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. 
 
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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%. 
 
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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