Monday, April 6, 2009

Economic crisis takes its toll on Egyptian workers, says report

By Sarah Carr - Daily News Egypt - April 3, 2009

A new report paints a grim picture of the effect of the global economic crisis on unemployment rates in Egypt.

The Center for Trade Union and Workers Service (CTUWS) which published the report, estimates that half a million Egyptians will lose their jobs in 2009.

It refers to figures released by the Central Agency for Public Mobilization and Statistics (CAPMAS) according to which 88,000 people lost their jobs in the first three months of 2009, raising unemployment rates in Egypt to 8.8 percent.

While CAPMAS places the number of unemployed at 2.2 million, non-governmental sources estimate that the true number is double this figure, according to CTUWS.

That the reverberations of the global economic crisis would be felt domestically was inevitable CTUWS says, pointing to the fact that 75 percent of Egypt’s GDP is derived from trade and 32 percent of Egyptian exports are destined for the US market. In addition, two thirds of foreign direct investment over the past two years has come from the US and Europe.

As a result, the report says, Gross Domestic Product growth will fall in 2009 to between 3.5 percent and 4.1 percent.

While government statements initially denied that the Egyptian economy would suffer, the Ministry of Economic Development expects that the net losses resulting from the crisis will total $4 billion in 2009.

The ministry also says that remittances from Egyptians abroad has also fallen by $600 million, while income from tourism in the first quarter of 2009 dropped by more than $2 billion. 

CTUWS says that income from the Suez Canal has fallen by about $400 million as a result of the slowdown in the global trade movement.

Quoting a study conducted by the Industrial Modernization Center (IMC) at the beginning of March 2009, CTUWS says that the half a million workers expected to lose their job this year will cost the government LE 2 billion — if it honors its obligation to pay financial welfare to them through the Unemployment Assistance Fund. 

IMC manager Adham Nadim revealed that 10 companies have submitted requests to the Unemployment Assistance Fund, but only three have been approved. 

The effect of the economic crisis is not only being felt through redundancies; it is also apparent in incentive payment reductions and an increase in working hours at the same time as shift numbers are decreased. 

CTUWS assesses this in a study of six industries; tourism, textiles, construction, chemicals, engineering and catering services.

In the textiles and ready-made garments sector, Textiles — in the Port Said General Free Zone for Investment where 48 companies operate as part of the QIZ agreement signed with the United States — more than 1,500 people have been made redundant. 

Officials at the General Authority for Investment and Free Zones (GAFI) has called on minister of trade Rachid Mohamed Rachid to increase government support for ready-made garments from 6 percent to 12 percent. 

The report quotes laid-off textiles worker Ahmed Morsy as saying that he does not receive any social insurance benefits despite the fact that monthly deductions were made from his salary for this purpose. 

CTUWS says that the tourist sector has been most hard-hit by the crisis with activity in popular tourist destination Sharm El-Sheikh dropping by 40 percent. 

In response, a number of hotel company and tourist village owners have implemented a new policy of laying off three or four employees every day. 

This policy is pursued in order to avoid large group protests by laid-off workers, CTUWS says. Mahmoud Gaballah, a member of the executive board of the Egyptian Chamber of Tourist Establishments affirmed that he has “benefited greatly” from this approach, and has laid off over 300 members of his 4,000 staff because he is unable to pay their wages. 

CTUWS makes reference to newspapers reports according to which Hamed El-Shiaty, head of the Travco group, told Prime Minister Ahmed Nazif that he will have to make redundant 1,000 of his 11,000 work force if the government does not intervene and lend support. 

El-Shiaty says that bookings in Travco’s hotels have dropped by 40 percent.

Officials in the South Sinai and Sharm El-Sheikh Hotel Chambers confirmed that a number of hotels have made temporary workers redundant and given a one-month paid (maximum LE 300) holiday to permanent employees because of the reduction in the rates of activity.

Happy Dolphin, which offers sea trips in Hurghada, laid off 25 workers at the end of January after activity dropped by half. 

Company owner Amgad Soryaal Zarei has asked workers to take an unpaid holiday for an unspecified amount of time, and work hours have been increased from eight to 12 hours per day.