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Egypt's prime minister touts the country's economic reforms

CAIRO, Egypt—When a suicide bomber blew himself up and killed three foreign tourists on April 7 in the first terrorist attack in Egypt in eight years, the first place Egyptian Prime Minister Ahmed Nazif and his aides looked for clues was the stock market.

Cairo's high-flying bourse dropped 3.5 percent on worries about tourism and foreign investment, but recovered almost completely within two days.

Egypt, with several millennia's worth of bureaucracy, has long been a sort of dead zone for capitalism. The state monopolized most sectors of the economy, government payrolls were bloated and many foreign firms stayed away.

Nazif, who as communications minister was credited with revolutionizing Egyptians' access to computers and the Internet, is trying to change that. He took office last July with, he says, a mandate for reform from President Hosni Mubarak and an unusually youthful Cabinet.

"We've chipped at least 10 years off the average age, if not more," said the prime minister, who's 52.

He spoke in an interview with Knight Ridder in an office he maintains in Smart Village, an airy high-tech park still under construction in the capital's far western suburbs.

Far from downtown Cairo's traffic and incessant noise, the park includes Xceed, a 1,000-person call center that Egypt hopes will help it challenge India's lead in that field.

Nazif is overseeing a reform program that's a world banker's dream and has drawn praise from the Bush administration.

Taxes and tariffs have been slashed, and state-owned enterprises are being privatized.

The economy has responded, the prime minister and his aides said. There's been $1 billion in new foreign investment in the last nine months, more than double the previous year, and the stock market has risen 130 percent during that period.

"People are seeing this government is a reformist government ... not afraid to take the necessary steps," said Nazif, who'll visit Washington later this month.

But the reforms aren't universally popular. Workers at state-run factories being sold off have gone on strike to protest staff reductions. Plans to cut state subsidies for heating, food and other items could jeopardize millions of poor Egyptians.

Subsidies account for roughly $7 billion of Egypt's $29.5 billion state budget, Nazif said.

He envisions a social contract in which Egyptians would be required to fulfill a bargain, such as ensuring children get to school each day, in return for the subsidy.

"That's new to the Egyptian environment," he said.

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(c) 2005, Knight Ridder/Tribune Information Services.

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