Africa, Economy & Trade, Financial Crisis, Headlines, Labour, Middle East & North Africa

EGYPT: Workers Reeling Under Financial Crisis

Cam McGrath

CAIRO, Jun 16 2009 (IPS) - The global financial crisis has forced Egyptian companies to lay off thousands of workers, and provided cover for firms to evade their legal and financial obligations to their workers, labour rights groups warn.

“(There is) a rising phenomenon of business owners exploiting the global financial crisis as an opportunity to dismiss employees without paying them their legal financial rights…or to violate the rights of workers,” according to a study by the Centre for Trade Union and Workers Services (CTUWS) published Jun. 1.

The global meltdown has had calamitous consequences for Egypt’s economy and 25-million strong labour force. A parliamentary report released in March revealed that gross domestic product (GDP) growth fell to 4.1 percent in the last quarter of 2008, from 7.2 percent during the previous fiscal year. As a result of the contraction, up to half a million Egyptians are expected to lose their jobs this year.

Companies suffering losses began restructuring and retrenching staff in late 2008. The first wave of layoffs and cutbacks targeted temporary staff and factory workers, among the lowest paid in the country. Over 100,000 workers were laid off during the six months ending March 2009, according to a senior official.

Retrenched workers say that managers pressured them into early retirement, or dismissed them without providing due severance packages.

CTUWS reports widespread deterioration of working conditions among retained staff in the public and private sectors. The NGO has documented cases of company managers altering contracts or forcing workers to sign resignation notices as a condition for their continued employment. Firms have also slashed salaries and bonuses, withdrawn benefits, or transferred workers to lower-paying positions.

“The company cut our salary by 30 percent,” says Mostafa Awad, a yard worker at an alabaster factory near Cairo. “We are forced to work longer hours, and they use any excuse to deduct from our pay. But if we open our mouths, they tell us about the global financial crisis and say we should be lucky we still have jobs.”

Egypt has committed 5.4 billion dollars to an economic stimulus plan to confront the repercussions of the global financial crisis. The allocation has been earmarked for infrastructure projects and export subsidies aimed at compensating for falling foreign direct investment (FDI) and declining overseas demand.

Labour rights groups argue that the government’s economic policies target job creation, but are backed by a legal framework that protects the interests of the nation’s business magnates. Companies have been given broad discretion in handling their workforce, leaving the door open to abuse.

“Employers raised their voices calling for a free hand to lay off workers in order to reduce costs and reduce losses resulting from the crisis,” CTUWS said in an earlier study in April. “They, in turn, forget that what they lose is just a portion of their profits, whereas the workers will lose their sole sustenance and livelihood.”

Egypt’s unemployment rate climbed to 9.4 percent in the first quarter of 2009, from 8.8 percent the previous quarter. The rising rate is a setback to poverty alleviation efforts, putting additional burden on the 15 million Egyptians living below the two dollars per day poverty line.

“When GDP growth falls and unemployment soars, it is always the poor who suffer most,” says Abdel Fatah El-Gebaly, an economist at the Al-Ahram Centre for Political and Strategic Studies. “The poverty rate in Egypt…will certainly increase as a result of this crisis.”

Deteriorating economic conditions have compelled workers in many sectors to defy the state’s long-standing ban on labour strikes. They say the illegal industrial action is necessary because the state colludes with companies to exploit cheap labour, and unions are toothless institutions controlled by the ruling party’s cronies.

Striking workers have demanded wages and bonuses that have been withheld by their employers, as well as job security and better working conditions.

Labour rights groups have called for the government activate two national funds intended to support workers laid off as a result of a company’s downsizing or going into bankruptcy. Yet both funds were designed in ways that, despite outward appearances, offer workers very little by way of assistance.

“Like all labour legislation in this country, the provisions were drafted with businessmen in mind,” says Awad.

One fund may only be activated after a company is bankrupt, liquidated and its employees are dismissed by a court sentence – and even then is subject to approval. The other stipulates that in the case of a company’s downsizing or closure, retrenched employees are to receive a monthly disbursement equal to 75 percent of their basic salary.

“The way salaries work in Egypt is very complicated, but suffice to say the basic salary is not more than 20 percent of a worker’s total salary,” El-Gebaly points out. “It is almost nothing.”

And there may be little incentive for the government to mend the holes in its unemployment assistance programmes. Egypt’s 2009-10 state budget forecasts a deficit of 18 billion dollars, or 8.5 percent of GDP – a 25 percent increase over last year due to a sharp decline in revenues. Budget committees armed with scalpels appear unlikely to approve any measures that would increase expenditure.