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Viewing cable 09CAIRO258, Egypt: Tepid Responses to Growing Labor Woes

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Reference ID Created Released Classification Origin
09CAIRO258 2009-02-12 07:07 2011-02-16 21:09 SECRET//NOFORN Embassy Cairo
VZCZCXYZ0003 
RR RUEHWEB 

DE RUEHEG #0258/01 0430755 
ZNR UUUUU ZZH 
R 120755Z FEB 09 
FM AMEMBASSY CAIRO 
TO RUEHC/SECSTATE WASHDC 1622 
INFO RUCPDOC/DEPT OF COMMERCE WASHDC 
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS CAIRO 000258 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ELAB PGOV PREL EG
SUBJECT: Egypt: Tepid Responses to Growing Labor Woes 
 

ΒΆ1. (SBU) SUMMARY: Egypt is suffering from a chronic labor mismatch 
between market supply and demand. Despite several years of high economic growth, unemployment remains a problem, and there is a scarcity of skilled workers and managers. Each year, Egypt produces 750,000 new college graduates, many of whom have limited skills and lack training, and are not ready for the workforce. As a result, the comparative wage advantage of skilled and unskilled labor in Egypt is offset by much lower productivity than many other countries in the region. Efforts to address this issue by both the Egyptian government and the private sector are not well coordinated or communicated. The worldwide economic slowdown is likely to exacerbate the situation in the near term. USAID has been working closely with the Ministry of Education to improve the quality of primary and secondary education, but has found little traction for reform at the Ministry of Higher Education (septel). End Summary.

2.(U) Despite having long ago abandoned guaranteed employment for all university graduates, the Government of Egypt has taken few steps to improve the quality of post secondary education in Egypt to make new graduates competitive in the modern workforce. The 750,000 graduates being produced each year by Egypt's universities are ill-equipped for the demands of most Egyptian employers. As a result of low skills and the lack of proper training, unemployment and underemployment are rampant. The Central Agency for Public Mobilization and Statistics (CAPMAS) reports that there are 24.9 million Egyptians in the labor force. According to Ambassador Magda Shahin, Director of the Trade-Related Assistance Center at the American Chamber of Commerce in Egypt, this number is expected to increase to 30 million workers over the next decade. With little training and low skills, graduates continue to enter the workforce with limited opportunities to work inside or outside Egypt.

3.(U) In a recent conference on Egyptian human resource issues, Aisha Abdel Hadi, Minister of Manpower and Migration, conceded that there were serious issues in the skill-set of Egyptian workers. She said that the government has set up a Higher Council for Human Resources Development comprised of all the various ministries and parties involved in the labor improvement process. She also said that the government was putting increased resources into training for workers at all levels.

4.(U) Egypt has the largest labor pool in the Middle East and North Africa, accounting for 22% of the region's workforce. Heba Nassar, an economist and Vice President of Cairo University, contends that despite the comparatively low cost of Egyptian labor, there are a number of factors which prevent Egyptian workers from being competitive regionally and globally. Egyptian workers have some of the lowest productivity in the region (ahead of only Morocco and Yemen). Nassar also points out that Egypt's spending level on research and development represents a mere 0.19% of GDP. High levels of illiteracy coupled with poor education and a lack of technical skills contribute significantly to the low productivity of Egyptian workers. As a result, Egypt loses most if not all of its comparative wage advantage.

5.(U) According to the Egyptian government, there are 5,000 vocational training centers, though according to private sector sources, much of the training and equipment is severely outdated. The sentiment among private sector companies is that the government should play a larger role in worker training, but most don't have high expectations that this will come to pass. Most private sector employers, particularly multinational corporations and labor intensive industries, provide their own training centers in order to obtain sufficient numbers of skilled employees.

6.(U) Expatriate Egyptians working in the US, Europe, and the Gulf are a critical part of the workforce. An estimated 2 million Egyptians work overseas; their remittances account for over $8.5 billion per year (six percent of GDP in 2006/2007). As the global economy worsens, there are worries that significant numbers of expatriate Egyptians may lose their jobs (particularly in Dubai and other Gulf states) and return to Egypt, intensifying the domestic labor crisis.

7.(U) This situation highlights out another gap in the GOE's labor management. Unlike many exporters of labor, Egypt has very little active management of its expatriate workforce to insure that workers have the skills required by labor importing countries and that workers can get jobs that match their skill sets. As a result, Egyptian workers may be particularly vulnerable during bad economic times. Though the effects of the economic slowdown are only beginning to be felt in Egypt, early anecdotal reports suggest that thousands of workers may soon be returning from the Gulf.

8.(SBU) Comment: Egypt is a demographically young country and the Egyptian labor pool continues to grow at a rapid rate. Both the GOE and private sector agree that Egypt's educational system does not meet the country's needs. At the same time, there is a lack of coordination between the government and the private sector to address education and training. Focusing the work of the various stakeholder ministries within the GOE is a start, but the private sector needs to commit resources and political will to the issue as well. USAID has been working closely with the Ministry of Education to improve the quality of primary and secondary education, but has found little traction for reform at the Ministry of Higher Education (septel). In the short term, the worsening economic situation will undoubtedly result in increased unemployment and will further expose the shortcomings of Egyptian labor competitiveness in the global market. End Comment. Scobey