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oil-damaged gulf economics are cutting loose foreign workers, threatening a key support of egypt's economy

by joseph logan

human resources manager ezzeldin enan is at the leading edge of a disturbing trend. in the late 1980s, his company, cairo-based personnel firm premier recruitment, used to place hundreds of skilled professionals in jobs in the gulf, where educated egyptians have long found positions and salaries unavailable in a dismal local market.

but rising unemployment in the gulf, plummeting prices for oil and political troubles have all cut away at enan's once-booming business. several years ago, placing workers in the gulf accounted for 60 percent of premier recruitment's total business. now, it accounts for just a quarter. worse, enan said it doesn't look like the forces that have taken business from premier recruitment and other personnel firms are going to weaken any time soon.

"i wouldn't be surprised to see very dramatic changes in recruitment patterns in gulf countries, and it will affect egypt in a drastic way," enan said. "we may see a lot of them returning for good."

substantial repatriation of egyptian workers abroad would be bad not just for recruiters and for the workers themselves, but for the nation as a whole. hungry labor markets in the oil-rich arab world not only have helped mask egypt's persistent unemployment, but egyptians working abroad have directed much of what they earned back home, providing the country with a vital stream of hard currency. and at the moment, such remittances - a substantial share of the $3.5 billion in private transfers the central bank reported for 1997-98 - are critical.

tourism revenues collapsed following november 1997's luxor massacre and aren't expected to recover fully for another year or two. income from suez canal transit fees continues to decline mildly but steadily, as it has for the past several years. revenues from petroleum exports have suffered from tumbling international prices for oil. and there is an agreement in principle that the $850 million in u.s. economic aid that egypt receives annually will be phased out. remittances from workers abroad, in short, are egypt's only significant source of foreign currency yet to suffer a serious shock, stagnation or a negotiated demise.

but there are indications that the writing is on the wall for this source of foreign currency as well. as of yet, there has been no perceptible drop-off in the flow of cash egyptians repatriate from abroad. in fact, figures for the first half of the 1998-99 fiscal year show that private foreign transfers reached $1.9 billion, slightly more than the $1.8 billion recorded in the first half of the previous year.

nonetheless, as the prolonged slump in oil prices forces gulf countries to contemplate new belt-tightening measures, income from expatriates seems far less secure than ever. oil prices may have turned up recently, but the long slide has prompted the governments of countries like saudi arabia to revisit plans to address unemployment among their own citizens by trimming the ranks of foreign workers.

pinning down the exact number of egyptians working in the gulf states is difficult. most estimates range from 1.5 million to 2 million, which includes an expatriate labor elite of engineers, doctors and computer programmers, and a white-collar work force that fills the gaps in sales, marketing and middle management. although many observers are confident the elite workers will re-main indispensable, there are hints that the others may prove more replaceable.

"the less skilled foreign workers, including those in management and administrative positions, are probably going to be affected," said abd el fattah el gabali, head of the economics unit at the al ahram center for strategic & political studies, "and that will certainly have repercussions here."

enan of premier recruitment said that saudi arabia, in particular, is unable to find jobs for its own graduates and is addressing the problem by nationalizing expatriate positions. the giant petroleum producer aramco, for in-stance, was hoping to have only 5 percent foreign staff by 1997, he said. "there's an open desire to 'saudiize' companies," he said. the cuts will primarily affect middle management and certain technical workers - and, enan said, will therefore work against egyptians in particular. "the british and americans are occupying jobs saudis can't do, the sri lankans and pakistanis have the ones they don't want to do, and the middle management and clerical positions are held by egyptians," he said. "they are a logical target."

this logic has been borne out in practice. when saudi officials restricted renewals of workers' residence permits in the mid-1990s, they specified positions like clerks and personnel staff, enan said. and saudi restrictions on immigrant workers adopted in 1995 directly limited egyptian competition for saudi jobs. "prior to 1995, about 90 percent of our foreign business was with saudi firms," he said. "but it fell off dramatically after they is-sued regulations restricting the number of egyptians permitted to travel there for employment." officials at the saudi embassy in cairo refused to comment on any aspect of policy regarding migrant labor.

the slack labor market is by no means a phenomenon peculiar to saudi arabia. enan said demand for personnel in qatar, which had boomed following natural gas discoveries in 1995, has dropped sharply. "at that time, we supplied a full administrative staff for a gas plant that had just been completed," he said. now, economics and politics (egypt and qatar feuded in 1997 over egypt's decision to boycott the mena iv economic conference in doha), have reduced qatari recruitment of egyptian employees, led to restrictions on work visas and produced expulsions of egyptian workers.

if white-collar positions in the gulf do indeed begin to disappear in large numbers, an indication of the likely consequences can be found in the fate of egyptians who returned from iraq in the aftermath of the invasion of ku-wait in 1990. the returnees from iraq, typically unskilled or manual laborers working in service industries and simple trades, found that their capabilities weren't in demand in egypt's tight labor market and so joined the ranks of the unemployed, el gabali said. "it's a phenomenon that became visible almost immediately, though it isn't really apparent in official estimates of unemployment, which are approximately 10 percent," he said. "where you can see it is in the numbers of people who are peddling things on the streets and bridges, and in the ranks of itinerant laborers."

according to el gabali, increased unemployment also will be the most noticeable affect of reduced expatriate employment in the gulf. remittances could fall, but not drastically. "the groups of workers being eliminated were probably not earning or transferring that much," he said. "it's the remittances of engineers and doctors that are keeping the figures up."

the greatest impact, then, will likely be on the workers themselves. the situation of emad rushdie, a graduate student and teacher of arabic who spent two and a half years in iraq, provides a glimpse into the role expatriate jobs and foreign income played for the egyptian middle class during the past decade.

after completing his degree in 1988, rushdie decided to go directly to iraq to seek employment rather than try his luck in egypt's dismal market. "i'd spent a summer working there while i was a student and knew that i wouldn't have much trouble finding work once i arrived," he said. "i would have been able to find a job here after graduating, but it wouldn't have been anything very good. i would have been making just enough to cover my expenses without really contributing anything to the household."

his brother assam joined him for a six-month stint working at a baghdad hotel, then worked in saudi arabia for a year following the iraqi invasion of kuwait. a second brother has spent several years as a schoolteacher in kuwait.

their remittances became an important component of their family's income, although not to the dire extent some might think. rushdie and his brother said the money they transferred from abroad was never critical: another brother, hossam, was a government employee, and their father had a pension. moreover, they weren't transferring huge sums. assam said it was hard to save and transfer much of the £e 1,000 per month he earned in saudi arabia, and emad said regulations governing transfers made it difficult to send money from iraq on a monthly basis.

but the extra money gave the family options it wouldn't have had otherwise. "it was more like extra cash for various household expenses and emergencies," assam explained. added emad, "it was something the household depended on, but not to stay even with debts or to make any big purchases. it went toward the cost of my father's prescriptions and anything that came up unexpectedly."

like many egyptians, the rushdie brothers saw their foreign work as a stopgap measure preceding more solid career opportunities in egypt. when assam got the news in saudi arabia that he'd been appointed to a job with egypt's tax authority, he immediately made preparations to leave.

"there was no incentive to stay," assam said. "i didn't want to spend the rest of my life working 16 hours a day in a restaurant, and the saudi government was already beginning to replace egyptians who worked in schools, hospitals or any government agency."

egyptians squeezed out of white-collar jobs in the gulf won't all make such easy transitions to domestic employment, but there are some new opportunities. foreign companies setting up shop in egypt will provide a market for some of the returnees, premier recruiting's enan said, and the narrowing gap between salaries for local hires and what expatriates had earned is making it easier to place people here.

that same foreign investment could help egypt defray the impact of declining remittances. "the remittances are a maximum of 10 percent of gdp," said sultan abu ali, a professor of economics at zaqaziq university and fellow of the economic research forum. "even if that's halved in five years, the effects can be minimized, or at least absorbed, in the long term." the keys, he said, are in-reased tourism, continued structural reform and more investment.

but it's important to plan for the shortfall. premier recruitment, having become aware of the saudi government's plans to nationalize jobs, spread out its foreign contacts and focused on placing workers in egypt. as a result, enan said, the company weathered the slump. not all of his competitors were as successful.

"about 300 of the 350 companies placing egyptians abroad a decade ago have gone out of business," enan said. "but we were prepared." there's a lesson there for policymakers as well.

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