Seated in the Nile Valley, Assiut is a vital link between upper and lower Egypt. It is also the focal point of the violent struggle between the government and the extreme Islamic group trying to overthrow it.

`THIS is like another country, this isn't Egypt at all,'' a stunned visitor from Cairo says, waiting at one of the many security checkpoints that obstruct travel around Assiut, an agricultural region halfway between the capital and the luxury tourist resorts farther south.

Plainclothes security men, disguised as local farmers, cradle submachine guns at checkpoints outside Assiut, capital of Assiut province and the largest city in Upper (southern) Egypt.

Despite the decline in violent incidents over the last year in the city itself, it is at the heart of an extensive antiterrorist campaign waged by Egyptian state security against the underground Islamist organization known as the Gamaa Islamiya or Islamic Group.

Evidence of the clampdown is everywhere. In stark contrast to the lush Nile-side gardens and the elegant but dilapidated colonial architecture, armored personnel carriers are tucked away throughout Assiut. Pickup trucks, bristling with automatic weapons, cruise the streets, and every 10th person - judging from their walkie talkies and dark sunglasses - appears to work for undercover intelligence.

It is not surprising that the police are edgy: The militants of Gamaa specialize in ambushing policemen, often killing them in front of their families. More than 130 Egyptian policemen have died over the last two years, mostly in Assiut province, including five police generals. Nearly as many militants have been killed by police. Over the April 30-May 1 weekend, 81 suspected Muslim militants were detained in Assiut and seven were shot dead in Sohag province.

Given the pervasive hold of Egyptian security and the numbers of Gamaa activists killed or in prison, few observers believe that the Gamaa has any hope of achieving its objective of overthrowing the government of President Hosni Mubarak and setting up a purist Islamic state.

But, unfortunate for Egypt's tourism industry, the Gamaa has taken advantage of Assiut's strategic travel position in the Nile Valley. Buses, trains, and cruise boats ferrying tourists have been targeted by gunmen as they pass through. While only two tourists have died in the area during the two years, the attacks have effectively quashed the tourism industry south of Assiut, despite statements from the United States government that it is still safe to fly to Luxor and Aswan to enjoy the relics of Egypt's Pharaonic heritage.

The Gamaa alleges that the government has approved a torture and shoot-to-kill policy against its members. Independent observers also question the treatment meted out by the security services.

``Tactics, targets, and techniques have all changed [over the last two years] with the confrontation now often assuming the garb of vendetta-like violence between the two sides,'' explains analyst Kabil Abdel-Fattah.

But the governor of Assiut, Gen. Samih al-Said, believes that Assiut's reputation for violence is unearned: ``The situation is better now, everything is under control.... Assiut is safe, tourists should come,'' he insists, sitting in his heavily guarded offices overlooking the Nile. He was infuriated when Egypt's minister of tourism last month discouraged tourism in Assiut.

Many analysts argue that the Egyptian authorities eventually will have to reach a political compromise with the banned but tolerated Muslim Brotherhood, which advocates using the ballot box to achieve an Islamist state.

But the extreme views developed by the Gamaa's ideologue, Sheikh Omar Abdel Rahman, now in prison in the US, still have the power to gather adherents to the cause, especially in Upper Egypt. There, the already impoverished economy has been particularly disrupted by the militant campaign - increasing already simmering antigovernment resentment.

Observers note that the Gamaa has deep roots here. Sheikh Rahman began teaching Islamic law at Assiut University in 1973, gathering around him people who would form the backbone of the Gamaa. Most of their activities have been centered in Assiut, where poverty and unemployment have created breeding grounds for dissidents.

A local journalist and member of a leftist opposition party disagrees with the government's position that Assiut is now secure. He argues that the militants have left the Assiut area, but have moved south, bringing with them economic dislocation.

``In my town of Abu Tig, you can see the deterioration. It was the largest market town in Assiut,'' Ahmed Rifat explains. ``There were a lot of rich people with shops in Cairo who had factories here. The increase in terrorism has meant people have stopped coming from the countryside.... The effects have been devastating.''

The future is bleak for hundreds of thousands of unemployed youth in the Assiut region. ``Because of the clampdown here, there are no jobs,'' explains Saad Muhammad, a karate teacher in Abu Tig who has been unemployed since the government forbade martial arts training in Assiut. ``I have tried to leave to find a job, but they just look at my ID, see that I'm from Assiut, and send me back.''

IN Abu Tig, the poverty and chronic underdevelopment of Upper Egypt, long ignored by the central government in Cairo, is striking. The smiling faces of dozens of curious children are marred by the stunted growth of their bones and the sores on their skin - spread by lack of clean water and the ever-present clouds of flies. And all this in a rich agricultural region where sugar cane, wheat, cotton, and other crops thrive close to the Nile.

Governor Salih insists that the government has now recognized the need to improve services in the Assiut region: ``We have set aside nearly $17 million for improving sewage, water, roads, and electrification in informal housing areas [slums],'' he says.

But Mr. Rifat says the belated interest of the central government in making funds available for the development of Assiut means that ``the militants are being thanked for the improvements.''

Unlike many of his predecessors, the governor accepts that poverty and unemployment encourage the growth of political extremism in Upper Egypt.

The governor advocates a national initiative to provide business loans to unemployed university graduates - a segment that has proved susceptible to recruitment by the Gamaa. ``Jobs are an essential element to prevent graduates turning to terrorism,'' he says. ``If I have a job, I have no time to waste, and I don't need support from other organizations.'' He has plans for seven new industrial parks, and land reclamation and other employment projects.

But Ahmed Rifat is skeptical. ``There are 83,000 unemployed graduates in the Assiut region. Is it practical that they all set up their own businesses?''

Faroul al-Mairy, a businessman and member of parliament, is a keen supporter of these new initiatives. ``For decades money has been draining out of this region,'' he says. ``Now is the time to put it in.... Only economic development can improve the general political situation.''

It will take years to gauge the effectiveness of the current plans, observers say. But as expert Nabil Abdel-Fattah says, while an all-out security confrontation with Islamic extremism is taking place, ``a similar confrontation of the social, cultural, and political inequalities, which are so much at the root of this violence, still lags far behind.''

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