A Study on Remittances and Investment Opportunities for Egyptian Migrants

International Organization for Migration E-mail: [email protected] Internet: http://www.egypt.iom.int The Ministry of Manpower and Migration The International Organization for Migration (IOM) is committed to the principle that humane and orderly migration benefits migrants and society. As an intergovernmental organization, IOM acts with its partners in the international community to: assist in meeting the operational challenges of migration; advance understanding of migration issues; encourage social and economic development through migration; and uphold the human dignity and well-being of migrants. This report has been made possible through the contribution of the Italian Cooperation, under the framework of the project “ Integrated Migration Management System for the Arab Republic of Egypt” (IMIS Plus).

The material presented herein may be used for information purposes only. While IOM endeavoured to ensure the accuracy and completeness of the contents of this publication, the views, findings, data, interpretation and conditions expressed in the report are those of the authors and do not necessarily reflect the views of IOM and its Member States..The designations employed and the presentation of material throughout the report do not imply the expression of any opinion whatsoever on the part of IOM concerning the legal status of any country, territory, city or area, or of its authorities, or concerning its frontiers or boundaries.

Publisher: International Organization for Migration (IOM) Villa 25, Street 5 Maadi Cairo, Egypt Tel.: +20 2 2358 0011 Design and Printing : Road 9 ______© 2010 International Organization for Migration (IOM) ______

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher. A Study on Remittances and Investment Opportunities for Egyptian Migrants Acknowledgements

This report has been made possible thanks to the generous contribution of the Italian Cooperation, under the framework of the Integrated Migration Management System for the Arab Republic of Egypt (IMIS Plus).

This report was prepared by: Ray Jureidini, Iveta Bartunkova, Ahmed Ghoneim, Nadia Ilahi and Erin Ayjin from the Center for Migration and Refugee Studies (CMRS) at the American University in Cairo, with technical assistance by George Thabet.

CMRS is grateful to the International Organization for Migration (IOM) for its technical, editorial, and intellectual support for this project, with particular thanks to Luigi Carta, Priyanka Debnath and Roberto Pitea.

CMRS also wishes to thank the interviewers, interviewees and the many individuals who gave their time, their personal details and insights while participating in this project.

2 Table of Contents

Acknowledgements 2

Table of Contents 3

List of Tables and Figures 4

List of Acronyms 6

Executive Summary 7

1. Introduction 10

2. Methodology 17

3. Brief Literature Review 18

4. Rules, Regulations and Policies Governing Establishing Businesses in Egypt

with Special Focus on SMEs 21

5. Profile of Remitting Migrants 29

6. Characteristics of Remittances Sent 34

7. Characteristics of Remittance-Receiving Households 38

8. Uses of Remittances Received 38

9. Household Investment Decision-Making 45

10. How Migrant Households Invest 47

11. Why Most Migrant Households Do Not Invest 51

12. Conclusions and Recommendations 56

13. References 59

Appendices 64

A Study on Remittances and Investment Opportunities for Egyptian Migrants 3 List of Tables and Figures

List of Tables

Table 1: Select development indicators in the Cairo, Menofeya, Sharkia and Fayoum governorates...... 16

Table 2: Age of migrant...... 29

Table 3: Occupation of migrants in destination country...... 32

Table 4: Frequency of receiving remittances...... 34

Table 5: Methods used by migrants to send remittances to Egypt...... 35

Table 6: Reasons for preferred method of receiving remittances...... 36

Table 7: Currency in which remittances are sent...... 36

Table 8: Currency in which remittances were received...... 37

Table 9: Amount of remittances received (EGP)...... 41

Table 10: Different uses of remittances...... 42

Table 11: Migrant’s advice on spending remittances...... 45

Table 12: Reasons for decisions to invest...... 48

Table 13: Advantages of investment choice...... 49

Table 14: Disadvantages of investment choice...... 50

Table 15: Areas of desired investment...... 51

Table 16: Is your area conducive to profitable business?...... 52

Table 17: Do government rules and regulations create unfavourable conditions for investment?...... 53

Table 18: Obstacles to investing...... 54

Table 19: Suggested areas for social projects...... 55

4 List of Figures

Figure 1: Remittance inflows to Egypt from 1999 to 2009 (USD millions)...... 10

Figure 2: Yearly growth of remittance inflows to Egypt from 1999 to 2009 (%)...... 11

Figure 3: Remittances sent by Egyptian migrants, according to country of destination...... 12

Figure 4: The General Framework for Establishing Manufacturing Enterprises...... 25

Figure 5 : Classification of education of migrants from the study population...... 30

Figure 6: Educational level of migrants in the four governorates...... 30

Figure 7: Current country of residence of migrant (N= 198)...... 31

Figure 8: Marital status of migrants (N=199)...... 33

Figure 9: Relationship to migrant...... 38

Figure 10: Breakdown of average monthly household income by governorate...... 39

Figure 11: Average monthly expenditure items compared to monthly income...... 39

Figure 12: Average savings compared to average income...... 40

Figure 13: Remittances as a percentage of total household income...... 41

Figure 14: Median of remittances for all four governorates...... 42

Figure 15: Investment compared to other household expenditures and total household income (in EGP)...... 46

A Study on Remittances and Investment Opportunities for Egyptian Migrants 5 List of Acronyms

CMRS – Center for Migration and Refugee Studies

EU – European Union

GAFI – General Authority for Investment and Free Zones in Egypt (Egypt)

GCC – Gulf Cooperation Council

GDP – Gross Domestic Product

GOE – Government of Egypt

IOM – International Organization for Migration

IMC – Industrial Modernization Center

KSA – Kingdom of Saudi Arabia

EGP – Egyptian Pound

EHDR – Egypt Human Development Report

MTO – Money Transfer Office

NILEX – Egyptian Stock Exchange for SMEs

OECD – Organization for Economic Co-operation and Development

SMEs – Small and Micro-Sized Enterprises

SFD – Social Fund for Development

UAE – United Arab Emirates

UNIDO – United Nations Industrial Development Organization

6 Executive Summary

igrant remittances from abroad are an to expedite the establishment of most new businesses important source of income for the Egyptian within 72 hours (with the exception of those related to economy, and in 2008 represented 5.3 per health). The SFD offers lines of credit in the area of small centM of the gross domestic product (GDP). This research and micro loans through 28 branch offices in various project aimed to shed light on the use of remittances governorates. While the services of GAFI and SFD are by Egyptian migrants and their potential to foster local available to all Egyptian citizens, including migrants, this investment opportunities, with a particular focus on study revealed the little awareness of migrant households establishing small and micro-sized enterprises (SMEs). A of the availability of such facilities. During interviews, desk study of the relevant rules, regulations and policies however, the representatives of SFD expressed their governing investment was conducted followed by an interest in supporting migrants and their families in empirical survey of 200 remittance-receiving households establishing businesses in Egypt. This study found that in Cairo and in the governorates of Menofeya, Fayoum while entrepreneurial motivations prior to leaving Egypt and Sharkia. The overall objective of this study was not (those who explicitly left with the intention to save for a only to find out how remittances are used by remittance- productive investment) applied to only 1 per cent of the receiving households, particularly with regard to sample, 20 per cent of remittance-receiving households investment practices, but also to explore the decision- were actually channelling remittances towards various making dynamics in terms of remittance usage at the forms of investment. Of those who did invest (40 out household level. of the 200 in the study sample), almost half invested in real estate and a lesser number invested in SMEs, stock The investment climate in Egypt has been restructured markets and agriculture. The large majority (80%) of the since 2004, as business reforms aiming to alter the business study population was more concerned about utilizing environment were launched. The strategy of improving remittances for meeting the daily needs of their families, the business climate in Egypt stands on six main pillars: including health care and education. The study also legislative reform, monetary and banking reform, tax found that there was a strong preference and trust in the reform, trade policy reform, investment policy reform, banking system for receiving remittances because of their and expanding the role of the private sector (OECD, perceived safety, convenience and low cost. Nevertheless, 2006). One practical example in legislative reform was in this study sample, around 22 per cent of the remittances an 80 per cent reduction in the capital requirement for were received using informal channels, for instance, starting a new business – from EGP 50,000 to 1,000 through either a trusted friend or a relative of the migrant (28% of per capita income) (World Bank, 2009). Other who was visiting the migrant in the destination country. incentives devised by the government over the years It is important to mention here that this percentage in have included promoting access to the free economic reality might be higher because of the bias in this survey’s and industrial zones, easing company and tax laws, sample towards highly educated migrants who may be lowering banking charges and exchange rates to enhance more likely to use formal banking channels due to ease investments. Alongside the new policies, designated of accessibility and general awareness of the benefits. facilities were established to assist entrepreneurs in the The survey found a relationship between the volume of process of business creation. For instance, the Social the remittances transferred and the education levels of Fund for Development (SFD) was created to offer small the migrants in terms of their preference between formal lines of credit to new investors. Similarly, the General and informal channels of transfer. The larger the volume Authority for Free Zones and Investment (GAFI) was of remittances and the higher the education level of the established which subsequently initiated a one-stop shop migrant, the more likely it is that he/she will opt for

A Study on Remittances and Investment Opportunities for Egyptian Migrants 7 formal channels of remittance transfers (i.e. banks and choice of whether to invest and on what to invest seemed official money transfer institutions). to be based on cautious considerations that take into account the availability of sufficient financial resources, The majority of migrants from the households surveyed knowledge regarding the type of investment and avenues in this research were male and at the time of the research, of risk minimization. In particular, Cairene respondents most of them (81%) resided in destination countries seemed to emphasize the need for minimizing potential in the Persian Gulf, mainly in the Kingdom of Saudi risk/loss when making an investment decision, while Arabia (KSA). The migrant-sending households in Egypt respondents from the other governorates prioritized averaged four members; most of them (67%) were female- experience in their chosen field of investment. headed in the absence of the male migrant (husband/ father). For these households, remittances represented an Nevertheless, it is important to emphasize the fact that important source of income, accounting for 43 per cent of approximately 80 per cent of the migrant-sending families their total household income, on average, across the four interviewed in the four governorates did not engage in governorates studied. Most migrants from the sample investment. When asked why they do not invest, the most studied had dependents in Egypt – 81 per cent of migrants common explanation offered by the household heads had spouses in Egypt and 85 per cent of migrants had were concerns regarding pre-existing financial constraints children who remained in Egypt. Nevertheless, having that their households were facing, including limited or dependents living in Egypt was not a significant factor in no access to formal credit. One-fifth of the interviewees determining whether migrants invested their remittances stated that the investment climate in Egypt is “too risky”. in Egypt or not. The spending and potential investment of Another 10 per cent of the study population reported most remittances was not based on the unilateral decisions that they lacked information on the different investment made by the migrant abroad. Only in a few cases (11%) opportunities and were not sure as to how and when to did the migrant alone decide how his/her remittance start the process. The locality, its infrastructure, overall money was to be used. In an overwhelming number of development and purchasing power of the population in cases, the decision about ways to use remittances was the area also play an important role in migrant household decided through a process of mutual consultation between investment decisions. More than half of all respondents the migrant and the head of the household (mostly the did not believe that the area in which they lived was wife). However, the head of the household who received conducive to opening a profitable business. the remittance also enjoyed a fair deal of autonomy in deciding how the money would be spent. Overall, around A large majority of the respondents believe that 20 per cent of respondents and migrants in the sample government policies play an important role in their used some part of their income for productive investment. investment considerations. The perception of difficulties In Cairo, 31 per cent of households invested at least part and obstacles to investment varied depending on the of what they received. In Menofeya and Sharkia, 20 per governorates in which the respondents lived. Corruption cent of the households engaged in the investment of their in various forms was perceived the primary obstacle to remittances. Among the four governorates, Fayoum had investment in Cairo, whilst high taxes were of primary the lowest proportion of investing households (11%). concern for respondents from Fayoum. Similarly, The largest proportion of investors (39%) chose to invest bureaucratic “red tape” troubled many of those interested in real estate, followed by 22 per cent who invested in in investment in Menofeya and in Sharkia. small agricultural business ventures employing fewer than five people. The smallest proportions of investors Notably, Egyptian migration is predominantly a male (6%) invested in medium private businesses employing phenomenon (87%). With the social fabric being no more than 20 people. In Cairo and Fayoum, small and conventionally patriarchal, migration often generates private business was the most represented investment strong changes in family dynamics. In the absence of a activity, while in Menofeya and Sharkia, the primary father/spouse, women/mothers primarily fill the role. investment activity was reported to be real estate. The While this ultimately creates extra burdens for women,

8 it may also represent a subtle but positive shift in gender capacities that deserves more detailed investigation.

The findings from this study show that while remittances contribute up to 40 per cent of the income of Egyptian households, and they represent a major source of foreign currency earnings at the national level, remittances are primarily channelled towards essential expenses and consumption. A small but significant proportion of remittances (approximately 20%) is invested in real estate and other forms of productive investments, Survey respondents and key stakeholders interviewed for this study pointed out that several crucial factors impede migrants from engaging more in productive investment. While the Government of Egypt (GOE) has taken several positive steps in reforming the legislative framework and opening up one-stop shops to improve the investment climate in Egypt, these provisions have not produced a significant impact for migrant investors, partly due to lack of information, but also due to the nature of the investments of Egyptian migrants, mostly in the form of small and medium enterprises.

The study concludes with a set of recommendations to improve the development impact of remittances, namely through increased incentives for small and migrant investors, as well as by generally improving the business climate in Egypt and reducing the perception of risk associated with investments in the country.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 9 1. Introduction

he role of migrant remittances is one of remittance receiving country in the world in 2009, with much interest within the current discourse on an estimated remittance inflow of USD 7.8 billion. The international migration and development. It is decline in remittances caused by the global financial significantT particularly for countries which are relatively crisis in 2008-2009 took place at the end of a decade of small and are still developing. In 2008, for example, rapid growth in remittances that witnessed a 158 per cent remittances in low-income countries were 5.8 per cent of increase between 1998 and 2008, constituting one of the GDP, while in middle-income countries they reached 1.9 top earners of foreign currency and surpassing revenues per cent of GDP. However, there are countries such as from the Suez Canal (Ratha et al., 2009). However, Tajikistan and Moldova where remittances were as high although the volume of remittances was significant, it was as 49.6 per cent of GDP (Ratha et al., 2009). less than the Foreign Direct Investment (FDI) in the fiscal year 2008 (USD 11.6 billion) (UNCTAD, 2008). Using Egypt can be grouped into the lower end of the middle- the national accounts statistics of GDP from the United income countries. Remittances from Egyptian migrants Nations, the following figures have been constructed. continue to contribute significantly to the country’s They show the steady growth in the importance of developing economy. While the global financial crisis remittances to Egypt as a proportion of its GDP between resulted in a yearly negative growth of remittance flows the years 2000 and 2009.1 of 10 per cent, Egypt ranked as the seventh- biggest

Figure 1: Remittance inflows to Egypt from 1999 to 2009 (USD millions)

10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009est Source: Ratha et al., 2009.

1 Note that the proportions here differ (slightly higher) from others. The World Bank, for example, estimated remittances as USD 5.3 billion (5% of GDP) (Migration and Remittances Factbook 2008, available at http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1199807908806/EgyptArabRep.pdf. Data was also also obtained from the Central Bank of Egypt (2008) database.).

10 Figure 2: Yearly growth of remittance inflows to Egypt from 1999 to 2009 (%)

60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

-10.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -20.0% 2009est

Source: Ratha et al., 2009.

Paying particular attention to the role remittances play in it is important to mention that the reasons for the lack developing economies, it has been widely acknowledged of remittances being directed to productive investment that they have the potential to promote economic in Egypt have, been under-researched. While there is a development by creating investment opportunities, as growing body of literature on various aspects of Egyptian well as assisting in the human development of migrant migration, the identification and overview of factors that families and their wider communities at home. The determine decisions regarding the usage of remittances existing evidence of the patterns of remittance usage remain relatively underexplored. One of the reasons in Egypt suggests that although the country receives a for this is that investigating the usage of remittances is substantial amount of remittances from Egyptians living challenging, both conceptually and methodologically. abroad (according to Wahba (2007), remittances represent Furthermore, the lack of reliable and accurate statistics the second-largest source of migrant household income on the number of Egyptian migrants and diaspora after labour income), the bulk of remittances is channelled communities makes it difficult to make strong reliable to housing and consumption expenditure, rather than quantitative or qualitative analyses. into productive investment.2 Such patterns of remittance usage, however, are neither new nor particularly unique In order to better understand the rationale behind the to Egypt. Existing literature on the topic tends to portray current pattern of remittance spending by the Egyptian remittances being mainly spent on everyday consumption household and to explore the obstacles to productive items (Chandavarkar, 1980). Carling (2005) notes that investment such as investing in SMEs in Egypt, the generally, only a small proportion of remittances is used critical influence of a number of factors need to be to set up small businesses, improved agricultural practices examined. As Carling (2005) points out, factors including or other forms of productive investment. Carling points migrants’ characteristics, the characteristics of their out that this is well-understood, creating a degree of country of employment (destination countries) and the disillusionment over the potential developmental impact characteristics of their country of origin (Egypt), all have of remittances among researchers and policymakers a bearing on migrants’ propensity to remit and invest. from as far back as the 1970s and 1980s. Nevertheless, Similarly, the characteristics and decision-making

2 It has been argued by some scholars that the negative effects from spending remittances on everyday consumption as well as on real estate in Egypt is an increase in inflation rates and increase in the level of property prices. International Migration Outlook (2006) cites Adam’s (1991) work stating that between 1980 and 1986, the price of agricultural land rose by 600 per cent in Egypt due to remittance inflows.”

A Study on Remittances and Investment Opportunities for Egyptian Migrants 11 structure of the households left behind play a significant in terms of the patterns of remittance investment. For role in determining the patterns of remittance spending. example, Wahba (2004) found that those who managed to accumulate savings and who did invest and became 1.1 Importance of the Characteristics of entrepreneurs upon their return to Egypt were, on average, more likely to be married with spouses left behind. Thus, Migrants the desire to be reunited with their families is presumably a strong incentive for migrants to return to their country The characteristics of migrants include issues such of origin. Nonetheless, this is not a sufficient explanation as the migrants’ intention to return, number of years for why one person engages in entrepreneurial activity spent abroad, gender and marital status, education and and another does not. occupational levels. Scholars seem to agree, for example, that temporary migrants are more likely to remit money, as Drawing from a large data set provided by the recent are those who leave their spouses behind in the country of Egypt Labour Market Panel Survey (2006), Wahba origin (Russell, 1986, 1992; Stahl, 1982; Carling, 2005). (2007) confirms that in 2006, among Arab destination countries, the maximum number of temporary Egyptian In the case of Egypt, migration is predominantly a male migrants went to KSA, followed by Jordan, Libya, Kuwait phenomenon and temporary in nature (Talani, 2003; and United Arab Emirates (UAE). The figure below Wahba, 2007b; Nassar, 2008). The division of temporary shows the main countries of origin of remittances sent by and permanent emigration originates in Law No. 11 of Egyptian migrants to Egypt through formal channels in 1983 that differentiates between temporary and permanent 2008, according to the Central Bank of Egypt. migration. Nassar (2008) argues, however, that in practice the distinction is a purely geographical one, whereby all migrants to the Arab states are assumed to be temporary, Figure 3: Remittances sent by Egyptian migrants, according to country of destination even though they may have been there for many years. In contrast, all migrants to Europe, North America or Australia are assumed to be permanent, even if they had migrated only recently. The reason for this is because the US, Canada, Australia and some European Union (EU) countries are traditionally immigrant-receiving countries providing opportunities for permanent residence and subsequently for citizenship. However, migrants/foreign workers working in Arab states are not given similar opportunities for permanent residence or citizenship. Under the kefala or sponsorship system prevalent in the Arab region, permanent residency and citizenship possibilities are basically closed to foreigners even if they are from a neighbouring Arab country. Hence, the formal categorization of temporary and permanent is not based on the duration of stay of the migrant, but rather on the probability of whether a migrant can apply for permanent residency followed by citizenship.

Source: Central Bank of Egypt, 2009. The intentions of migrants in terms of their length of Note: Data refers to 2008. * Data for the EU includes only those for the following countries: France, Germany, Italy, the Netherlands, the stay are difficult to determine; it is also difficult to United Kingdom, Greece and Spain. obtain reliable responses from migrants when asked. Understanding incentives to return can shed useful light

12 1.2 The Characteristics of the Country of reducing the processing time as well as the hurdles that Origin investors had previously encountered. Along with GAFI, the GOE has also created the SFD to provide microfinance opportunities to Egyptian citizens. The characteristics of the country of origin, which require 1.3 Characteristics of the Migrant consideration when exploring the issue of remittances and their use, include the perceptions on the level of Household political and financial risk involved in sending, receiving and investing remittances; the level of hardship and The composition of the migrant household, the the patterns of household consumption in the country relationship between the migrant and family members of origin; and the existence of incentive programmes left behind, along with the overall economic behaviour to remit and invest (Russel 1986, 1992; Stahl, 1982; of the migrant’s household can contribute to further Carling, 2005). Interviews conducted with officials from understanding the potential of, and barriers to, investment the Egyptian Ministry of Manpower and Emigration opportunities. For example, the existing migration and GAFI during the course of this research revealed a research on Egypt suggests that the heads of households sense of responsibility on behalf of the government to receiving remittances are more likely to be female, rural promote a stronger sense of national identity among the (almost 69%) and are less likely to be waged workers, Egyptian diaspora and to encourage them to invest in that is, they are more likely to be out of the labour force Egypt. For instance, changing company and tax laws, (Wahba, 2007a). In cases when the remitting migrant is the banking and exchange rates and other charges, opening main breadwinner, or in situations when family members free trade zones and sponsoring Arabic language courses remaining in Egypt are without adequate social protection abroad are attempts by the Egyptian government to from major contingencies such as unemployment, maintain ties with its diaspora communities. It should sickness or old age, the remittances may be allocated to also be noted that the overall investment climate in Egypt meet the daily living expenses of households, including has been undergoing positive changes since 2004 in an nutrition, health care needs and the education of younger attempt to make the country a more lucrative destination household members. These types of households also for investment. The strategy of improving the business tend to save part of the remittances for future unforeseen climate in Egypt stands on six main pillars: legislative emergencies, rather than invest it any form. For these reform, monetary and banking reform, tax reform, households, remittances are likely to serve as an informal trade policy reform, investment policy reform, and the and safe form of insurance. This resonates with the central expanding role of the private sector (OECD, 2006). One argument of the New Economics of Labour Migration, example of a practical step in legislative reform was the which claims that the decision to migrate is not an reduction of the capital requirement for starting a new individual decision; rather, it is a decision taken by the business by 98 per cent, from EGP 50,000 (81.5% of per entire migrant household. Furthermore, proponents of this capita income) to EGP 1,000 (16% of per capita income). theory claim that people migrate not only to increase their Other incentives devised by the government include the income, but also to diversify the sources of household promotion of access to the free economic and industrial income in order to insulate the household from any risks zones. Alongside the new policies, a new designated that might come due to external factors in the country of authority, GAFI, was established to assist investors. origin (Taylor, 1999). GAFI instituted an efficient service called the One- Stop-Mall for investors. The investors can come to this Risk minimization strategies are important given the One-Stop-Mall and avail of different services related to chronic high unemployment rate, as well as the less opening a new business. One-Stop-Mall brings together than adequate social protection faced by the Egyptian the different sub-authorities that one needs to visit to population. The unemployment rate has recently been fulfil different requirements to obtain license to start a estimated to be around 8.7 per cent (CIA Factbook, 2008). new business. This dramatically increased efficiency by However, under-employment and a significant reliance

A Study on Remittances and Investment Opportunities for Egyptian Migrants 13 on the informal economy (often estimated as one third 1.4.1 Cairo to one half the size of the official GDP) are also major features of the Egyptian economy. Government and Cairo is an urban governorate and the capital city of Egypt private estimates put the number of job seekers entering with 7.8 million people (not including Greater Cairo, the labour market annually at anywhere from 700,000 to which would add another 10 million to the population). 800,000 (Nassar, 2008). At the same time, as the analysis It has a high population density (2,560 people per square of the 2005 Egypt Human Development Report, published kilometre). There is a high concentration of government by the United Nations Development Programme (UNDP, institutions, commerce, trade and the industrial production 2005), reveals, Egypt’s social protection system struggles of textiles, iron, steel, consumer goods, etc. The major with difficulties ranging from insufficient targeting, proportion of Cairo’s labour force is employed in the lack of outreach and social exclusion of the poorest, to service sector (78%), followed by the manufacturing inefficiencies in the implementation of social protection sector (21%). Notably, professionals represent more than schemes and misallocation of resources. UNDP (2005) a quarter of the labour force, the largest representation estimated that 20 per cent of the country’s population among all governorates in Egypt. However, Cairo also is living below the national poverty line (measured has one of the highest unemployment rates (11%), where as income poverty) and 31.8 per cent is experiencing 43 per cent of those with a university education or better subjective poverty (measured as relative deprivation). remain unemployed. Nonetheless, Cairo also has one of The report also notes that “the proliferation of private the smallest proportions of its population ranked as poor and relatively expensive alternatives (to state-subsidized (4.6%) or ultra poor (0.5%). At the same time, among the deliverables such as health care) attests to the fact that four governorates, it is the governorate with the highest even those least able to afford them now pay for services income inequality (Gini coefficient of 37.8)4 (UNDP, deemed essential but lacking” (UNDP, 2005: 77). The 2008). estimated cost of education is reported to be EGP 748 per year, of which 22 per cent is spent on private tutoring. 1.4.2 Menofeya Similarly, health care expenses frequently have to be paid out of pocket3 and the respondents in the survey reported This is a governorate located north-west of Cairo with that the bulk of their expenditure on health care goes to a population of 3.3 million. It is known as an area with paying for doctor’s fees well as for medications (UNDP, extensive agricultural production in cotton, wheat and 2005). potato. Menofeya is home to a mostly rural population (80%) living in rural units, villages and hamlets. The 1.4 A Brief Description of the Study Sites largest proportion of the Menofeya labour force is in services (53%), followed by agriculture (36%). (Four Governorates) for this Research Professionals represent 12.4 per cent of the total labour force of the governorate. The unemployment rate of The four different governorates of Egypt that represent the governorate is 7.3 per cent. Among those who are the geographical focus of this study –Cairo, Menofeya, unemployed, 64.5 per cent had secondary education and Sharkia and Fayoum – have different demographic and 28.5 per cent had university education. The percentage resource endowment profiles, with different levels of of the poor population in Menofeya is higher than that education, standards of living, development outcomes, in Cairo. Approximately 17.5 per cent in the governorate etc. was ranked as poor in 2005 and 0.4 per cent as ultra poor. However, income inequality is lower in Menofeya than in Cairo (the 2005 Gini coefficient of Menofeya is 22.1) (UNDP, 2008).

3 Out of pocket payment is direct payment made for a service such as health care by the recipient of the service. 4 A low Gini coefficient indicates a more equal distribution, with 0 corresponding to perfect equality. A higher Gini coefficient indicates more unequal distribution, with 1 corresponding to perfect inequality. Note that the Gini coefficient can range only between 0 and 1, but it can be multiplied by 100 to range between 0 and 100, as is the case here.

14 1.4.3 Sharkia 1.4.4 Fayoum

The governorate of Sharkia is located in the Suez The Fayoum governorate, located 85 kilometres south of Canal region and is one of Egypt’s largest agricultural Cairo, is an important agricultural area of Egypt. Most governorates, comprising of up to 10 per cent of Egypt’s of the land is cultivated by small farmers. In 2006, 76 cultivated agricultural land and a population of 5.3 per cent of the 2.5 million population of the governorate million. Apart from agricultural production (particularly lived in rural areas, operating as owners, tenants, and in cotton and wheat), the governorate hosts a number sharecroppers. The main crops were wheat, cotton, of industries, including the textile, cotton spinning and maize, rice, etc. Almost an equal share of the population chemical industries. Most of Sharkia’s population is is employed in agriculture (46%) and in services (47%). rural (77%). More than half of Sharkia’s labour force Professionals, however, represent less than 10 per cent is employed in the services sector (51%), followed by of the total labour force of the governorate. In 2006, the agriculture (39%). Compared to Menofeya and Fayoum, unemployment rate in Fayoum was one of the lowest there are more professionals in Sharkia (14.2%). (3.7%). The structure of unemployment is similar to that Unemployment in Sharkia reached almost 11 per cent in the other governorates; those with higher educational in 2006, and, as elsewhere, those with higher education attainment form the bulk of unemployed. Eighty per were more affected: 64 per cent of Sharkia’s unemployed cent of those who were unemployed in Fayoum had were those with secondary education and 27 per cent, secondary education and 16 per cent had university with university education and above. Among the four education or above. Along with having a comparatively governorates studied, Sharkia is the governorate with low unemployment rate, the governorate of Fayoum has the highest percentage of poor (28%) and ultra poor a lower proportion of poor (12%) and ultra poor (1.1%) (2.9%). At the same time, Sharkia has the lowest income relative to the other two rural governorates in this study inequality among the four governorates (Gini coefficient (Menofeya and Sharkia). The income inequality in of 19.7). Fayoum (Gini coefficient of 24.9), however, is higher relative to the governorates of Menofeya and Sharkia. Table 1 lays out the composition of the different features of the four governorates.

Table 1: Select development indicators in the Cairo, Menofeya, Sharkia and Fayoum governorates

Industry Services Agriculture % % % Cairo 21 78 9

Menofeya 11 53 36

Sharkia 10 51 39

Fayoum 7 47 46

A Study on Remittances and Investment Opportunities for Egyptian Migrants 15 Higher Edn. Unemployment Poor Ultra Poor Inequality (Gini) Unemployed % % % % Cairo 11 43 4.6 0.5 37.8

Menofeya 7.3 28.5 17.5 0.4 22.1

Sharkia 11 27 28 2.9 19.7

Fayoum 3.7 16 12 1.1 24.9

Source: UNDP, 2008.

1.5 Structure of this report

This study builds upon existing qualitative and quantitative research on Egyptian migration and remittance-related behaviour, including the characteristics of migrants abroad, from a survey of 200 remittance-receiving households. The study is divided into three parts. The first section gives an introduction to the Egyptian migration experience and background information about the four governorates. The second section briefly discusses the methodology employed for collecting data and conducting the overall research. The third section gives a brief overview (literature review) of some previous research on remittances and investment. The fourth section explores the investment climate in Egypt, focusing on the current policy framework underscoring the efficacious changes that have taken place within the last five years. Importantly, this section draws upon the challenges that potential and current investors face. The succeeding seven sections summarize the primary research findings. Finally, concluding remarks and recommendations are provided based on the research findings.

16 2. Methodology

he research project utilized a participatory sampling, which tends to be biased in favour of informal approach to research, employing a combination networks, the findings of this study cannot be generalized. of qualitative as well as quantitative techniques. Access to certain villages in some governorates was InformationT was gathered through semi-structured met with some obstacles. To counter this, local-level interviews, focus group discussions and survey researchers were employed to gather data and ensure questionnaires. A total of 200 households were surveyed access to the different households within the specific in the governorates of Cairo, Fayoum, Menofeya and communities. Further, as most migrants themselves were Sharkia. These governorates were chosen as they are not present during the interview, some caution should be reported to be the major governorates of origin of taken with regard to interpreting information on certain Egyptian emigrant populations. The respondents were circumstances that are specific to the migrants abroad. selected using the snowball sampling method. For instance, the question regarding the transaction costs of sending money was difficult for the respondents In the survey, household heads were interviewed in each (migrant’s family in Egypt) to answer. There was no way of the four governorates to collect basic socio-economic to verify the figures given on income and remittances data on each household member, including the remitting received, so it cannot be determined how precise they migrant. The questionnaires administered in this project were. This is an inherent methodological limitation of consisted of 91 questions and are composed of five major these types of research for at least two reasons. First, the sections: basic demographic information of household issue of income and expenditure in private households is members, personal migration histories, remittance generally sensitive and requires establishing considerable transfer patterns, allocation of spending on household trust between the researcher and the respondent. Second, goods and investments, and information on non- people cannot always recall or keep receipts that document investment related expenditures. Sixteen trained research their income and expenditure in the reference period. assistants administered the questionnaires in Arabic. The Future research should consider time-series studies that chosen method of administering the questionnaires aimed obtain the consent of households to actually document to maximize answers to the questions, and also to probe income and expenditure in detail on a daily basis over a for deeper narratives from migrant families and, in some specified period of not less than one month, and allowing cases, the migrants themselves. The questionnaire is for repeated visits. This will help to ensure the accuracy attached in Appendix 13 of this report. and reliability of the data collected.

Semi-structured interviews with key informants and stakeholders ranging from investment experts within particular Egyptian ministries, government institutions and non-governmental organizations (NGOs) that work with migrants provided insight to the current investment climate in Egypt. Subsequently, the narratives of migrant families were juxtaposed against the information gathered through policymakers/stakeholders to inform the findings and conclusions of this paper.

The key limitation of the research is its modest sample size. Since the primary sampling method was snowball

A Study on Remittances and Investment Opportunities for Egyptian Migrants 17 3. Brief Literature Review

he term remittance has been defined in several capital and knowledge capital) when starting up an SME ways. Carling (2005) defines remittances in the country of origin. as “transfers of value by emigrants or their descendantsT to their country of origin” (Carling, 2005). Remittances at a Conceptual Level Such transfers include not only those covered by the balance of payment statistics5 but also “social remittances”, that is Traditionally, usage of remittances as a category of “the ideas, behaviours, identities and the social capital the analysis have been conceptually approached in “either/ migrants export to their home communities” (Levitt and or” terms, distinguishing between “productive” and Nyberg-Sorensen, 2004: 8). Also included in the notion “non-productive” forms of investment. While in general, of transfers of value are remittances in kind and transfers productive investment can be classified as an investment made through informal value transfer systems (Levitt and in an asset or activity that produces a positive income Nyberg-Sorensen, 2004; Carling 2005; Adams 1991). flow,6 these notions of clear division lines between the Nevertheless, for the purpose of this study, the following two types of investment and their assumed developmental IOM definition of remittances would be used: impact (or lack of it) have been challenged on several grounds. Migrant remittances are defined broadly as monetary transfers that a migrant makes to the country of origin. To start with, there have been considerable debates In other words, financial flows associated with migration. surrounding the very term “productive investment”, Most of the time, remittances are personal, cash transfers and what exactly it constitutes. Murshid et al. (2002) from a migrant worker or immigrant to a relative in also underscore this argument that the term has not been the country of origin. They can also be funds invested, adequately defined. They also state that some authors deposited or donated by the migrant to the country of consider the use of remittances to construct or repair origin. The definition could possibly be further broadened houses, purchase consumer durables and acquire land to to include in-kind personal transfers and donations (IOM be unproductive, while others argue to the contrary. Glossary). Glystos’ (1993) research in Greece found that to some Remittances can take numerous forms, including personal extent, spending on non-investment related goods such deposits, investments, intra-family transfers, charitable as consumption and housing is beneficial for the local donations made by migrants both as crisis relief and economy as it positively impacts the industries which long-term development contributions, and pension produce these items. Glystos argues, “investment in and social security transfers from destination countries housing is very productive and keeps the multiplier where migrants obtain the right to pensions. While the benefits well within the domestic economy” (1993: 154). focus of this research is on financial remittances, it must In other words, employing labour, purchasing building be acknowledged that the categories and forms that materials and all the other supplies required for house remittances take, in practice, are not easily separable. construction and renovation stimulates consumption and For example, in the case of entrepreneurs, the skills and further demand in the local economy. While housing networks they acquire while abroad act as an asset (social may not be a direct income-producing investment for the

5 This in turn includes : 1. compensation of employees – wages, salaries, other benefits paid to non-resident workers; 2. worker’s remittances – transfers made by migrants who are considered residents in the country where they are employed; 3. migrant’s transfers – assets and liabilities that migrants take with them when they move from one country to another. 6 This definition leads to some difficulties in deciding the tipology of investment . For instance, the purchase of a house could be defined as “non-productive investment”, if the house is bought with the intention to live in it, and a “productive investment” if the house is rented out, thus generating an income.

18 migrant and his/her family, it does have economic benefits the formal channels of transferring remittances reduced at a broader level than simply capital appreciation of costs.7 Similarly, Ghosh’s (2006) study raises important housing over time. issues regarding the limitations that migrants face, such as the lack of formal migrant associations, to aid them in Similarly, in a study of remittances and its investment gearing their remittances into productive mechanisms. characteristics in Guatemala, Adams (2005) maintains that migrant households that are receiving remittances Other research findings raise the notion that productive tend to spend more in the way of “human capital” investment is dependent on the individual characteristics – education, health and housing – and characterizes of the migrant (for example, the migrant’s skill level), these spending choices of the households as a form of the general governance and investment environment in investment. Adams’ analysis is similar to that of Glystos. the area where the migrant household lives, and how He claims that expenditures on housing represent a form this investment climate is perceived by the migrant of investment for the migrant; at the same time, it boosts household (Adams, 1991b, 2004, 2005; McCormick and the local economy through increased demand. This in Wahba, 2004; Ghosh, 2006). McCormick and Wahba turn has other positive developmental impacts, such as (2001), in their study of Egyptian migration, found that the creation of new employment opportunities in the local illiterate migrants tended to rely on savings as a force to economy for both skilled and unskilled workers. drive investment endeavours at home, whereas literate migrants’ investment opportunities were inspired by Other scholars, such as Levitt and Nyberg-Sorensen their time spent abroad, owing to their foreign work (2004) argue that expenditures on education and health experience and acquired skills. Two other notable studies care should be seen as an investment in the human capital on Egyptian migrants were done by Arif and Irfan (1997) of the country. Today’s children are tomorrow’s future and Ilahi (1999). Both these studies revealed that the labour force. They also claim that a simple increase in experience of transnational migration indeed affects a the level of consumption by poorer households is often migrant’s life-cycle and his/her occupational behaviour equivalent to poverty alleviation, which is in itself a (Ilahi, 1999: 184) as well as occupational mobility (Arif developmental goal. and Irfan, 1997: 2). Similarly, Wahba’s (2004) evidence suggests that the experience of work abroad plays an Remittance Investment and the Role of important role in migrants’ entrepreneurship and their Policy-Making investment decision through two different channels – overcoming credit constraints and the accumulation of The second key aspect of the debate concerning remittance human capital. usage is more policy-oriented. It deals with the actual opportunities and barriers to the productive investment Policies in the country of origin can play an important of remittances. role in ensuring that the migrants view the investment environment in their country as safe and sound. In relation A recent empirical study (IOM, 2005a) surveyed to the domestic investment environment, Reichert’s (1993) 312,000 remittance-receiving households that owned a exploration of six villages in the Egyptian countryside productive unit in Guatemala and was concerned with offers a good starting point. Reichert (1993) argued that how remittances stimulated the growth of SMEs amidst while unskilled workers are not entrepreneurs per se, they the absence of microfinance institutions and microcredit could benefit from investment possibilities if they have programmes. The study found a link between the methods access to proper supportive facilities, as well as economic of remittance transfer and their usage, concluding that environments advantageous to SME growth. Furthermore, remittances would further shape productive investment if Reichert’s study explains that migrants in rural villages

7 IOM Policy Paper: Working Notebooks on Migration, 2005b.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 19 tend not to invest in SMEs because of the capital required and the difficulties faced in securing funding for such projects. The study argued that underinvestment is in part caused by the lack of government initiatives to involve return migrants and their savings in a systematic approach for fostering economic and social development in the countryside (Reichert, 1993).

Exploring the issue of the importance of the perception of the safety and security of the investment environment, Adams (2005) found that, of those receiving remittances, a large percentage of them invested in land because it was seen as a good investment, i.e. an investment with limited risk exposure and a more predictable rate of return. For peasant migrants, land is a less risky endeavour because it usually tends to appreciate in value and keeps up with the changing rate of inflation (Adams, 1991b).

20 4. Rules, Regulations and Policies Governing Establishing Businesses in Egypt with Special Focus on SMEs 8

his section will detail the specificities of the financed by SFD. Hence, the main investment law in Egypt Egyptian laws that govern the investment did not discriminate explicitly against SMEs or projects climate in Egypt. Companies in Egypt must, in with low capital. Nevertheless, the law did not provide principle,T be formed under one of two laws --- the Code any incentives or special treatment towards SMEs. of Commerce 17/1999 for partnerships or the Companies Law 159/1981 for corporations (joint stock companies The Investment Incentives Law No. 8 1997 was extensively or limited liability companies). Furthermore, the activity amended in 2005 by Law 94/2005, in conformance with of the company determines whether it is subject to the the new income tax law. The preferences and incentives Investment Incentives and Guarantees Law 8/1997 that were previously offered to new investors in priority and its amendments. Thus, to say that a company is sectors, such as housing, transportation, petroleum, an Investment Law company means that – in terms of and computer software, were eliminated. However, the activity – it is formed under the provisions of Law 8/1997 incentives provided by Law 8 for agricultural activities (or preceding investment laws if the company has been including reclamation, cultivation, irrigation, animal established before this law was enacted). Law 3/1998 breeding, bee-hiving and fish farming were not removed introduced some amendments to the existing Companies by Income Tax Law 91/2005 (Article 41). Article 42 of Law 159/1981 allowing automatic registration of a the new tax law (Law 91/2005) ensured also that the company upon presenting an application to the Companies profits of projects financed by SFD will be subject to Department, which was previously a division in the a five-year tax holiday (executive regulations of Law Ministry of Economy and Foreign Trade, but is now under 91 of 2005). Law 94 of 2005 amended the Investment the umbrella of GAFI (Handoussa et al., 2003). Incentives Law and made companies incorporated under the Investment Incentives Law subject to the relatively Investment Law (8/1997) and its simpler incorporation provisions of the Companies Law Amendments 3 1998.

This law and its amendments is the main law governing It is worth pointing out that there are three types of special investment activities in Egypt. Law 8/1997 which used zones in Egypt, namely free zones, economic zones and to provide tax exemptions (cancelled by the tax law in industrial zones. Free zones follow Law 8/1997 and 2005) did not discriminate against SMEs. In fact, the law envisage the possibility of establishing a firm in public treated all legal forms of a corporation equally, without zones (established by the government and involve several any differentiation based on size. Moreover, neither the activities) or private free zones (established by private law nor its executive regulations favoured large sizes sector for a specific activity). Normally, firms in free of capital. The 16 (plus) fields to which this law applies zones are exempted from taxes and tariffs, however, their include areas where SMEs are likely to be active, for products are not considered to be of Egyptian origin. instance, poultry, fish production, as well as projects Economic zones follow Law 83/2002. Firms established

8 This section has been written by Ahmed Farouk Ghoneim, Associate Professor of Economics, Faculty of Economics and Political Science, Cairo University. Email address: aghoneim@ gmx.de. The author would like to thank Mr. Ahmed Rizq for excellent research assistance.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 21 in economic zones are granted Egyptian origin and new cities for small and micro enterprises. In addition to enjoy expedited customs tariffs and tax measures, but such advantages, a Prime Ministerial decree allocates 10 are not exempted from them. Industrial zones are per cent of government procurement to SMEs. clusters of industries and enjoy better facilities regarding infrastructure, but there exist no specific laws for them. Tax Laws

Companies Law 159 of 1981 (Amended In 2005, the Egyptian parliament approved Law 91/2005. by Law 3/1998) The law lowered the corporate profit tax rate from 32 per cent and 40 per cent for firms working in the fields This law applies to domestic and foreign investment of services and manufacturing, respectively, to a flat in sectors not covered by the Investment Incentives tax rate of 20 per cent regardless of the size of the firm. Law, whether shareholder, joint stock, limited liability Tax holidays and exemptions were eliminated and the companies, representative offices, or branch offices. withholding tax on interest and royalties was reduced The law permits automatic company registration upon to a 20 per cent flat rate. The law included provisions presentation of an application to GAFI, with some to expand the tax base, including incentives aimed at exceptions. encouraging individuals and companies in the informal sector to legalize their status. Law 91/2005 eliminated Bankruptcy Law some of the incentives in the Investment Incentive Law, namely all corporate tax exemptions and tax holidays Egypt does not have a bankruptcy law per se, but the that the latter law had authorized for newly established Commercial Code 17 of 1999 includes a chapter on companies. So, while the new law provided significant bankruptcy. The terms of the bankruptcy chapter are tax reductions, it also curtailed some of the benefits given silent or ambiguous on several key issues that are crucial by the previous law. to the reduction of settlement risks. According to the Ministry of Trade and Industry, the GOE is planning to In addition to lower tax rates, tax administration was amend the bankruptcy provisions of Law 17 of 1999, but made much easier and transparent, putting more trust these amendments are still pending. The amendments are on the taxpayer while strengthening the punishment for crucial for enhancing the investment climate for migrants tax evasion. In 2006, the Ministry of Finance continued since they ensure transparency in separating personal to reduce the tax burden by abolishing the tax on check from stakeholder liabilities. In other words, more clarity transactions. The ministry also passed a stamp duty law will help the migrants feel secure about their investment. which lowered the stamp duty rate on a number of services and goods, including advertising, from 36 per cent to 15 SMEs Law (141/2004) per cent.

Law 141/2004 provides a definition of small and micro The sales tax ranges from 5 to 25 per cent, and can reach enterprises using capital and number of employees. up to 45 per cent in limited cases. Every importer is According to Articles 1 and 2 of Law 141/2004, for small required to pay the tax and register for sales tax. Although enterprises, paid capital needs to be above EGP 50,000 like a value added tax (VAT) in many ways, the sales tax and less than EGP 1 million and labour needs to be less is not in fact a full VAT. Manufacturers suffer from the than 50, whereas for micro enterprises, paid capital needs imposition of sales tax on the capital goods they use, and to be less than EGP 50,000. Law 141/2004 assigned despite the fact that this has been raised several times, the SFD as the central agency for small and micro the GOE did not respond to their demands by abolishing enterprises in terms of providing financial support as well sales tax on capital goods. It has been mentioned that the as facilitating their operations in ways such as startup, GOE is intending to replace the sales tax with VAT, but functioning, licensing, etc. The SME law also allocates still this has not yet been achieved. Issues that can be 10 per cent of land in industrial zones, tourist zones and considered as double taxation from investors’ point of

22 view can have negative impacts on investment decisions importers be Egyptian nationals and fulfil a number in many sectors as it reduces the profitability of projects. of other conditions, including financial reliability and Moreover, the pending status of changing the sales tax to the presentation of a proven record of past commercial VAT delays the market entry of investors who are waiting activities. When registering, importers must also provide for these changes in the laws to concretize. details of the products they intend to import. Importers must pay for imports through a bank operating in Egypt. Customs Laws and Regulations 4.1 Policies adopted by the Government As for customs laws and regulations, several reforms of Egypt to enhance business environment were undertaken. Tariff rates were cut unilaterally (i.e. not because of the commitments made at the World Trade and SMEs Organization or Regional Trade Agreements) in 2004, 2006, 2007, 2008, and 2009, substantially bringing down Investment Policies rates to an average weighted rate of less than 6.9 per cent. In addition, the engagement of Egypt in several regional Over the last few years, and particularly since 2004, trade agreements with Arab countries, the EU, Turkey and several major economic reforms have been undertaken the Common Market for East and South African countries by the existing cabinet to make the environment more implied duty-free access for a large number of imports conducive to business. In terms of investment procedures, and facilitated increased market access for Egyptian several reforms were undertaken to attract businesses, goods in these markets. Moreover, customs administration including the reduction of capital requirement for starting drastically improved in recent years. For instance, in a new business by 98 per cent from EGP 50,000 (815% 2005, exporting a container from the port of Alexandria of per capita income) to EGP 1,000 (16% of per capita would have required, on average, eight documents, 27 income) following an amendment of the Company days and USD 1,014. Since 2008, exporting this same Law (159/1981) (World Bank, 2009). Moreover, the container has required, on average, six documents, 15 procedures were simplified, along with reducing the days days and USD 714. This has enormously benefited needed to start a new business. The process that took over Egyptian businesses. During the 2004 tariff reform, the a period of 43 days, included 13 steps and cost 63 per cent government abolished service fees (ranging from 1% to of income per capita in 2004 was reduced to nine days, 4%) and import surcharges associated with imports, along seven steps and required only 28.6 per cent of income per with reducing the number of ad valorem tariff bands from capita in 2007. 27 to 6 (World Bank, 2009). Such changes have acted positively to improve the investment climate in Egypt Moreover, the adoption of the one-stop-shop model by as well as expand the export opportunities for Egyptian GAFI further helped in lessening the number of days businesses. needed to start a new business from 10 to 7 days. The one- stop-shop brings together all the government ministries The main legislations relating to international trade is needed for establishing a new business and provides after- the Customs Law 66/1963 (amended by Laws 88/1976, care services for existing companies. This shop reportedly 75/1980 and 158/1997 respectively), and Law 118/1975 processes approvals for new investments within 72 hours, on Import and Export (known together with its executive on average. It also simplified registration procedures by regulations as the Import and Export Regulations). making it possible for entrepreneurs (once registered) to file all documentation at this one-stop shop –including Moreover, in accordance with Law 121/1982, all tax registration (for both income and sales taxes) and persons or companies importing goods into Egypt must chamber of commerce registration. The entrepreneur register with the General Organization for Export and pays all fees at the bank counter, notarizes the contract Import Control within the Ministry of Foreign Trade at the notary counter and returns the following day to and Industry. The Law also requires that all registered pick up the final registration documents. Furthermore,

A Study on Remittances and Investment Opportunities for Egyptian Migrants 23 publication can be done immediately at the registry for a Despite the policies undertaken by the GOE to enhance much lower fee. The approval system is computerized and the business environment, a number of problems still in some instances, regulations enable a company to begin prevail which could have significant impacts on SMEs. operating pending security clearance. While not a legal These are discussed in detail below: requirement, in practice, all proposed foreign investments are scrutinized by the security services, which has caused - The most significant obstacles are the procedures for significant delays in the approval process in the past. land acquisition, obtaining building permit, getting access Figure 4 shows the normal procedures for starting a to utilities, and finally, obtaining an operating license. manufacturing business, which has been much simplified in terms of time and cost by GAFI’s one-stop shop. - Although GOE has taken several positive steps towards reducing many costs regarding setting up new businesses, Although, the one-stop-shop model is not active in all the there are still some arbitrary fees that need to be paid to governorates, it has been spreading in other governorates, obtain different approvals. These fees create extra costs including Alexandria, Assiut and Ismailia. The spread for investors, particularly small-scale investors. of one-stop shops implies that local entrepreneurs do not need to go to Cairo for completing the paperwork - Long waiting times to obtain security clearance for for starting their new businesses. It is worth noting that foreign partners involved in the business ventures delay Egypt is close to having one of the best world practices the process of starting new businesses. in this regard, falling only behind OECD countries, where it takes six days to start new businesses. However, - Investors establishing their enterprises in governorates despite such improvements, still some delays and extra instead of industrial cities are faced with different costs are associated with obtaining licenses from certain procedures and requirements for land allocation and agencies. For example, for manufacturing activities, the acquisition than those imposed by the New Communities firm needs to obtain operating licenses from the Industrial Authority. Development Authority in Cairo, which can cause delays for business units not based in Cairo. - The price of land is overvalued, especially in the new industrial cities which have the necessary infrastructure Other decrees, such as Decree No. 719 for 2007 by the (Handoussa et al., 2003). Ministries of Trade and Industry and Finance, provide further incentives for industrial projects in the governorates - A lot of micro and small enterprises prefer to refrain from of Upper Egypt. Decree 719 provides the investors with an registering themselves with the Income Tax Authority. incentive of EGP 15,000 for each job opportunity created This deprives them of many services and minimizes their by their project, given that their investment costs for the growth opportunities, since they are not recognized as project exceed EGP 15 million. Although helpful for part of the formal sector as long as they are not registered. large-scale investors, this decree implicitly discriminates In this regard, a new law is being discussed to raise the against SMEs, where many returnee migrants might be value of registration in the Sales Tax Department for interested in investing. enterprises with a capital of more than EGP 500,000. If that law is adopted, SMEs will be exempted from paying In an attempt to enhance production and quality, the such registration fees. However, at the time of drafting of Industrial Modernization Center (IMC) provides technical this report, the law has not been adopted. support and training. Nevertheless, its activities remain biased towards large enterprises. To overcome this biased - The system of bankruptcy in Egypt is inefficient and attitude towards large enterprises, the IMC established ten costly in terms of time and money. On average, it takes business incubation centres, in addition to programmes four years to be able to announce bankruptcy in Egypt and specially designed for industrial clusters where SMEs the entire cost of the bankruptcy process represents about have more chances to benefit. 18 per cent of the bankruptcy estate (Helmy, 2005). Such

24 Figure 4: The General Framework for Establishing Manufacturing Enterprises

1. Finalize all needed documents 2. Legal revision of the documents at GAFI. 3. Getting security approval on foreign partners (if any) Legal Requirements for 4. Contract Registration (Lawyer’s Syndicate) Establishment and Registration* 5. Notarize company contract 6. Commercial Registry 7. Tax Registration (General Tax and Sales Tax) 8. Social Insurance Registration. 9. Approval of the General Organization for Industrialization and Environment Agency. 10. Publish articles of incorporation

1. Get preliminary approval Land Acquisition 2. City Council to approve the architectural design (or relevant authority) 3. Soil analysis report

1. Approval of Imported Equipment List from GAFI Construction and 2. Building permit issuance Equipment 3. Access to utilities (water, electricity, natural gas, waste water, and telephones)

1. Identify operation start-up date (GAFI Committee) 2. Operating License Issuance - Housing/Health Directorates - Fighting and Civil Defense Operation Start-Up Department - New Communities Authority - General Organization for Standardization - Federation of Egyptian Industries - Industrial Development Authority 3. Industrial Register

Source: Handoussa et al., 2003.

* Required Documents: Incorporation documents including incorporation request and the legal form of the Company contract. Power of attorney in case of authorization to carry out procedures on behalf of investor. Security intelligence form in case of having foreign partners. Certificate of uniqueness of company name. Bank deposit certificate of 10% of initial capital for joint stock companies and 100% for limited liability companies. Preliminary approval of the New Communities Authority for land allocation (25% of total land value must be deposited in advance.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 25 inefficient bankruptcy system has negative impact on the measures had the expected result of an increase in investors’ security, thus, deterring them from undertaking remittance inflows through formal channels. Part of the investments. reluctance of migrants to use such options was the lack of trust among migrants in governmental activities and - There are overlaps in the duties of different institutional fear of delays and bureaucracy. None of these policies led bodies such as GAFI (affiliated with the Ministry of to significant growth of access to remittances by official Investment), Industrial Development Authority (IDA) and sources (Roman, 2006). In June 2001, the Ministry of IMC (affiliated with the Ministry of Trade and Industry), Manpower and Emigration requested IOM to set up a and SFD which falls directly under the Cabinet of Prime project financed by the Italian Government to develop an Minister. Moreover, there still prevails a plurality of Integrated Migration Information System (IMIS) between governing laws, regulations and decrees which, in many Italy and Egypt. The objectives of this project included, cases, are contradictory, outdated and/or overlapping. inter alia, the channelling of human and financial capital There needs to be a clearer division of responsibilities resulting from migration in order to benefit the economic among the different government institutional bodies put development of Egypt. The IMIS has helped create a set in place to enhance investment. Furthermore, laws need to of interactive websites targeted at the Egyptian diaspora address the needs of the investors and should be uniform communities, which helped in undertaking better policies in nature. towards this community and also helped the Egyptian diaspora to trace social and economic developments 4.2 Remittances, Banks and Finance in Egypt. However, there are still no special facilities available to these migrants for investing their remittances Regulations (savings) while they are abroad or once they return home. The rules and regulations dealing with remittances have undergone several changes. The GOE in the 1960s used Banking and Channels of Remittance to ask Egyptian emigrants to repatriate part of their Transfer earnings abroad to the government (whereby migrants had to transfer 25% of their income depending on the The respondents of this survey revealed that neither banks size of their households), a policy which proved to be nor the SFD in Egypt have special, tailored products for unsuccessful. The exchange rate system was reformed by migrants. It is true that in early 2000, one bank tried to the end of the 1960s and the beginning of the 1970s to enhance its remittance inflows by offering immediate encourage the inflow of remittances and the government transfer services with no fees for migrants. However, the also started issuing special bonds for emigrants to attract project failed as the bank realized that migrants do not their remittances. For example, during those years, Egypt leave the money in the bank, thus, creating losses for the adopted a fixed exchange rate system but allowed specific bank. The two largest public banks in Egypt – the Bank rates for migrants to encourage them to transfer their Misr and the National Bank of Egypt – do not have any money to Egypt. The government changed its policy in the special products solely targeting migrants as potential 1980s and induced migrants to send money to a foreign investors. However, these two banks have agreements currency account in Egypt by offering them favourable with almost 56 exchange bureaus in other Arab countries exchange rates. and have a large number of branches in different parts of Egypt and other Arab countries to facilitate access by Moreover, Article 12 of Law No. 80 of 2002 “Promulgating migrants. During interviews conducted with officials from Anti-Money Laundering Law”, amended by Law No. Bank Misr, it was clear that the bank facilitates remittance 78 of 2003, states that travellers shall still be entitled to transfers by lowering fees to beneficiaries (recipients) of carry foreign currency into or out of the country under Hewalat (cash transfers). Bank Misr charges a flat rate the law, provided that upon arrival they declare amounts of USD 2 regardless of the amount transferred, along exceeding USD 20,000, or their equivalent. None of with an additional USD 2 per thousand dollars received

26 with a minimum of USD 2 and a maximum of USD 50. a range of interbank payment products, including salary The USD 2 charge is abolished when the recipient and pension payments, bill payments, money orders and receives the money in EGP. However, there are charges cash withdrawals. The introduction of these products will imposed by either the sending bank, the exchange bureau increase the electronic (Giro) money flows and create a or Money Transfer Offices (MTO). Bank Misr and the multiplier effect in Egypt. It is expected that in the next National Bank of Egypt have introduced a new system of ten years, at least 20 million Egyptian citizens will use cards (similar to ATM cards) whereby migrants abroad this infrastructure. Households receiving remittances are can deposit their transfers at the exchange bureaus or a core target group and will be encouraged to open Giro cooperating banks using their bank card and the recipients accounts at local banks. (in Egypt) can withdraw the money by using another similar card. Some existing banks have special programmes for SMEs. In principle, there are around 15 banks which have As for remittances or any other international transfers, special programmes, but in practice only five banks are private banks have different fee structures. The fees active. Banks offer different services to SMEs, including charged by banks (for example, HSBC Bank) for such business Internet services, tailored account services and transactions can vary substantially, but are usually around call centres catered for the needs of SMEs. The banks USD 3 per thousand with lower and upper limits of mentioned in interviews by the respondents do not target USD 5 and USD 100, respectively. Arab Bank charges start-up businesses. They target established firms and a flat rate of USD 2 if the sender transmits money from provide a lot of services, including concessional loans. another Arab Bank branch. Although in reality these services are targeted towards migrants, the banks do not Microfinance specifically brand or name products/services as products for migrants. In Egypt, the microfinance sector includes 900,000 clients. However, their financial demands are not fully covered The Egyptian Postal Service has developed a financial due to a variety of reasons, including their inability to service through which migrants can send money to a meet potential demand for loans with the existing supply. specific person using their bank accounts abroad and the The organizations that provide microfinancing in Egypt beneficiary can cash it in EGP by going to the Egyptian include business associations with the help of the SFD, post office against a fee. Moreover, Egypt Post provides specific programmes by banks and international donors a variety of remittance services where migrants can pay such as the United States Agency for International government entities when abroad and can have remittances Development (USAID). The main challenges facing transferred electronically.9 banks in responding to the needs of microfinance include the difficulties of identifying markets to be targeted by Other initiatives, such as a consortium of Bank Misr SMEs, and a lack of responsive systems to cater for the (the largest public bank), Egypt Post, Commercial special needs, products and expectations of SMEs (Bore, International Bank (the largest private bank) and a 2008). payment system expert organization (Inclusion Group) is currently implementing a payment infrastructure in In 2007, NILEX, a new stock exchange for SMEs, was Egypt called the Giro-Nil. The company has launched established. NILEX is the first of its kind in the Middle

9 A postal remittance is a financial service to transfer funds from one person to another using a postal document. It has several types as described below: a) Internal remittances (remittances of the public): These are remittances sent by one person to another person within the Republic. These internal remittances are further classified into two types – withdrawn and cashed. b) Governmental remittances: These are remittances sent by individuals to government bodies as fees for a particular service through post offices without having to physically go to the government office directly. They are called withdrawn governmental remittances. c) Electronic remittances (immediate remittances): This is a service through which customers can send money within a short time period to others. This service is carried out electronically. d) Cashed external remittances: These are received by individuals in Egypt. These are sent in foreign currency and are cashed to beneficiaries in EGP from post offices against a specified fee paid in EGP. e) Cashed remittances in residence: This is a modern service which is provided for customers who wish to opt for it against an additional fee. f) Expired remittances: They are remittances which are not received by their specified consignees within two months. These remittances can be cashed by special procedures and they are accrued to the authority after five years.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 27 East region and it aims primarily to provide access for change the attitude of migrants and encourage them to SMEs to finances which cannot be registered, due to their invest in Egypt. Finally, Egyptian migrants returning to size, in the normal Egyptian stock exchange. As a result, Egypt might not be aware of the recent changes that have NILEX helps SMEs to develop and grow by providing taken place in their country while they were working new means of financing (El Serafy, 2008). In fact, NILEX abroad. Thus, they might not factor in these incentives can be viewed as a pooling scheme helping SMEs to better when deciding how to best channel their remittances and access credit. Furthermore, the SFD and the Ministry of savings. Investment, through the new NILEX, have developed many programmes for SMEs, which could have an impact on stimulating migrants to utilize their savings in productive projects.

This short review identifies that access to microfinance is a problem facing SMEs in Egypt, but ongoing efforts identify that this problem of access to finance is being solved through the active engagement of banks and the establishment of NILEX.

4.3 Reasons for weak channelling of remittances into productive investments

Neither a weak business environment nor the lack of sophisticated financial infrastructure can be fully blamed for the weak channelling of remittances through the official banking system and the lack of use of such remittances in productive investments. In the case of Egypt, until 2004, business environments were not conducive and the banking sector was not highly sophisticated. However, things have positively changed due to several policy reforms and new initiatives as discussed earlier. This does not imply that remittances are now expected to be automatically channelled through the banking system into productive investments. Social, cultural, and political factors that act as obstacles are still present.

On the economic side, the new real estate tax (Law 196/2008), which is expected to be implemented in January 2010, is expected to reduce the hyper demand on real estate and could have an impact on diverting remittances into alternative investment avenues, though its effects are not likely to materialize in the short run. Moreover, the positive changes that have taken place in terms of the business environment and the banking system need a bit more time to exhibit their effects to the migrant community. These changes are expected to gradually

28 5. Profile of Remitting Migrants

s mentioned earlier, Egyptian emigration is migrants in the study sample was 37 years (N=197).10 essentially a male phenomenon (Wahba, 2004; Migrants referred to in this sample were aged between 15 Nassar, 2008). Almost all migrants (91%) from and 70 years. The median age of migrants was 35 years. Athe households represented in this study sample were The table below provides a better breakdown of the age male. Family members reported having a migrant relative structure of the migrants. abroad who is as young as 15 years. The average age of

Table 2: Age of migrant

Valid Cumulative Age of Migrant Frequency Percentage Percentage Percentage

*Valid <20 4 2.0 2.0 2.0

21-25 14 7.0 7.1 9.1

26-30 49 24.5 24.9 34.0

31-35 34 17.0 17.3 51.3

36-40 31 15.5 15.7 67.0

41-45 20 10.0 10.2 77.2

46-50 20 10.0 10.2 87.3

51-55 16 8.0 8.1 95.4

56-60 6 3.0 3.0 98.5

61-65 1 0.5 0.5 99.0

66-70 2 1.0 1.0 100.0

Total 197 98.5 100.0

**Missing System 3 1.5

Total 200 100.0

*Valid refers to the number of people in the sample who answered the question. **Missing system refers to those in the sample who did not answer the question.

10 N refers the number of respondents who answered the particular question referred to. As the reader will see, whenever results are reported in this study, it is usually followed with “N”, representing the number of respondents who answered that particular question.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 29 Overall, the education levels of the migrants in this survey from Cairo completed bachelor’s degrees, whereas only were high, with 59 per cent having completed university 52 per cent of migrants from other governorates attained degrees.11 It is interesting to note that the proportion of this level. Similarly, among those who received vocational university graduates within the entire Egyptian population education, 15 per cent are from other governorates, while is only around 10 per cent (CAPMAS, 2006 Census). only 2 per cent are from Cairo. Additionally, only 1 per Drawing on the Egypt Labour Marker Panel Survey of cent of migrants from other governorates completed their 2006, Wahba (2007) shows that around 20 per cent of the primary education, while those in Cairo continued their Egyptian workforce has post-secondary qualifications. education beyond primary education. Finally, less than 1 With regard to this study sample, migrants, on average, are per cent of the migrants in this study sample are reported more educated (with 27 per cent having post-secondary to be illiterate and they all belong to governorates other education) than both the overall Egyptian population as than Cairo. well as those who are in the Egyptian workforce (Wahba, 2007a). While the selectivity of migration results in Figure 6: Educational level of migrants in the four migrants who are better educated than the average governorates population, the bias in this study sample is mainly due to the use of the snowball sampling technique, which led to the inclusion and therefore interview of more highly educated migrant-sending households.

Figure 5: Classification of education of migrants from the study population

The largest proportion of migrants appears to have left Egypt when they came across an opportunity to work abroad. When asked why their family members left Egypt, 25 per cent of respondents stated that s/he had obtained a contract of employment abroad. Lack of suitable employment opportunities (20%) in Egypt was also cited as a primary reason for emigration. The responses further revealed that various financial constraints and motivations to improve living standards were among other crucial factors causing emigration. To be precise, 14 per cent of Note: Each category includes both partial and completed levels. the study respondents reported the intention to improve the standard of living of the household as the main When compared, the levels of education attained by cause of emigration. Similarly, 11 per cent highlighted migrants from Cairo were higher than those attained by financial constraints and 4 per cent highlighted the need migrants from other governorates. For instance, 6 per to raise money to pay for marriage costs as reasons for cent of the migrants from Cairo, versus 3 per cent of the emigration.12 Notably, only 1 per cent of migrants left migrants from other governorates, completed their post- with the intention to save money to start an investment graduate studies. Furthermore, 65 per cent of migrants project. Importantly, for most migrants, the current

11 Fourteen per cent had completed their secondary education and 12 per cent had completed their secondary vocational education. The remaining 15 per cent included those who had some postgraduate education (2%), some college education (6%), completed some preparatory education (4%), primary education (1%) and some secondary schooling (2%). 12 The remaining 24 per cent of explanations for emigration included travelling with a spouse (4%), joining a relative or a friend (5%), going to work for the same employer but in a different country (3%), desire to travel (2%), and in some cases, going on a pilgrimage (less than 1%), leaving a marriage (less than 1%) or buying a visa (4%).

30 stay abroad was their first overseas work experience. The large majority (81%) of migrants in the sample Approximately, 81 per cent of respondents reported that resided in countries in the Arabian Gulf – almost half the migrant from their family had no previous migration (47 per cent) lived in KSA, 12 per cent in UAE, 11 per experience. Of those who had migrated previously (19%), cent in Kuwait, 7 per cent in Qatar, 3 per cent in Oman some had travelled abroad up to nine times.13 The bulk of and 1 per cent in Bahrain. Countries in the Middle East the migrants (77%) in this sample was reported to have and North Africa (MENA) region account for a further left Egypt in the last decade – between the years 1999 and 10 per cent of the migrant destinations.15 A further 2 per 2009. For a breakdown of years of reported absence from cent were reported to reside in the US and another 8 per Egypt, please see Appendix 2. cent, in European countries.16 Figure 7 below provides a complete breakdown of migrants’ country of current In all the cases, the decision to migrate was not a sudden residence. one. Prospective migrants needed a considerable amount of time to meet the administrative requirements before Figure 7: Current country of residence of migrant (N= their departure. Some respondents recalled that, on 198) average, it took almost seven months for the migrant to prepare to leave Egypt. The median estimated time spent by the migrant arranging for his/her emigration from Egypt was 3.5 months. The minimum amount of time needed in making necessary administrative arrangements was one month and the maximum was two years. Given that the large majority of migrants in the sample had families, the decision of the husbands and fathers to emigrate needed considerable time and discussion even before the search for jobs abroad was undertaken. As Taylor et al. (1999) noted, migration for economic reasons is more likely to be a collective family decision, rather than an individual one. This issue, however, was not specifically addressed When comparing the choice of destinations of Egyptian in this study. migrants who came from the capital (Cairo) versus those who came from the other three governorates, a slight Overall, almost all the migrants travelled legally, 90 per pattern of preference emerged in the choices of the main cent having obtained a visa to work abroad (N=197). The destination countries. For example, migrants from Cairo current legal status of the migrant was noted as irregular appeared to be more represented in Kuwait and UAE, by only 4 per cent of respondents. The majority of compared to those from other governorates. Conversely, respondents (68%) stated that their family member had migrants from other governorates were more represented more or less permanent residency status in the destination in KSA, Libya, Qatar, Bahrain and Oman. country, while 28 per cent had temporary status and 4 per cent were irregular (N=198). Over 70 per cent of It is not clear to what extent the choice of destination the migrants in KSA, Kuwait and UAE were reported as countries may have been linked to the occupational having permanent residency status (migrants in these three status opportunities opened to prospective migrants in countries represented almost 71% of the study sample).14 those countries. Overall, the proportion of managers and As discussed previously, in the countries of the Arabian professionals within the migrant community in Cairo Gulf, labour migrants are usually awarded temporary (63%) was higher than the other three governorates migration status in accordance with the kefala system. combined (44%). Approximately, 42 per cent of managers

13 For overview of responses regarding destination countries of prior migration experience, please refer to Appendix 1. 14 Thus, introducing a bias in the results. The findings of this study need to be interpreted keeping these sample biases in mind. 15 Libya (5%), Yemen (1%), Algeria (1%) and Jordan (3%). 16 Italy (3%), France (1%), Germany (1%), Greece (1%), Netherlands (1%) and Spain.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 31 and professionals from Cairo went to KSA and 23 per In the overall composition of occupations held abroad cent to Kuwait. Thus, around 65 per cent of these high- by Egyptian migrants, professionals (28% accountants, level workers from Cairo gravitated to KSA and Kuwait 28% teachers and 22% engineers) represented the largest combined. However, 63 per cent of professionals from all percentage of occupations (44%). A further 13 per cent the other three governorates combined went to KSA and worked as craft and related trade workers (mainly in Kuwait. Technicians and other associated professionals construction) and 10 per cent in services and sales. Other almost all came from governorates other than Cairo. types of occupations included technicians and associated Approximately, 71 per cent of these category migrants professionals (9%), such as medical and air conditioning resided in KSA and in Kuwait. technicians, sports and fitness instructors, drivers of various kinds (6%) and low-skilled labourers (6%) (See Table 3: below for detailed composition).

Table 3: Occupation of migrants in destination country

Valid Frequency Percentage Cumulative percentage Valid Managers 9 4.5 4.6 4.6

Professionals 86 43.0 43.9 48.5 Technicians and associate professional 17 8.5 8.7 57.1

Clerical support workers 10 5.0 5.1 62.2

Service and sales Workers 19 9.5 9.7 71.9 Skilled agricultural forestry fishery 5 2.5 2.6 74.5 workers Craft and related trades workers 26 13.0 13.3 87.8 Plant and machine operators and 12 6.0 6.1 93.9 assemblers Elementary occupations 12 6.0 6.1 100.0 Total 196 98.0 100.0 Missing System 4 2.0 Total 200 100.0

Note: The occupations listed are based on International Labour Organization (ILO) occupational classifications.

In the destination countries, most migrants were working eight obtained positions as professionals; one, as a in the same occupation they had in Egypt prior to manager; six, as technicians; six, as tradesmen in industry departure. About 90 per cent of migrants who worked or agriculture; four, in sales; and four, in clerical jobs. as professionals in Egypt were working in the same or Thus, while there was some evidence of downward in similar professions in their country of destination. occupational mobility once some migrants left Egypt, However, in a number of cases, former professionals there was also a substantial number (15%) of migrants were working abroad as labourers, and former teachers, who were able to find work abroad, rather than remaining as drivers, labourers and clerical officers. Interestingly, unemployed at home. however, of the 29 migrants who were unemployed in Egypt prior to migration (around 15% of the sample), By country, among the professionals, 53 per cent resided

32 in KSA, 14 per cent in UAE, 13 per cent in Kuwait to care for and support using remittance income. and 7 per cent in Qatar. In all of the Gulf states, the proportion of migrants (from this study sample) who had Among the 18 female migrants abroad in this sample, professional positions was around 50 per cent. Countries 15 were married with children (between one and three like Libya, Jordan and Italy had higher representations children). Eight out of the 15 married female migrants of tradespeople and labourers; however, the numbers had their children with them, while the children of the in those countries were not so significant in the overall other seven migrants remained in Egypt. However, 12 of sample. the migrants were accompanied by their husbands. The average age of the wives was 32 years and the median Most migrants from the sample had immediate family ties was 30 years (compared with an average of 42 years and in their home country. An overwhelming majority of the median of 36 years for the male migrants in the sample). migrants were married (80%), 5 per cent were engaged All but one left Egypt since the year 2000 and had no and only 1 per cent were divorced. The remaining 14 per previous migration experience. Ten had obtained work cent of the migrants were never married (N=199). The visas prior to departure. Four had migrated because they large majority of migrants (72%) in the sample also had had obtained a contract abroad; one had been transferred children, with two children per family, on average. by the organization she had been employed with in Egypt; one left because of financial difficulties in Egypt; three Figure 8: Marital status of migrants (N=199) left because they were unemployed in Egypt; and the remaining nine left to accompany their husbands. Among the female migrants, three worked as professionals, one was self-employed and 12 others worked as teachers (nine of whom had been teachers in Egypt). All but one sent remittances back home, mostly to their parents and husbands. Thus, although most of the female migrants in the sample did not migrate independently, almost all had professional careers, mostly as teachers, and were able to remit money back to their families in Egypt.

Approximately 81 per cent of married migrant spouses resided in Egypt, while 19 per cent joined the migrant abroad (N=152). Only a minority of their children were residing with them abroad (15%), while the large majority (85%) were living with the migrant’s family in Egypt.

Importantly, of the 109 spouses of migrants who were interviewed, 95 (87%) had children. Of these children (between one and seven children per household), 80 per cent were 18 years of age or less. This gives some indication of the high number of children still financially dependent upon their parent abroad (mainly fathers). It would have been an even higher percentage if those who were older but unmarried were included. This is because in Egypt, it is most likely that they would still be living at home, even if they had independent incomes. Thus, in this sample, the large majority of spouses (mainly wives) of the migrants remaining in Egypt had dependent children

A Study on Remittances and Investment Opportunities for Egyptian Migrants 33 6. Characteristics of Remittances Sent

ore than half (51.5%) of migrant households member returning to Egypt, the largest percentage (43%) received remittances monthly, 22 per cent resided in KSA, followed by Libya (12%) and Kuwait received them every several months, and 25 (8%). Five per cent respondents reported receiving money perM cent received them irregularly. Table 4 gives a detailed through the post office and a further 3 per cent received quantitative explanation. money through Western Union. Lastly, 1 per cent of respondents used a debit card to access their remittances Approximately 62 per cent of the respondents received (N= 237).18 It is important to note that the respondents remittances through bank transfers. The majority (73%) of also reported having received remittances through more those sending remittances from countries in the Arabian than one mechanism. The following table lays out all Gulf seemed to prefer bank transfers as their primary the varying methods used by migrants when sending method of sending money.17 The second most widely used remittances back to Egypt. method of delivering remittances was through informal means, that is, hand delivery by either a trusted friend or a relative who was visiting the migrant household (22%). Of those who sent remittances through a friend or a family

Table 4: Frequency of receiving remittances

Frequency Percentage Valid Percentage Cumulative Percentage

Valid Monthly 103 51.5 52.3 99.5

Every several months 44 22.0 22.3 47.2 Irregularly 43 21.5 21.8 21.8

Annually 5 2.5 2.5 24.4

Every two months 1 0.5 0.5 24.9

When needed 1 0.5 0.5 100.0

Total 197 98.5 100.0 Missing System 3 1.5 Total 200 100.0

17 Eighty per cent of those residing in Oman, 79 per cent of those residing in UAE, 77 per cent of those in Qatar, 70 per cent of those in KSA and 59 per cent of those in Kuwait send their remittances through bank transfers. 18 Over half (65%) of respondents who reported that the migrant from their family visits annually receive remittances through bank transfers. Likewise, most migrants who send remittances through bank transfers (58%) visit Egypt annually. In addition, the majority of migrants who send remittances through a friend or a family member visit the respondent either annually (46%) or twice a year (26%). Over half (63%) of migrants who visit Egypt twice a year send remittances through friends or family members traveling back to Egypt (N= 178).

34 Table 5: Methods used by migrants to send remittances to Egypt

Responses Percentage of Cases Means of Receiving Remittances N Percentage Bank transfer 148 62.4% 74.4% Friend or relative visiting 51 21.5% 25.6% Money transfer services 16 6.8% 8.0% Post office 11 4.6% 5.5% Western Union 7 3.0% 3.5% Debit card 2 0.8% 1.0% Migrantʼs employerʼs Cairo branch office 1 0.4% 0.5% In-person, when visiting 1 0.4% 0.5% Total 237 100.0% 119.1%

The use of primary means of remittance delivery differs to half preferred bank transfers (55%); followed by informal some extent in each governorate. Western Union, the post channels of transfer, namely hand delivery (33%). office and other specialized money transfer services were Transfer via post office was preferred by 6 per cent of used predominantly in Cairo. Approximately 26 per cent the respondents and Western Union, by 2 per cent. The of respondents from Cairo reported the use of such formal remaining 4 per cent stated that they preferred receiving channels as their primary means of receiving remittances, remittances either through the Cairo branch of the compared to only 6 per cent of those from Fayoum, 4 migrant’s company or delivery in person by the migrant per cent from Menofeya and 4 per cent from Sharkia. when he/she visits. Comparatively, banking services were used as the primary means of remittance delivery in the governorates outside The principle reasons for the preferences given by Cairo – 90 per cent in Sharkia, 70 per cent in Menofeya respondents included: safety (27%), convenience and and 48 per cent in Fayoum. In Cairo, 49 per cent of ease (23%), and low or no costs (14%) (N=86) (see Table respondents received remittances primarily through bank 6 below). transfers. The hand-delivery method appeared to be most popular in the Fayoum governorate, where visiting friends and relatives accounted for 46 per cent of the primary means of delivery of remittances. In comparison, hand delivery as a primary means of receiving remittances was cited in 24 per cent of responses from Menofeya, 22 per cent of responses from Cairo and only 6 per cent of responses from Sharkia (please refer to Appendix 3 for a detailed breakdown of the methods used to send money in each governorate).

When asked whether they had any preferences regarding the method of receiving remittances, more than half of the respondents (58%) replied “no” (N= 191). Of those who had a preference and elaborated further, more than

A Study on Remittances and Investment Opportunities for Egyptian Migrants 35 Table 6: Reasons for preferred method of receiving remittances

Responses Percentage of Cases Frequency Percentage Reasons It is safe 29 26.6% 35.4% Low/no cost 15 13.8% 18.3% It is fast 14 12.8% 17.1% Convenience 13 11.9% 15.9% Ease 12 11.0% 14.6% Only feasible option 7 6.4% 8.5% Confidentiality 6 5.5% 7.3% Proximity 4 3.7% 4.9% Habit 3 2.8% 3.7% Avoiding red tape 2 1.8% 2.4% Personal connection 2 1.8% 2.4% Get the migrant’s updates 1 0.9% 1.2% Good customer service 1 0.9% 1.2% Total 109 100.0% 132.9%

Table 7: Currency in which remittances are sent

Responses Percentage of Cases Currency Frequency Percentage EGP 85 42.9% 44.7% USD 55 27.8% 28.9% SAR 27 13.6% 14.2% EUR 16 8.1% 8.4% KWD 7 3.5% 3.7% JD 5 2.5% 2.6% QAR 2 1.0% 1.1% AED 1 0.5% 0.5% Total 198 100.0% 104.2%

36 The largest proportion of respondents (43%) stated that in US dollars (N=50), 66 per cent of migrants opted for the migrants sent remittances to them in EGP. Note that bank transfers, 24 per cent sent money through a friend monetary transfers may be sent from abroad in EGP, or a relative, and the remaining 10 per cent used money converted at the point of dispatch, or they may be sent in transfer services such as Western Union. the sending country’s currency and converted upon receipt. However, the respondents, as remittance recipients, may Around 99 per cent of respondents who received not necessarily be aware of the conversion processes. This remittances in Egyptian pounds reported that the initial might explain the relatively high percentage of households money was also sent (by the migrants) in Egyptian stating that remittances were sent in Egyptian pounds pounds. Similarly, in 92 per cent of the 50 cases where the by the migrant family member. Just above one quarter migrants sent remittances in US dollars, the money was of respondents (28%) reported that the remittances were also received by their households in the same currency. sent in US dollars, while 14 per cent said that remittances Almost 60 per cent of households to which KSA Riyals were sent in KSA Riyals. Other currencies included: Euro were sent stated that they also received money in the same (8%), Kuwaiti Dinars (4%), Qatari Riyals (1%), Jordanian currency. It is interesting to note that most remittances Dinars and UAE Dirhams. sent in US dollars and KSA Riyals remained largely unconverted upon receipt. Nevertheless, as mentioned In cases where the migrants sent Euros (N=16), 38 per earlier, these results need to be interpreted with caution cent were sent through bank transfer, 38 per cent through as many respondents seem to guess the type of currencies a friend or a relative, and the remainder through a debit in which the remittances was originally sent by the card, post office or money transfer services. When sent migrant.

Table 8: Currency in which remittances were received

Responses Percentage of Cases Currency Frequency Percentage EGP 115 57.8% 58.7% USD 52 26.1% 26.5% KSA 14 7.0% 7.1% EUR 10 5.0% 5.1% KWD 4 2.0% 2.0% JD 3 1.5% 1.5% QAR 1 0.5% 0.5% Total 199 100.0% 101.5%

The respondents stated that on average the sender (migrant) the sum received (N= 42). The low number of responses bore higher costs for the transaction than the recipient on this particular question about transaction costs may be (respondent/migrant household) in terms of service fees, due to the lack of knowledge of the respondents at the exchange rates and exchange fees. The average costs of time of interview. Thus, once again, this data needs to be sending remittances to migrant are reported to be 1.5 per interpreted with caution. cent of the remitted sum. The costs of receiving remittances borne by the respondents are reported to be 0.5 per cent of

A Study on Remittances and Investment Opportunities for Egyptian Migrants 37 7. Characteristics of Remittance- Receiving Households

n average, migrant households in Egypt consist Among the 131 female heads of household who were of four members. The average household interviewed, 77 per cent were the wives of migrants in Cairo has four members, while those in abroad; 15 per cent were their mothers; 3 per cent, OMenofeya, Fayoum and Sharkia have four members, on sisters; 2 per cent, daughters; 2 per cent, sisters-in-law; average. Most (67%; N=131) of the remittance-receiving and one per cent, grandmothers. The significance of households were female-headed. the high proportion of female heads of households in relation to changes in intra-family or household dynamics The interviewed heads of households receiving merits a separate analytical study. Nevertheless, some remittances were related to the migrant abroad in various effects are quite apparent. For instance, the wives with ways: spouse (56%), father (20%), mother (11%), brother dependent children must undertake extra responsibilities (6%), sister (2%), son (1%), uncle (1%), sister-in-law of parenting in the absence of the father. Furthermore, the (1%), father-in-law (1%) and grandmother (1%). The responsibilities previously undertaken by the migrant, following pie chart better depicts this information. such as managing finances and dealing with other household logistics would now need to be taken up by Figure 9: Relationship to migrant the new household head (female) along with her previous responsibilities.

To gauge the economic situation of the households and the role that remittances play in the household economy, the proportion of remittances in household income is estimated first, and then the household expenditures19 are assessed against the reported total income of the households. The composition of household income ties up with the reasons given for emigration cited in the previous section, namely, the economic constraints being the push factor behind labour emigration. Remittances sent back home by migrants represent an important source of non-labour household income in all governorates, averaging 43 per cent of total household income across governorates. In When asked about their occupation, the largest percentage Cairo particularly, the remittances represented almost half (31%) of household heads described themselves as of the average income of households (48%). Similarly, housewives, i.e. being out of labour force. The second- in Menofeya, they accounted for 45 per cent of average largest group of respondents (22%) were government household income; in Fayoum, 44 per cent; and in Sharkia, employees holding clerical jobs. Eleven per cent of the 35 per cent. household heads were teachers, 12 per cent of them were retired and 7 per cent held professional jobs. The remaining 15 per cent of respondents were employed in a variety of occupations including blue collar work, college teaching, farming and business. Finally, 2 per cent of the respondents were unemployed (N= 187).

19 As estimated by the household heads.

38 Figure 10: Breakdown of average monthly household income by governorate

Note: EGP 1 equals approximately USD 5.5.

When looking at household expenditures, it is apparent respondents (such as zakat, personal items and gifts that the basic costs of living are substantially higher in for children), when totalled, accounted for 54 per cent Cairo than in other governorates. When combined, average of total household income in Cairo, on average. These spending on essentials, defined here as food, health care, expenses together amounted to more than the reported education, rent and utilities, represents 41 per cent of the income of these households from labour and production. reported average income (inclusive of remittances) of Thus, for these households, remittances seem to be an households in Cairo, 37 per cent in Fayoum, 24 per cent extremely important source of income, making up for the in Menofeya and 18 per cent in Sharkia. difference.

The main household expenses, consisting of essentials (as listed above) and those deemed important by the

Figure 11: Average monthly expenditure items compared to monthly income

Note: The table does not represent total household expenditures but expenditures on selected items. A Study on Remittances and Investment Opportunities for Egyptian Migrants 39 It is further made clear that the households attach great importance to savings, which account for the second major allocation of household income after essentials. Households in Cairo reported saving, on average, 13 per cent of their income (which includes remittances), while households in Menofeya and Sharkia reported saving, on average, up to 18 per cent of their total household income. Households in Fayoum reported saving only 2 per cent of their household income.

Figure 12: Average savings compared to average income

18% 18%

13%

2%

Menofeya Fayoum Cairo Sharkia

40 8. Uses of Remittances Received

s already discussed, remittances form a Figure 13: Remittances as a percentage of total significant proportion of household income in household income all four governorates researched, representing, Aon average, 43 per cent of the total household income (median, 50%) (N= 182).

On average, the recipient households received EGP 2,361 (approximately USD 430) monthly as reported by respondents. The remitted amounts ranged from EGP 110 to 15,000. Note that, although Table 4 indicates that not all households received remittances on a monthly basis, all questions related to income and expenditure amounts have been recorded as being monthly. In instances where remittances were not received monthly, the respondents were asked to calculate an average monthly figure.

Table 9: Amount of remittances received (EGP)

Frequency Percentage Valid Percentage Cumulative Percentage A m o u n t 1-999 52 26.0 26.9 26.9 in EGP 1000-1999 54 27.0 28.0 54.9

2000-2999 34 17.0 17.6 72.5

3000-3999 24 12.0 12.4 85.0

4000-4999 6 3.0 3.1 88.1

5000-5999 11 5.5 5.7 93.8

6000-9999 7 3.5 3.6 97.4

10,000-15,000 5 2.5 2.6 100.0

Total 193 96.5 100.0

Missing System 7 3.5

Total 200 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 41 The median of sums received by all the migrant families Figure 14: Median of remittances for all four interviewed is EGP 1,500. There are, however, notable governorates differences observed when results are broken down by governorate. While respondents from Cairo reported a median remittance income of approximately EGP 3,000, the median remitted sum in Fayoum is only EGP 600, which is consistent with the profile of the migrants from Fayoum having significantly less university education overall and holding occupations that pay less in general. Among the migrants who came from Fayoum, the largest proportion (48%) held skilled or blue-collar jobs, while only 16 per cent worked as professionals. Migrants from Cairo, however, held professional positions in 27 per cent of cases and 29 per cent were skilled labourers.

Table 10: Different uses of remittances

Responses Percentage of Cases Uses of Remittances Frequency Percentage General household expenses 144 34.8% 74.2% Education 64 15.5% 33.0% Health care 49 11.8% 25.3% Savings 40 9.7% 20.6% Family expenses 34 8.2% 17.5% Food 23 5.6% 11.9% Utilities 16 3.9% 8.2% Property investment 16 3.9% 8.2% Personal items 6 1.4% 3.1% Capital investment 6 1.4% 3.1% Emergencies 5 1.2% 2.6% Rent 3 0.7% 1.5% To finance a marriage 3 0.7% 1.5% Investment 2 0.5% 1.0% Nothing specific 2 0.5% 1.0% Insignificant amount 1 0.2% 0.5% Total 414 100.0% 213.4%

20 Hence, oftentimes, it adds up to be more than 100%.

42 When asked how remittances are spent, the respondents Development Report (EHDR) (UNDP, 2005), many provided a plethora of uses (N= 414, multiple responses respondents paid out of pocket to meet even their basic were recorded for many respondents).20 The most frequent health care needs. When asked what kinds of medical answer was that the household uses the remitted money treatment were obtained with the remittances, the for meeting their daily living/essential expenses (29% of respondents listed a wide range of medical procedures all responses). The next most represented category was (N= 117) and overall, 53.2 per cent of respondents used educational expenses (16% of all responses). This was remittances for general medical checkups. closely followed by health care expenditures (12%).21 Finally, more than half of the respondents (51%) used When respondents were asked questions as to whether remittances for the educational expenses of the children remittances were used for specific purposes, more than living in the household (N=197). This corresponds to the half of the respondents informed about prioritizing findings of the EHDR, where it was reported that even low- spending of remittances to address emergencies, obtain income households incur significant costs for education. health care and provide education for their children. In particular, 60 per cent of the Cairo respondents reported For more information on these expenses, please refer to using their remittances for this purpose, followed by 51 Appendices 4, 5 and 6. per cent of respondents from Fayoum, 44 per cent of those from Menofeya and 40 per cent of respondents Notably, 71 per cent of all respondents said that they from Sharkia (see Appendix 9 for more details). The used remitted money for emergencies. Most of these average cost of a school year for a child was said to be emergencies were medical, but also included expenditures EGP 4,504 (N=103, equivalent to approximately USD such as a wedding in the family (Appendix 7 provides 820). Importantly, 74 per cent of those who elaborated more detailed information). Interestingly, 62 per cent of on the chosen type of education stated that they spend respondents did not put away any proportion of remittances the money on private education for the children (N=34). for future emergencies. Half of the respondents (51%) Furthermore, among those who spend more than EGP stated that when an emergency occurs, they directly 4,000 annually on educational expenses, all sent the contact the migrant and ask the migrant to send money to children to private schools. meet that particular unexpected expenditure. On average, EGP 1,231 was saved by those who did put money aside It is important to mention that, contrary to the assumptions for emergencies (N=49). The range was, however, rather in much of the literature on remittances, the receipt of wide, ranging from EGP 5 to 30,000, with a median of remittances did not seem to have a significant impact EGP 800. on the patterns of consumption of imported goods or entertainment among the respondents surveyed for this More than half (61%) of the respondents employed study. remittances to cover health care expenditures (N=198). Again, some variation can be observed in responses among When asked whether their consumption patterns had different governorates. While 80 per cent of respondents changed, i.e., whether they bought more foreign goods from Fayoum used remittances to meet their health care since they started receiving remittances, 88 per cent of needs, a relatively lower proportion of respondents from respondents answered negatively (N=197). Of those who Menofeya (55%), Sharkia (42%) and Cairo (65%) used used the remittances to purchase goods produced abroad, it for similar purposes (for more information, refer to 28 per cent used it to buy electronics; 22 per cent, to buy Appendix 8). clothing; and 22 per cent, to buy imported food.22

Consistent with the findings of the Egypt Human

21 A further 9 per cent of all answers stated that the respondent’s household use the remittances for savings, 7 per cent use it for clothes, 6 per cent use it to purchase food items and 4 per cent use it to pay for utilities. The remaining percentages included emergencies, gifts or settling the migrant’s debt. 22 Further items include home appliances (8%), cell phones (6%) and computers (3%). The remaining 10 per cent represent purchases of miscellaneous items for personal use (N= 36).

A Study on Remittances and Investment Opportunities for Egyptian Migrants 43 Similarly, when asked whether they used remittances noted a sense of guilt or shame when this question arose. towards recreational activities and other similar activities,23 In other words, parents might not have wanted to admit 78 per cent of respondents answered negatively. Of those that they are financially dependent upon their children who did report using their remittances for such activities, abroad, even if they were. 32 per cent stated that they went to restaurants for dinner, 12 per cent included grocery shopping, 10 per cent stated purchasing items for children and a further 10 per cent reported using it for household improvements.24

Recalling that the remittances represented, on average, 43 per cent of the total income of the receiving households and that most respondents report using them on essential items, it is puzzling that 61 per cent of the respondents claimed that if they did not receive remittances, their standard of living would not be affected. Of those who elaborated on their answers (N=67), over half (58%) said that they also had other sources of income, or that the whole amount of remittances went into savings (22%). Further, some reported that the entire remittance amount was fully invested on behalf of the migrant (9%).25 Among the 61 per cent of the respondents who claim that their standards of living would not be affected by non-receipt of remittances, 42 per cent did not view remittances as part of their household income.26 Furthermore, if the remittances constituted 50 per cent or less of the household income, the respondents were more likely to answer that their standard of living would not be affected if the remittances ceased. The discrepancy between the data may also be partly explained by the difficulty of obtaining accurate information on sensitive issues such as income and expenditures at the level of the surveyed households.

Nonetheless, there were also cases where households wholly, or to a large extent, relied upon remittances and still reported that they would not be affected if they did not receive remittances any more. This type of household constituted 10 per cent of those who stated that their standard of living would not be affected. This may be explained by the fact that many heads of households received remittances from their children and interviewers

23 This category referred to things such as going to a restaurant or buying something new for a child, such as toys and sweets,. 24 The remaining 36 per cent spend towards charity (7%), family gatherings (7%), debt repayments (5%) or helping others (5%). 25 The remaining 11 per cent of respondents explained that they regard the remittances as a significant addition, but not indispensable, to their livelihood, or that the remittances are fully invested into real estate. 26 For 22 per cent of the respondents, remittances represented up to one-quarter of household income. For a further 17 per cent of the respondents, remittances constituted between 26 per cent and 50 per cent of total household income. For 9 per cent of respondents, remittances represented between 51 per cent and 75 per cent of household income. For 10 per cent of respondents, remittances constituted between 75 per cent and 100 per cent of total income.

44 9. Household Investment Decision-Making he spending and potential investment of remittances that they are sending home should be spent. remittances is not largely based on unilateral Approximately 66 per cent of respondents also reported decisions made by the migrants abroad. In fact, that they always inform the migrant how the money is onlyT in 11 per cent of cases did the migrant who sent the spent. When asked what kind of advice the migrants give money decided how it was to be used. It appeared mostly regarding the use of money in the household, respondents that the decision-making regarding spending and investing gave multiple answers. The largest proportion of them remittances is a process involving mutual consultation, (25 per cent) was advised to save. A further 23.8 per cent with a great deal of autonomy enjoyed by the heads of was advised to spend the money on daily living expenses, households receiving the remittances. The finding of this 13.8 per cent were told to invest in real estate, and 5 per study is consistent with Khalaf’s (2009) study of Lebanese cent were advised to invest in capital. So, in total, 18.8 wives whose husbands worked abroad. per cent were asked to invest in either capital or land. The following table shows a breakdown of the other forms of Overall, 42 per cent of the respondents revealed that the advice given by the migrants. migrant abroad advises them (not decides) as to how the

Table 11: Migrant’s advice on spending remittances

Responses Advice of Migrants to their Families on the Use Frequency Percentage Percentage of Cases of Remittances Savings 20 25.0% 37.7% General household expenses 19 23.8% 35.8% Property investment 11 13.8% 20.8% Education 5 6.2% 9.4% Family expenses 5 6.2% 9.4% Capital investment 4 5.0% 7.5% Health care 4 5.0% 7.5% To finance a marriage 4 5.0% 7.5% Personal items 2 2.5% 3.8% Emergencies 1 1.2% 1.9% Remittances are an insignificant 1 1.2% 1.9% addition Rent 1 1.2% 1.9% Utilities 1 1.2% 1.9% Zakat 2 2.5% 3.8% Total 80 100.0% 150.9%

A Study on Remittances and Investment Opportunities for Egyptian Migrants 45 In terms of the actual decision-making about spending Figure 15: Investment compared to other household the remittances, 41 per cent of the heads of households expenditures and total household income (in EGP) interviewed reported making the decisions independently. Among the wives of the migrants who acted as heads of the household, 52 per cent said that they made the decisions themselves; 36 per cent said that they made the decisions along with their husbands abroad; and 11 per cent said it was a family decision. Only one of the wives at home said their husbands abroad made all the decisions. It is important to note that the data collected during the research only indicated the decision-making and spending pattern while the migrant is abroad. Thus, it does not give information about whether these decision- making procedures were any different from when the migrants were at home.

When it came to the respondents who were parents of the migrant, 37 per cent said that they made the decisions themselves on how to spend or invest their child’s remittances; 23 per cent said that they made the decisions jointly with their migrant child; 21 per cent said it was the migrant’s decision; and 7 per cent said it was a family decision.

In all governorates, the majority of respondents reported that migrant remittances were not invested. Overall, the proportion of income spent on investment was reported to be low, compared to other household expenditures and total household income.

The following sections of this study will explore both the patterns of investment of the households interviewed, as well as their reasons for relatively low levels of investment.

46 10. How Migrant Households Invest

round 20 per cent (N=40) of the migrants or had children (N=186). migrant families in the survey said that they invest. However, the survey did not find any The age of the investing head of household seems to be Asignificant differences in characteristics between the a factor as well. Among those who invested, 18 per cent migrants who invest and those who do not. There were no belonged to the 21-35 age group, 24 per cent belonged to differences in marital status, age, education, occupation, the 36-50 age group, 33 per cent belonged to the 51-55 or remittances as a proportion of the household income. age group, 13 per cent belonged to the 56-60 age group Some differences, however, are worth mentioning, and 19 per cent belonged to the 61-65 age group. The although because of the relatively small number of migrant investment rate peaked again (33%) for the 66-70 year investors in the sample (40 out of 200), they should not be age group. In general, it seems that the older the heads of seen as indicative of entrepreneurial features. For example, migrant households, the more investment they undertake slightly more investors owned their own homes than non- (with the exception of few older groups as seen above). investors (83% compared to 77%); a higher proportion of investors than non-investors had spent 17 or more Among those who invested, the largest proportion (39%) years abroad (25% compared to 12%); five out of the six invested in real estate, followed by 22 per cent who migrants in Italy were investors; a higher percentage of invested in small private businesses employing fewer than respondents from Cairo invested (38% compared to 22% five people. Eleven per cent of respondents invested in an in all other governorates combined). agricultural activity, 9 per cent invested in stock market/ financial instruments, 6 per cent invested in medium Overall, 20 per cent of all respondents in the sample do private businesses employing fewer than 20 people, 4 per invest some part of their income, which is somewhat cent invested in retail and a further 4 per cent invested closer to the percentage of people who stated that they in transportation activities. The remaining 5 per cent of were advised to invest by the migrant. In Cairo, 31 per respondents includes those who reported participation cent of households receiving remittances invested at least in a group saving scheme as an investment (2%) and part of what they received. In Menofeya and Sharkia, 20 those investing in industrial activities and services (3%, per cent of the remittance-receiving households invested. N=54). Fayoum had the lowest proportion of households that invested (11%). A difference can be observed in the primary investment activity as reported by respondents in different The relationship between household heads and their governorates. In Cairo and Fayoum, small and private migrant counterparts seems to play an important role in businesses were the most represented investment activity investment decisions. More than half (54%) of those who (40% and 60%, respectively). In Menofeya and Sharkia, invested are the spouses of the migrants, followed by the the primary investment activity was reported to be real parents of the migrants (28%). On average, however, estate (50% and 60%, respectively) (N=42). only 20 per cent of all spouses in the sample and 19 per cent of the parents in the sample invested remitted After exploring the investment strategies of different money. Interestingly, of the in-laws and the siblings household heads, it is clear that the spouses and parents of represented in the sample, a third (33%) reported to be migrants preferred investing in real estate (43% and 36% investing the remittances (for details, see Appendix 10). respectively). The siblings who head migrant households Having children also seems to play a role in the decision appear to almost equally prefer investing in real estate, to invest. Twenty-nine per cent of respondents without small private business and medium private business. children invested, compared to 20 per cent of those who

A Study on Remittances and Investment Opportunities for Egyptian Migrants 47 When asked why they chose their particular kind of Furthermore, 18 per cent of the respondents stated that investment, the respondents listed a variety of reasons. they expected their investment to be profitable, and 14 per Overall, the highest percentage (28%) of responses cent chose their investment because they felt it was a safe was “having an experience in that area of activity.” venture (N=257, multiple answers per respondent).27

Table 12: Reasons for decisions to invest

Responses Percentage of Cases Reason for Investment Choice Frequency Percentage Experience 71 27.6% 39.7% Profitable 47 18.3% 26.3% Safe 37 14.4% 20.7% High demand 14 5.4% 7.8% Low/no risk 13 5.1% 7.3% Personal preference 13 5.1% 7.3% Only feasible 12 4.7% 6.7% Stable 12 4.7% 6.7% Ease 10 3.9% 5.6% Migrantʼs decision 7 2.7% 3.9% Effortless 6 2.3% 3.4% Religiously legitimate 6 2.3% 3.4% Provides employment 2 0.8% 1.1% opportunities Specialization 2 0.8% 1.1%

Education 1 0.4% 0.6%

Liquid 1 0.4% 0.6%

Low cost 1 0.4% 0.6%

Non-seasonal 1 0.4% 0.6%

Seasonal 1 0.4% 0.6% Total 257 100.0% 143.6%

While examining the primary reasons for investment the chosen field of investment (42% of primary responses choices in individual governorates, noticeable differences in Fayoum, 40% in Menofeya and 36% in Sharkia). One emerge between the respondents from Cairo and those from possible explanation for this could be that, on one hand, the other three governorates. While Cairo respondents Cairo provides greater investment opportunities than seem to put an emphasis on the safety of their investment other governorates and, on the other hand, the insecurity when making an investment decision (35% of all primary of investment is perceived to be greater in Cairo than responses from Cairo), the respondents from other in the other three governorates. Several respondents governorates appear to prioritize having an experience in indicated that this is because Cairo is perceived as the

27 Other reasons mentioned included the following: their particular choice of investment entailed low or no risk (5%), the chosen investment seemed the most feasible at the time (5%), personal preference (5%), or expected ease (4%) and stability (5%) in executing the project. The remaining 16 per cent of answers include, in small proportions, reasons such the expected effortlessness of starting the chosen project, high demand for that particular activity in the respondent’s area and religious legitimacy of the investment (halal).

48 governorate most removed from the traditional rules of system of justice that they do not entirely trust (corruption conduct which to some extent still govern the other three in various forms was cited as one of the primary reasons rural communities, rules that call for fairness, justice, for not investing in Cairo). and honesty, among others. It may be argued that while the market in Cairo offers more opportunities, it is also a Finally, when asked about the advantages and the more competitive environment which makes investment disadvantages associated with their investment choices, risky. However, the narratives of respondents outside respondents provided some insight into what benefits Cairo seemed to indicate that the risk from competition is and what hinders their investment activity. The most just as strong there because the market demand for goods frequently stated advantage (31%) was, as one would and services is far more limited in the other governorates. expect, the profitability of their investment. Furthermore, Nevertheless, in the more traditional communities, people echoing the primary reasons for investing, 19 per cent said know each other and are more aware of who to trust and the advantage of their investment was its safety and for 9 what is unsafe. Hence, losing their money through unsafe per cent, it was its stability (N=193, multiple answers).28 investment is not their primary concern. In Cairo, where anonymity is greater, people have to rely on a formal

Table 13: Advantages of investment choice

Responses Percentage of Cases Advantages of Investment Choice Frequency Percentage Profitable 59 30.6% 44.4% Safe 36 18.7% 27.1% Stable 17 8.8% 12.8% Provide employment opportunities 11 5.7% 8.3% Only feasible 9 4.7% 6.8% Experience 9 4.7% 6.8% Low/no risk 9 4.7% 6.8% Effortless 8 4.1% 6.0% High demand 8 4.1% 6.0% Social development 7 3.6% 5.3% Ease 6 3.1% 4.5% Personal preference 5 2.6% 3.8% Religiously legitimate 3 1.6% 2.3% Liquid 2 1.0% 1.5% Proximity to home 1 0.5% 0.8% Swift 1 0.5% 0.8% Low cost 1 0.5% 0.8% Seasonal 1 0.5% 0.8% Total 193 100.0% 145.1%

28 Other advantages mentioned included having experience in the particular chosen activity (5%), low risk of the activity (5%), low cost (5%), ease of the chosen project (3%), personal preference (3%) and proximity of the business to home (1%).

A Study on Remittances and Investment Opportunities for Egyptian Migrants 49 When asked about the disadvantages of their investment the overall response. These answers include credit risk choices, respondents cited instability (17%), followed (3%) and investment not being fully in line with religious by low profits (11%), high costs of maintaining the beliefs (1%). Thus, it seems that perceived disadvantages investment (11%), high risks involved in the investment referred mostly to market conditions and, to a much lesser (9%), changing demand and supply conditions (9%) and extent, to the bureaucratic red tape. bureaucratic obstacles (7%) (N=140, multiple answers). A further 36 per cent of answers varied widely, with none of the answers accounting for a significant share of

Table 14: Disadvantages of investment choice

Responses Percentage of Cases Disadvantage of Investment Choice Frequency Percentage Instability 24 17.1% 21.4% High cost 16 11.4% 14.3% Low profit 15 10.7% 13.4% High risk 12 8.6% 10.7% Subject to market forces 12 8.6% 10.7% Large capital requirement 10 7.1% 8.9% Effort 10 7.1% 8.9% Red tape 10 7.1% 8.9% Taxes 6 4.3% 5.4% Competition 5 3.6% 4.5% Credit risk 4 2.9% 3.6% Decentralization of the authorities 3 2.1% 2.7% Seasonal 2 1.4% 1.8% Licensing 2 1.4% 1.8% Limited 2 1.4% 1.8% Not profitable 2 1.4% 1.8% Religiously questionable 2 1.4% 1.8% Unsafe 1 0.7% 0.9% Low demand 1 0.7% 0.9% No experience 1 0.7% 0.9% Total 140 100.0% 125.0%

50 11. Why Most Migrant Households Do Not Invest

he majority (79%) of migrant-sending families The lack of investment activities, though, does not seem do not invest. When asked why, the respondents to stem from any absence of creative ideas or lack of offered a variety of reasons. The largest proportion understanding that investing can be advantageous. When (28%)T of answers related to financial difficulties or asked in what area they would like invest if they were economic constraints which households face. A further to begin to invest, the respondents gave a wide range of 20 per cent of responses echo the previously stated desire responses. One quarter (25%) of all responses accounted for safety, arguing that investment in Egypt is too risky, for a desire to open a private business and provide and 11 per cent related to having no access to cash or services. Seventeen per cent expressed a desire to invest credit. Furthermore, 10 per cent of respondents did in real estate. Sixteen per cent of the respondents firmly not know how or where to start the process. Seven per believed that savings is a positive form of investment and cent revealed that they were already too busy with their mentioned their wish to increase their current level of daily duties and activities; hence, they were unable to savings. Finally, 14 per cent stated an interest in investing engage in investment-related activities (N=207, multiple in a private firm or agricultural project (N=246, multiple answers).29 answers).30

Table 15: Areas of desired investment

Responses Percentage of Cases Areas of Desired Investment Frequency Percentage Private business/service 61 24.8% 33.5% Real estate 42 17.1% 23.1% Savings 39 15.9% 21.4% Private business/agriculture 34 13.8% 18.7% Retail 21 8.5% 11.5% Business partnership 14 5.7% 7.7% Private business/manufacturing 10 4.1% 5.5% Personal health care 6 2.4% 3.3% Industrial services 5 2.0% 2.7% Islamic banking 4 1.6% 2.2% Stock market - other financial instrument 3 1.2% 1.6% Transportation 3 1.2% 1.6% Create youth employment opportunities 1 0.4% 0.5% Purchase of foodstuffs 1 0.4% 0.5% No desire to invest 1 0.4% 0.5% Real estate broker 1 0.4% 0.5% Total 246 100.0% 135.2%

29 The remaining quarter (approximately 24%) gave multiple reasons, such as investment is against their religious beliefs and that dealing with the bureaucratic obstacles is not worth it. With regard to the former, respondents were most likely referring to interest-bearing financial products. They also cited corruption, lack of information, high taxes, or lack of trustworthy business partners. 30 The remaining 28 per cent of answers included interest in investing in health care, industrial services, Islamic banking, transportation and stocks or other financial instruments.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 51 The investment ideas varied according to the areas in Approximately 26 per cent of respondents in Fayoum, 10 which the respondents resided. Appendix 11 gives an per cent in Sharkia and 7 per cent in Cairo also expressed elaborate description of these ideas. The primary answers interest in investing in agriculture. about investment ideas given by the respondents reveal patterns of preferences in individual governorates: - In Sharkia, the most frequently cited investment interest concerned services (38%). - Forty-four per cent of respondents from Cairo expressed a wish to increase their savings as a form of investment, While the respondents had numerous ideas about possible compared to only 5 per cent of respondents from investment, when asked whether their area is suitable Fayoum, 17 per cent from Menofeya and 12 per cent from for starting a business, overall more than half of all Sharkia. respondents (63%) replied “no” (N=192). In particular, 88 per cent of respondents from Menofeya and 74 per - Almost half of respondents from Fayoum (47%) cent of those from Sharkia believed that they are living expressed interest in investing in private businesses in areas unsuitable for business. The respondents from providing services, compared to 13 per cent of those from Cairo and Fayoum seemed less pessimistic with regard Menofeya, 38 per cent from Sharkia and 20 per cent from to the overall investment outlook of their governorates. Cairo. Sixty per cent of respondents from Cairo and 51 per cent respondents from Fayoum believed that their respective - The most represented investment interest of those governorates had an environment that was conducive to from Menofeya (27%) was in the area of agriculture. business.

Table 16: Is your area conducive to profitable business?

Is your area conducive to Total profitable business? Yes No Frequency 29 19 48 Cairo % within governorate 60.4% 39.6% 100.0% % within area conducive 40.3% 15.8% 25.0% % of Total 15.1% 9.9% 25.0% Frequency 25 24 49 % within governorate 51.0% 49.0% 100.0% Fayoum % within area conducive 34.7% 20.0% 25.5% % of Total 13.0% 12.5% 25.5% Frequency 6 43 49 % within governorate 12.2% 87.8% 100.0% Menofeya % within area conductive 8.3% 35.8% 25.5% % of Total 3.1% 22.4% 25.5% Frequency 12 34 46 % within governorate 26.1% 73.9% 100.0% Sharkia % within area conducive 16.7% 28.3% 24.0% % of Total 6.3% 17.7% 24.0% Frequency 72 120 192 % within governorate 37.5% 62.5% 100.0% Total % within area conducive 100.0% 100.0% 100.0% % of Total 37.5% 62.5% 100.0%

52 The reasons for scepticism and the listed disincentives to government services for investors are concentrated in invest in their area, especially those from Menofeya and the capital (Cairo). Among the government rules and Sharkia, were wide-ranging, from a lack of resources with procedures, the most cited obstacles towards investment which to invest to a perceived lack of investment security. was bureaucratic red tape (26%), followed by high tax The perceptions about the role of government are not levels (17%), corruption (14%), complex licensing uniform across the governorates. Half of the respondents procedures (11%) and an increase in prices of goods and from Cairo believed that government rules and regulations services (5%, respondents provided multiple answers).31 do not create obstacles to their investment plans and activities. On the contrary, 85 per cent of respondents from Fayoum, 91 per cent of respondents from Menofeya and 75 per cent of respondents from Sharkia stated that the government rules and procedures do play a role in increasing or decreasing the difficulties in their investment plans and hopes. This might be due to the fact that most

Table 17: Do government rules and regulations create unfavourable conditions for investment?

Do government rules and regulations create Total unfavourable conditions for investment? Yes No Governorate Cairo Frequency 21 21 42 % within governorate 50.0% 50.0% 100.0% % within obstacles 14.9% 47.7% 22.7% % of Total 11.4% 11.4% 22.7% Fayoum Frequency 40 7 47 % within governorate 85.1% 14.9% 100.0% % within obstacles 28.4% 15.9% 25.4% % of Total 21.6% 3.8% 25.4% Menofeya Frequency 44 4 48 % within governorate 91.7% 8.3% 100.0% % within obstacles 31.2% 9.1% 25.9% % of Total 23.8% 2.2% 25.9% Sharkia Frequency 36 12 48 % within governorate 75.0% 25.0% 100.0% % within obstacles 25.5% 27.3% 25.9% % of Total 19.5% 6.5% 25.9% Frequency 141 44 185 % within governorate 76.2% 23.8% 100.0% Total % within obstacles 100.0% 100.0% 100.0% % of Total 76.2% 23.8% 100.0%

31 The remaining 27 per cent of answers were diverse and included lack of seeds, fertilizers, pesticides and lack of adequate facilitation and support from the government towards particular forms of agricultural investment. Some respondents also mentioned that they feel that the government sometimes intervenes a bit too much, thus, negatively affecting investment and related activities.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 53 Table 18: Obstacles to investing

Responses Percentage of Cases Types of Obstacles to Investment Frequency Percentage Red tape 51 25.5% 37.2% Taxes 34 17.0% 24.8% Corruption 27 13.5% 19.7% Licensing 21 10.5% 15.3% Lack of seeds, fertilizers, pesticides 16 8.0% 11.7% Increase in prices 9 4.5% 6.6% Government does not facilitate 7 3.5% 5.1% Government facilitates 7 3.5% 5.1% Decentralization of the authorities 4 2.0% 2.9% Government ban on informal sector 3 1.5% 2.2% Lack of information and guidelines 3 1.5% 2.2% Reclaiming cultivated land 2 1.0% 1.5% Does not provide employment 2 1.0% 1.5% opportunities Industrial safety 2 1.0% 1.5% Insurance 2 1.0% 1.5% Social insurance 2 1.0% 1.5% Access to credit liquidity 1 0.5% 0.7% Convoys 1 0.5% 0.7% Copyrights 1 0.5% 0.7% Environmental requirements 1 0.5% 0.7% Increase in property tax 1 0.5% 0.7% Low interest rates 1 0.5% 0.7% Recession 1 0.5% 0.7% Utilities 1 0.5% 0.7% Total 200 100.0% 146.0%

The perception of obstacles to investment varies depending various agencies to raise awareness and encourage on the governorate of residence of the respondent. investment do not seem to have trickled down to small Corruption was cited as the primary obstacle to investment investors, especially rural ones. Overall, the majority in Cairo (26%), high taxes was the most represented (92%) of all respondents said that they are not aware of primary obstacle for respondents from Fayoum (33%), any programmes that encourage opportunities to invest and bureaucratic red tape troubled those most interested remittances in Egypt. Nevertheless, the level of awareness in investing in Menofeya (39%) and Sharkia (43%). seems to be highest in the Cairo governorate and lowest in the Menofeya governorate (see Appendix 12 for details). The previously discussed attempts of the GOE and

54 Lastly, attention was paid to the transnational collective from social projects financed by migrant associations/ investment in development, that is, to transfers made by groups (N=91). Among this 39 per cent of respondents, 23 migrant organizations/hometown associations. When per cent suggested funding projects in their communities asked about the social projects being financed by migrant that will utilize the local manufacturing capacity, 11 associations, more than half of all respondents (61%) per cent suggested projects that will focus specifically said that they have never heard about such projects in on education, 9 per cent suggested projects targeting their community (N=191). Nonetheless, some of the agriculture and another 9 per cent suggested promoting respondents (39%) believed that their area could benefit transportation projects.32

Table 19: Suggested areas for social projects

Responses Percentage of Cases Areas/fields that could benefit from social Frequency Percentage projects financed by migrants Manufacturing 17 17.3% 24.6% Education 14 14.3% 20.3% Services 11 11.2% 15.9% Health care 9 9.2% 13.0% Food and beverage 7 7.1% 10.1% Orphanages 7 7.1% 10.1% Transportation 6 6.1% 8.7% Charitable organization 5 5.1% 7.2% Access to credit 3 3.1% 4.3% Nursing home 3 3.1% 4.3% Sewage system 3 3.1% 4.3% Agriculture 2 2.0% 2.9% Retail 2 2.0% 2.9% Garbage collection 2 2.0% 2.9% Real estate investment 1 1.0% 1.4% Mosques 1 1.0% 1.4% Provide employment opportunities 1 1.0% 1.4% Export agricultural products 1 1.0% 1.4% Bread distribution 1 1.0% 1.4% Eliminate red tape 1 1.0% 1.4% NGOs 1 1.0% 1.4% Total 98 100.0% 142.0%

32 A further 48 per cent of answers were very diverse and included: providing employment opportunities, enabling export of agricultural products, improving health care, creating and improving overall services in the area.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 55 12. Conclusions and Recommendations

12.1 Conclusions were mainly policies and provisions aiding large-scale investors/investment activities. However, in recent years, the GOE has addressed this bias in service provision and While there is a considerable geographical dispersion of created special provisions establishing NILEX to help Egyptian emigrants abroad, by far the largest proportion SMEs access greater financial capital. resides in KSA. However, the US is the largest supplier of remittances from a smaller but wealthier stock of Despite all these changes in laws and policies, there are Egyptian migrants in that country. Therefore, in terms of still some existing laws whose amendments will lead to migrant numbers and the value of remittances, it would creating a more favourable investment and business climate seem that these are the two main countries that would for small-scale investors, such as migrant households need the attention of policymakers who seek to channel or returnee migrants. Another important aspect is to remittances into productive investments in Egypt. With disseminate such facilities and services to all the different respect to this study, the migrant households researched governorates of the country. The respondents of the study mainly had migrants to KSA. from the three governorates (except for Cairo) were less aware about the government programmes designed to The level of remittances contributing to Egyptian help them invest their remittances. household income is significant, averaging 43 per cent for the households surveyed. Thus, while macro-economic While the proportion of highly educated Egyptian analyses focus on remittances as a major source of foreign emigrants was over-represented in this study, they are currency earnings at the national level in relation to trade an important remittance-sending group. In some cases, it balances and GDP, they are also crucial at the individual was seen that those educated migrants who were unable household and community levels. This study offers to find employment in Egypt were able to find good job some contribution to the contemporary circumstances opportunities abroad. The overall migration experience of of migrant-sending and remittance-receiving families the migrants and their households from these four study in the four governorates of Egypt. It confirms that the areas depicts a positive experience for the migrant, their primary interest of these households is the contribution households and the overall Egyptian economy. of remittances to their everyday essential expenses while at the same time helping them (21%) to invest in various Egyptian migration is mainly a male phenomenon activities. A sizeable part of the remittance income and generates strong changes in the family dynamics (13%-18%) was saved by migrant households in three particularly when viewed through the lens of gender. governorates (Cairo, Menofeya and Sharkia).33 A large During the pre-migration stage, the households are usually proportion of the research respondents (including those headed by the male migrant (husband/father). Once the who do not currently invest) expressed their interest in male head of the household engages in international investment. Nevertheless, they pointed out several crucial labour migration, the female household member (spouse/ factors that impede them from engaging in productive mother) becomes the head of the household. This means investment. As discussed in this study, the GOE has taken an increase in the women’s responsibilities. While this several positive steps, including changing and amending ultimately generates an extra burden for women, it several laws and opening up one-stop-malls to improve may also represent a subtle but positive shift in gender the investment climate in Egypt. Previously, there capacities that deserves more detailed investigation.

33 The exception is the Fayoum governorate where savings is reported to be only 2 per cent.

56 12.2 Recommendations 5) The GOE needs to devise policies that will work as incentives for investing in the different governorates of the country. The policies and programmes would be The following sets of recommendations are made in light more effective if they are decentralized and take into of the findings from this study: consideration the particular conditions of each particular governorate. 1) To improve investment, the GOE needs to have specific programmes in different governorates to provide business 6) While the study found some differences between and investment advice to migrant families and the migrants governorates in terms of destination countries and other themselves. Moreover, awareness-raising campaigns demographic features, the large bulk of Egyptian emigrants promoting these programmes need to actively reach are living and working in KSA. Thus, among the Arab migrant households within the different governorates. countries, KSA should be one of the prime focuses for GOE policies and initiatives to enhance remittance inflows 2) As the study revealed, migrants spend a considerable and remittance investment through advice and assistance amount of time preparing for their travel abroad, including to migrants and their families. Additionally, there is some getting in order all the essential documents. Therefore, suggestion that Egyptians in Europe (specifically Italy) information on formal channels for sending remittances and other developed countries such as the US, Canada and ways to invest them could be disseminated through and Australia are investment-oriented, and hence should the government offices that potential migrants are required also be targeted. to visit to arrange for their travel papers, passports, visas, etc. Pre-departure training of the migrants could 7) From this study it is evident that the wives (and parents) also include information about how to securely send of migrants play a critical role in remittance spending and remittances and how to direct them towards productive investment. Thus, gender responsive- and family-specific and profitable business opportunities in Egypt. As the programmes should be developed to educate and assist study showed, respondents from different governorates with information to improve levels of financial literacy had different worries and concerns regarding investing and capacities to better manage investment. in their respective governorates. Hence, one-size-fits-all approaches will not be as effective. Policymakers need to 8) While the banking and financial sector needs to design programmes addressing the specific concerns of provide special migrant-category products and services, particular migrant communities (governorate). perhaps the government could also give special consideration to migrants abroad for their contributions 3) As there are no financial products that explicitly target to the Egyptian economy. The example of the Philippines Egyptian emigrants, banking sectors need to be encouraged may be instructive, whereby overseas filipino workers to start packages targeting emigrants. Successful examples (OFWs) are given the status of “new heroes” because from countries such as the Philippines could be considered of their collective contributions to the nation in terms before designing such products and packages. of both financial and social remittances. The Philippine government also provides training programmes through 4) The fact that a significant number of respondents in the their embassies in various countries for the skills- governorates of Menofeya and Sharkia believe that their upgrading of their nationals abroad. These training areas were not suitable for business investment requires programmes, in turn, provide opportunities to discuss further investigation and examination. For instance, the remittance and investment options with migrants. GOE needs to investigate to see if there are specific factors, such as sub-optimal infrastructure or a lack of 9) Information on recent legislative and administrative essential business amenities, that impede investment changes should be better disseminated to the Egyptian projects in these governorates. diaspora using the consular network, information desks at airport and events that are likely to be attended by

A Study on Remittances and Investment Opportunities for Egyptian Migrants 57 Egyptian migrants both abroad and while in Egypt during their holidays. Specifically, initiatives like the one-stop shop at GAFI and the possibilities to obtain microcredit and business counselling at SFD should be promoted.

10) Many respondents of this study described the investment climate in Egypt as unsafe and insecure. A common factor is a lack of trust in government programmes and policies, as well as prevailing market conditions such as lack of competition. The GOE needs to undertake specific programmes to improve their image and build trust among the migrant communities. Ensuring more transparency and accountability would be essential elements in gaining and fostering such trust. Investors must be assured that they can access and receive justice in the event that they are exploited or misled in business. Providing a secure and stable investment climate will attract both migrant communities as well as foreign investors to invest in Egypt.

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A Study on Remittances and Investment Opportunities for Egyptian Migrants 63 Appendices

Appendix 1: Prior migration experiences

Percentage of Responses Cases Frequency Percentage

Prior migration experience (a) Algeria 1 1.7% 2.8%

France 1 1.7% 2.8%

Greece 1 1.7% 2.8%

Netherlands 2 3.4% 5.6%

Italy 3 5.2% 8.3%

Jordan 6 10.3% 16.7%

Kingdom of Saudi Arabia 13 22.4% 36.1%

Kuwait 2 3.4% 5.6%

Libya 4 6.9% 11.1%

Oman 2 3.4% 5.6%

Qatar 2 3.4% 5.6%

USA 2 3.4% 5.6%

Austria 3 5.2% 8.3%

China 1 1.7% 2.8%

Denmark 1 1.7% 2.8%

Iraq 5 8.6% 13.9%

Japan 1 1.7% 2.8%

Congo 1 1.7% 2.8%

South Africa 1 1.7% 2.8%

Sudan 1 1.7% 2.8%

Switzerland 2 3.4% 5.6%

Syria 2 3.4% 5.6%

Yugoslavia 1 1.7% 2.8% Total 58 100.0% 161.1%

* Note that for Congo and Yugoslavia, the migrant referred to the country’s former names at the time of their migration experience.

64 Appendix 2: Year of leaving Egypt

Frequency Percentage Valid Percentage Cumulative Percentage

Valid 1970 1 0.5 0.5 0.5 1980 4 2.0 2.1 2.6 1981 1 0.5 0.5 3.1 1982 1 0.5 0.5 3.6 1983 1 0.5 0.5 4.1 1984 3 1.5 1.5 5.6 1985 1 0.5 0.5 6.2 1986 4 2.0 2.1 8.2 1987 1 0.5 0.5 8.7 1989 5 2.5 2.6 11.3 1990 4 2.0 2.1 13.3 1991 2 1.0 1.0 14.4 1992 1 0.5 0.5 14.9 1994 8 4.0 4.1 19.0 1995 5 2.5 2.6 21.5 1996 1 0.5 0.5 22.1 1999 10 5.0 5.1 27.2 2000 7 3.5 3.6 30.8 2001 5 2.5 2.6 33.3 2002 8 4.0 4.1 37.4 2003 14 7.0 7.2 44.6 2004 16 8.0 8.2 52.8 2005 19 9.5 9.7 62.6 2006 21 10.5 10.8 73.3 2007 21 10.5 10.8 84.1 2008 27 13.5 13.8 97.9 2009 4 2.0 2.1 100.0 Total 195 97.5 100.0 Missing System 5 2.5 Total 200 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 65 Appendix 3: How are remittances received?

Cross-tabulation: Governorate & How Are Remittances Received

How are remittances received?

Migrantʼs Friend Money Bank employerʼs Debit or Post Western transfer Total transfer Cairo branch card relative office Union services of office visiting

Governorate Cairo Frequency 24 0 1 11 5 6 2 49 % within governorate 49.0 0.0 2.0 22.4 10.2 12.2 4.1 100.0 % within how are 18.8 0.0 100.0 22.4 50.0 75.0 100.0 24.6 remittances received Fayoum Frequency 24 0 0 23 3 0 0 50 % within governorate 48.0 0.0 0.0 46.0 6.0 0.0 0.0 100.0 % within how are 18.8 0.0 0.0 46.9 30.0 0.0 0.0 25.1 remittances received Menofeya Frequency 35 1 0 12 2 0 0 50 % within governorate 70.0 2.0 0.0 24.0 4.0 0.0 0.0 100.0 % within how are 27.3 100.0 0.0 24.5 20.0 0.0 0.0 25.1 remittances received Sharkia Frequency 45 0 0 3 0 2 0 50 % within governorate 90.0 0.0 0.0 6.0 0.0 4.0 0.0 100.0 % within how are 35.2 0.0 0.0 6.1 0.0 25.0 0.0 25.1 remittances received Total Frequency 128 1 1 49 10 8 2 199 % within governorate 64.3 0.5 0.5 24.6 5.0 4.0 1.0 100.0 % within how are 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 remittances received

66 Appendix 4: Are remittances used for emergencies?

Emergencies

Frequency Percentage Valid Percentage Cumulative Percentage

Valid Yes 141 70.5 71.2 71.2 No 57 28.5 28.8 100.0 Total 198 99.0 100.0 Missing System 2 1.0 Total 200 100.0

Appendix 5: Are remittances used for health care?

Health care

Frequency Percentage Valid Percentage Cumulative Percentage Valid Yes 120 60.0 60.6 60.6 No 78 39.0 39.4 100.0 Total 198 99.0 100.0 Missing System 2 1.0 Total 200 100.0

Appendix 6: Are remittances used for education?

Education

Frequency Percentage Valid Percentage Cumulative Percentage Valid Yes 96 48.0 48.7 48.7 No 101 50.5 51.3 100.0 Total 197 98.5 100.0 Missing System 3 1.5 Total 200 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 67 Appendix 7: Governorates: Use of remittances for emergencies Cross-tabulation: Governorate & Are remittances used for emergencies?

Are remittances used Total for emergencies? Yes No

Governorate of respondent Cairo Frequency 42 7 49

% within governorate of 85.7 14.3 100.0 respondent % within are remittances used 29.8 12.3 24.7 for emergencies

% of Total 21.2 3.5 24.7

Fayoum Frequency 40 10 50

% within governorate of 80.0 20.0 100.0 respondent % within are remittances used 28.4 17.5 25.3 for emergencies

% of Total 20.2 5.1 25.3

Menofeya Frequency 33 16 49

% within governorate of 67.3 32.7 100.0 respondent % within are remittances used 23.4 28.1 24.7 for emergencies

% of Total 16.7 8.1 24.7

Sharkia Frequency 26 24 50

% within governorate of 52.0 48.0 100.0 respondent % within are remittances used 18.4 42.1 25.3 for emergencies

% of Total 13.1 12.1 25.3

Total Frequency 141 57 198

% within governorate of respondent 71.2 28.8 100.0

% within are remittances used for 100.0 100.0 100.0 emergencies

% of Total 71.2 28.8 100.0

68 Appendix 8: Governorates: Use of remittances for health care Cross-tabulation: Governorate & Are remittances used for health care?

Do you spend remittances Total on health care? Yes No

Governorate of respondent Cairo Frequency 32 17 49

% within governorate of 65.3 34.7 100.0 respondent % within do you spend 26.7 21.8 24.7 remittances on health care

% of Total 16.2 8.6 24.7

Fayoum Frequency 40 10 50

% within governorate of 80.0 20.0 100.0 respondent % within do you spend 33.3 12.8 25.3 remittances on health care

% of Total 20.2 5.1 25.3

Menofeya Frequency 27 22 49

% within governorate of 55.1 44.9 100.0 respondent % within do you spend 22.5 28.2 24.7 remittances on health care

% of Total 13.6 11.1 24.7

Sharkia Frequency 21 29 50

% within governorate of 42.0 58.0 100.0 respondent % within do you spend 17.5 37.2 25.3 remittances on health care

% of Total 10.6 14.6 25.3

Total Frequency 120 78 198

% within governorate of respondent 60.6 39.4 100.0

% within do you spend remittances 100.0 100.0 100.0 on health care

% of Total 60.6 39.4 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 69 Appendix 9: Governorates: Use of remittances for education

Do you spend remittances Total on children’s education? Yes No

Governorate of respondent Cairo Frequency 29 19 48 % within governorate of 60.4 39.6 100.0 respondent % within do you spend remittances on childrens 30.2 18.8 24.4 education % of Total 14.7 9.6 24.4

Fayoum Frequency 25 24 49 % within governorate of 51.0 49.0 100.0 respondent % within do you spend remittances on childrens 26.0 23.8 24.9 education % of Total 12.7 12.2 24.9

Menofeya Frequency 22 28 50 % within governorate of 44.0 56.0 100.0 respondent % within do you spend remittances on childrens 22.9 27.7 25.4 education % of Total 11.2 14.2 25.4

Sharkia Frequency 20 30 50 % within governorate of 40.0 60.0 100.0 respondent % within do you spend remittances on childrens 20.8 29.7 25.4 education % of Total 10.2 15.2 25.4

Total Frequency 96 101 197 % within governorate of 48.7 51.3 100.0 respondent % within do you spend remittances 100.0 100.0 100.0 on childrens education % of Total 48.7 51.3 100.0

70 Appendix 10: Who invests remittances?

Do you invest Total remittances? Yes No Head of Household Child Frequency 0 4 4 % within head of household 0.0 100.0 100.0 % within do you invest remittances 0.0 2.6 2.1 % of Total 0.0 2.1 2.1 Grandparent Frequency 0 1 1 % within head of household 0.0 100.0 100.0 % within do you invest remittances 0.0 0.6 0.5 % of Total 0.0 0.5 0.5 In-laws Frequency 2 4 6 % within head of household 33.3 66.7 100.0 % within do you invest remittances 5.1 2.6 3.1 % of Total 1.0 2.1 3.1 Parent Frequency 11 48 59 % within head of household 18.6 81.4 100.0 % within do you invest remittances 28.2 31.2 30.6 % of Total 5.7 24.9 30.6 Sibling Frequency 5 10 15 % within head of household 33.3 66.7 100.0 % within do you invest remittances 12.8 6.5 7.8 % of Total 2.6 5.2 7.8 Spouse Frequency 21 86 107 % within head of household 19.6 80.4 100.0 % within do you invest remittances 53.8 55.8 55.4 % of Total 10.9 44.6 55.4 Uncle Frequency 0 1 1 % within head of household 0.0 100.0 100.0 % within do you invest remittances 0.0 0.6 0.5 % of Total 0.0 0.5 0.5 Total Frequency 39 154 193 % within head of household 20.2 79.8 100.0 % within do you invest remittances 100.0 100.0 100.0 % of Total 20.2 79.8 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 71 Appendix 11: Governorates: In what areas/fields would respondents invest?

Cross-tabulation: Governorate & Would you invest?

If given the opportunity, the respondent would invest in: Total Retail Savings No desire Real estate Agriculture Priv. service Priv. Manufacturing fin. instruments Bus. Partnership Stock market - other Stock market - other

Frequency 18 6 2 0 3 3 1 8 0 41

% governorate 43.9 14.6 4.9 0.0 7.3 7.3 2.4 19.5 0.0 100.0

Cairo % would invest 52.9 16.7 66.7 0.0 25.0 9.4 12.5 15.1 0.0 22.5 Governorate % of Total 9.9 3.3 1.1 0.0 1.6 1.6 0.5 4.4 0.0 22.5

Frequency 2 8 0 0 0 11 2 20 0 43

% governorate 4.7 18.6 0.0 0.0 0.0 25.6 4.7 46.5 0.0 100.0

% would invest

Fayoum 5.9 22.2 0.0 0.0 0.0 34.4 25.0 37.7 0.0 23.6

% of Total 1.1 4.4 0.0 0.0 0.0 6.0 1.1 11.0 0.0 23.6

Frequency 8 7 1 1 8 13 1 6 3 48

% governorate 16.7 14.6 2.1 2.1 16.7 27.1 2.1 12.5 6.3 100.0

% would invest 23.5 19.4 33.3 100.0 66.7 40.6 12.5 11.3 100.0 26.4 Menofeya % of Total 4.4 3.8 0.5 0.5 4.4 7.1 0.5 3.3 1.6 26.4

Frequency 6 15 0 0 1 5 4 19 0 50

% governorate 12.0 30.0 0.0 0.0 2.0 10.0 8.0 38.0 0.0 100.0

Sharkia % would invest 17.6 41.7 0.0 0.0 8.3 15.6 50.0 35.8 0.0 27.5

% of Total 3.3 8.2 0.0 0.0 0.5 2.7 2.2 10.4 0.0 27.5

Frequency 34 36 3 1 12 32 8 53 3 182

% governorate 18.7 19.8 1.6 0.5 6.6 17.6 4.4 29.1 1.6 100.0 Total % would invest 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

% of Total 18.7 19.8 1.6 0.5 6.6 17.6 4.4 29.1 1.6 100.0

72 Appendix 12: Governorates: Awareness of programmes encouraging investment

Are you aware of any programmes which Total encourage investment of remittances? Yes No

Governorate Cairo Frequency 6 39 45

% within governorate of respondent 13.3 86.7 100.0 % within are you aware of any programmes which encourage 40.0 22.0 23.4 investment of remittances

% of Total 3.1 20.3 23.4

Fayoum Frequency 4 44 48

% within governorate of respondent 8.3 91.7 100.0 % within are you aware of any programmes which encourage 26.7 24.9 25.0 investment of remittances

% of Total 2.1 22.9 25.0

Menofeya Frequency 2 48 50

% within governorate of respondent 4.0 96.0 100.0 % within are you aware of any programmes which encourage 13.3 27.1 26.0 investment of remittances

% of Total 1.0 25.0 26.0

Sharkia Count 3 46 49

% within governorate of respondent 6.1 93.9 100.0 % within are you aware of any programmes which encourage 20.0 26.0 25.5 investment of remittances

% of Total 1.6 24.0 25.5

Frequency 15 177 192

% within governorate of respondent 7.8 92.2 100.0

Total % within are you aware of any programmes 100.0 100.0 100.0 which encourage investment of remittances % of Total 7.8 92.2 100.0

A Study on Remittances and Investment Opportunities for Egyptian Migrants 73 Appendix 13

14.1 Migrant Remittances Questionnaire

*(Note to interviewer: Let them know you’ll be asking them questions pertaining to the advantages and disadvantages of the kind of investments they have made. Reassure the respondent that all answers are anonymous and private.)

Demographics of respondent

1. Name of Respondent ______(This is optional, but we need to look for the current head of the household.) 2. Governorate of residence ______3. Age 4. Sex of respondent: □M □F 5. Current Marital Status □ Never Married □ Married □ Divorced □ Widowed 6. Do you have children? □ Yes □ No 7. How many? ______Gender (ask the sex of each child) Age(s)/Sex______,______,______8. Occupation (s) of respondent ______9. Household location □ Urban □ Rural 10. Household composition (other than respondent)—ask in detail who lives in the household.

1. 2. 3. 4. 5. 6. 7. 11. How many people are currently abroad for work from this household?______12. What is the respondent’s relationship to migrant(s) abroad? ______13. Current Marital Status of Migrant(s) □ Never Married □ Engaged □ Married □ Divorced □ Widowed

74 14. Does the migrant have children? (If yes, proceed to question 15) □ Yes □ No 15. How many children does the migrant have? ______16. If the migrant is married, where is the spouse? ______17. If migrant has children, where are they? ______

Pertaining to Information of Family Member Abroad Sending Money

18. Age(s) of migrant/migrants ______, ______, ______19. Sex of migrant(s) □ Male □ Female 20. Last certificate degree of migrant Q: What is the migrant’s last certificate degree? □ None (illiterate, did not complete primary school) □ Some primary school □ Completed primary school □ Some secondary school □ Completed secondary school □ Some undergraduate university □ Completed undergraduate university □ Some graduate university □ Graduate university □ Other □ Don’t know

Migration History *Note to interviewer: Please understand some of these questions are rather sensitive. Please reassure the respondent that they have complete anonymity and are safe to talk about these answers with you.

21. When did the migrant leave Egypt? ______22. Why did he/she decide to emigrate? (What are the reasons? Get the story.) ______23. Where is the migrant currently residing? 24. What is his/her current occupation in country of current residence? 25. Did the migrant obtain a work visa in order to work abroad? □ Yes □ No (How did he/she manage to go? Please explain.) ______

A Study on Remittances and Investment Opportunities for Egyptian Migrants 75 26. How many years has he/she been working abroad? 27. What is the status in the country of migration? □ Regular (temporary residence) □ Regular (permanent residence) □ Irregular 28. Place of residence before leaving (governorate and village) □ With household interviewed and in current location □ With household interviewed but in different location □ Other (please specify) 29. What was his/her previous occupation? 30. Did she/he have any previous migration experience(s)? □ Yes □ No 31. If yes, which country/countries did he/she migrate to before the current migration experience? 1. 2. 3. 4. 32. Did he/she ever return to Egypt after leaving the first time? □ Yes (Proceed to question 33.) □ No (Why? Please explain.) ______33. What was reason for returning? □ Termination of employment □ Loss of residency status □ Personal consideration □ Job offer elsewhere □ Other (please explain) ______34. How often does the migrant come back to visit? ______

Questions on Migrant Remittances

35. How often do you receive money from your relative? □ Weekly □ Once a month □ Every few months □ Yearly □ Other (Please state)______□ Variable 36. On average, how much do you receive (in EGP): Monthly______37. Remittances represent what percentage of your family income? (Get percentage. Help calculate if you have to.) ______38. If you did not receive remittances, would you still have enough to live on? □ Yes

76 □ No (Please explain why.) ______39. How do you receive the money? Tick all that apply. If there is more than one method, then ask which one is used more frequently □ Friend/relative travelling home □ Post □ Bank transfer □ Money transmitting service □ Western Union □ Money Gram □ Money transfers □ Debit card □ Other ______40. Which is the most used way of receiving the money? ______41. Do you receive remittances in a non-financial form, such as gold, appliances, etc.? □ Yes (What kind? Please explain below.) □ No ______42. Does the migrant send gifts home? □ Yes (For which occasions? Please explain below.) □ No ______43. In what currency is the money sent? □ EGP □ Euro □ US dollar □ Other 44. In what Currency did you receive this money? □ EGP □ Euro □ US dollar □ Other 45. What is the cost of sending money to you from your relative (migrant)? (Ask if they have a record from the last time money was sent to them) EGP _____ □ Don’t know 46. What is the cost of receiving money transfers each time from your relative (migrant)? EGP ______□ Don’t know 47. Do you prefer one particular method of receiving cash over another? □ Yes □ No

A Study on Remittances and Investment Opportunities for Egyptian Migrants 77 48. Tick the preference(s) for receiving remittances. There may be more than one. □ Friend/relative travelling home □ Post □ Bank transfer □ Money transmitting service □ Other (please explain) 49. Why do you prefer the chosen methods? You can probe by asking, “For example, is it easier to receive money via bank transfer rather than using a money transmitting service like Western Union?” ______50. Do you know how much you spend each month on living expenses? Can you tell me how much you spend each month (or whatever period they are familiar with) on the following items: • Rent ______EGP • Utilities (electricity, gas, water) ______EGP • Food ______EGP • Family expenses (clothing, etc.) ______EGP • Health care ______EGP • Education (private tutoring for kids) ______EGP • Individual/Personal(cigarettes, makeup) ______EGP • Investments ______EGP • Real estate (Purchases, upkeep, taxes, agriculture, etc.) ______EGP • Zakat ______EGP • Savings ______EGP

*Depending on which items received the highest level of importance, the interviewer can probe the respondent as to why they chose particular items with a level of importance over others.

51. Do you own your own home? □ Yes (Go to question 52.) □ No (Go to question 51.) 52. Are you building a house? □ Yes □ No 53. Do you get an income from renting property to others? □ Yes (Please tell how much on the line below and then proceed to question 55.) □ No (Go to question 54) ______54. Are you planning on getting an income from renting property to others? □ Yes □ No 55. Where is the property located? ______56. How much money do you expect to receive from renting property? ______EGP

78 Questions Regarding Remittances and Investment

57. Can you tell me what you spend the remittances on? Can you distinguish? ______58. Has money been received specifically in order to help finance another family member to emigrate abroad? □ Yes □ No 59. Do you tell the family member overseas (migrant) what you spend it on? □ Yes □ No 60. Do they (migrant(s)) tell you what it is to be spent on? □ Yes (Please explain what they tell you.) □ No ______61. How do you decide how to spend the remittance money? Is it a family decision? Who makes the decision? ______62. Do you use the remittance money on education for your children or any other children in your extended family? (Ask only if the question applies to them.) □ Yes □ No 63. How much does it cost to send them to school yearly? ______64. What type of school are they going to? Private, primary, secondary, high school? University?______65. Who are you sending to school (if any) (*Note to interviewer—find out if money is being spent more on one child than the other. Is it the son? The daughter? ) ______66. Do you spend any of the remittances on health care? □ Yes □ No 67. If so, what kind? ______68. Do you buy more goods that are imported (for example, foodstuffs, household items, clothing) because you receive this money? □ Yes (Please explain.) □ No ______

A Study on Remittances and Investment Opportunities for Egyptian Migrants 79 ______69. What special things do you do with the remittance money? For example, do you do anything special like going out to the cinema or restaurant or inviting people over for dinners? ______70. Do you help out other relatives when they are in need? □ Yes (How? Please explain.) □ No ______71. Are the remittances used for these emergencies? □ Yes □ No 72. In emergencies, do you ask the migrant to send more money? □ Yes □ No 73. Do you put a specific amount of the remittances away for future emergencies? □ Yes (How much?) ______□ No 74. Do you invest? *Note to the interviewer-Explain what is meant by investment. Do you use the remittance money to generate an income? Examples: To invest money means to spend it on something that then gives you more money (shop, agricultural land, real estate, employing someone to do/make something for you) □ Yes (Proceed to question 75.) □ No (Go to question 78.) 75. If so, what is the kind of investment? Make sure to get details. (If they don’t invest, go to question 78.) A. Developing a business. Please mark what kind of business it is (numbers indicate the number of people employed) □ Small (less than 5) □ Medium (less than 20) □ Large (more than 20) What sector? □ Agriculture □ Manufacturing □ Services B. Shares in someone else’s business C. Stocks and other financial instruments (insurances, mutual funds, Islamic finance, etc.) Explain what kind. D. Real estate E. Other ______76. If you are an employer, how many people are employed in your business? ______77. What is the business? ______□ Agriculture, mining, fishing □ Manufacturing

80 □ Service industry 78. If you do not invest your money, what is the reason? EXAMPLES: □ Financial difficulty/Economic constraints □ Legal constraints □ Against religious beliefs □ Too risky □ Do not have enough information □ It is more profitable to invest in country of migration (destination) □ Lack of profitable opportunities in my area □ Don’t know how and where to start □ Would be too risky □ Would not be profitable □ Bureaucratic hassles □ No access to credit □ Taxes and official fees are too high □ Corruption □ Other (Please explain)______79. What kind of investment would you choose if you had the possibility to do so or if you wanted to? □ A. Developing a business (In what sector?) □ Agriculture □ Manufacturing □ Services □ B. Shares in someone else’s business (what kind?)______□ C. Stocks and other financial instruments (insurances, mutual funds, Islamic finance, etc.) ______□ D. Real estate (What kind?) ______□ E. Savings of various kinds (What kind?) ______□ Other (Please explain.) ______80. Are you the one who manages the investment? □ Yes □ No (If no, who manages the investment? Please tick the appropriate box below.) □ Respondent □ Siblings or parents of migrant □ Children □ The migrant □ Spouse of the migrant □ Business partner (non family member)

A Study on Remittances and Investment Opportunities for Egyptian Migrants 81 □ Other ______81. Why have you chosen the particular kind of investment ? Please explain. (When they answer, if they give more than one reason, prompt them for why those are important to them). ______82. Are you using the money you receive as remittances towards the development of your community? □ Yes (If yes, please explain below.) □ No If yes, give specific examples? (Examples of this may be helping to pool money for a relative or friend in order to start a business, or pooling money in order to make a larger purchase for the use of the whole community) ______83. In your opinion, what are the advantages of investing remittances in the way that you have? ______84. In your opinion, what are the disadvantages of investing the remittances the way that you have? ______85. Are you aware of any programmes which encourage financial investment opportunities for remittances in Egypt? □ Yes (If yes, what are they?) □ No ______86. Whether you invest or not, does the government play a role in encouraging you to invest? Please explain your answer. ______87. Whether you invest or not, does the government play a role in creating obstacles for you to invest? Please explain your answer.

82 ______88. Do you think the area you live in is a suitable environment to start a profitable business? Please explain why. ______89. Do you think that the area you live in could benefit from social projects financed by a group or cooperative of migrants? Please explain why. ______90. Have you heard anything on social projects financed by others abroad in your community? ______91. Do you know of anything that could be done? Please explain. ______

Thank you for your participation in filling out this questionnaire. If you would be willing to be contacted for follow- up information, please write your contact information in the space below.

Name: ______

Phone: ______

Do you know anyone willing to take part in another interview like this one? Please feel free to leave us his/her contact information.

A Study on Remittances and Investment Opportunities for Egyptian Migrants 83 14.2 Follow up Questions for Migrant Investors

1. (If the person invests) Can you tell me more about the business you currently own? a) How long have you had this business? b) How did you come up with the idea? c) How many people do you have employed in your business (es)? d) Is this your only business or do you have other projects, or other branches? e) Are you the sole owner of your business? If not, how many other partners do you have and what is their relation to you?

2. What was the process like for you to start your business/investment project? a) How long did it take to legally register your business? b) Did you have to take out any loans in order to purchase the equipment, land or building location for your business? c) Follow-up: If so, what kind of loan did you receive? d) Follow-up: What is the process of attaining credit like? *Probe, is it difficult or relatively easy? What are the steps? e) Are you aware of any community or governmental organizations here where you can get financial advice on starting your own business? If so, who are they and did you seek their help? f) Follow-up: What kinds of advice did they offer? g) Follow-up: Was it useful? Do people tend to trust these sources of information/help? h) In your opinion, what needs to be done in order to minimize the difficulties in forming one’s own business? i) What kinds of advantages have come from developing your own business? j) Did you receive tax exemptions from the government? k) Did you receive any special incentives from the government to return and start your own business? If so, what? l) How did the legal aspects regarding the creation of your business affect you? m) Were there any difficulties gathering necessary paperwork or in the initial planning of your business? If so, what? For example, did you encounter any bureaucratic procedures that made it difficult to establish your business? n) In your opinion, are the legal policies surrounding the formation of SMEs generally helpful for prospective Egyptian entrepreneurs?

3. Do the remittances you receive go into supporting your business? If so, how? 4. Do you still rely on receiving remittances outside of the income your business generates? If so, to what degree do you rely on remittances? 5. How often are you still receiving remittances? Weekly, monthly, yearly, etc.? 6. Who sends them? 7. How much do you receive? In what currency? 8. How do you receive the remittances? Hand-delivered, Western Union, other? 9. Has your business helped encourage other families in your community who receive remittances to invest in establishing their own business? 10. If you do not rely on remittances as much due to the success of your business, would you mind sharing financial details regarding the income generated from your business? 11. If so, how much profit would you say your business generates per month?

84 12. If you had the chance, would you create more branches of your business? (Assuming respondent answered “no” to question 1d).. 13. What can be done to encourage the promotion and development of other SMEs in your community?

14.3 Interview Questions-Stake Holders-Migrant Remittances Project

1. How does your organization view the impact of the financial crisis on migrant remittances being sent to Egypt? 2. What is the effect on the local Egyptian economy amidst the financial crisis? 3. Can you tell me more about the investment projects your organization is involved with? 4. Does your organization encourage Egyptian families who are receiving remittances to invest? 5. If so, how? 6. (Follow-up question): Are these useful? Have you been able to show that these have been successful? 7. Are there any specific communities (rural or urban) you target to work with and if so, what arethese communities? 8. How do you advertise your services within the communities you work with? 9. Have you been involved in any development projects that draw on migrant remittances and investment? 10. If so, what are these projects? 11. How were these projects envisioned initially? 12. What population of Egyptians did you work with? 13. Were they successful? 14. What kinds of projects are you involved with that draw on the strengthening of SMEs in Egypt? 15. Are these useful? 16. What are the characteristics of SMEs in Egypt? 17. Are there ways in which communities are strengthened from investing remittances? If so, what are they? 18. Pertaining to remittances, what areas of economic development does your organization seek to promote? Example: health, education, or entrepreneurial endeavours – housing, nutrition, land acquisition, savings, other form of investment. 19. What kinds of SMEs are being developed from migrant remittances? 20. What are the difficulties Egyptians experiences in trying to invest or start SMEs? 21. What are the advantages Egyptians experience in trying to create SMEs? 22. What are the obstacles faced by policymakers, migrants and local communities concerning the role of remittances being channelled towards investment? 23. Do Egyptians who wish to invest in their own business face problems accessing formal modes of credit? 24. In what ways do the laws concerning investment in Egypt positively and negatively affect Egyptians who wish to participate in the development of their economy? 25. How does your organization target legal policy on the issue of Egyptian investment? 26. (Follow-up) Has this been useful? 27. What is the role development plays in further encouraging Egyptians to invest?

A Study on Remittances and Investment Opportunities for Egyptian Migrants 85