No wait-and-see

As remittances are affected by the financial crisis, Nesmahar Sayed investigates the extent of the problem and seeks solutions

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Many Egyptians working in the construction sector in the Gulf are at risk of losing their jobs as a result of the global financial crisis

It has been six months since the current financial crisis broke out. During that time it has become clear how revenues from hard currency earners, such as the tourism sector and the Suez Canal, will be affected. A third major source of hard currency is remittances from expatriates, particularly those working in the Gulf. However, to date there are no exact figures as to the extent to which these remittances will be affected. Nonetheless, the problem is already manifesting itself indirectly.

Abdel-Rahman Ahmed, general manager of Eatemadco, a currency exchange and money transfer company in Kuwait told Al-Ahram Weekly, "the amount of money transferred to Egypt from Egyptians working in Kuwait has fallen by 15 to 20 per cent compared to January 2008." Ahmed attributed this drop in part to the fact that the value of the dollar has increased to become 290 fils while it was 277 Fils last year (one Kuwaiti dinar equals 1,000 fils). This in turn led to the depreciation of the Egyptian pound against the Kuwaiti dinar. "LE1,000 equals 52.3 Kuwaiti dinars instead of 50."

In reality, this is not the only reason. According to Ahmed, the reduction is also understandable in light of the fact some workers and employees are being laid off. And those who still have a job are unable to send the same sums because rent and the cost of living have increased globally, therefore eating into their savings.

That being said, Kuwait's economy is the least affected among Gulf economies because of its lesser integration into the global economy. The sectors most affected are the stock market, real estate and automobile industries.

Further, transfers from Saudi Arabia were also affected. According to banker Osama Mohamed, who preferred to keep the name of the bank he works for anonymous, the amount of money transferred from Saudi banks to Egypt has fallen by 15 to 20 per cent too. But the biggest damage yet, Mohamed says, is that incurred by transfers made from the United Arab Emirates.

In fact, Dubai's open economy and strong correlation with international markets led it to be hit very hard by the crisis. "Many workers had to leave their jobs and return to their home countries," managing director of Antal International Network (AIN), an executive recruitment company, Walid Abdel-Wadoud told the Weekly.

One Egyptian employee working in real estate describes life in Dubai in the aftermath of the outbreak of the global financial crisis. "Dubai is not the same by any means. The streets are empty, the airport waiting for visitors and residents are wondering, what next?"

Abdel-Wadoud pointed out that over the past two months the highest number of job applications, to the company's offices around the region, came from Dubai. "Sixty per cent of real estate projects have come to a standstill," he added.

Hanan Youssef, coordinator of the Women's Committee in the Arab Labour Organisation, estimates that a million Egyptians out of eight million working in the Gulf are predicted to return to Egypt during the next months, which will mean an even tighter labour market for job seekers. The only way out, according to Youssef, is to create more jobs, promote the culture of entrepreneurship and offer debt facilities that would encourage the set-up of new projects.

For his part Abdel-Wadoud believes there is a bright side to the story. He believes in the potential of Egyptian expatriates and is recruiting them to work for companies in Egypt. And he's not alone. "Regardless of the loss individuals feel after being dismissed from their jobs, on the long run, the Egyptian labour market will be privileged to have them back," Bassel Hemeida, managing partner of AIN, told the Weekly.

Samir Radwan, board member and advisor to the General Authority for Investment and Free Zones, agrees with Hemeida regarding the positive effect the returnees may have on the Egyptian market, although he admits that no one can really make out the numbers that may return from the Gulf countries. He too believes that the highest number of returnees in the next few months will come from the UAE, because that state is deeply integrated in the global economy. The Egyptian labour market, according to him, should make optimal use of these returnees. He said that a strategy should be laid out to make the most of these returning Egyptians. "Most of those people are returning with experience in many fields, and savings that should be received with open hands to reintegrate them in the Egyptian society," Radwan said.

Mustafa Ahmed Mustafa, professor of economics at the Institute of National Planning, believes that although the financial crisis was not homemade, policymakers have to come up with a homemade solution. Mustafa believes it is only natural that Gulf countries, out of their willingness to maintain a certain growth rate, will stop receiving new comers and will prefer to offer available vacancies to their own citizens.

However Mustafa says that this will represent a problem "only as far as we let it become a problem." He advised that the concerned ministers, whether within the framework of the Arab League or the Organisation of Islamic Conference, should meet and negotiate a formula by which the least harm is done whether to those being laid off or to the host country. Among his suggestions is that although employees will be dismissed, their contracts should not be annulled so that they may return to their jobs when the economic situation improves. Another suggestion, he said, would be to give employees the choice of accepting half their salaries but keeping their jobs.

Mustafa also urged Egyptian officials to change their wait-and-see attitude fast, and to start compiling the expected numbers of returning expatriates and calculating how much money they could be repatriating.

Further, Mustafa recommends the creation of an emergency fund for returning labour. The fund could be financed jointly by the returnees themselves, the government and the business community. "The amount of money collected in that fund should be invested to set up new projects that could create new jobs," he said, adding that such a fund would help combat the social and psychological problems that could accompany this situation.