The views expressed in this report do not reflect those of the World Bank or its Board.

Transcription

1 The views expressed in this report do not reflect those of the World Bank or its Board.

2 Labor Migration in the Middle East and North Africa A View from the Region Georges Corm

3 ABBREVIATIONS AND ACRONYMS APEC ANETI ATCT CAPMAS CFO DOZ EIB ENP EU ESCWA FDI FTE GCC GDP GNI HCM ICT ILO IMIS IOM OWWA IT LERC MENA MTOs NDU NGOs ODA OECD OTE POEA R&D UAE UN UNCTAD WOCCU National Agency for the Promotion of Employment and Competences Agency for Employment and Independent Labor Agency for Technical Cooperation Central Agency for Public Mobilization and Statistics Commission on Filipinos Overseas Outsourcing Zone European Investment Bank European Neighborhood Policy European Union United Nations Economic and Social Commission for Western Asia foreign direct investment Foreign Trade Enterprise Gulf Cooperation Council gross domestic product gross national income Higher Committee for Migration information and communication technologies International Labour Organization Integrated Migration Information System International Organization for Migration Overseas Workers Welfare Administration information technology Lebanese Emigration Research Center Middle East and North Africa money transfer operators Notre Dame University nongovernment organizations official development assistance Organisation for Economic Co-operation and Development Office for Tunisians Abroad Philippines Overseas Employment Administration research and development Untied Arab Emirates United Nation United Nations Conference on Trade and Development World Council of Credit Unions

4 TABLE OF CONTENTS INTRODUCTION: CONTEXT, CONSTRAINTS AND CONTENTS...1 I. BACKGROUND: POPULATION EXPLOSION IN MENA Historical Perspective Population Explosion in MENA...4 II. MIGRATION STOCKS AND FLOWS The Measurement Problem The Changing Migrant Stocks The Diversified Migration Flows...10 III. REMITTANCES: VOLUME AND BENEFITS MENA s Comparative Remittances Remittances and Economic Aggregates Use and Other Benefits Remittance Transfer Costs Role of Institutions...20 IV. FDI, SUBCONTRACTING AND OUTSOURCING Link between FDI and Offshoring/Outsourcing MENA Region in the International Outsourcing Market...23 V. IMPROVING THE CONTRIBUTION OF MIGRATION Role of Education and Knowledge Managing Migration Flows: Institutional Dimensions...29 VI. IMPLICATIONS FOR INSTITUTIONAL AND POLICY CHANGES...36 ANNEX A. MIGRATION POLICY IN THE PHILIPPINES...40 ANNEX B. MENA S BUSINESS CLIMATE INDICATORS...42 ANNEX C. STATISTICAL ANNEX...47 BIBLIOGRAPHY...66

5 TABLES Table 1 Discrepancy between Numbers of Migrants Counted by Countries of Origin and Countries of Destination, Selected Countries...7 Table 2 Percentage of Total MENA Emigrants to Total MENA Population...8 Table 3 Emigration Intensity by Region of Origin and by Destination: Ratio of Migrants to Population (In Percentage)...9 Table 4 Remittances: Officials Figures and Unofficial Estimates for Three MENA Countries.14 Table 5 Remittances Per Capita of Population by Region...14 Table 6 Distribution of Remittances by Moroccan and Egyptian Migrants, by Region of Destination and Per Capita, Table 7 Remittances Ratio to Exports and FDI...17 Table 8 Evolution of FDI Flows to the Various Developing Regions...22 Table 9 Distribution of FDI Inflows in the MENA Region, By Country...23 Table 2.1 Business Climate Indicators (Starting & Managing Business)...44 Table 2.2 Business Climate Indicators (Credit, Property & Protection)...45 Table 2.3 Business Climate Indicators (Taxes, Trade, Contracts, Closure)...46 FIGURES Figure 1 Evolution of MENA Population...4 Figure 2 Evolution of Rural and Urban Population in the MENA Countries...5 Figure 3 Distribution of MENA Region Migrants by Destination Regions ( )...9 Figure 4 Outflow of Emigrants from MENA Region to OECD Countries...11 Figure 5 Levels of Skills of MENA s Migrant Active Population in Selected European Countries and North America...11 Figure 6 The Increase in Remittances by Regions...13 Figure 7 Percentage of Remittances to GDP...16 Figure 8 Numbers of Students in Different Types of Educational Institutions in Ten MENA Countries...29 BOXES Box 1 Cost of Remittance transfers...19 Box 2 The World Council of Credit Unions...20 Box 3 The Barcelona Process and Immigration...30 Box 4 NOSSTIA, Network of Syrian Scientists Technologists and Innovators Abroad...34

6 INTRODUCTION: CONTEXT, CONSTRAINTS, AND CONTENTS Mass migration has become an important economic phenomenon associated with the expansion of globalization and trade between nations. For many decades, indeed centuries, it has shaped or reshaped the social and economic scene in many continents, regions, and countries of the world. More recently, the oil boom in the Arabian Peninsula attracted a large flow of temporary Arab and non-arab workers. Today, many of the European Union s once-labor-exporting countries are counting on regulated (skills-targeted) immigration flows to fill skill shortages and adjust to their aging or declining populations. In this context, the Middle East and North Africa (MENA) Region is by far the most important partner of Europe due to its geographic vicinity and the historical, political, cultural, and economic links between the two regions. Migration inside the region is also quite developed because of the manpower needs of Arab oil-exporting countries with small or medium-size populations. At the same time, Australia, Canada, and the United States are continuing to attract migrants from MENA countries. This report presents an overview of migratory movements [ inside and outside the MENA Region, that is, focusing on the push and pull factors at play, the benefits accruing to the countries of emigration, and the issues they give rise to. Given the importance of demand for temporary labor from within the region MENA is both a region of origin and a region of destination it was difficult to separate the issues related to intra-mena migrations from issues related to migration outside the region. In fact, today there seems to be one global market for temporary and permanent unskilled and skilled migrants. Demand for immigrants on the global labor and skills market is determined by a number of complex factors and is affected by several constraints in recipient countries. MENA Region emigrants have to compete with other regions of the world seeking to export surplus manpower. Even in meeting demand within the MENA Region, Arab emigrants are facing strong competition from Asian workers. This report is part of a broader initiative by the Bank s MENA Region to prepare a regional report or reports on labor migration and insourcing in MENA countries. In addition to this report, the initiative led to the preparation of three case studies on the Arab Republic of Egypt, Morocco, and Tunisia dealing with the same subject. 1 The case studies, which are synthesized in a separate report in this volume, 2 were completed at about the same time as this report. While the two sets of reports, therefore, do not fully draw on each other, their findings are mutually consistent. The analysis of migration in the MENA Region confronts serious statistical difficulties, and this exercise is no exception. The difficulties permeate all aspects of the subject migrant stocks, flows, remittances, and others and are illustrated in the relevant sections of the report. It suffices to note that the data problem includes volume, continuity, consistency, comparability, 1 The three case studies are: (i) Labor Emigration and Insourcing in MENA The Case of Egypt, by Christophe Schramm, in collaboration with IOM Cairo and M.L Fares; (ii) Migration et Insourcing dans les Pays de MENA Cas de la Tunisie, by Ahmed Basti and Tahar Ben Abdesselem, in collaboration with IOM; and (iii) Migration et Insourcing dans les Pays de MENA Cas du Maroc, by Mohamed Khachani, Fouzi Mourji, and Christophe Schramm in collaboration with IOM Rome. 2 Schramm 2006.

7 - 2 - and reliability. The report is based on the best data available, complemented by information extracted from various ad hoc studies and papers of varying depth and quality on different subjects. Despite the data problems, the picture drawn in this way is believed to be representative. The report has a broad sweep but includes selected areas of emphasis. After highlighting the MENA Region s postindependence population explosion (section I), the report reviews the evolution of migrant stocks and flows (section II). Migrant remittances are examined in section III (the report s longest section), given their current importance and because of the room that exists to improve their volume, distribution, and use. Section IV examines the need to increase the MENA Region s competitive capacity to attract a greater proportion of the foreign direct investment (FDI) flows and offshoring or outsourcing activities that thus far have been directed mostly to Asia and Latin America. Section V looks at the role that education and the management of migration can play in increasing the contribution of migration flows. The institutions currently or potentially involved with migration are described in some detail, including examples of best practice within the region. Section VI draws on the implications of the overview for institutional and policy changes, pointing to the appropriate emphasis or changes in specific areas such as education, business climate, remittances, and others. Historical Perspective I. BACKGROUND Migration to, from, and within the MENA Region goes back a long time; it has had varied root causes, taken many forms, and produced different effects. In the modern era, starting in the middle of the nineteenth century, the region received a flow of refugees from the Caucasian region especially Russia and the former Ottoman lands due to political upheaval, armed conflict, and the brutal suppression of local revolts. At about the same time, the colonial occupation of places like Algeria, Egypt, Libya, Morocco, and Tunisia brought an influx of European settlers to the region. These settlers, who come mostly from France, Great Britain, Italy, and Spain, played an important though mixed economic role in the destination countries. Although contributing to the modernization of these countries, in cases like Algeria and Libya, the settlers displaced parts of the local population from fertile land, adding to their hardship. In general, the promotion of the poor segments of the local population and their access to modern education and modern economic life was restricted in most countries. A reverse migration soon followed. The Lebanese were the first to emigrate in large numbers during the period because of the political disturbances that began there. This emigration, which was initially directed to North and South America as well as Egypt, has continued to this day and has diversified to Australia, Sub-Saharan Africa, and the Arab oilproducing countries. After World War II and as Arab countries gained their independence between 1956 and 1962 European settlers began returning to their countries of origin. This return migration had a

8 - 3 - mixed impact. On the one hand, it opened channels for social and economic promotion of the domestic population; on the other hand, it contributed to a decline in the productivity of these countries modern sector. The nationalization of most European enterprises helped to absorb the growing number of people entering the employment market, but without helping the economies efficiency, as the former European monopolies were transformed into state monopolies. Since the nineteenth century, the MENA Region has seen several waves of migration, including migration inside the region, with the Palestinian forced migration being a prime example. The creation of the State of Israel resulted in a flow of some 800,000 Palestinians from their home country to neighboring Arab lands. Lebanon and Jordan, despite their small size, received the largest number of these refugees, the rest going to Egypt, Iraq, and the Syrian Arab Republic. Following the 1967 Arab-Israel war, a new wave of Palestinian emigrants found their way to Jordan. Many other waves of internal migration followed. The Lebanese civil war ( ) produced a huge increase in the annual flow of Lebanese emigrants. The almost continuous disturbances in the Kurdish regions of Iraq and Turkey have contributed to a large flow of Kurdish emigrants to Western Europe. The Iranian revolution in 1979 resulted in a large wave of emigration mainly to North America. The Iraqi invasion of Kuwait and the ensuing first Gulf War were responsible for the expulsion of temporary migrants of certain nationalities working in Iraq and the Gulf states. A large number of Egyptian agricultural workers were expelled from Iraq, while Yemeni workers as well as a large number of Palestinians were expelled from Saudi Arabia and Kuwait. In recent decades, North America has attracted a growing number of so-called nontemporary (permanent) emigrants from the MENA Region. The number has not been as high as in the case of Europe; however, the nature of emigration has been different, as a large part of emigrants have been of middle-class origin and with university degrees. Australia has received a substantial number of Arab emigrants, though of a lower skill level. Temporary migration has been directed to three main destinations: the Arab oil-exporting countries of the Arabian Peninsula, where a strong demand for labor was generated by the oil boom of the 1970s; Libya and Iraq, two other oil-producing countries whose populations were either small or engaged in military conflict; and Sub-Saharan Africa, where a large number of Lebanese in particular emigrated during the French mandate of and, later, during Lebanon s protracted civil war of Perhaps the most important recent trend concerning migration in MENA, whose impact is still being manifested, has been the competition with local labor coming from foreign workers at two levels. After significantly relying on Arab immigrants, many of the traditional European destination countries, as well as the Arab oil-producing countries, began diversifying their foreign manpower in the 1980s and 1990s. This diversification has not been restricted to the labor-importing countries. Many MENA countries themselves have been receiving foreign workers, not counting transit migrants or political refugees. Despite their high rates of unemployment, Lebanon and Jordan have been receiving cheap foreign manpower as their citizens abstain from performing certain types of work and services.

9 - 4 - This recent phenomenon adds to the complexity of migratory movements in the MENA Region, where large pockets of poverty and illiteracy persist. Furthermore, the varied socioeconomic, institutional, and education profiles of the MENA countries create a situation that is both highly heterogeneous and dynamic. Population Explosion in MENA Except for Lebanon where permanent mass migration began in the second half of the nineteenth century there has been a great stability in the population of the MENA Region since the sixteenth century. Migratory movements consisted mainly of refugees from neighboring zones flowing into the region, spurred by political repression, revolutions, and wars, or of the flow of European settlers during colonial times. The situation began changing in the 1960s. After independence, accelerated progress in health care and education led to a demographic explosion. The population of the region increased nearly fourfold: from about 81 million in 1950 to 311 million in 2000, and is expected to reach 445 million by All country groups in the region experienced significant increases (see figure I.1). Figure I.1 Evolution of MENA Population In million Maghreb Mashrek GCC Countries Iran Source: Annex C, table C1. A universal trend in demography has been the huge and sustained flows from rural to urban areas caused by several factors. The various significant improvements in agricultural techniques considerably reduced the manpower required for cultivation, at a time when, the developing countries in particular were experiencing a population explosion. This occurred in MENA, too, where the high population growth led to high levels of migration from rural areas to urban areas. Figure I.2 shows the dramatic changes in the rural-urban population distribution that have taken place in all parts of the region over the last decades.

10 - 5 - Figure I.2 Evolution of Rural and Urban Population in the MENA Countries Maghreb Rural Urban Machrek Rural Urban 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Iran Rural Urban 100% 80% 60% 40% 20% Source: Annex C, table C2. 0% The demographic trends that began in the 1960s affected the migration flows between the MENA Region and Europe in the 1970s. There were, however, additional factors at play. The fourfold increase in world oil prices in 1973 created an economic slowdown in Europe, curtailing substantially the demand for foreign labor, while in the Arab oil-exporting countries (with the exception of Algeria), almost simultaneously, a new strong demand for labor emerged. The bulk of the demand originated in the Gulf countries and, to a lesser extent, in Libya. Mashrek countries took advantage of the Gulf Cooperation Council s (GCC) growing demand, while Maghreb countries, closer to Libya, exported their excess labor to their direct neighbor. 3 Egypt was able to take advantage of the needs for additional manpower of both the GCC and Libya. Temporary migration to the oil-exporting countries of the region alleviated the pressure of rural migration, as emigration in countries like Egypt and Morocco took place directly from rural areas to countries of destination. Most of these migrants, on return to their country of origin, tend to settle in urban towns and not in their rural region of origin. These new flows of emigrants from the MENA Region have taken place outside any institutional and legal framework. No bilateral agreements between countries of origin and countries of destination of migrants were signed to organize the flow of emigrants and provide for their rights and duties. This institutional and legal void allowed for the harsh treatment of emigrants that has 3 The Mashrek (or Mashreq) countries are Jordan, Lebanon, the Syrian Arab Republic, Iraq, Saudi Arabia, Oman, the Republic of Yemen, and the United Arab Emirates (UAE). The Maghreb group includes Morocco, Algeria, and Tunisia, as well as Libya and Mauritania. GCC stands for Gulf Cooperation Council, formed in 1981, grouping the Arab oil-exporting countries in the Arab Peninsula.

11 - 6 - taken place during periods of political or military hostilities between the countries of origin and those of destination. Mass expulsion of emigrants has occurred on several occasions, such as those in Libya (regarding Tunisian and Egyptian workers) and in Iraq (regarding Egyptian workers). Following the oil crisis, when demand for foreign labor declined sharply in Europe, the nature of migration changed in several respects. For example, an important part of the flow of emigrants from MENA countries took place under programs allowing family reunion. The import and employment of labor ready to perform menial or underpaid jobs continued, but in many cases, it did so under the form of illegal immigration. Almost in parallel, there was an increase in emigration from the MENA region to countries implementing immigration policies based on quotas for different nationalities and emphasis on qualifications and skills. Chief among these countries were Australia, Canada, New Zealand, and the United States. The numbers of migrants involved, however, have remained limited to this day by the prevailing quota systems and competition from regions (such as Latin America or Asia) neighboring these countries. The Measurement Problem II. MIGRATION STOCKS AND FLOWS The measurement and analysis of MENA migration by countries of origin and destination pose serious difficulties. The quantitative picture presented below is based on two Organisation for Economic Co-operation and Development (OECD) sources to two ends: (i) the OECD electronic data base on immigrants and expatriates, to analyze the stock of the foreign-born population in OECD countries according to country of origin, and (ii) the OECD annual reports for the years 2003 and 2004 on Trends in International Migrations, for statistics concerning the flows of migrants. OECD migration statistics cover European countries, Australia, Canada, Japan, New Zealand, and the United States as destination countries. They distinguish between emigrants who keep the nationality of their countries of origin, and those who acquire the nationality of the countries of destination, in addition to emigrants from undetermined countries of origin. The aggregate figures in the figures and tables that follow include all three categories. As will be seen, numbers seem to be underestimated for both stocks and flows, especially concerning Lebanon and the Islamic Republic of Iran, but for other MENA nationalities as well.

12 - 7 - A comprehensive study on Mediterranean migration that has looked into the measurement problem has confirmed and documented the large discrepancies that exist between migrant numbers as recorded by the OECD and those that appear in official country-of-origin statistics. 4 These discrepancies are highlighted in table II.1 in reference to four countries of origin. The table shows that the total number of migrants for the four countries combined, recorded by official home-country statistics, is more than 2 million (or 71 percent) higher than the number reported by the OECD. The differences for individual countries can be even higher. One reason for the discrepancy is that the OECD electronic database does not include workers who have acquired the nationality of the host country. There are similarly wide discrepancies for important indicators like the flow of remittances, which will be illustrated later. These and other shortcomings limit both the analysis and the interpretation, both of which need to be kept in mind. Table II.1. Discrepancies between Numbers of Migrants Counted by Countries of Origin and Countries of Destination, Selected Countries Origin Country Destination Migrants Counted at Difference (Origin - Origin Destination) Absolute Relative Algeria (1995) 807,051 1,058, ,151 31% Egypt, Arab Rep. of (2000) 429,428 1,050, , % Morocco (2004) 1,721,892 2,887,319 1,165,427 68% Tunisia (2003) 362, , ,783 91% Total 3,321,359 5,688,142 2,366,783 71% Source: Fargues 2005b, p The Changing Migrant Stocks Despite the information constraints noted above, the following traits and trends can be discerned in the MENA Region s migrant stocks. The cumulative number of migrants from MENA at the turn of the current century was 9.7 million, representing 3.35 percent of the region s total population, which averaged 329 million in the years If only migrants to OECD countries (for whom there are better statistics) are considered, the percentage ratio of migrants to population in the same period drops to 2.04 percent. This drop is due to the exclusion of the large number of migrants to the GCC. Table II.2 shows that the migrant-to-population ratio was much higher in the past, whether considering all migrants or just those to OECD countries; it declined (for total migrants) from about 9.5 percent in 1960 to 3.3 percent in recent years, or by nearly two-thirds. All country groupings within the region experienced a similar decline. This decline indicates that the number of migrants, though increasing, did not keep up with the population explosion highlighted in section I. 4 See Fagrues 2005b.

13 - 8 - Table II.2. Percentage of Total MENA Emigrants to Total MENA Population Migrants in North Migrants in Main America & Australia to European Countries to Total Population Total Population Migrants in GCC& Other Arab Countries to Total Population Total Migrants to Total Population MENA Maghreb Algeria Morocco Tunisia Mashrek Egypt, Arab Rep. of Jordan a Lebanon Syrian Arab Rep Iraq Occupied Palestinian Territory Iran, Islamic Rep. of Source: OECD Database on immigrants and expatriates, Demography and Population, November 2005, and (for GCC and other Arab countries) Baldwin-Edwards2005. Note: a. Figures for GCC also include Palestinians. The GCC and other Arab countries group is now the largest destination region for MENA migrants. It accounted for 45 percent of total migrants in , against 42 percent for migrants to European countries and 13 percent only for those to North America and Australia (see figure II.1), The GCC-plus group s share is almost certainly lower though probably still high today owing to the growing influx of Asian workers into GCC countries. It should be noted, however, that emigration to GCC countries attracts temporary labor only, because of the fact that host countries legislation does not provide for acquisition of nationality by long-term residents, and rights of ownership of housing and business are still restricted. The three Maghreb countries, with the exception of Lebanon, have the largest proportion of emigrated population in the region. Lebanon is the country with by far the highest rate of emigration (about 13 percent in , based on migration to OECD) in spite of its relative prosperity. This is due to the concentration of economic activities in the traditional service sector (trade, banking, and tourism) and the large decline in the country s agricultural and industrial production capacity, caused by the long period of civil war during

14 - 9 - Figure II.1 Distribution of MENA Region Migrants by Destination Regions, Regional distribution of MENA emigrants GCC & other Arab countries, 4,417,865 45% Total North America Australia 1,224,996 13% Total Main EU+Norway & Switzerland, 4,062,858 42% Source: Annex C, table C3. Table II.3 compares the intensity of emigration the ratio of emigrants to population between the different groups of country of origin. In spite of its high unemployment rate of 12 percent in recent years, the MENA Region does not match the emigration intensity of Central and South America or of the Balkan countries. Its migration intensity of 2 percent earlier in this decade was less than half that of Central and South America and less than a third of that of the Balkan group. Among the Central and South American countries, Puerto Rico, Jamaica, El Salvador, Mexico, the Dominican Republic, and Honduras, top the list (in that order) of the most important exporters of surplus labor relative to their populations. The absorptive capacity of the North American economy has been a key factor explaining the very high migration rates of this region, in addition to persistent deep poverty in the sending countries. Table II.3. Emigration Intensity by Region of Origin and by Destination Ratio of Migrants to Population (%) Total North America and Australia Main EU+Norway & Switzerland Total Central and South America Asia Balkans MENA For the Balkan group of countries, the destructive Balkan wars of were a key factor in increasing the number of emigrants. In Asia, except for a few countries (the Lao People s Democratic Republic, the Philippines, the Republic of Korea, and Vietnam), the migration rate has been much lower (less than 1 percent) than in the three other population exporting regions.

15 However, if the temporary Asian emigration to the GCC countries is taken into account, the migration rate would be much higher. This is also true for the Arab countries, but to a lesser extent than for Asian migrant, because of the fact that the number of non-arab, Asian emigrants in the GCC countries is more than double that of the Arab emigrants. The policy followed by the GCC countries has been to reduce their high dependence on Arab immigrants that developed during the 1960s and the 1970s. To this effect, they recruited more workers from non-arab Asian countries, mainly from Bangladesh, Indian, and Pakistan. Contrary to the American situation in which geographic vicinity has largely determined the countries of origin of the emigrants (Mexican and other Caribbean or Central Americans), in the case of the GCC countries, geographic proximity played a role only during the first waves of emigration. Political considerations were key factors in promoting an active policy to diversify the emigration flows and reduce dependency on regional emigration. The Diversified Migration Flows The data available on the distribution and size of the annual flows of migrants have serious shortcomings in terms of quantity, breakdown, and reliability. 5 They permit painting the picture only with broad brush strokes. After a considerable decline during the period , the annual number of migrants from MENA increased as a whole and for Maghreb countries in particular (figure II.2). The number of emigrants to the United States expanded significantly, with a marked increase registered by the Maghreb and GCC countries. Egypt and Lebanon are the two countries with the largest inflows to the United States. There has also been a large immigration from the Islamic Republic of Iran, which was probably linked to the Iranian revolution. In Canada s case, too, the inflow of Iranian emigrants has been quite significant. However, this was not the case with Iranian emigration to Europe, which has been rather modest. In terms of the stock of population from Arab origin in the United States, emigrants from the Mashrek region constitute by far the largest group. Also important has been the inflow of GCC emigrants, especially to Canada, despite the high gross domestic product (GDP) per capita of this group of oil-exporting, labor-importing countries. Emigrants from Saudi Arabia and the United Arab Emirates constitute the two largest inflows among Arab emigrants to Canada, where they rank directly behind the inflow of Iranians. 5 Data from the OECD are fragmented and give no indication of the size of the inflow of emigrants from the MENA region to the United States. Statistics for Canada have only aggregate figures for Other African and Middle Eastern countries. Sending countries keep a partial record of migrant inflows by destination countries. Thus, for Algeria, for example, only flows to France are identified, and for other countries of origin, only the flows to main destination countries are reported.

16 Figure II.2 Outflow of Emigrants from MENA Region to OECD Countries Maghreb Machrek Iran Total MENA Source: Annex C, table C5. Generally, MENA emigrants to North America have had a higher skill level than those who migrated to Europe. The trend in Europe has been to restrict immigration to people with the special or specific skills needed by the countries concerned (see figure II.3). Germany has already adopted such a policy and the French government has been considering a law that will regulate immigration according to the needs for certain types of skills. Figure II.3 Level of Skills of MENA s Migrant Active Population in Selected European Countries and North America 50% 45% 40% 35% Germany- Spain- France- UK Canada- USA 30% 25% 20% 15% 10% 5% 0% Hihly skilled Clercks Serv ice workers Skilled agricultural Craf t and related Plant and Elementary prof essionals and shop and and f ishery trade workers machine occupations market sales workers operators and workers workers assemblers Source: CARIM 2005.

17 An important aspect of emigration to Europe is the competition that exists with Turkey, the Balkan countries, and other developing countries. MENA immigrants constitute only 25 percent of the total foreign immigrant labor force in Europe, while immigrants from Turkey account for 36 percent. The bulk of MENA emigrants come from the Maghreb countries (24 percent of total emigrants), while emigrants from the Mashrek countries represent an insignificant number (less than 1 percent). This shows that in spite of the geographic proximity of, and the old colonial links with, France and Great Britain, Arab emigration from the Maghreb and the Mashrek groups remains low compared with citizens from Turkey or the former Yugoslavia. The bulk of the foreign labor force in the EU is concentrated in two countries: Germany (for Turks) and France (for Maghreb countries). Italy and Spain are two other European countries which have received substantial numbers of migrants from Maghreb countries. Emigrants from the Balkan countries are more evenly distributed between European countries, while immigrants from other developing countries are concentrated heavily in Spain and Italy. The last quarter century has seen a major increase in temporary migration with a distinct evolution and pattern of geographic distribution. Temporary migration has been directed to three main destinations. The first one has been the Arab oil-exporting countries in the Arabian Peninsula that regrouped into the GCC in Given their small population and the needs generated by the oil boom in the 1970s, a strong demand emerged from this group of countries for both skilled and unskilled manpower. After being almost totally dependent on Arab immigrants from the Mashrek countries, the GCC countries diversified their foreign manpower in the 1980s and 1990s. As noted earlier, an important feature of the GCC labor market that differentiates it from other destinations is the impossibility for immigrants to acquire the nationality of their country of residence even if they reside permanently in the GCC. In addition, GCC countries do not grant social security or pension rights to immigrant workers. Libya and Iraq, two other economies based on oil, are other destinations for emigrants. Libya, with a small population, has attracted workers mainly from Egypt and the Maghreb countries (especially its Tunisian neighbor). Although endowed with a larger population, Iraq was an importer of labor because its own male labor force was heavily engaged in the military during the war with the Islamic Republic of Iran ( ). It imported Egyptian agricultural laborers who were later obliged to quit Iraq when Egypt sided with the U.S.-led coalition to liberate Kuwait. The third destination has been the Western part of francophone Sub-Saharan Africa where a large number of Lebanese emigrated during the war ( ). The first flow of Lebanese to Africa began during the French mandate on Lebanon ( ). Family networks encouraged this flow, but the flow was reduced as many African countries underwent political and military turmoil.

18 At the same time, the number of refugees, transit migrants, and even foreign workers in MENA s non-oil economies has been on the increase. Morocco receives a large number of poor Africans from Sub-Saharan countries trying to reach Europe through its territory. The same is true of Libya. MENA s Comparative Remittances III. REMITTANCES: VOLUME AND BENEFITS A substantial benefit of emigration is the regular flow of remittances that it generates. Such flows have acquired a key importance in the resources available to the MENA economies. This is true for the world as a whole: the amount of global migrant remittances has grown from US$17 billion in 1980 to US$76 billion in 2000 and $126 billion in 2004, according to World Bank statistics (see figure III.1). 6 The importance of remittances can be illustrated by the fact that the value of remittances has exceeded by far the amount of official development assistance (ODA) received by North African sending countries (including Egypt). For the Maghreb countries alone, the ratio, which stood at 135 percent of ODA in 1980, reached 561 percent of ODA in 2003 (see annex C, table C12). The flow of remittances has become a key element of macroeconomic stability in many MENA countries. After a slowdown in the growth of remittances between 1986 and 1992, remittances registered a sharp increase due to the boom in oil prices that the GCC countries and Libya have been enjoying. The true magnitude of workers' transfers is believed to be much bigger than what official statistics show, especially for countries in turmoil like Iraq. In addition, official international sources do not show remittances by Palestinian workers to their families in occupied territories. Another factor for the underestimation of the amount of remittances is the informal or parallel circuits of transfers to countries with exchange control regulations like Syria or to countries with either weak banking systems (Algeria, the Islamic Republic of Iran, Iraq, and Syria) or with systems dominated by large bureaucratic state banks. Table III.1 shows that for three of the above countries (Algeria, the Islamic Republic of Iran, and Syria) the estimated volume of remittances may be three times the level officially reported. Remittances accruing to the MENA Region as a whole may well be 30 percent higher than the US$16 billion official statistics show (see annex C, table C11). Compared with other regions, the MENA Region has been loosing its rank as the largest beneficiary of workers remittances. After having reached 37.4 percent of total migrants remittances in 1990, remittances to the MENA Region declined to 16.2 percent of total worldwide remittances in 2000 and to 12.7 percent in In fact, the increase in migration from Latin America and the Caribbean to the North American continent has made this region the largest beneficiary of remittances; the South Asia and the and East Asia and Pacific Regions 6 See World Bank 2005.

19 come next as a result of the large increase of Asian workers in the GCC; and the MENA Region is fourth (see annex C, table C10). However, if remittances per capita (remittances to the population of the countries of origin) are considered, as shown in table III.2, the MENA Region ranked second in Figure III.1 The Increase in Remittances by Regions (US$ Million) 140, , ,000 80,000 60,000 40,000 20, Latin America & Caribbean South Asia East Asia & Pacific Middle East and North Africa Europe and central Asia Sub-Saharan africa Source: Annex C, table C12. Table III.1. Remittances: Official Figures and Unofficial Estimates for Three MENA Countries, 2003 (in US$ million) Official Statistics Estimates Differences Algeria 1,090 2,748 1,658 Syrian Arab Rep Iran, Islamic Rep. of 340 3,247 2,907 Total 2,048 6,831 4,783 Source: CARIM 2005, table 11. Table III.2. Remittances Per Capita of Population by Region (US$) Regions East Asia and the Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia

20 Sub-Saharan Africa Source: World Bank 2005, for remittances; and World Development Indicators 2005 for population.[ It is equally or more useful to consider the amount of remittances per capita of migrant population instead of per capita of population of the sending countries. This calculation alters the ranking of the sending countries in some cases, although the wider and more interesting variation is in the remittances by country of destination. For example, as table III.3 shows, per migrant remittances by Egyptian and Moroccan remittances from the United States were roughly double and more than 50 percent higher, respectively, than those from the European Union. In contrast, remittances from the GCC and other countries by both Egyptian and Moroccan workers were significantly lower. Table III.3. Distribution of Remittances by Moroccan and Egyptian Migrants, by Region of Destination and Per Capita, Arab Republic of Egypt Morocco Country of Residence in US$ millions % Number of Migrants Remittances Per Capita (US$) in US$ millions % Number of Migrants Remittances Per Capita (US$) European Union ,104 2,911 2, ,533,404 1,880 North America ,420 6, ,335 3,012 GCC and Other Arab Countries 1, ,912, , Other Countries Total 2, ,213,253 1,253 3, ,882,511 1,732 Source: For remittances, CARIM 2005; for number of migrants per region, OECD 2005 and Baldwin-Edwards The above findings confirm that a strong relation exists between the level of skills and the amount of remittances, which was noted earlier. Skills also explain the high level of remittances by Egyptian migrants, compared with Moroccan migrants, in the case of remittances from either North America or the European Union. Concerning the low level of remittances from GCC and other Arab countries, this may be due to the fact that remittances are significantly underreported, as they tend to be sent through informal channels. Another explanation may be the increasing competition faced by Arab labor from Asian labor in GCC countries. Remittances and Economic Aggregates The economic importance of remittances in the MENA Region can be illustrated in reference to various macroeconomic aggregates and in comparison with other countries and regions. Figure III.2 shows that the percentage of remittances to GDP in the MENA Region was highest among all regions in This percentage has since fallen behind the number for Latin America, but it remains important for a number of countries like Jordan, Lebanon, Morocco, Tunisia, and the Republic of Yemen (see annex C, table C14).

21 Figure III.2 Percentage of Remittances to GDP 4% 3% 2% 1% 0% East Asia & Pacific Europe and central Asia Latin America & Caribbean South Asia Source: Annex C, table C14. Middle east and north Africa Sub-Saharan africa Turning to other economic aggregates, as shown in table III.4, the ratio of remittances to export of goods and services reached a peak of 47 percent for the Mashrek group in 1980 but declined to 27 percent in 2003.Despite this decline, however, the same ratio (remittances to exports) for the MENA Region as a whole was as high as that of Latin America in 2002; and for the Mashrek countries alone, the ratio was the highest among all the different regions of the world. MENA s ratio of FDI to remittances, estimated at about 30 percent in 2003, is the lowest of all regions, except for South Asia. In other regions, FDI is equivalent to between 1.4 and 4.5 times the amount of remittances. The above comparative numbers illustrate the poor performance of the MENA Region in attracting FDI compared with other regions. The most striking indicator of the importance of remittances is their ratio to the amount of ODA received by the emigrants countries of origin, as was noted earlier. For the Mashrek countries, the ratio stood at 76 percent in 1980, but increased to 100 percent in 1990 and reached 337 percent in The same year, the MENA Region as a whole received remittances 4.2 times the amount of ODA extended to it. This is comparable to the number for Turkey or the South Asia Region, although lower than that for the Latin America and the Caribbean Region, where remittances were more than five times the level of ODA (see annex C, table C12).

22 Table III.4. Remittances Ratio to Exports and FDI a Remittances to Exports (%) Maghreb Mashrek Middle East and North Africa (total) Latin America and the Caribbean South Asia East Asia and the Pacific Europe and Central Asia FDI to Remittances (%, average of the last three years) Maghreb Mashrek Middle East and North Africa (total) Latin America and the Caribbean Sub-Saharan Africa South Asia East Asia and the Pacific Europe and Central Asia Sources: World Development Indicators for exports; Arab Economic Unified Report (several years) for Kuwait budget deficit or surplus; UNCTAD 2004 for FDI. Note: a. Except for 1980, regional figures for FDI are averages of the last three years. Use and Other Benefits Most migrants from the MENA Region to Europe are unskilled workers seeking jobs to help those members of their family who have remained at home. Benefiting from social allowances and social security has been an important aspect of the income accruing indirectly to these workers, which allows them to devote more of their total income to sending remittances to their relatives in the countries of origin. There is no recent regionwide systematic survey of the use of remittances by their beneficiaries, although some individual country surveys or statistics are available. A Moroccan survey indicates that 58 percent of remittances were devoted to subsistence expenses or improvements in the standard of living, and 29.2 percent to housing, while 20 percent was used to finance education, and only 3.7 percent went to create a business. 7 This distribution typology in the use of remittances is confirmed by a recent study of the European Investment Bank (EIB) and the three case studies (Egypt, Morocco, and Tunisia). The EIB study stated: In terms of use of funds in recipient countries, it appears that remittances are primarily aimed at consumption, and can enhance education, health and housing conditions. Little evidence is found of remittances being used for immediate productive investment, although some interesting examples exist. 8 The low proportion of remittances going to productive investments (other than housing), which 7 See Khachani 2004, p EIB 2005, p. 12.

23 has been confirmed by the three case studies, is a shared concern of all remittance-receiving countries in MENA, and increasing their share of remittances tops the policy agendas in the area of migration. Relevant to studying the end-use pattern of remittances is the increasing number of migrants returning during vacations to visit their families. The phenomenon is especially common in the case of North African migrants residing in Europe. In Lebanon, it is estimated that more than half of the tourist movement is due to visits by emigrants residing in Africa, Europe, or the GCC countries. Generally, the visiting migrant brings along consumer goods or household equipment. The amount in terms of value is not insignificant. According to an Algerian study carried out in the early 1990s, the value of goods imported by Algerian migrants visiting their country is estimated to be on the order of US$2.5 billion a year. 9 The economic impact of a migrant s final return to the home country can be even bigger. In addition to bringing back a car or high-value household equipment, the returnees may enjoy a pension from years of work abroad transferred by the country of destination. The migrant may also repatriate his or her savings and use them either to build a new home in the village of origin, open a small business, or buy an apartment in a big city. Remittance Transfer Costs As noted before, remittances are grossly underestimated. An important reason is the wide use of informal channels (hand delivery, regular mail, and so on) to avoid paying high fees to banks or money transfer agencies. Transaction costs are indeed high (see box III.1 for examples of the costs in selected bilateral remittance flows). According to a 2005 study, up to 20 percent of the value of remittances can be lost in transfer. 10 Costs of transactions in the MENA Region have been estimated at around 13 percent. Among the costs of transfers are the fees and the commission taken on currency exchange rates. If the recipient and the beneficiary countries are dollarized, as in the case of the United States and Lebanon, or have the same currency as the euro, the only cost that is incurred is the fees. These fees vary from 10 to 20 percent, depending on the amount, the destination country, or the policy of the transferring institution. 9 Khachani, 2004, p For remittances, see

24 Box III.1. Cost of Remittance Transfers A study prepared by a consultant for the European Investment Bank (EIB) shows that the cost of transferring 400 through banks, post offices, or money transfer operators (MTOs) is as follows: Germany Turkey: percent Italy Egypt: percent Spain Morocco: percent Germany Lebanon: percent France Tunisia: percent Germany Jordan: percent France Algeria: percent Germany Syria: percent The study concludes that: <ext>a number of market imperfections and information deficiencies have been identified. These include exclusivity contracts for Money Transfer Operators in post offices; lack of transparency on transfer costs (particularly as regards exchange rate fees); inadequate information regarding available transfer mechanisms and associated costs, speed and reliability; and inadequate payment systems and limited usage of bank accounts in Mediterranean countries. Accessibility to banking accounts for emigrants residing in the EU is also limited, and banking products are not sufficiently tailored for remitters, with few exceptions. These imperfections have resulted in high transactions costs, which vary widely according to transfer operator and corridor, but can exceed 16 percent of capital sent. Source: FEMIP Interestingly, as the volume of remittances increased, fees have tended to decrease. This is due to the fact that the transfer market attracted more competitors, as well as encouraged the use of new technology. In addition, bilateral initiatives to reduce such costs have taken place by sending and receiving countries. 11 A recent study by the World Bank concluded that: <ext>reducing the cost of personal remittances is the most promising area of policy intervention for several reasons. First, it will stem the drain on the resources of poor migrants and their families back home. Second, it will increase flows through formal channels, especially banks. Third, it will improve financial access for the poor in developing countries. 12 </ext> There are a number of initiatives afoot, bilateral as well as multilateral, to reduce remittance transfer costs (see box III.2 for a multilateral initiative). Success will involve a number of changes: Encouraging a more competitive market Stimulating banks to offer low-cost remittances services and related financial facilities Establishing and strengthening financial institutions in rural areas Reforming government regulations including easing overregulation Instituting flat transfer fee to decrease the cost Establishing networks between MTOs, post offices, and banks to expand remittances services; however, exclusive arrangements may keep the costs high as competitors become reluctant to enter the market World Bank 2006b. 12 Ibid. 13 Ibid.