War with Israel in 1956, 1967 and 1973 — all part of the larger Arab-Israeli conflict
— led to the territorial loss of Sinai and Gaza as well as the erosion of Egypts
position in the Arab world. This was made definitive with the expulsion of Egypt from the Arab
League after Egyptian President Anwar El Sadat signed a peace accord with Israel in 1979.
Since Sadats assassination in 1981 by Islamist army officers, Muhammad Hosni Mubarak has
governed the country authoritatively.
At present, most decision-making authority remains vested in him. While opposition parties
do exist, they pose little threat; harassment, intimidation and arrest of opposition leaders,
including suspected members of the Muslim Brotherhood, ensure they remain weak and fragmented.
This has hampered any political democratization.
Some of Egypts regional allies criticized the Mubarak administration for its handling
of the Israeli-Hamas conflict in Gaza in the winter of 2008-2009, when Egypt tightened its
borders with Gaza. This worried some allies, who expected Egyptian interests and expatriates
to be targets of symbolic vandalism or violence. Since Israeli commandos took over a Turkish
aid ship bound for Gaza in the spring, however, Egypt has reopened its borders to the densely
In the past several years, homegrown extremists either affiliated with or inspired by Al
Qaeda have carried out a string of small attacks in the country. Most have been directed at
tourist areas, particularly in Sinai. In response, the government has enacted a set of
emergency laws that permits authorities to detain suspects indefinitely and, in
cases, deny them the right of appeal. Activists, journalists, Islamists and members of the
political opposition have decried the measures as undemocratic. Dozens have been arrested.
The Egyptian government has long nurtured strong bilateral relations with the United
States. Over the years, these relations have deepened, due partly to a shared commitment to a
comprehensive settlement to the Arab-Israeli conflict; the preservation of Iraqs unity,
sovereignty and territorial integrity; and the maintenance of overall regional peace and
security. After Israel, Egypt remains the second largest recipient of U.S. aid, but the annual
amount is decreasing. This aid has financed infrastructure projects, strengthened economic and
social reform programs and enlisted U.S. technical expertise. Moreover, trade between the two
countries remains robust and, recently, U.S. foreign investments in Egypt have picked up after
a brief slowdown.
Economic situation. The Egyptian economy is the second largest in the Arab world
after Saudi Arabia. It is also one of the fastest emerging markets for real estate. Until the
late 1990s, Egypts economy was highly centralized — the legacy of
Nassers socialist-inspired economic policies. But from 2004 to 2008, the country
underwent major economic reforms and experienced a dramatic increase in foreign direct
investment, slowed only by the global recession. In 2009, the countrys gross domestic
product (GDP) fell to 4.7 percent from 7 percent just one year earlier.
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