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Cablegate: Remittances and the Demographics of Migration

VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #1890/01 1711457
ZNR UUUUU ZZH
R 201457Z JUN 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 5751
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0286

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


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Summary
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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.

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Big Money
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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.

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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.

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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.

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Comment
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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

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