Cablegate: Czech Republic: Reply to Request for Information

DE RUEHPG #0489/01 2321336
R 201336Z AUG 09



E.O. 12958: N/A

REF: STATE 43864

This is a re-transmission of Prague 0484.

1. (SBU) SUMMARY: The effects of the global financial crisis
are evident in the migration patterns of both skilled and
unskilled workers to the Czech Republic (CR). In the two
years prior to the economic slowdown, third-country workers
poured into the CR to satisfy a growing labor shortage,
especially in the manufacturing sector. Anticipating that
the economic slowdown in the CR would hit third-country
workers the hardest, the Czech government (GOCR) developed
programs for the internal transfer and voluntary return of
foreign workers, ostensibly designed to assist the most
vulnerable and to stave off economically-driven xenophobia.
The inflow of foreign workers to the CR has dropped
dramatically since the fourth quarter of 2008, when a severe
external demand shock led to double digit drops in year on
year Czech exports and manufacturing.

Welcome and Farewell

2. (SBU) Prior to the onset of the global financial crisis,
the CR experienced a flood of third-country (non-EU) workers,
primarily to satisfy the low-skilled labor needs of the
growing domestic manufacturing sector. According to the
Czech Labor Ministry Statistics Department, 2007 saw the
arrival of over 27,000 third-country workers, a forty percent
increase from the 2006 level. Third-country economic
migration numbers increased another fifty percent in 2008.
Among the largest non-European ethnic groups arriving were
Vietnamese (from the arrival of nearly 700 new laborers in
2006 to over 16,000 in 2008), as well as Mongolians and
Uzbeks. However, between January and May of 2009, the number
of third-country, legal workers declined by over sixteen

3. (SBU) Interior Ministry Department for Asylum and
Migration Policy Analysis Head Pavla Novotna and her section
performed an internal analysis which estimated that 12,000
foreign workers would lose their jobs in 2009, and an
estimated 68,000 work permits would expire in early 2009.
The Interior Ministry (MOI) recognized that this meant that
workers, primarily from Mongolia and Vietnam, would become
unemployed and be unable to afford return tickets to their
home countries. These individuals, Novotna explained, would
not be eligible for social services under the Czech system,
and could be forced into poverty, crime, or the gray market
(unofficial or unauthorized distribution of otherwise legal
goods and services). MOI correctly predicted that EU
citizens who lost jobs would return home without GOCR

4. (SBU) In February 2009 the MOI launched a voluntary return
pilot program, which provided 500 Euro and a return flight to
2000 legal, third-country workers who lost their jobs due to
the economic slowdown. According to Novotna's colleague
David Vondracek, the Department for Asylum and Migration
Policy Unit for Policy and Analyses sold this program to
pragmatic then-Deputy and now-current Finance Minister Pavel
Janota with the promise that it would ultimately save money
in legal and humanitarian costs. As of mid-June, roughly
1000 Mongolians, 300 Uzbeks, and 200 Vietnamese participated
in this program. Thanks to a targeted information campaign,
the 2000-participant cap was reached in July 2009. The MOI
is now launching a second phase of voluntary return for
2000-3000 more applicants with a ticket and a 300 Euro
payout. In addition, the MOI will begin offering return
transportation to illegal workers who will not be eligible
for a payout. Illegal workers who take advantage of this
offer will be granted a shorter re-entry ban than deportees
from the Schengen Zone and a "clean slate" with respect to
undocumented work.

Those Who Stayed

5. (SBU) The MOI, in cooperation with the Czech Labor
Ministry, also instituted an internal transfer program in
early 2009. Third country workers who lost their jobs are
referred to employment offices, which places workers in other
factories around the CR. Labor Ministry Official Vera
Kolmerova explained that the Foreign Ministry also suspended
issuance of new work permits to Vietnamese citizens, which

PRAGUE 00000489 002 OF 003

provides incentive for factories in need of foreign labor to
seek internal tranferees. Czech visa issuance in Hanoi had
also been suspended from November 2008 to March 2009.
(COMMENT: Although Foreign Ministry officials publically
offer economic explanations for the suspension of consular
activities at the Czech Embassy in Hanoi, it was likely
connected to accusations of corruption (see paragraph 6). In
fact, a Foreign Ministry Official told us that the full
overhaul of Czech consular operations around the world was
attributable to incidents in Hanoi. END COMMENT)

6. (SBU) The estimated 60,000-strong Vietnamese community
constitutes the Czech Republic's second largest minority
ethnic group (after Roma). Of these 60,000, roughly one
third arrived in the last two years with the goal of finding
work and sending remittances home. Many Vietnamese workers
obtained their jobs and legal status in the CR through "job
agencies." These agencies are largely unregulated and, for
the going rate of USD 10,000, promise a job paying USD 1000
per month. According to Thu Hien, a member of the local
Vietnames advocacy group Klub Hanoi. In reality, however,
most Vietnames workers receive on average only USD 500 a
month (roughly 30 percent below the national average income).
Furthermore, job agencies often garnish a significant
portion of workers' wages for "other expenses," such as
housing or food. According Irena Konecna, Director of La
Strada, a European NGO focused on combatting human
trafficking and labor exploitation, when Vietnamese workers
have lost their factory jobs due to the economic downturn,
they often owed large sums of money This debt, coupled with
the shame of returning home unsuccessful, has led many
Vietnamese workers into poverty and the gray market. Konecna
said that fear of deportation or prosecution also deters them
from seeking social services. Both Vietnamese community
leaders and Czech government ministries struggle to estimate
the number of such workers. (Note: Unlike most foreign
laborers, who came to the CR with "work visas" tied to a
specfic job, Vietnamese job agencies generally arrange
"entrepeneurial visas" for their clients. "Entrepreneurial
visas" are much more flexible and not linked to any specific
place of employment. Thus unlike most other foreign workers,
most Vietnamese do not lose their legal status within the CR
when they lose their jobs. End Note.)

Attracting Talent

7. (SBU) In January 2009, the GOCR launched a green card
program to attract third-country, skilled workers and
expedite their arrival. Vondracek estimates that to present,
300 vacancies have been posted in CR's green card database of
jobs that companies were unable to fill with Czechs or EU
citizens. While skilled, third-country workers, particularly
in management-level positions generally kept their jobs in
the CR despite the economic slowdown, new, skilled positions
appeared in lower numbers than were anticipated when the
program was conceived. Vondracek attributes sparse offerings
and low participation to the state of the economy. Still,
MOI is optimistic. Novotna says that her office is working
on post-crisis management plans to include new admission
projects and public relations compaigns to attract both
skilled and unskilled foreign workers after the economy

Not Out of the Woods Yet

8. (SBU) COMMENT: Foreign workers, who came here in the tens
of thousands in 2007 and 2008, have been the first to lose
their jobs as the Czech economy began to slow (the Czech
economy is expected to contract by 4.3 percent for all of
2009, following a sharp first quarter drop in manufacturing
and exports). As the Czech Republic's main export markets
have fallen into recession, demand for Czech products has
plummeted. While the worst of the economic slowdown may now
be over, Czech unemployment, while still relatively modest,
is expected to continue to grow. Czech National Bank Chief
Economist Tomas Holub stressed to us that unemployment tends
to lag behind GDP by several quarters. Furthermore, the slow
growth expected in 2010 (less than one percent) is unlikely
to create many new jobs. Thus, he expects unemployment to
peak at nearly 10 percent in 2011. As unemployment continues
to rise, the situation for foreign workers will become more
difficult, potentially leading to more hardship, more crime,
and more xenophobia.

PRAGUE 00000489 003 OF 003


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