In economic and financial terms, the most important aspect of migration for the sending country is remitted money — usually cash transfers — and goods that migrant workers send back to family or friends at home. Such flows of wealth are important to both the families of migrants and to the economy of sending countries. Formal remittances that are sent through banks, post offices, exchange houses and transfer companies are the only form that can be accurately measured. Their size and frequency are determined by several factors such as the number of migrant workers, wage rates, exchange rates, political risk, economic activity in the host and sending countries, the existence of appropriate transfer facilities, the level of education of the migrant, the number of people accompanying the migrant, the number of years since migration and the difference in interest rates between sending and receiving countries.

There are around 6 to 7 million Egyptians living abroad; approximately 75% of whom are in Arab countries while 25% live in the West, including Australia and New Zealand. The remittances of Egyptians abroad are an important asset to the Egyptian economy. According to the Central Bank of Egypt (CBE), remittances of Egyptians abroad increased to $12.6 billion (LE 75.73 billion) in FY2010/11 from $9.8 billion (LE 58.9 billion) in FY2009/10.

Between 1993 and 2003, remittances stabilized at approximately $3 billion (LE 18 billion). In 2008, remittances increased to $8.7 billion (LE 52.29 billion), then decreased to $7.2 billion (LE 43.27 billion) in 2008 due to the international financial crisis.

Origin of remittances
The CBE publishes remittances’ data by country of origin, showing that in the last few years, remittances from the US comprise about 30% of total remittances to Egypt. Remittances from Western European countries comprise about 12% while an estimated 60% of remittances come from Arab — mainly Gulf — countries. Unfortunately, data on the origin of remittances is not available for FY2009/10 and FY2010/11, but one may expect the same pattern due to the fact that the majority of Egyptians abroad are in Gulf countries.

Remittances transferred through informal channels or brought by travelers and returning migrants are unlikely to be captured in official records, although they may represent a substantial addition to the remittances sent through official channels. Hence, one should not ignore informal and in-kind remittances made by Egyptian migrants not only from Arab countries (Jordan and Libya), but also from European countries such as Italy due in part to the migration to Italy and the fact that illegal immigrants don’t have access to formal channels and banking systems.

Remittances and macroeconomics
Remittances are among Egypt’s largest sources of foreign currency, along with Suez Canal receipts and tourism. As early as 1979, these remittances amounted to $2 billion (LE 12.02 billion); a sum equivalent to the country’s combined earnings from cotton exports, the Suez Canal, transit fees and tourism. Between 1990 and 2006, workers’ remittances accounted for an average of 6.1% of GDP. Even if their contribution to GDP declined to less than 5% in recent years, remittances remain an important capital flow for Egypt. Moreover, their role appears even more clear when compared to investment and export figures.

The impact of remittances on poverty alleviation in Egypt is not entirely known. Research on the use of remittances has shown that 75% of these funds are used for daily household expenses such as food, clothing and health care, while spending on building new houses and education come second and third items in remittances utilization. This confirms other findings that show that remittances are also spent on building or improving housing, buying land or cattle and buying durable consumer goods. The distribution of uses indicates in any case the importance of migration and remittances in poverty alleviation.

Generally speaking, only a small percentage of remittances are used for savings and “productive investments,” for example, for activities with multiplier effects in terms of income and employment creation. However, the entrepreneurial activities of return migrants contribute to the Egyptian economy. Investments by returning migrants are a continuation of their support to the national economy.

Studies indicate that about 10% of returnees invest in economic projects. In addition, remittances help families to establish family-based and family-managed small projects such as raising cattle, opening a mini market or buying and operating a taxi, especially in rural areas. Many taxi drivers in Cairo and other governorates bought their car upon their return and operate it themselves or through hired taxi drivers as their main source of income.

However, attempts to attract businessmen among the Egyptian diaspora to invest in Egypt seem not to have had the expected success. One of the main mandates of the emigration sector of the Ministry of Manpower and Emigration and the Migration Law no. 111/1983 is to attract Egyptians abroad to maintain links and invest in Egypt, but government bureaucracy and suspicion from many Egyptians abroad have been obstacles to a significant flow of investments into the country.

Post-revolution remittances’ surge
The current surge in remittances to Egypt to $12.6 billion (LE 75.73 billion) in FY2010/11 from $9.8 billion (LE 58.9 billion) in FY2009/10 as announced by the CBE with an almost 30% increase in one year, is promising. This comes at a critical time for the Egyptian economy, which suffered a sharp decrease in cash reserves and decreasing tourism revenues. The most significant factor in the recent surge in remittances, eventually, may be attributed to the campaign run through  the internet and social media, which urges Egyptians abroad to transfer money to the Egyptian banking system to “Save Egypt’ and prevent the collapse of its economy.

The media campaign urged Egyptians to transfer $1,000 (LE 6,010) to their bank accounts in Egypt. Other reasons played a significant role in the surge of remittances, such as the desire of many Egyptians in the West to come back to Egypt and invest in their home country. The increase of remittances could be regarded also as the only way for Egyptians abroad to contribute to building a new nation since it was difficult for them to participate in the political arena until they were recently granted their right to vote in the elections while abroad. bt