GOH, directly and indirectly, provides trafficking victims with access to legal, medical, or psychological services. In October 2009, the 2005 Crime Victim Support and State Compensation Act was amended easing the application process and requirements. Under this act, Crime victims can receive compensation (lump sum or allotments) and psychological services. In 2009, no TIP victims applied for this benefit.
MSAL operated a crisis hotline, which was successful in directing trafficking victims to the appropriate service providers. The hotline, funded entirely by the MSAL, employed a staff of 12 operators and one director position. Several other NGOs reported that the crisis hotline operated successfully and effectively during the year.

Although the government offers temporary residency, short-term relief from deportation, and shelter to trafficking victims who cooperated with police and prosecutors, authorities claim that no one applied or received such support. During the year, the government allocated a total of 245.7 million forints (approximately $1.3 million) to anti-trafficking efforts including: HUF 70 million (approximately $370,370) to trafficking victim assistance programs, HUF 4.5 million (approximately $23,800) for research, HUF 3.2 million (approximately $17,200) for training, HUF 3 million (approximately $15,800) for prevention, HUF 6 million (approximately $31,700) for shelter support, and HUF 157 million (approximately $829,630) on prosecution and enforcement resources to include the special trafficking in persons investigation unit.

The Office of Justice Victim Support Service ran a pilot program from September to December with the National Police Board and three county victim support service centers. The aim of this pilot project was to proactively contact and support more victims of violent and deliberate crimes. When the police take a victim’s statement, they request written permission to share the victim’s personal data with the victim support service, which then immediately contacts the victim. If the pilot program proves effective, the government plans to broaden the program to the whole country.

— D. The Act on Entry and Stay of Third Country Nationals (Act No.2) described above (para. A) provides foreign trafficking victims certain rights that facilitate their stay in Hungary. No foreign victims were identified in 2009.

— E. The GOH did not directly provide longer-term housing benefits to victims, or other resources to assist victims to rebuild their lives. The GOH provided financial support to NGOs that delivered such services.

— F. A formal victim referral program process, with an emphasis on victim protection, has been in place since 2005. According to one NGO, the referral system is functioning well. NGOs reported that courts and prosecutors’ offices use the referral program to their satisfaction. The police updated their directive on counter-trafficking measures in 2007, which provides guidance to all policemen on how to appropriately handle trafficking cases. The guidance places a special emphasis on victim identification, international coordination, and cooperation with NGOs.

— G. There are no figures or estimates of the actual number of trafficking victims in Hungary. However, 94 trafficking victims were identified during the reporting period. Of these, two were referred by NBI, and nine by the GOH-operated crisis hotline, to the victims’ assistance NGO for follow-up. Law enforcement officials referred two victims to care facilities. The GOH provided assistance to any trafficking victims through government-funded assistance programs during the year (see para C above).

— H. NGOs reported that law enforcement officials are successfully proactive at identifying possible trafficking victims. Police officers receive a manual on TIP explaining the causes of victimization, interrogation methods for the victim-witness, and specific investigation techniques and tactics. The manual was compiled in the framework of a regional training program of the Stability Pact for South Eastern Europe and the International Center for Migration policy Development (ICMPD) on implementation of the regulations of Palermo Protocol. Hungarian authorities do not register persons engaged in prostitution. As a result, there is no formal mechanism in place to screen for trafficking victims among this population.

— I. It is not GOH policy to jail, detain, fine, or deport victims of trafficking, and there were no reports that any of these occurred during the reporting year. According to both the GOH and NGOs, the directive on counter-trafficking measures from the Hungarian National Police to all police officers across the country has had a positive effect on the treatment and identification of trafficking victims.

— J. The GOH officially encourages victims to assist in the investigation and prosecution of trafficking cases. Twenty-seven victims assisted in the GOH’s investigations, resulting in charges against 16 persons suspected of TIP crimes during the year. In 2001, Hungary adopted its Act on Witness Protection. In theory, the program grants physical protection to witnesses. The program is available to victims of trafficking, provided they are willing to testify in a court of law.

— K. The GOH conducts regular training sessions for consular officers to raise their awareness about potential TIP victims they may encounter while posted abroad. The training program,
developed by the MFA’s Consular Department and I0M, is mandatory for all Hungarian consuls and is part of the manual issued to all consular officers. The training also serves as a model for other Foreign Ministries in the region. In 2009, consular officers identified 28 Hungarian trafficking victims: six in Germany; six in Italy; six in Austria; three in the United States; two in the United Kingdom; two in Spain; one in Greece; one in South Africa; and, one in SWITZERLAND. In the two U.S. cases the victims were employed as housekeepers and au-pairs/babysitters. In all cases, the MFA worked with local victim assistance organizations and referred many of the victims directly to those agencies for assistance.

— L. Repatriated nationals who are trafficking victims have access to the range of social services available to all Hungarians. Once repatriated, the GOH does not directly provide any additional assistance to these victims. Instead, the victims are normally referred to the NGO-operated victim care facilities for follow-up.

— M. The most active organization concerned with trafficking is IOM. Since 1999, IOM has conducted the most in-depth training on trafficking in Hungary. In 2009, IOM and the GOH carried out a prevention campaign and training workers at an unaccompanied minor shelter. IOM also refers Hungarian victims identified by their offices outside of Hungary to the
victims’ care facility in Budapest.

The HBA has done considerable street-level work, operates a victims’ shelter, and provides counseling services to trafficking victims and prostitutes, as well as international relief services. The NGO finances trafficking awareness programs for its own social workers and experts.

Women United Against Violence (NANE) is a small, but active, NGO. Although NANE’s primary focus is on violence against women, it provides counseling to trafficking and domestic
violence victims and promotes public awareness of these issues.

The Foundation for the Women of Hungary (MONA) primarily focuses on women’s empowerment, it lead a project to establish inter-professional support services in Hungary to promote the fight against trafficking in women, prostitution, and violence against women. The project aims to establish cooperation between the governmental authorities for a more appropriate legal policy by organizing training for policemen, and forums for the target groups to foster professional cooperation.

The European Roma Rights Center (ERRC) is an international public interest law organization engaging in a range of activities aimed at combating anti-Romani racism and human rights abuse of Roma. Currently they are researching regional trafficking trends among the Roma.

The Cordelia Foundation is a small NG providing relief to victims of torture and organized crime. They also work on refugee assistance.

The Hungarian Prostitute Interest Association (HPIA) is a small but active NGO that seeks to raise government awareness on the plight of prostitutes. HPIA conducts surveys on the working conditions of street prostitutes, rehabilitates prostitutes, and counsels them on how to avoid being victimized by traffickers.


— A. The MOJ and the Hungarian National Police, in cooperation with IOM and the Hungarian Oil Company Ltd. (MOL) launched a demand-side campaign from March to June 2009. The three month campaign employed press conferences, radio interviews, an article in “Cop” magazine, and posters placed in 100 gas station restrooms to reach the target audience of 25-45 year old males. The posters which showed a bed with money on it and handcuffs, stated “You can get out of it, but can she?” was intended to get the audience to consider how hiring a prostitute could support the trafficking industry.

The slogan stressed the lack of choice that TIP victims have. Other ‘giveaways’ like badge holders and coasters with the slogan and the MOJ website address on them were distributed to members of the target group. Additionally, IOM developed anti-demand related information that was posted on the MOJ website. MOJ stated that nearly 10,000 target group members received the campaign materials and the on-line information material was downloaded 4,000 times. MOJ financed the campaign with HUF 3 million (approximately $15,800). Some NGOs complained that the campaign was not visible enough and that the message was not clearly about TIP victims.
Additionally, the government funded IOM to provide a six-session trafficking prevention training course to shelter staff at the unaccompanied minor shelter.

— B. Since December 21, 2007, Hungary has been a member of the Schengen zone and continues to place a high importance on monitoring its borders. A wide range of modern techniques are in place to detect illegal border crossings (such as sensors, infra-red cameras, etc). Immigration and emigration patterns are monitored and law enforcement agencies pay special attention to cases where TIP may occur during the entrance procedure at the borders. NNI police officials noted however, that the removal of border controls between Hungary and its
neighboring Schengen countries has reduced the number of immigration officials screening potential victims and offenders as they cross these borders.

— C. The GOH established a formal mechanism to facilitate communication between the key TIP stakeholders upon adopting the National Strategy on April 10, 2008. In practice however, this mechanism is minimally used. Though the working group meets quarterly and invites NGO participation, NGOs reported expressed their disappointment in the lack of available data from the government. Additionally, the GOH did not establish an internet group for stakeholders to share information as planned.

The multi-agency working group, which also incorporated NGOs and IOs, met quarterly The US-Hungary bilateral working group, which previously existed to provide information to for the TIP Report, was dissolved with the adoption of the National Strategy.

— D. The National Strategy laid the foundation for the creation of a National Action Plan, setting an implementation deadline of August 31, 2008. However, at the end of the reporting year, MOJ stated that the Action Plan was still being developed, with no clear indication of implementation.

— E: Aside from the gas station poster campaign, there were no reports that the GOH had taken any measures during the reporting period to reduce the demand for commercial sex acts. However, in 2007 Parliament amended the Hungarian Criminal Code to stipulate that any person who pays for sexual intercourse with a person under the age of 18 is guilty of a felony punishable by imprisonment up to three years.

— F. Law enforcement agencies have no knowledge of Hungarian nationals participating in international sex tourism. The Hungarian Criminal Code stipulates that Hungarian law shall be applied to crimes committed in Hungary, as well as to any conduct of Hungarian citizens abroad, which are deemed criminal in accordance with Hungarian law. Hungarian nationals can be prosecuted on the basis of this article if they commit a criminal offense abroad.

— G. An assessment regarding Hungary’s efforts to ensure that its troops deployed abroad for international peacekeeping missions do not engage in or facilitate trafficking or exploit trafficking victims was unavailable for this reporting period. According to the information of the Office of the Military Prosecutor there was no criminal procedures launched in TIP cases committed by Hungarian peacekeeping troops.


— A. Both the NBI and the Hungarian Consular Service established good cooperation with their partner authorities in Austria, the Netherlands, SWITZERLAND, and Italy. As mentioned previously, the government relies heavily on the expertise and services provided by IOM and the two faith-based organizations managing trafficking victim shelters.

— B. The government currently exchanges information in investigations and in consular cases with other countries, principally with Austria, Italy, The Netherlands, SWITZERLAND, Portugal, Czech Republic, Romania, Spain, Germany, Slovenia France, Belgium and the United Kingdom.
Though the government participates in the EU-funded transnational project on the fight against trafficking in human beings, they do not provide financial assistance.


There were no reports of child soldiers in Hungary.


3. Post nominates Deputy Head of Department for Gender Equality of the Ministry of Social Affairs and Labor Mrs. Iren Duani Adam as the 2010 TIP Hero. Mrs. Adam has demonstrated outstanding commitment and dedication to improving victim’s assistance services provided by the government of Hungary. She has been an active member of the TIP working group since 2005 and has proposed and carried out several key TIP initiatives. Due to her initiative MSAL signed an agreement to open the first TIP shelter in Hungary in 2005. That same year, she orchestrated the operations for the crisis hotline, which refers TIP victims to assistance centers. For the past several years, Mrs. Adam has organized several training opportunities for professionals assisting TIP victims. She continues to work closely with NGOs to improve TIP victim assistance. In 2009 she campaigned for and was granted funding to establish a second TIP victim shelter, managed by the NGO, Hungarian Interchurch Aid. In addition to her achievements, Mrs. Adam continues to provided extensive information every year to supplement the annual TIP report.

Iren Duani Adam has been vetted through the Consular Lookout and Support System (CLASS). No derogatory information about her was returned.


4. Post’s POC for trafficking is Christina Hernandez, phone:
36 475-4598, fax: 36 475-4027.

The number of hours spent in preparation of the TIP report cable includes the following:
FS-03 Christina Hernandez- drafter 80 hours, FS-03 Jon Martinson- reviewer 1 hour, FS-01 Paul O’Friel- reviewer 2 hours, DCM Jeffrey Levine- reviewer 2 hours, AMB Eleni Kounalakis- reviewer 1 hour.


DE RUEHUP #0098/01 0491711
R 181711Z FEB 10


ADDED     2011-09-04 04:02:26
STAMP     2011-09-04 04:02:26
TWEETS     0



Sunday, September 4th, 2011

DATE 2010-02-18 00:00:00
ORIGIN Embassy Bratislava



E.O. 12958: N/A

REF: 10 STATE 2094

BRATISLAVA 00000071 001.3 OF 010


A. Slovakia continues to make strides in strengthening and expanding its anti-TIP programs. A generous victim assistance program provides both Slovak and foreign victims with a minimum of 180 days of fully funded crisis intervention and reintegration services. Although estimates on the total number of victims in Slovakia have not changed, the assistance program has grown significantly in the past year, with a nearly 60 percent increase in victims identified and participating.

The GOS is making serious efforts to identify foreign victims through outreach to asylum-seekers and immigration detention camps and public information campaigns. Training activities  in 2009 focused on areas that had been identified as gaps last year: border police and community workers working with vulnerable Roma, who make up an increasing percentage of Slovak victims. Despite these efforts, the GOS has not yet identified foreign victims.

There is still room for improvement in investigation and prosecution of traffickers. Training and capacity-building of police investigators, prosecutors, and judges will enhance the GOS’s track record in getting convictions and prison time for traffickers.

End summary.

B. Answers below are keyed to section and paragraph numbers in reftel. Embassy Bratislava point of contact is:

Name: Anne Debevoise
Position: Consular Officer
Phone: 421 2 5922 3291
Fax: 421 2 5441 8861

C. Total time to complete TIP report:

FSN: 50
FS04: 50
FS02: 30
FS01: 1



The Ministry of the Interior (MOI), police, the International Organization for Migration (IOM), and NGOs are reliable sources of information regarding the number and kinds of TIP victims.

In March 2010, the government will open an International TIP Information Center in the city of Kosice in eastern Slovakia. The MOI has devoted USD 75,400 to the center, which will centralize the collection of TIP data for Slovakia and facilitate information sharing with neighboring countries.


Slovakia is considered a source and transit country for trafficking in persons. IOM estimates that 150 to 200 individuals are trafficked each year. IOM states that due to the small number of known victims who are third country nationals or those trafficked only within Slovak borders, the country cannot be classified as a destination country, though some women may be forced to work briefly in Slovakia while in transit to their final destinations in Western Europe.

According to NGOs, most of the victims trafficked through Slovakia come from the former Soviet Republics (especially Moldova and Ukraine), Bulgaria, the Baltics, the Balkans and China. Victims are mainly trafficked to the Czech Republic, Germany, United Kingdom, and Ireland, with smaller numbers going to SWITZERLAND, Sweden, Italy, Austria, the Netherlands, Spain, Croatia, and Slovenia.

NGOs have reported some cases of internal trafficking within Slovakia, usually of Roma women trafficked from the eastern to the western part of the country.

Slovak victims usually come from economically depressed regions of Slovakia with high levels of unemployment, especially eastern Slovakia. They are trafficked for sexual exploitation, as well as for forced labor.


Victims report being trafficked after accepting offers from relatives, acquaintances, or unlicensed agencies to arrange for work abroad. Some consciously enter into prostitution only to become trafficked at a later date. Because they are willing participants (at first) the victims tend to be transported to their destination country on public transportation with no resistance.

Roma victims, in particular, are likely to know their traffickers. Some Roma women enter into prostitution knowingly, fleeing the conditions of an abusive home or poor living conditions in a Roma settlement, and become victims of trafficking in the destination country. The NGO Caritas reported that one of its Roma clients was a young woman who grew up in an orphanage, was trafficked by an acquaintance, and was living in his apartment in Prague while being sexually exploited. We also heard from NGOs that several of the Roma victims they have helped are mentally handicapped.

The NGO Dotyk described groups of Roma men who traveled to the UK with the promise of jobs on farms. Upon arrival, traffickers took their travel documents and told the men they owed USD 12,500 for their travel and living costs. The men said they were sent out to commit theft to pay off their debts. The Police Anti-Trafficking Unit reported that traffickers are also increasingly applying for and collecting social benefits in the UK on behalf of their victims.

Roma activists have reported trafficking of Roma children for begging. According to a Roma NGO, the practice is highly organized. Traffickers from within the Roma community send children (either by themselves or with their mothers or other women) by bus to Austria, Italy and Germany to work the streets. Traffickers then withhold the victims’ identity papers in order to keep them from escaping.


The MOI, IOM, and NGOs all report that an increasing percentage of Slovak TIP victims are Roma. The NGO Dotyk reported that while five years ago their typical TIP client was an ethnically Slovak woman in her late teens to early twenties, in the past few years they have found that the majority of victims are poorly-educated, vulnerable Roma from segregated settlements, ranging in age from teen to middle-aged. Other NGOs have found that about half of their TIP clients are Roma. They also report an increase in cases of trafficking of Roma men for forced labor.


According to police, as well as the testimony of some victims and offenders, trafficking in Slovakia is usually an organized criminal activity. Small-scale Slovak perpetrators feed victims into larger international syndicates at their destinations. Organized trafficking groups consist of Germans, Czechs, Russians, Ukrainians, Albanians, Italians, Macedonians, Poles, or Slovenes.

Male and female Slovak traffickers usually have prior knowledge and direct experience in the sex industry in Western Europe. They typically utilize employment or hostess agency schemes, but also rely on personal connections with women. Roma trafficking victims in particular tend to know their traffickers, who are often also Roma. The Police Anti-Trafficking Unit reports that Roma traffickers operate in groups based on family clans.



The government acknowledges that TIP is a problem in Slovakia.


The MOI State Secretary, Vladimir Cecot, has since 2007 been the National Coordinator for anti-TIP activities and presides over the Interagency TIP Expert Group. Cecot and his staff have demonstrated a sustained commitment to upgrading GOS efforts to combat TIP. The Director of the MOI’s Department of Security Strategies, Jozef Hlinka, is responsible for the day-to-day activities of the Expert Group and oversees the implementation of the National Program. Hlinka chaired the Expert Group meeting in December 2009 to discuss progress on the 2008-2010 National Action Plan. This included drafting the update of the National Program, organizing inter-agency cooperation, tracking TIP statistics, distributing funds for anti-TIP projects, and working with NGOs to develop those projects.

In addition to the Expert Group, some prevention activities are coordinated by the working group established within the Government Council for Crime Prevention. Other ministries that
advise MOI on TIP include the Ministries of Justice, Education, Finance, Health, Labor and Social Affairs, and Foreign Affairs, as well as the General Prosecutor’s Office.

Falling under the Police Anti-Organized Crime Bureau, the Police Anti-Trafficking Unit, which has 10 dedicated officers, coordinates most activity regarding trafficking both within Slovakia and with INTERPOL; members of the unit have traveled overseas to participate in seminars and training. The unit documents and investigates crimes, monitors known places of prostitution, investigates suspicious travel or employment schemes, and contributes to public awareness by giving presentations at conferences and conducting training.

The Border and Alien Police are responsible for monitoring border crossings for evidence of trafficking, with the customs directorate and the MFA also playing a role.

The Equal Opportunity Office at the Ministry of Labor and Social Affairs (MOL) supports NGO activity through grants, manages the implementation of international protocols regarding workers’ rights, and works to reduce violence against women.

The Ministry of Education (MOE) coordinates with IOM to bring TIP awareness discussions into high school classrooms.

The Ministry of Justice (MOJ) is responsible for strengthening safeguards for victim protection.

The General Prosecutor is responsible for the prosecution of traffickers.


The National Program’s 2009 budget to fight trafficking was approximately $400,000, with $275,000 granted to NGOs to provide training, prevention, and victim assistance. Anti-TIP police remain funded at past levels, supporting 10 officers at the national police headquarters. Government corruption is not a problem for trafficking in persons. NGOs report that they believe government resources devoted to anti-TIP efforts are more than sufficient for their needs, and in fact are more generous that many other European countries, especially in the area of victim assistance. The NGO Caritas said that its budget for victim assistance was much more generous than it could use during 2009.

Inability to identify foreign victims remains a limitation, but in 2009 the GOS expanded its training program for border police and social workers, and its outreach to illegal migrants and asylum-seekers in order to identify foreign victims.

Effective investigation and prosecution of traffickers is also a limitation. NGOs familiar with the Slovak police reported that investigators have difficulty conducting large-scale investigations on TIP, particularly on traffickers’ finances, due to a lack of capacity. They are more likely to focus on low-level traffickers than to find connections to organized crime. The NGOs recommended that the existing police anti-TIP unit develop a trained, specialized investigator to handle TIP cases.


The MOI provides internal assessments and baseline information regarding the nature of trafficking in Slovakia. The National Program for 2008-2010 contains an assessment of the Program’s performance during the 2007 reporting period. In 2008, the UNODC and the MOI conducted a joint evaluation of Slovakia’s TIP programs. As a signatory to the Council of Europe’s anti-trafficking convention, Slovakia is subject to regular monitoring of its TIP activities. The evaluating body, the Group of Experts on Action against Trafficking in Human Beings (GRETA), will conduct its first evaluation of Slovakia starting in February 2010.


Local vital records offices (matrika) issue birth certificates for each town and city. Matrika offices also accept applications for Slovak citizenship and forward them to the MOI for approval. All Matrika offices report to the MOI, which maintains a central database of all citizens and residents. Slovak law requires that all residents in Slovakia register their permanent or temporary residence with the police department in their district of residence.


The MOI’s National Coordinator’s office serves as the clearinghouse for TIP data. It is capable of gathering the required data, but is unable to provide some more detailed information on criminal cases (e.g. the number of cases that were related to sexual vs. economic exploitation.) The International TIP Information Center, scheduled to open in March 2010, is intended to gather and assess data and should improve the quality of TIP information for Slovakia.


There have been no changes in laws against TIP, sex and labor trafficking, or rape during the reporting period.


TIP is defined and criminalized through Section 179 in the Criminal Code. Trafficking in children is a separate crime, covered by sections 180 and 181. Other related legislation includes: Section 367 on Procurement (Pimping), Section 208 on torture of a close person or person in one’s charge, Section 371 on endangering morality. The law states explicitly the extra-territorial nature of this crime and acknowledges that the crime also entails fraudulent means, violence, threat, or other forms of coercion to elicit agreement from a victim older than 18 years (for section 179) for the crime of trafficking. These laws are being used in trafficking cases and adequately cover the full scope of trafficking. Slovak law allows a renewable 40-day “tolerated stay” status for foreign victims of serious crimes, including trafficking in persons.

On January 30, 2007, Slovakia signed the Council of Europe’s (COE) Convention of 2005 on Action against Trafficking in Human Beings. It ratified the document on March 27, 2007. The Convention subsequently entered into force on February 1, 2008. It is a comprehensive treaty, focusing mainly on the protection of trafficking victims and safeguarding their rights. It also aims to prevent trafficking and to prosecute traffickers. The Convention applies to all forms of trafficking, whether national or international, and whether related to organized crime. It applies to men, women and children equally, whatever the form of exploitation (labor or sex acts). The Convention provides a mechanism to guarantee each signatory’s compliance with its provisions. Starting in February 2010, the COE’s Group of Experts on Action Against Trafficking in Human Beings (GRETA) will carry out an evaluation of Slovakia’s performance for the period 2007 to 2009.

In the past several years, Parliament has amended and ratified other relevant trafficking legislation to conform with EU directives and UN requirements, such as the UN Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children. In 2006, Parliament passed a law on victim assistance requiring police to provide victims of any crime information on organizations that can help them.


The GOS increased the minimum sentences for trafficking in 2006. The provision on trafficking (both for the purpose of sexual and labor exploitation) states that any person, who entices, enlists, transfers or receives another person to or from abroad with the intention to engage such person in sexual intercourse or exploitation is liable to a term of imprisonment of four to ten years. A four-to-ten year sentence is also applicable to a person who exploits another person through forced labor, involuntary servitude, slavery, or other similar forms of exploitation. The penalty increases to a 7-to-12 year prison term if a) the perpetrator gains considerable profit, b) the offense is committed against a protected person, c) the offense is committed with a special motive, or d) the offense is committed in conjunction with another grave illegal activity, such as organized crime. The penalty increases to 12-to-20 years if a) the perpetrator gains extensive profit, b) the offender causes serious bodily harm or death or other extraordinarily serious effect, or c) the offense is committed as a member of a dangerous group. Lastly, a term of 20-to-25 years can be applied if the perpetrator gains large-scale profit or causes serious bodily harm to or the death of multiple persons.


The penalty for trafficking for labor exploitation is the same as for trafficking for sexual exploitation.

Slovakia criminally prosecutes labor recruiters who use false or deceptive offers of employment, or who confiscate employee’s passports. Articles 179, 181-184 and Article 241 of the anti-TIP law are used to prosecute such cases.


The range of sentencing for rape is five-to-ten years’ imprisonment and could be increased to 7-to-15 years depending on the age of the victim or whether violence was used. The sentence may be further increased to 15-to-20 years if the act results in serious bodily harm, and 20-to-25 years if the perpetrator causes the death of the victim or the crime is committed in a crisis situation. The penalties for rape are on par with penalties for trafficking for commercial sexual exploitation.


According to official statistics, 3 TIP cases reached the point of investigation by the General Procurator during the reporting period. For these cases, three perpetrators were identified, all men. Nine victims were identified, all women. It was not reported whether these were cases of sexual or economic exploitation. There were no cases of trafficking of children investigated during the reporting period.

The MOJ reported a total of ten convictions for TIP in 2009, and one for trafficking in children. Of the ten TIP convictions, six were under section 246 of the criminal code, which was effective until December 31, 2005, and four were under section 179 of the criminal code, which is effective starting January 1, 2006. The single conviction of trafficking in children was pursuant to sections 180 and 181. There were nine convictions for pimping under section 367 of the criminal code. For the ten TIP convictions, eight perpetrators received suspended sentences and two received prison terms.

(NOTE: it is common for Slovak judges to grant suspended sentences for first-time offenders for crimes with a maximum sentence of two years or less. However, TIP offenses have a minimum sentence of four years. End note.)

The one person convicted of trafficking in children received a prison sentence. Details on the length of the sentences were not provided. There were no fines imposed. It was not reported whether the TIP convictions were for sexual or economic exploitation.

In 2009, the General Procurator investigated 19 cases of pimping, leading to nine charges and three convictions.

The government actively investigates cases of trafficking through the specialized anti-trafficking unit at Police Headquarters in Bratislava. The anti-TIP unit first conducts a preliminary investigation, then assists local police officials directly involved with the case, or assists investigators from the Bureau for Organized Crime if the case involves organized crime or has international implications. The police conduct inspections of suspected places of prostitution, and monitor internet sites.

At the regional level, TIP is investigated by four specialized officers (two in the city of Zilina, one in the city of Trnava, and one in the city of Kosice) who have experience in related crimes, such as pimping, rape and other sexual violence.


IOM and NGOs built on their 2008 GOS-funded training program, training 319 individuals in victim identification, care, and prevention in 2009. IOM and NGOs trained border police and migration and asylum-seekers’ camp employees; police officers working as community liaisons; police academy instructors; labor inspectors; members of the GOS’s Plenipotentiary for Roma Affairs; social workers working in Roma communities; Catholic nuns and priests; and secondary school teachers.

The 10 officers in the Police Anti-trafficking unit located in Bratislava have been fully trained in TIP, and often participate in international trainings. All police districts have at least one officer who receives some additional instruction and, among his/her other duties, serves as a point of contact with the Anti-trafficking unit.

NGOs and the GOS agree that more training is necessary, especially for prosecutors, judges, and Roma community social workers in eastern Slovakia. IOM reported that follow-up training will be necessary in the next year to ensure that newly hired officials are fully trained.


The GOS cooperated with 14 international investigations on TIP during the reporting period. Additionally, police had 65 working-level contacts and requests for information regarding a total of 223 victims and 184 suspects. Over 40 of these cases involved the UK, demonstrating that cooperation with the British police is especially close. Most of these cases consisted of requests from abroad for Slovak police assistance in cases involving Slovak victims and suspects, mostly in the UK, Ireland, and Germany.

Many international investigations occur in the framework of Interpol and Europol. Additionally, Slovak embassies abroad have a police attache who assists with joint investigations.

The government plans to use its new International TIP Information Center (see section 1A) to improve cooperation and information-sharing with other European countries.


Slovakia extradited four TIP suspects in 2009. Slovakia did not request the extradition of any suspects.

Based on the Law on Criminal Court Procedures, Slovakia can extradite persons for any crime with a corresponding sentence longer than one year, except a crime political in nature. Slovak citizens can only be extradited in cases governed by a treaty signed by Slovakia. The UN Convention against Transnational Organized Crime allows Slovakia to extradite traffickers. Slovakia has a bilateral extradition agreement with the U.S. which allows for the extradition of non-Slovaks to the United States.


There is no evidence of governmental involvement in or tolerance of trafficking.


According to police and NGOs, there were no cases of government officials involved in trafficking.


During the reporting period, Slovakia did not report any cases of trafficking involving nationals deployed abroad.


Slovakia is not identified as a destination for child sex tourism. The trafficking in children law, like the trafficking in persons law, reflects extraterritoriality.



NGOs receive GOS funding from the National Program to provide specialized victim assistance program for repatriated Slovaks, internally trafficked Slovaks, and foreign victims. The victim assistance program provides financial support for a minimum of 180 days (and is often extended, according to NGOs), including 90 days each of crisis intervention and reintegration. According to NGOs and the MOI, the Slovak program is among the most generous in the EU.

According to IOM, the situation in Slovakia continues to improve every year. The generous package of victim support – including legal, psychological, medical, and social help – has encouraged returning victims to seek assistance. The GOS is ready to provide the same level of assistance to foreign victims once they are identified.

Slovak law provides for a renewable 40-day “tolerated stay” for foreign victims of serious crimes, including TIP. This status gives the victim the right to work. In addition to the “tolerated stay” law, Slovak authorities are required to postpone deportation of any third-country national who seeks to enter a witness protection program or who claims asylum, thus providing temporary residency status.

The government provides witness protection for victims. NGOs, through their victim assistance grants, provide protection for victims housed in their shelters by the use of a private security firm. Other witness protection measures include recorded testimony or testimony through video connection, which is now mandatory for minors. Another law explicitly states that the victim and perpetrator must be kept separate during the judicial procedure, thus requiring video testimony for most current trafficking cases.


The government provides dedicated shelters through its NGO programs. In 2009, the MOI funded six NGOs with approximately USD $241,000 for victim care. Three of these NGOs – IOM, Dotyk, and Caritas – provided shelter for TIP victims. There are no specialized facilities for male victims of TIP. There was one child participant in the National Program; an NGO provided reintegration services to her while she was living at home with her family.

Foreign victims have the same access to shelter as Slovak victims.


Through NGO grants totaling $241,000 in 2009, National Program victim assistance program provides Slovak and foreign TIP victims with medical, psychological, and legal services for a minimum of 180 days. The program also provides secure shelter, food, clothing, and job retraining and job-seeking help free of charge. Victims do not have to cooperate with police in order to join the program. However, victims who do cooperate with police investigations of traffickers can receive services for the duration of their cases, which could last several years.


Slovak law provides for a renewable 40-day “tolerated stay” for foreign victims of serious crimes, including TIP. This status gives the victim the right to work. In addition to the “tolerated stay” law, Slovak authorities are required to postpone deportation of any third-country national who seeks to enter a witness protection program or who claims asylum, thus providing temporary residency status.

Foreign victims are eligible for the same benefits as Slovak victims under the National Program. However, these measures were not put in practice during the reporting period due to a lack of identified foreign victims.


NGOs reported that the government resources devoted to assisting TIP victims are quite generous. Victims participating in the National Program are able to stay in state-funded shelters and rehabilitation programs for at least 180 days. Victims cooperating with police investigations can stay as long as their cases are ongoing, which may take several years.


The Expert Working Group adopted a National Referral Mechanism in December 2008. This provides a standard operating procedure throughout the country for law enforcement officials who come into contact with a trafficking victim, and enables them to reach out to the most readily available state and NGO resources to assist the victim. The National Referral Mechanism is posted on the MOI website, where it is also available to the public.


During the reporting period, NGOs working with the MOI reported assisting 59 trafficking victims, a significant increase from the 37 assisted in 2008. 27 of these victims participated in the National Program, compared with 17 in 2008. NGOs assisted the 32 victims who declined to participate in the Program through other funding.

According to the NGOs, of the 27 participants in the National Program, 19 were victims of trafficking for sexual exploitation, seven of forced labor, and one of forced begging.

According to Slovak law, police are required to offer potential TIP victims the assistance of NGOs working under the National Program.

NGOS reported that the main reason that victims declined to participate in the National Program was that they had criminal records and were uncomfortable with contact with the authorities. Additionally, some victims were drug addicts and were unwilling to abide by the rules of the program, which ban drug use.


Slovak law requires authorities to provide information about organizations offering support services to potential TIP victims. Under the National Program, the GOS has trained border police and social workers who interview illegal migrants and asylum-seekers to screen for foreign victims. Officials also have access to a manual developed by IOM on victim identification. These officials have materials available in seven languages to provide potential victims information about the services available.

The National Program has also funded training of social workers and religious workers who work in vulnerable Roma communities on victim identification.

Prostitution exists in a legal gray area in Slovakia: it is neither legal nor illegal. (Pimping is illegal.) Therefore, the sex trade is not regulated and there are not regular mechanisms for authorities to screen sex workers for trafficking victims. However, the GOS-funded NGO Prima does work with sex workers and assists with victim identification.


When an individual is identified as a trafficking victim, the victim’s rights are respected and he or she does not face fines or jail sentences. However, it has been reported that unidentified victims have been treated as illegal migrants or prostitutes and have been detained or deported.


The National Program encourages victims to participate in cases against their traffickers. Twelve victims participated in such cases during the year, according to the police. Six cases involved forced labor, five sexual exploitation, and one forced begging. Victims may file civil suits against their traffickers in addition to criminal charges. Slovakia also has a victim’s compensation law that allows for a one-time reimbursement for victims of violent crime, paid by the Ministry of Justice.

Foreign victims cooperating with the police in cases may stay in Slovakia under renewable 40-day tolerated stay status, and may work.


As described in Section 3F, the MOI, in cooperation with IOM and other NGOs, provided training to 319 law enforcement officers, government officials, and community workers. The training included victim identification. how to communicate with victims, victim assistance, and general information about TIP. TIP is also included in the human rights curriculum at the Police Academy. Lastly, the MOI educated local governments, central government branches and law enforcement agencies on trafficking and victim assistance.

Slovak embassies helped six Slovak victims return home during 2009. Slovak missions abroad provide travel documents, assistance with money transfers, contacting relatives, arranging services, and travel home. The Ministry of Foreign Affairs helps refer repatriated victims to NGOs for assistance.


The MOI-funded National Program package of services described in sections 4.A-C is available to repatriated Slovak citizens as well as foreign victims identified in Slovakia.


Most NGOs aiding trafficking victims in Slovakia are domestic, although they may have loose cooperation agreements with NGOs abroad. Some of these Slovak NGOs are: Dafne, Dotyk, Prima, Storm, Slovak Caritas, the Cultural Association of Roma in Slovakia, the Association of Community Centers in Kosice, Naruc, and Victims’ Support Slovakia. They provide a wide range of services, from preventive awareness education and identifying victims to arranging for repatriation transport to post-trafficking needs such as medical, mental health, legal, and protective services, and work re-training courses.

In 2009, NGOs received approximately USD 275,000 from the GOS for anti-TIP programs, including USD 241,000 for victim care, and remaining funds for training and prevention.



Government officials and agencies cooperated with NGOs on anti-trafficking information and education campaigns, targeting potential trafficking victims, but also educating local government workers, teachers, students, community centers, journalists, local police, and the border and alien police.

Since 2008, the GOS has funded part of a public-private partnership for a national TIP hotline. Under this agreement, the telephone company T-Mobile provides the phone line free of
charge, and IOM staff (paid for through the National Program) man the phone lines. In 2009, the phone line received 840 phone calls. Since the phone line started in June 2008, it has
identified eight trafficking victims.

The GOS also funded a number of other TIP information campaigns, including: billboards and leaflets in nine languages for potential foreign victims; leaflets for potential Slovak victims; internet ads on Slovak-language websites; television ads for the TIP hotline; a mobile TIP information center for youth that traveled around the country and distributed leaflets and showed a film about TIP; 5300 posters posted at bus stations, police stations, migrants and asylum-seekers camps, and Slovak embassies abroad; and 600 copies of the National Program distributed to Slovak embassies and government officials.


According to the MOJ, in 2009, the GOS investigated 55 cases of human smuggling. Thirty-three people were charged, and 25 were convicted of smuggling.

Slovakia has a well-controlled border with Ukraine, which is its only non-Schengen border. Foreign law enforcement officials have reported that Slovakia’s border security is the envy of many neighbors. However, Slovakia continues to be a transit country for illegal migrant smuggling to Western Europe. NGOs and law enforcement have reported that since Slovakia’s border with Ukraine is so secure, illegal migrants (and presumably traffickers) enter the Schengen zone through Poland, and then may cross undetected from Poland into Slovakia before heading further west.

The United Nations High Commissioner for Refugees (UNHCR) believes that the majority of smuggled or trafficked persons that have claimed asylum in Slovakia “disappear” by terminating their asylum cases after being registered at reception and refugee facilities. UNHCR reported that better implementation in recent years of Slovakia’s Readmission Treaty with Ukraine has reduced the number of migrants in Slovakia. An agreement among the GOS, NGOs and UNHCR allows NGOs to monitor the border situation to ensure that asylum seekers are not sent back to their country of origin. The Ministry of Labor funds a facility for unaccompanied minor asylum seekers.

As described in section 3F, in 2009 IOM trained border police and social workers dealing with illegal migrants and asylum-seekers in TIP victim identification.


The National Coordinator at the MOI is the focal point for inter-governmental coordination on trafficking. Within his office, he has designated the Director of the Department of Security Strategies to be the working-level point of contact. The National Coordinator convened the High-Level Expert Group in December 2009, and again invited the U.S. Embassy to participate. The group is designed to have the political weight to enforce measures to combat TIP. The Expert Group includes Directors and State Secretaries from the Ministries of the Interior, Justice, Labor, Finance, Health, and Foreign Affairs, as well as, the office of the Deputy Prime Minister, the General Prosecutor, five NGOs, IOM, and UNODC.


The National Program contains a National Action Plan for the fight against trafficking in persons. The plan, valid for 2008-2010, calls for the establishment of an increased network of victim support services (specifically regarding legal, psychiatric, medical, and social assistance), the creation of repatriation protocols for Slovak victims identified abroad, and increased media and youth outreach campaigns.

The agency responsible for its development is the MOI, in cooperation with other ministries. The MOI invites NGOs to participate in its Expert Group meetings, to contribute their perspective on the implementation of the National Program and Action Plan, as well as logical next steps in coming years. We have observed that cooperation between the MOI and NGOS is very good, and that NGOs have reported satisfaction with the MOI’s level of attention to and funding for trafficking.


Part of the training provided by the MOI and NGOs under the National Program educated key interlocutors from municipal offices, schools, and law enforcement about TIP and the criminal consequences of participation in illegal commercial sex acts. Participants in these trainings were provided with additional materials to distribute in their communities, to raise awareness about the role of consumers in perpetuating the illegal sex trade. However, Slovakia is not considered a destination country for TIP victims.


The Anti-Trafficking Unit of the police did not report any cases of Slovak nationals who had traveled abroad for child sex tourism during the reporting period. However, as mentioned in the previous paragraph, TIP trainings do include an explanation of the Palermo protocol and the domestic penal code’s instruments to prosecute traffickers.


The National Program provides anti-TIP training for government personnel stationed abroad. This training focuses on the consequences of participation in illegal commercial sex acts. The MOI and Ministry of Defense are responsible for the training, which is also incorporated into police and military personnel basic training.



The GOS regularly engages with other governments through international conferences and training. In January 2010, MOI officials represented the GOS at a conference on TIP in Central and Eastern Europe organized by DHS-ICE and the Austrian police and held in Traiskirchen, Austria. The conference shared best practices in combating TIP.

The GOS’s focal point for TIP in the MOI has a close relationship with the six NGOs through which it provides victim assistance and prevention activities. For its 2010 programs, it has expanded to seven NGOs and increased its budget by ten percent.

Slovakia participates in all EU and Council of Europe structures and working groups that seek to monitor and control trafficking in persons.


As described in section 3G, Slovak police regularly work with their counterparts in other countries on international investigations. Additionally, the MOI has a program in place to assist foreign victims with voluntary return to their home countries, should they wish it.


DE RUEHSL #0071/01 0491539
R 181539Z FEB 10


ADDED     2011-09-04 04:02:05
STAMP     2011-09-04 04:02:05
TWEETS     0



Sunday, September 4th, 2011



DATE 2010-02-19 00:00:00







E.O. 12958: DECL: 02/17/2030






Classified By: Charge d’Affaires Carol Fuller for reasons 1.4 (b) and (d).


1. (C) The process to replace the OSCE Representative on Freedom of the Media (RFoM) has reached a deadlock with the overwhelming preponderance of the OSCE participating States (pS) on one side and Russia on the other. (Ref A).

Kazakhstani Permanent Representative Ambassador Kairat Abdrakhmanov told USOSCE CDA several weeks ago he was confident Russia would ultimately withdraw its candidate – in time for the consensus candidate to take up the position before the current RFoM leaves office on March 10. However as the date draws closer, signs of Russian intransigence are growing stronger. Representatives of SWITZERLAND, Greece, and Spain (in her capacity as representative of the EU Presidency) told USOSCE that EU and other countries had been demarched by the Russians in an effort to get agreement on a new round of balloting for the RFoM. In their weekly meeting on February 16, USOSCE CDA told Abdrakhmanov there was no need for a new round of voting and the U.S. would not agree to one. Abdrakhmanov confirmed his opposition to another round of voting and stated that FM Saudabayev would raise this with Russian FM Lavrov on February 22. This is a test of Kazakhstani leadership in protecting and nurturing the OSCE’s Human Dimension, and we will continually remind the CiO of this.


2. (C) Miklos Haraszti is the current OSCE Representative on Freedom of the Media. After six years in office, he will reach the end of his second term on March 10, 2010. The process to replace him began in September 2009. By mid-December 2009, the overwhelming preponderance of OSCE pS – with the only voiced exception being the Russian Federation – agreed that the next RFoM should be Dunja Mijatovic of Bosnia-Herzegovina (and an ethnic Serb). Russia has refused to withdraw its candidate Mikhael A. Fedotov. The Russian delegation in Vienna claims that because Fedotov met with Russian President Medvedev, they are now unable to withdraw his candidacy.

3. (C) At the weekly meeting February 16 between the U.S. and the OSCE Chair in Office (CiO), the Kazakh representative told USOSCE CDA Carol Fuller the Russians were pushing for a new round of voting on the RFoM candidacy. Kazakh Ambassador Abdrakhmanov previously said he was confident the Russians would back down before Haraszti left office. CDA made clear that it was “totally unacceptable” for a single country to block consensus in this manner and we saw no need for a new round of voting and would not agree to one. CDA said the CiO either had to extend Haraszti’s term (which would require consensus from all pS) or get the Russian Federation (RF) to withdraw their candidate. CDA noted that the RF did precisely the same thing in 2004 when Haraszti was selected – resulting in a three month gap with no RFoM. Abdrakhmanov assured CDA that Kazakhstan also opposed holding a new vote.

4. (C) Also on February 16, Deputy Chief of Mission from the Swiss delegation told A/DCM the Swiss had been demarched by the Russian Federation seeking Swiss agreement to call for a new round of voting for the next RFoM. Similarly, the Spanish Ambassador (in her capacity as representative of the EU Presidency) said the Russians were demarching various EU countries on the topic. Canadian Permanent Representative told CDA the Russian behavior may be designed to enable the Russian MFA to prove it has done everything to bring about consensus on the Russian candidate, to no avail.

5. (C) COMMENT: Media freedom is one of the highest profile issues in the human dimension, particularly under the Kazakh CiO, given how many Central Asian countries have restrictions on media activities. A prolonged gap in the RFoM office would suit the Russians and Central Asian states, removing an important source of information and material for critical statements in the PC overwhelmingly directed at those countries. Russian Foreign Minister Lavrov will be meeting with Kazakhstani Foreign Minister Saudabayev in Astana on February 22 and the Kazakhstanis have promised that this issue will be high on the agenda. (Note: Convincing Russia to allow the OSCE to work inside Afghanistan is also on the agenda.) It is essential we continue to make clear to the Kazakhstanis in Vienna, Washington and Astana that a successful management of this transition, in accordance with the wishes of most participating States, is what we had in mind when indicated to FM Saudabayev in Washington in early February that Kazakhstan needed to protect and nurture the OSCE’s Human Dimension.




DE RUEHVEN #0054 0500658


P 190658Z FEB 10








ADDED 2011-09-04 04:02:53

STAMP 2011-09-04 04:02:53












Sunday, September 4th, 2011

ID     10BERN76
DATE     2010-02-25 00:00:00
ORIGIN     Embassy Bern
TEXT     C O N F I D E N T I A L BERN 000076



E.O. 12958: DECL: 02/25/2020

REF: A. STATE 13698

Classified By: Acting POLE Counselor Chris Buck; reasons 1.4(b) and (d).

1. (U) Poloff delivered reftel A message on February 24 to Andreas Friedrich, Head of the Arms Control and Disarmament Section of the Federal Department of Foreign Affairs (FDFA). Friedrich’s deputy, Jean-Daniel Praz, joined the meeting.

2. (C) Friedrich said that SWITZERLAND is very frustrated by the delay in negotiations on a Fissile Material Cutoff Treaty (FMCT), due to Pakistan’s refusal to join consensus on a program of work (POW). Referring to the Pakistani PermRep’s February 18 statement to the CD Plenary (reftel B), Friedrich expressed some pessimism that an agreement on a POW can be reached soon. He said that, in the meantime, the Swiss government is favorably disposed to pursuing informal consultations and side activities among CD representatives in Geneva in order to prepare the ground for what they hope will be eventual FMCT negotiations. Friedrich also noted that SWITZERLAND continues to make available Swiss PermRep Juerg Streuli to chair such future negotiations.



DE RUEHSW #0076 0561622
P 251622Z FEB 10


ADDED     2011-09-04 04:16:02
STAMP     2011-09-04 04:16:02
TWEETS     0



Sunday, September 4th, 2011

DATE 2010-02-26 00:00:00
ORIGIN Consulate Strasbourg



E.O. 12958: DECL: 2/25/2020


STRASBOURG 00000003 001.2 OF 002

CLASSIFIED BY: Vincent Carver, CG, Strasbourg, State.
REASON: 1.4 (b), (d)
– – – – –

1. (C) The Council of Europe (COE) welcomed Georgia’s transparency and efforts at political and human rights reforms, although it noted that Tblisi should increase efforts to involve the opposition in the parliamentary process. There is, however, increasing fatigue among member-states when discussing the consequences of the war between Russia and Georgia – in large part because of Russian stonewalling and threats. The Secretary General is exploring a “new approach” to build on the limited common ground between Russia and Georgia. On Belarus, COE member-states noted that Minsk’s failure thus far to renew authorization for the COE’s “Information Point” office in Minsk and the GOB’s recent move against the Union of Poles complicate greater COE-Belarusian engagement. The Swiss reported that their FM may meet Lukashenko today (February 25) in Kiev to discuss these issues. Delegations supported the continued (limited) COE programs concerning Chechnya.

End summary

– – – – – – – – – – – – – – – – –

2. (U) The COE’s Democracy Committee discussed Georgia’s fulfillment of its COE obligations, prospects for greater engagement with Belarus, and its program for Chechnya February 25. The Secretariat characterized Georgia’s attitude as “open and constructive,” and said that Tblisi has made progress in “practically every field.” Still, Georgia has not met its commitment of signing and ratifying the COE’s Convention on Regional and Minority Languages and constitutional reform is an “ongoing work where the landscape is not always clear.” The Secretariat added that a large part of the political opposition is not represented in the parliament and that some in the opposition had presented visiting Secretariat officials with lists of “political prisoners” – their term, not the COE’s, he noted.

3. (U) Most delegations praised Georgia’s transparency and progress in the judicial and anti-corruption fields. Several noted Tblisi’s reform efforts continued despite the war with Russia. Russia and Greece were more muted but did agree that Georgia had made progress, although the Russian added that he would like to see how the “so-called legislation on the Occupied Territories” is being adjusted to meet Venice Commission recommendations. The Georgian Ambassador acknowledged that “sporadic problems” remain but stressed that Tblisi has tackled most of its systemic problems. He noted the use of minority languages in education while admitting that Georgia is responsible for signing and ratifying the Convention on Regional and Minority Languages when possible. He observed that the Georgian Parliament is scheduled February 26 to adopt amendments to its Law on the Occupied Territories in line with Venice Commission recommendations.

– – – – – – – – – – – – – – – – – – – – –

4. (C) Reflecting what several delegations have told us privately is “Georgia Fatigue” from the 18 months of discussion of the consequences of the war between Russia and Georgia (during which the Russians skillfully threatened the end of any cooperation with the COE should Moscow be placed on a par with the “aggressors”) the COE Council of Ministers’ Deputies (resident ambassadors) February 24 voiced informal support for the Secretary General’s “new approach” to find common ground among the parties to the conflict. The Georgian Ambassador reviewed a lengthy list of COE documents and decisions calling for the review of both Georgia’s and Russia’s COE commitments. The Russian Ambassador, noting his consistent position, appealed to all “to stop participating in endless discussions initiated by Georgia” and start thinking of the what the COE can do constructively in the conflict zone. The EU welcomed Georgia’s “Engagement through Cooperation” initiative for the breakaway territories (REFTEL) and reiterated strong support for Georgian’s territorial integrity and sovereignty. Many delegations echoed the EU Ambassador.

– – – – – – – – – – – – – –

5. (U) The Secretariat noted that it is still waiting for Minsk to renew the authorization for the COE’s “Information Point” office in Minsk to operate – the current authorization expires in mid-March. The Secretariat observed that a seminar on COE values, held in Minsk with Swedish assistance, attracted a wide range of participation from ministries, the parliament, and others. SWITZERLAND noted that Swiss FM Calmy-Rey, as Chair of the COE’s Council of Ministers, met Belarusian FM Martynov on the margins of the Wehrkunde in Munich. Calmy-Rey emphasized to her Belarusian counterpart the need for Minsk to renew the Information Point’s authorization, to issue a moratorium on the death penalty, to ensure freedom of the media, and to open the political scene to the opposition – “The ball,” the Swiss FM reportedly told her counterpart, “is in Belarus’ court.” The Swiss Delegation noted that Martynov had claimed that Minsk is working on such issues but that the population continues to support the use of the death penalty; in any case, there are only “a few” executions every year. He also agreed that a limited number of opposition members could attend the April session of the COE’s Parliamentary Assembly, but only as guests seated in the public gallery. The Swiss also noted that Calmy-Rey might meet Lukashenko in Kiev later that (February 25) day to make similar points.

6. (U) The Polish Delegation stressed that it had always supported COE-Belarusian rapprochement, but that Warsaw does not see progress on the human rights front by Minsk. Lithuania agreed and said that Belarus must demonstrate some progress before the COE considers further cooperation. Russia, however, noted that it has no difficulty with Belarus’ accession to the Convention Against Trafficking in Human Beings. The Secretariat noted that any accession would be problematic given the Belarusian response February 24 to the COE that it would not extend privileges and immunities to Belarusian national experts who would be members of a COE expert group. Belarus also wants to reserve the right to renounce any agreement it makes in connection with its possible accession to the Convention while remaining a party to the Convention. Both the Secretariat and the Irish Chair of the Democracy Committee suggested a “wait and see” approach.

7. (C) The Irish Ambassador told us privately February 25 that, while Belarus has not made much progress on human rights, “It is in a bubble, with many wanting to burst out.” She added that the COE is one of several international organizations seeking to increase engagement with both civil society and the working-level of the GOB.

– – – – – – – – – – – – – –

8. (U) The Secretariat and Russian Delegation praised the COE’s (limited – under 300,000 Euros) programs for Chechnya. Several delegations observed that the programs are largely educational and awareness-raising and are not held inside the Chechen Republic. The UK Ambassador called for more concrete programs, including action plans, on democracy. Germany called for the broadening of the program to cover Dagestan and Ingushetia. Lithuania asked about involvement of NGOs, such as Memorial, that are not linked to the government in Grozny. The Secretariat replied to some of the pointes by noting that Russian Ombudsman Lukin viewed seminars held outside Chechnya as opportunities to broaden the horizons of some of the Chechen participants. That said, the Secretariat added that the improved security situation in Chechnya could mean holding programs “closer to the region.


DE RUEHSR #0003/01 0571534
P 261534Z FEB 10


ADDED 2011-09-04 04:18:01
STAMP 2011-09-04 04:18:01