REMITTANCES AND THE DEMOGRAPHICS OF MIGRATION

UNCLAS CAIRO 001890 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/ELA, NEA/RA, EB/IDF USAID FOR ANE/MEA MCCLOUD AND DUNN TREASURY FOR NUGENT AND HIRSON COMMERCE FOR 4520/ITA/ANESA/OBERG E.O. 12958: N/A TAGS: ECON EFIN EINV EG SUBJECT: REMITTANCES AND THE DEMOGRAPHICS OF MIGRATION -------------- Summary -------------- ¶1. (U) Remittances constitute the third largest source of hard currency income in Egypt, after Suez Canal revenues and tourism receipts. Most remittances come from the U.S., but in the last few years, a growing percentage has come from workers in Gulf countries. Workers in Gulf countries tend to be unskilled laborers, while those in the U.S. and other developed countries are professionals. Many of the unskilled workers in the Gulf are married and supporting families in Egypt, especially Upper Egypt, but many are single males seeking to earn money to get married in Egypt. Although many workers plan to return to Egypt, fewer migrants are returning now than after the first big wave of immigration in the 1970s and 80s. Most remittances come into the country via formal means, usually banks or Western Union. The Central Bank of Egypt, however, has not allowed wire services to expand in Egypt, forcing many overseas workers to resort to informal means of money transfer such as hawala. End summary. -------------- Big Money -------------- ¶2. (U) Remittances from expatriate Egyptian workers are the third largest source of hard currency income for the Egyptian economy, after Suez Canal revenues and tourism receipts. According to figures from the Central Bank, in FY 2005/2006, remittances from overseas workers totaled $5 billion. In the first half of FY 2006/2007, remittances totaled $2.7 billion, a 12.5% increase over the same period in the previous fiscal year. The majority of remittances in FY 2005/06 came from expatriates in the United States ($1.5 billion, or 30%),followed by Kuwait ($922 million or 18%), Saudi Arabia ($775 million or 15.5%),and UAE ($729 million or 15%). While the majority of remittances came from workers in the U.S., Egyptians working in all developed countries, including the U.S., constitute only 7% of the total number of Egyptians working overseas. Ninety-three percent of Egyptians working overseas are in Gulf countries. The total value of remittances from workers in all Gulf countries was $2.6 billion, compared to $2.1 billion sent from workers in all developed countries, including the U.S. ¶3. (U) According to a 2006 World Bank report on the demographics of migration, 4.8% of Egyptian households had a member of the family working overseas in 2006. Seventy-two percent of these households were in rural areas, and 60% of the workers were spouses. Approximately 4% of these households received remittances from the overseas worker. For Egyptian families, remittances represent the largest source of non-labor income, higher than interest from savings and investments or income from property. -------------- Laborers go East, Professionals West -------------- ¶4. (U) A 2005 study of migration intention in Egypt, Morocco and Turkey conducted by the Amsterdam-based Tinbergen Institute indicated that the types of workers migrating from Egypt to the Gulf vary significantly from workers migrating to the U.S. and other developed countries. Workers in the Gulf tend to be unskilled laborers taking advantage of the oil and construction boom in the Gulf. The majority are from rural areas in Upper Egypt. These workers tend to leave on their own, and do not bring their families with them, as they plan to return to Egypt after a few years working overseas. Workers going to the developing world, on the other hand, tend to be professionals searching for better opportunities to maximize their professional potential. The professions most likely to immigrate are doctors, engineers, university professors and teachers. Skilled workers are often the first member of a family to immigrate. Once established in a foreign country, they usually bring immediate and sometimes extended family members to live with them overseas. -------------- The High Cost of Family Life -------------- ¶5. (U) While many of the unskilled workers in the Gulf are spouses (either male or female) with children in Egypt, the bulk of unmarried workers are males hoping to earn enough money overseas to return to Egypt and marry. Marriage is one of the biggest expenses in Egypt, as Egyptian tradition requires the groom to have an apartment (usually owned outright, as mortgages are still not common in Egypt) and provide all major electrical appliances. The bride, on the other hand, has to provide only the furniture. The tendency to work overseas to earn money for marriage is one of the reasons cited in the Tinbergen paper for the slow rate of fertility decline in Egypt. Without the outlet of overseas work, many young Egyptians would not be able to marry. The Tinbergen paper suggests that migration has actually curbed forces of social change in Egypt, because of the exposure of Egyptian workers to the conservative ideas prevailing in countries of emigration, i.e. the Gulf and Saudi Arabia. -------------- Fewer Returnees -------------- ¶6. (U) The first big wave of migrant workers left Egypt in the 1970s and 80s, migrating mostly to the Gulf during the first international oil boom. Most of these workers returned to Egypt in the 1990s. Of the workers leaving Egypt since the 1990s, however, significantly fewer have returned. In 2006, only 2.5% of the population (15 years and over) or 7.2% of households, have a returnee, half the proportions in 1988. Though fewer new migrants have returned, more of the returnees are women, who made up 94% of returnees in 2006 compared to 82% in 1988. In 2006, 64% of returning migrants were from rural areas, while in 1988 the number was 52%. -------------- Remittance Methods -------------- ¶7. (U) The bulk of remittances enter Egypt through formal means, often a bank, but frequently wire services such as Western Union (WU). The General Manager of WU in Egypt told econoff that WU's money transfers have shifted along with migration patterns. Historically, most transfers came from the U.S., mainly from Boston; Dearborn, Michigan; San Francisco; Los Angeles, and Houston. Most transfers from the U.S. were destined for families in Cairo and Alexandria. Since 2001, however, the bulk of transfers has shifted to the Gulf, and most of these transfers are destined for families in Upper Egypt. There are almost no transfers into tourist areas such as Sharm el Sheikh or Hurgada. ¶8. (SBU) WU brought in $350 million in remittances 2006, and has already brought in $190 million in 2007. The Central Bank claims that WU only accounts for 10% of total remittances in Egypt, but the WU manager was skeptical of that figure, as most banks are unwilling to provide wire transfer services. Bank managers typically do not want the poor customers receiving inbound remittances to enter the bank. In Egypt, WU has 63 sites, 24 of which are in Arab African International Bank. Although internationally, National Societe Generale Bank (NSGB) has an agreement with WU allowing the latter to operating in all NSGB locations worldwide, this agreement does not apply in Egypt. In Egypt, NSGB works only with Moneygram. The Egyptian franchise of Moneygram is rumored to be partially owned by Alaa Mubarak's father-in-law. According to WU's manager, the Central Bank has repeatedly denied the company's request to expand the number of its locations to meet increased demand. She believed the Central Bank simply didn't want to be bothered regulating wire services. The lack of sufficient numbers of branches to service demand drives many overseas workers to use informal transfers, including cash couriers and hawala, to get money to family members in Egypt. ¶9. (U) Although the GOE denies that hawala exists in Egypt, WU believes there are many large networks, mainly servicing Gulf workers transferring money to families in Upper Egypt. These networks are often located in small business service centers where Internet and copying services are also available. In Lower Egypt, money tends to be brought in informally by cash couriers, usually returning migrant workers themselves, carrying money for friends in the Gulf back to families in Egypt. On the Libyan border, Egyptian workers pay minivan and bus drivers to carry money across the border into Egypt, where a family member or friend is waiting to receive the cash. -------------- Comment -------------- ¶10. (SBU) Remittances are likely to remain a major source of hard currency income in Egypt for the foreseeable future. Until the current economic growth rate translates into substantial job creation, Egypt's unemployment and underemployment rates are likely to remain in the 10% range. High-paying unskilled work overseas will therefore continue to be a draw for young Egyptians seeking to fulfill their and their family's basic needs. For professional workers, the problem, in addition to underemployment, is the stifling atmosphere of bureaucracy, corruption and cronyism which prevents them from maximizing their professional abilities. Changes to the deeply rooted socio-economic systems in Egypt will likely take much longer than creation of more unskilled jobs, so Egyptian professionals are likely to continue immigrating, a phenomenon with an overall negative impact on Egypt, as its best and brightest seek opportunity elsewhere. JONES