IV.  POLITICAL ENVIRONMENT

NATURE OF BILATERAL RELATIONSHIP WITH THE UNITED STATES

President Hosni Mubarak has supported a strong US-Egyptian
relationship based on shared interests in promoting regional peace
and stability, revitalizing the Egyptian economy, and
strengthening trade ties.  Over the years, Egypt and the U.S. have
worked closely to help further the Middle East peace process.  In
1993-94, Egypt hosted many of the negotiating rounds for the Gaza-
Jericho autonomy agreement which was signed in Cairo in May 1994
by Israeli Prime Minister Yitzhak Rabin and PLO leader Yasir
Arafat.

U.S. economic and military assistance is an important pillar in
the bilateral relationship.  In FY 1994, Egypt received $1.3
billion in U.S. military assistance which has allowed it to
modernize its deteriorating Soviet-supplied weaponry and improve
its ability to support regional stability.  The U.S. also extended
$815 million in economic development.

MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE

Terrorism:  Since 1992, small clandestine groups of armed Islamic
extremists have increased their attacks on the Egyptian government
by attacking government officials, security forces, foreign
tourists, and Egyptian Coptic Christians.  Although the terrorist
attacks have hurt Egypt's tourist industry, they are not a
substantial threat to the government or its ability to make
overall progress.

Political Reform:  The Egyptian political system has undergone
significant liberalization since the Nasser era of a few
generations ago.  Today, citizens enjoy wide latitude in freedom
of expression and the judiciary has demonstrated its independence
from the executive branch.  Further progress on political reform
has taken a back seat to meeting the challenge posed by terrorist
groups.  The government's anti-terrorism tactics have raised
serious questions about such human rights abuses as torture,
arbitrary arrest, prolonged detention without trial and the use of
military courts to try persons accused of terrorism.  Moreover,
the governing National Democratic Party (NDP) dominates the
political scene to such an extent that, as a practical matter,
people do not have a meaningful ability to change their
government.  In 1994, the People's Assembly approved a three-year
extension of the Emergency Law and Egypt has been under an
official state of emergency continuously since 1981.  Recognizing
the need for political reform, President Mubarak has authorized
the NDP to engage opposition parties and independents in a
"national dialogue" to chart the country's priorities.

BRIEF SYNOPSIS OF POLITICAL SYSTEM, SCHEDULE OF ELECTIONS, AND
ORIENTATION OF MAJOR POLITICAL PARTIES

The Egyptian Constitution provides for a strong president who is
empowered to appoint one or more vice presidents, the prime
minister, the cabinet, and the governors of Egypt's 26 provinces.
In 1993, President Hosni Mubarak was endorsed in a national
referendum, in which he ran unopposed, to serve a third six-year
term as President by the People's Assembly.

The People's Assembly has 454 members - 444 popularly elected and
10 appointed by the President.  The constitution reserves 50% of
the Assembly seats for workers and farmers.  Assembly members sit
for five-year terms.  The next national election for the Assembly
is scheduled for November 1995.  There is also a 210-member Shura
(Consultative) Council which has an advisory role on public policy
but little legislative power.

The NDP has been in power since its establishment in 1978 and
commands large majorities in the Assembly and the Shura Council
and effectively controls the local governments, mass media,
organized labor, and the large public sector.  The NDP is an
umbrella political party containing within its ranks members who
favor greater economic and political reform as well as those who
advocate continued government ownership of the public sector and
an active government role in "regulating" the economy.

There are 12 recognized opposition parties, but only one -- the
leftist Tagammu Party -- is represented in the People's Assembly.
All other parties boycotted the 1990 People's Assembly election
because of allegations of unfair election procedures.  Some of the
other opposition parties include the new Wafd party (centrist),
the Islamist-oriented Socialist Labor party, and the Nasserist
Party (leftist).