Cablegate: Sri Lanka - 2007 National Trade Estimate Report

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UNCLAS SECTION 01 OF 09 COLOMBO 001837

SIPDIS

SENSITIVE, SIPDIS

DOL/ILAB FOR TINA MCCARTER

DRL/IL FOR LAUREN HOLT

STATE FOR EB/TPP/BTA AND SCA/INS

MCC FOR D NASSIRY AND E BURKE

GENEVA PASS USTR/GBLUE

E.O 12958: N/A
TAGS: ECON ELAB EIND ETRD PHUM SOCI EAID CE

SUBJECT: SRI LANKA - 2007 NATIONAL TRADE ESTIMATE REPORT

REF: STATE 136302

1. The following report has been submitted per reftel instructions
in Microsoft Word format to the US Trade Representative. With the
exception of format changes for dissemination and readability via
cable, the language remains the same:

SRI LANKA: TRADE SUMMARY
-------------------------

2. The U.S. goods trade deficit with Sri Lanka was $1.9 billion in
2005, an increase of $95 million from $1.8 billion in 2004. U.S.
goods exports in 2005 were $179 million, up 18.5 percent from the
previous year. Corresponding U.S. imports from Sri Lanka were $2.1
billion, up 6.3 percent. US exports in 2005 included tsunami
related exports of approximately $20 million. Sri Lanka is
currently the 104th largest export market for U.S. goods.

IMPORT POLICIES
---------------

3. In 1978, Sri Lanka shifted away from a socialist orientation and
opened its economy to foreign investment. But the pace of reform
has been uneven. A period of aggressive economic reform under the
UNP-led government that ruled from 2002 to 2004 was followed by a
more statist approach under former President Chandrika Kumaratunga
and current President Mahinda Rajapaksa. President Rajapaksa's
broad economic strategy was outlined in his election manifesto
"Mahinda Chintana" (Mahinda's Thoughts), which now guides government
economic policy. Mahinda Chintana policies focus on poverty
alleviation and steering investment to disadvantaged areas;
developing the small and medium enterprise sector (SME); promotion
of agriculture; and expanding the already enormous civil service.
The current government has backtracked on trade liberalization
strategies followed by previous governments.
The Trade, Tariff and Investment Policy Division of the Ministry of
Finance and Planning is charged with the formulation and
implementation of policies in thise areas. In addition, the Trade
and Tariff cluster of the National Council of Economic Development
(NCED) also examines trade and tariff issues and sends
recommendations to the Ministry of Finance and Planning. The NCED
consists of 22 clusters representing both private and public sector
officials which examine various sectors of the economy.

4. Sri Lanka has entered into several bilateral and regional trade
agreements, such as the Indo-Lanka Free Trade Agreement, Sri
Lanka-Pakistan Free Trade Agreement, South Asia Free Trade Agreement
(SAFTA), and the Asia Pacific Free Trade Agreement (AFTA). Import
tariffs on imports from member countries to these agreements have
been reduced.

Import Charges

5. Sri Lanka's main trade policy instrument has been the import
tariff. The tariff structure is subject to frequent changes. Over
the past couple of years, Sri Lanka's tariff structure has moved
steeply upwards. The U. S. Embassy has received complaints from
affected U.S. exporters and U.S. companies in Sri Lanka regarding
the "prohibitive" tariff regime.

6. Import tariffs: Currently, there are 5 tariff bands (reduced
from 6 in November 2005) of 0 percent, 2.5 percent, 6 percent, 15
percent, and 28 percent. The highest tariff band was increased from
25 percent in 2002 to 27.5 percent in January 2004, and to 28
percent in November 2004. Textiles, pharmaceuticals, and medical
equipment are free of duty. Basic raw materials are generally
assessed a 2.5 percent duty. Semi-processed raw material tariffs are
6 percent, while intermediate product tariffs are 15 percent. Most
finished products are at 28 percent. There are also a number of
deviations from the five-band tariff policy. Tobacco and cigarette

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tariffs range from 75 percent to 250 percent. In addition, there are
specific duties on certain items, including footwear, ceramic
products and agricultural products. These specific duties are
designed to protect domestic producers. Some items are subject to an
ad valorem or a specific duty, whichever is higher, and there is
intermittent use of exemptions and waivers. Imports for export
industries enter duty free.

7. Export Development Board (EDB) Levy: In November 2004, the Sri
Lankan government introduced a new additional tax on a range of
imports identified as "non-essential." This new tax was a response
to a decline in Sri Lanka's foreign reserves and was intended to
protect domestic agriculture and industry. The EDB levy is applied
on the Cost plus Insurance plus Freight (C.I.F.) value, and ranges
from 1 percent to 25 percent, with most goods at rates at or above
10 percent. The highest rate band was increased from 20 percent to
25 percent in September 2006. Some items carry a specific duty.
Together with import tariffs, the EDB levy effectively increases
charges on most finished good imports to over 50 percent of the
import value, with the highest charges on goods subject to specific
duties. Despite an improvement in the foreign reserve position, the
government has not revoked the tax.

8. Other charges on imports include:
1) a 10 percent import duty surcharge on all dutiable imports;
2) a 2.5 percent ports and airports development levy (PAL) on
imports (increased from 1.5 percent from January 1, 2006);
3) a Value Added Tax (VAT) of 0 percent, 5 percent, 15 percent and
20 percent (import prices are increased by 7 percent, adding an
imputed profit margin, when calculating the VAT and excise duty);
4) excise fees on some products such as aerated water, liquor, beer,
motor vehicles (motor vehicle excise fees increased sharply in 2004)
and cigarettes;
5) a port handling charge that varies by container size; and
6) a surcharge of 1 percent assessed on the import duty for Social
Responsibility Levy (to fund the National Action Plan for Children).
This tax was increased from 0.25 percent from January 1, 2006.

9. As of October 2006, importers are required to keep a 50 percent
deposit on letters of credit on non-essential imports. The
requirement was introduced to discourage imports of over 40
categories of consumer items including confectionary, liquor,
personal care products, footwear and tableware.

Import Licensing

10. Sri Lanka requires import licenses for over 300 items at the
6-digit level of the Harmonized System (HS) code, mostly for health,
environment, and national security reasons. Importers must pay a fee
equal to 0.1 percent of the import price to receive an import
license.

Customs Barriers

11. The Government of Sri Lanka implemented the WTO Customs
Valuation Agreement in January 2003 and follows the transaction
value method to determine the C.I.F. value. The scheme has operated
quite successfully, and major companies have not faced problems.
Customs is also in the process of installing an Electronic Data
Interchange (EDI) system to support an automated cargo clearing
facility. When implemented, this system should improve customs
administration and facilitate trade.

STANDARDS, TESTING, LABELING AND CERTIFICATION
--------------------------------------------- -

12. At present, there are 102 items that come under the Sri Lanka
Standards Institution (SLSI) mandatory import inspection scheme.
Importers of these items have to obtain a clearance certificate from
the SLSI to sell their goods. SLSI accepts letters of conformity

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from foreign laboratories, but retains the discretion to take
samples and perform tests.

13. The Ministry of Health has drawn up a regulation for mandatory
labeling of genetically modified food that is due to be implemented
in January 2007. Some large U.S. food exporters have expressed
concern about this proposed regulation, which in addition to not
appearing to be science-based in its rationale, is thought to be
excessive and could hinder exports of U.S. food brands to Sri
Lanka.

14. A new labeling and advertising regulation came into effect from
April 01, 2004. These regulations have been issued under the Food
Act No. 26 of 1980 and govern the information that should appear on
a label of any pre-packaged food product offered for sale,
transported or advertised for sale in Sri Lanka. This includes all
imported food items as well. New features of the latest regulations
include the date of manufacture, names of the food additives, claims
that are allowed and disallowed, etc.

15. A few food items are banned completely. There is a ban on
chicken in order to protect the domestic industry. Imports of beef
from the United States are banned due to fears of Bovine Spongiform
Encephalopathy (BSE). Sri Lanka does not allow imports of seed
potato from the US due to unfounded fears of the Colorado Beetle
being introduced to the country.

GOVERNMENT PROCUREMENT
----------------------

16. Sri Lanka is not a member of the WTO Agreement on Government
Procurement. Government procurement of goods and services is mostly
done through a public tender process. The Government of Sri Lanka
publicly subscribes to principles of international competitive
bidding, but charges of corruption and unfair awards continue. Some
tenders are open only to registered providers. There are no
professional evaluation experts in Sri Lanka. In 2004, the
Government created a National Procurement Agency (NPA) to introduce
an improved system of procurement.

17. Recent examples of procurement outside the normal tender
process include an agreement in 2006 with the Government of China to
build a coal power plant, negotiations with India to build an
additional coal power plant, a memorandum of understanding in 2006
with a Chinese consortium for detailed design works for a port in
Hambantota without calling for competitive bidding, and the
decision to grant oil exploration rights off the western coast of
Sri Lanka to India and China without a competitive tender process.

EXPORT SUBSIDIES
----------------

18. Exporting companies approved by the Board of Investment (BOI)
are generally entitled to corporate tax holidays and concessions.
Exporters receive institutional support from the Export Development
Board in marketing. Imports for exporting industries and
BOI-approved projects usually are exempted from payment of VAT. For
others, the VAT is refunded. The airports and ports' levy on imports
for export processing is 0.25 percent of the CIF value.

INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION
---------------------------------------------

19. Sri Lanka is a party to major intellectual property agreements,
including the Berne Convention for the Protection of Literary and
Artistic Works, the Paris Convention for the Protection of
Industrial Property, the Madrid Agreement for the Elimination of
False or Deceptive Indication of Source on Goods, the Nairobi

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Treaty, the Patent Cooperation Treaty, the Universal Copyright
Convention and the convention establishing the World Intellectual
Property Organization (WIPO). Sri Lanka and the United States signed
a Bilateral Agreement for the Protection of Intellectual Property
Rights in 1991, and Sri Lanka is a party to the WTO Trade-Related
Intellectual Property Rights (TRIPS) Agreement. Sri Lanka needs to
ratify and conform to the WIPO Performances and Phonograms Treaty
(WPPT) and the WIPO Copyright Treaty (WCT). Sri Lanka has not
acceded to the WTO Information Technology Agreement.

20. In November 2003, a new intellectual property law came into
force that was intended to meet both the U.S.-Sri Lanka bilateral
IPR agreement and TRIPS obligations to a great extent. The law
governs copyrights and related rights, industrial designs, patents
for inventions, trademarks and service marks, trade names, layout
designs of integrated circuits, geographical indications, unfair
competition and undisclosed information. All trademarks, designs,
industrial designs and patents must be registered with the Director
General of Intellectual Property. Infringement of IPR is a
punishable offense under the new law, and IPR violations are subject
to both criminal and civil jurisdiction. Relief available to owners
under the new law includes injunctive relief, seizure and
destruction of infringing goods and plates or implements used for
the making of infringing copies, and a prohibition of imports and
exports. Penalties for the first offense include a prison sentence
of 6 months or a fine of up to $5,000. The penalties could double
for a second offense.

21. Enforcement, however, against piracy and counterfeiting is a
serious problem, as is public awareness of IPR protection. Aggrieved
parties must seek redress of any IPR violation through the courts, a
frustrating and time-consuming process. As a sign of limited
progress, during 2004-2006, Sri Lanka began enforcing its new IPR
law, although the minimal damages and suspended sentence imposed
suggests that the court system fails to recognize the significance
of IPR. The Sri Lankan police uncovered a Malaysian-owned CD/VCD
production facility in a Colombo suburb in October 2004. It was
found to have produced pirated copies of music, movies and software,
violating rights of several U.S. companies. The courts imposed a
fine of Rs 40,000 ($ 400) and issued a suspended prison sentence of
24 months. The police have also conducted a few other raids of
stores selling pirated movie and music CDs as well as counterfeit
apparel. Several offenders have been charged or convicted by
courts.

22. Counterfeit goods continue to be freely available. Local
agents of the U.S. and other international companies representing
recording, software, movie, and consumer product industries continue
to complain that the lack of IPR protection is damaging their
business. Piracy levels are very high for sound recordings and
software, 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. Government agencies are not proactively
taking steps to regularise their existing unlicensed software, and
in some instances continue to procure hardware without specifying
licensed software as a requirement.

23. The government's Director of Intellectual Property and
international experts have begun IPR legal and enforcement training
for customs and police officials. An IPR working group of adversely
affected industries led by the U.S. Embassy and American Chamber of
Commerce of Sri Lanka is also working closely with the Sri Lankan
government to pursue more aggressive enforcement and enhance public
awareness. It will take time before new procedures and significant
court precedents are established under the new law.

SERVICES BARRIERS
-----------------

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24. Sri Lanka has opened its services sector to foreign investment.
Foreign ownership of 100 percent equity is allowed in a range of
service sectors such as banking, insurance, telecommunications,
tourism, stock brokerage, the construction of residential buildings
and roads, the supply of water, mass transportation, production and
distribution of energy, 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.

Banking

25. Foreign commercial banks are allowed to open branch offices in
Sri Lanka, subject to an economic needs test and approval by the
Central Bank. Foreign investors are allowed to hold 100 percent
equity in local banks, subject to limits on individual share
ownership. Currently, there are twelve foreign commercial banks
operating in Sri Lanka, including one U.S. bank. Listed below are
the main constraints faced in the commercial banking sector:
1) government ministries and departments must use only state-owned
banks for their banking business;
2) restriction on speculative foreign exchange trading by commercial
banks (banks are allowed to buy or sell foreign exchange for
commercial transactions only);
3) restriction on total lending by foreign banks to a single name
limited to 30% of capital funds in Sri Lanka. (The option of a
guarantee from the head office in lieu of capital was withdrawn by
the Central Bank in 2006.);
3) a VAT on profit before tax and salaries;
4) a mandatory lending requirement to the agricultural sector
(applicable to both local and foreign banks). The Central Bank
requires banks to increase lending to the agricultural sector to 10%
of total advances by December 2009.

Insurance

26. One hundred percent foreign ownership is allowed in insurance.
Foreign insurance companies are required to incorporate in Sri Lanka
to conduct insurance business. The government has recently
privatized the state-owned insurance companies. Resident Sri Lankans
are prohibited from obtaining foreign insurance policies except for
health and travel. Sri Lanka's insurance regulatory body retains
powers to introduce minimum and maximum premiums for various
insurance products.

Telecommunications

27. The telecommunications sector is the most dynamic service
industry in Sri Lanka. There is one fixed wire line operator, Sri
Lanka Telecom (SLT), two wireless local loop operators and four
mobile phone operators. Several private operators also provide radio
paging, data communication, internet service and satellite link-ups.
The government of Sri Lanka sold a 35 percent stake in SLT to NTT of
Japan in 1997. The government sold a further 12.5 percent stake of
SLT in 2003 to the public. SLT has recently acquired a mobile phone
operator. Due to the past monopoly status under government control,
SLT continues to own most of the national telephone infrastructure
(including main switches and the only two international cable
landing stations) and continues to dominate the sector, affecting
the competitiveness of other operators. All other operators are
privately owned. In early 2003, the government liberalized
international telecommunications and issued 33 non-facilities-based
gateway licenses, ending the SLT monopoly over international
telephony. Since then, international outgoing call rates have
dropped sharply.

28. A key problem facing the telecommunications sector is
restriction on interconnection. The Regulatory Authority has failed
to enforce regulations provided under the Telecommunications Act to
establish an efficient and transparent interconnection regime. As a

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result, SLT, the wireless operators and the mobile operators have
effectively restricted interconnection for other operators. This has
adversely affected the operations of most of the other operators and
new international gateway licensees who are unable to make use of
their licenses due to lack of interconnection by the local exchange
operators. This situation has resulted in illegal bypassing by some
operators. Spectrum management is also weak and frequencies are not
properly allocated, thereby negatively affecting telecommunication
operators.

Tax on foreign TV programs and commercials

29. Following a proposal contained in the 2006 government budget,
the government has imposed a tax on foreign movies and television
programs as follows:
-- Imported English language movies shown on television are taxed at
Rs 25,000 (approximately $250). Movies in other languages are taxed
at Rs 200,000 ($2,000).
-- English language television programs are taxed at Rs 10,000
($100) per half hour episode. Programs in other languages are
taxed at Rs 75,000 ($750) per half hour episode.
-- Any foreign film or program dubbed in the local language Sinhala
is taxed at Rs 90,000 ($900) per half hour.
-- Documentaries of educational interest are exempted. Imported
Tamil language programs are also exempted.
-- Foreign television commercials are taxed at Rs 500,000 ($5,000)
per year.
-- Government approval is required for all foreign films and
programs shown on TV.

30. Copies of movies and programs need to be submitted to the
Ministry of Media and Information for prior approval. However, the
Ministry does not ask for copies of each and every episode of long
running television serials. Approval is usually given within 24
hours.

31. President Rajapaksa, who is also the Finance Minister,
proposing the tax on TV programs said the revenue will be used to
assist the local film and teledrama industry. Sri Lankan television
stations import English, Tamil and Hindi movies and programs in
addition to locally made Sinhala and Tamil ones. So far, no
revenues have been allocated for this stated purpose.

Closure of satellite TV stations

32. On a police complaint, courts imposed a clampdown in June 2006
on two of the biggest companies offering pay TV services in Sri
Lanka. The initial reason for the closure of the first operator was
an alleged connection to the Liberation Tigers of Tamil Eelam
(LTTE), a US-designated foreign terrorist organization (on the basis
that they used the same commercial satellite to receive data).
Later it was announced that these operators did not have proper
licenses. In July 2006, the President ordered the regulators, the
Ministry of Mass Media and Information and the Telecommunications
Regulatory Commission of Sri Lanka, to license the operators and
regulate the industry. However, the regulators failed to take
action to restart the operations until October 2006. The four month
closure of the two pay TV services has curtailed satellite
broadcasts of foreign programs, including some U.S. programs.

Professional Services

33. There is no formal national policy on professional services. In
practice, many foreign doctors, nurses, engineers, architects, and
accountants work in Sri Lanka. Most of them are employed by foreign
companies. Sri Lanka has not made any WTO commitments on the
presence of natural persons, and national treatment is not accorded
to foreign nationals working in Sri Lanka. Most foreign nationals do
not have statutory recognition in Sri Lanka and cannot sign
documents presented to government institutions or regulatory
bodies.

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34. The Immigration Department grants resident visas for
expatriates and professionals whose services are required for
projects or by companies approved by the Board of Investment (BOI).
The Department also grants visas for expatriates required for
projects approved by the government. Non-BOI companies, such as
banks, can also recruit expatriate staff. Sri Lanka also operates a
resident guest visa program for foreign investors and professionals
who are recommended by the relevant ministry.

Legal Services

35. A person can provide legal consultancy services without being
licensed to practice law in Sri Lanka. Foreigners are not allowed to
practice law (i.e., appear in courts) and do not have statutory
recognition in Sri Lanka. Sri Lankan citizens with foreign
qualifications need to sit for exams conducted by the Sri Lanka Law
College in order to practice and register in the Supreme Court.

Doctors

36. The Sri Lanka Medical Council allows qualified foreign doctors
and medical specialists to work in Sri Lanka. They have to be
sponsored by a medical institution or a non-government organization,
and are required to obtain temporary registration from the Sri Lanka
Medical Council (SLMC). Many Indian doctors have been issued
resident work visas recently to work in a hospital in Sri Lanka
which was Indian-owned until purchase by a Sri Lankan company in
mid-2006.

Engineers and architectural services

37. Over the years, most foreign funded projects have used foreign
consultants and contractors.

INVESTMENT BARRIERS
-------------------

38. Sri Lanka welcomes foreign investment. One hundred percent
foreign investment is allowed in most manufacturing and services
sectors. 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 Board of Investment (BOI) permits retail and
wholesale trading by reputable international brand names and
franchises with an initial investment of not less than $150,000);
coastal fishing; education of students under 14 years of age for
local examinations; and the awarding of local university degrees
(note that this does not limit the awarding of degrees from overseas
institutions). Investment in the following sectors is restricted and
subject to screening and approval on a case-by-case basis when
foreign equity exceeds 40 percent: shipping and travel agencies;
freight forwarding; higher education; mass communications; deep sea
fishing; timber-based industries using local timber; mining and
primary processing of non-renewable national resources; and the
growing and primary processing of tea, rubber, coconut, rice, cocoa,
sugar and spices. Foreign investment equity restrictions and
government regulations also apply to air transportation, coastal
shipping, lotteries, large-scale mechanized gem mining, and
"sensitive" industries such as military hardware, dangerous drugs
and currency.

39. The BOI offers a range of incentives to both local and foreign
investors. To qualify for BOI incentives, investors need to meet
minimum investment and minimum export requirements. In general, the
treatment given to foreign investors is non-discriminatory. Even
with incentives and BOI facilitation, however, foreign investors can
face difficulties operating in Sri Lanka. Problems range from
difficulties in clearing equipment and supplies through customs to
obtaining land for factories. The BOI encourages investors to locate

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their factories in BOI-managed industrial processing zones to avoid
land allocation problems. Investors locating in industrial zones
also get access to relatively better infrastructure facilities such
as improved power reliability, telecommunication and water
supplies.

40. Government treatment of foreign investors in the privatization
process has been largely non-discriminatory, with foreigners buying
controlling interest in some companies. The privatization process
has not always been transparent, however. For instance, in 2003,
the government sold part of the retail operations of state-owned
Ceylon Petroleum Corporation (CPC) to a foreign entity without a
formal tender process. The current government rejects the
privatization of state enterprises, including "strategic"
enterprises such as state-owned banks, airports, and electrical
utilities.

41. Government failure in paying, and delays in paying, agreed
subsidy payments and other charges owed to foreign companies is
acting as a clear barrier to foreign investment in Sri Lanka. For
example, a major US company has faced problems due to government
failure to honor an agreement to pay for services rendered under an
agreement signed between the US company and a government owned
company. As a result, $3 million was owed by the state-owned entity
to the US company. The US company has now reduced its claim
substantially, although even this amount remains outstanding as of
October 2006. In another case, a foreign majority owned (not US)
retailer has suffered heavy losses due to the government failure to
honor agreements with regard to the payment of subsidies to the
company resulting from price controls on the company's product. The
government has recently withdrawn this price control, and allows the
foreign company to set its own price. The company complains,
however, that it is finding it difficult to compete with its
competitor, a state-owned company which continues to sell at below
cost.

42. Access to local credit markets by foreign-owned companies
incorporated in Sri Lanka was liberalized in 2003 and such firms can
now borrow rupee funds without the approval of the Central Bank.
Foreign-owned companies, BOI-approved firms and exporters can access
dollar denominated loans. Applications for dollar denominated loans
from local firms are considered on a case-by-case basis and are not
encouraged.

Capital Repatriation

43. Sri Lanka has accepted Article VIII status of the IMF and has
liberalized exchange controls on current account transactions.
However, on October 20, 2006, the Central Bank introduced
restrictions on import financing. Banks are required to obtain a
deposit of 50 percent of the invoice value at the time of opening
letters of credit for imports of non-essential consumer items.
There are no surrender requirements on export receipts, but
exporters need to repatriate export proceeds within 120 days to
settle export credit facilities. Other export proceeds can be
retained abroad. Currently, contracts for forward bookings of
foreign exchange are permitted for a maximum period of 360 days for
the purposes of payments in trade and 720 days for the repayment of
loans. There are also no barriers, legal or otherwise, to the
expeditious remitting 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. Funds for debt service and capital gains of BOI-approved
companies exempted from exchange control regulations are freely
permitted. Other foreign companies remitting funds for debt service
and capital gains require Central Bank approval. Prior to Central
Bank approval they also need a tax clearance certificate. All stock
market investments can be remitted without prior approval of the
Central Bank. Investment returns can be remitted in any convertible
currency at the legal market rate.

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44. Controls on capital account (investment) transactions usually
prohibit foreigners from investing in debt and fixed income
securities. One exception has been the Central Bank's local market
dollar denominated bond issues which were opened to foreign
investors. Further relaxing capital controls, the Central Bank
decided to permit foreign investors to purchase government (local
currency denominated) bonds in October 2006. Accordingly, foreign
investors are allowed to hold up to 5 percent of government medium
and long term bonds. Local companies require Central Bank approval
to invest abroad. The process of granting approval for such
investments was streamlined in 2002, resulting in an increase in
approvals.

OTHER BARRIERS

45. Litigation delay is a serious problem. For example, a U.S.
investor with a substantial investment in an export manufacturing
company has faced lengthy delays in a court case over a large
insurance claim. The company instituted legal action in June 1999
and court proceedings are still on-going, resulting in additional
financial losses for the company. The government has established a
commercial court to hear business litigation, but delays are
common.

46. In 2004, the government reintroduced a 100 percent transfer tax
on property purchased by foreign nationals and companies. For this
purpose, a "foreign company" is defined as an entity with at least
25 percent foreign equity. Apartments above the third floor of
condominium buildings, land for the development of factories, large
housing schemes, hospitals, hotels, and large infrastructure
projects are exempted from the tax.

RANKING OF BARRIERS:

47. Key barriers to US trade and services are listed below.

-- Import charges

-- Intellectual Property Rights Protection

-- Proposed labeling regulation on genetically modified goods

-- Banking regulations

-- Taxes on foreign TV programming and closure of cable TV stations

BLAKE

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