Egyptian expatriates are a major source of hard currency inflows. They have always been sending billions of dollars into Egyptian banks to finance their families’ expenses or to fund their onshore enterprises.
Annual expat remittances ranged between $30 and $32 billion. Egyptian expatriates exclusively trusted their own country’s banks and economy. They were remitting their funds to hedge against future emergencies and to provide a brighter future for their children, believing that working overseas is only a temporary procedure and that they will return home sooner or later. Egypt has always been a hospitable country that respects its citizens.
Breaching confidence
Recently, there has been a breach in this confidence, causing expats to reroute their remittances outside of the official banking system due to a significant discrepancy between the official and parallel exchange rates of the local currency versus the US dollar that reached 100 per cent. This resulted in a sharp decline in yearly remittances of around $10 billion. The lack of a national response to the problem exacerbated Egyptian expats’ suspicion in the local banking sector. This changed expats from one of the primary providers of foreign currency to one of the primary causes of foreign exchange shortages.
The whole situation has altered as a consequence of engaging into the massive Ras El-Hekma contract and successful discussions with the IMF, which resulted in the loan being released, as well as getting another loan from the European Union.
The Egyptian state’s economic status has shifted from being unable to supply foreign exchange required for the economy and having two exchange rates in the market to total unification of the exchange rate, nearly eradicating the parallel market and restoring market control. As a result, Egypt is expected to receive about 60 billion US dollars.
Restoring confidence
Certainly, all of these good initiatives promoting the return of economic and monetary stability have influenced the views of Egyptian expats, who have begun to reestablish faith in the local banking system and reroute their remittances via it.
Egypt has around 14 million expatriates, the bulk of whom reside in Arab Gulf nations, particularly Saudi Arabia, which got over 1.5 million Egyptians, followed by the UAE, which received approximately 600,000 Egyptians.
Anyone who has followed this case over the recent years has noticed the extent of media attention to it only in times of hardship and crisis, considering it only a “source of foreign currency,” and frequently forgetting it in times of economic stability. This attitude undermines trust between the large numbers of Egyptian expats and the policies of their homeland government.
Governmental initiatives
Recently, the Egyptian government launched several initiatives to increase the contribution of Egyptian expatriate communities to bridging the foreign exchange gap. These initiatives include one that allows expats to import cars completely free of customs and taxes as long as they remit a refundable amount equal to the customs duties to the banking system. It also presented an opportunity to fix the conscription dilemma, as well as to start dollar-based insurance and pension schemes.
The government also began a campaign to export real estate in dollars, mostly targeting Egyptian expats, allowing them to buy housing units in novel and unorthodox methods.
According to official announcements, the government is also planning to establish a new investment firm for Egyptian expats with a capital of $100 million, which might grow to $1 billion in the future, and list it on local and international stock exchanges.
Required steps
These measures necessitate a number of factors that I believe are required to strengthen the relationship between the government and Egyptian expats and their children born in the diaspora, as well as to gain the trust of the majority of these workers, regardless of their categories or social conditions, in a proper manner, especially in light of violent regional competition to win the trust of everyone who has foreign exchange savings. So, I believe these aspects are as follows.
– The need to encourage Egyptian expats to not only transfer their money, but also to invest them in Egypt as per established rules. The government has made efforts on this issue, but more is needed. In this context, we need to establish investment institutions with substantial assets managed by global reputable organisations, which will instill trust in all Egyptian expats and urge them to participate in these firms.
– Establish a more comprehensive social dialogue to exchange experiences in development domains relevant to the state’s development goals. Local ministries and agencies should engage in these dialogues with foreigners who specialise in their particular fields.
– Introducing opportunities for Egyptian expats. Although several of the conferences had identified prospects, we urgently need formulas that allow Egyptian expats to contribute to industrial initiatives or firms in a way that ensures long-term profits. Meanwhile, procedures should be simplified to persuade expats to begin new ventures in their home nation.
– Modifying the media policy in dealing with the file of Egyptian expats. The media should emphasise the importance of Egyptian expats’ contributions not only to the state’s revenues, but also to the nation’s growth. The national dialogue discussed an odd idea for expats to contribute 50 per cent of their total income to Egypt, which benefited unfriendly agendas. Media should tackle the consequences of such initiatives.
– Make emigration easier, streamline the procedures, and get work permits in the target nations to increase the number of Egyptians working abroad. The Ministry of Labour, in co-operation with the Ministry of Immigration, should create a database of young people who want to work abroad, connect them with suitable employment prospects, and identify the necessary vocations. They, moreover, must give workforce training in order to create seasonal or permanent employment opportunities, hence increasing foreign exchange inflows.
– Launching professional immigration programmes to direct and qualify Egyptian workers to emigrate and work in areas that require migrant labour. This necessitates collaboration among the Ministries of Higher Education, Immigration, and Labour, with the latter two identifying areas in need of labour abroad and training young Egyptian cadres to work in these sectors.
-Bilateral and international co-operation with other countries to facilitate the transfer of labour and exchange experiences and information about emigration and work, as well as providing support and assistance to expatriates by establishing offices and centres to serve Egyptians in various countries.
– Egyptian banks must provide incentives to Egyptian expatriates through a variety of mechanisms, including specialised banking services, the launch of rewards and incentive programmes when using credit cards or other banking services, and the provision of financial advisory services to assist them with financial planning and successful investments.
These incentives, among many others, must be utilised to address this issue in the future so that we do not squander time and chances, and to preserve the long-term viability of a key pillar of the Egyptian economy.
Written by Dina Abdelfattah
