Forum puts spotlight on Egypt

As business and political heavyweights wrap up meetings at the World Economic Forum on the Middle East Monday, opposition members and analysts here are left questioning whether meaningful economic development can occur without political reform.

This meeting at Egypt's Sinai resort of Sharm el-Sheikh comes just days after Egyptian police arrested hundreds of peaceful pro-reform demonstrators in Cairo, one of several recent confrontations between security forces and protesters out to show their support for two judges claiming fraud in last year's parliamentary elections. Hundreds remain in prison.

Nevertheless, Egyptian President Hosni Mubarak's opening speech Saturday at the forum defended his government's actions and its reluctance to reform. Mr. Mubarak emphasized the regime's long-held policy that political change must be "based on a gradual prudent approach that ensures its sustainability," adding that rushing reform would just lead to "chaos."

But "foreign investors want to see not only a sound economic environment but also a good political environment, to see that the country is stable," says Egyptian economist Ahmed el-Sayed el-Naggar. "You cannot create stability with bullets. Real stability comes from allowing people to peacefully participate in a country's policymaking."

Some protesters in last week's clashes with security forces were also out supporting leading opposition leader Ayman Nour. A Cairo court rejected his appeal to overturn a forgery conviction. He had been given a five-year prison sentence last year.

With relations strained between the US and Egypt over its stifling of dissent, some in Congress are even lobbying for a reduction in the $3 billion Washington pays Egypt in military and development aid.

The forum's convivial three-day gathering of around 1,200 business and political leaders occurs a month after triple bombings in the Sinai resort of Dahab killed 21 people. This followed two other terrorist attacks in Sinai in less than two years, the most deadly being in Sharm el-Sheikh last summer, killing 64.

Many analysts blame Egypt's continuing Islamic extremist problem on the country's strict authoritarian policies and on an economy that doesn't provide enough jobs for this swelling population of 75 million.

Determined to move ahead on economic reform, Mubarak appointed the new cabinet of Prime Minister Ahmed Nazif 20 months ago with a "dream team" of savvy economists in key posts, including Finance Minister Youssef Boutros Ghali and Investment Minister Mahmoud Mohieddin.

Since then Egypt has drastically reduced taxes and customs tariffs and privatized around 200 government-owned businesses. Economists say these reforms are already having positive results: Gross domestic product growth is projected to reach 6 percent next year, and official figures show inflation last year at 3 percent after spiking to 12 percent in 2004.

Some are thrilled with the state's new economic policies: "This new cabinet has done quite a job," says Mona Abdel Hamid, a Cairo-based financial adviser. "They've really taken the bull by the horn."

Others, however, are less impressed. "Economic reform is weak," says political economist Samer Soliman. "They are reforming some state institutions, instead of reforming the state in general."