THE EGYPTIAN
DEBATE ON SUKUK LAW
The current
Egyptian debate about the sukuk draft law that had been proposed by the
government and tabled in the People Assembly and passed but rejected by some shows
clearly that sukuk is such a topical topic in a country where Islamic finance
was tested many decades ago even before many other countries started their Islamic
finance movement. During the eighties of the last century, many would remember
the controversy surrounding the so-called Islamic investment schemes that were
mushrooming in the country including the famous case of al-Rayyan Investment Scheme. The difference is that the government of
the day at that time had a very different attitude toward Islamic finance and
about anything Islamic generally.
Today the atmosphere has changed where the Muslim Brotherhood inspired parties are part of the establishment. Interestingly they were the ones who spearheaded the finance movement in Egypt during the last few decades of the last century, such that many initiatives involving Islamic investment were popularized by them.
Today the atmosphere has changed where the Muslim Brotherhood inspired parties are part of the establishment. Interestingly they were the ones who spearheaded the finance movement in Egypt during the last few decades of the last century, such that many initiatives involving Islamic investment were popularized by them.
On the other
hand, the concern as expressed by the members of Al-Azhar Research Academy who
rejected the draft has its own merit given the current economic problems
experienced by Egypt right now. Having rejected the IMF offer of financial
assistance based on sovereignty argument, it is of no surprise to see that the
same argument (together with Shariah compliance issue) was put forward by the
Al-Azhar scholars in rejecting the draft law. One thing significant in this
context is the fact that those al-Azhar scholars seem to have properly
understood what sukuk should mean when it come to the issue of the underlying
assets to be used to back up any future issuance of sukuk: that to be Shariah
compliant, investors or sukuk purchasers must be accorded with the true right
of ownership of the assets/project on the basis of which sukuk are to be issued.
If no such conveyance of ownership in its true sense, then purely from Shariah perspective
the sukuk are not Shariah compliant, therefore the outcome, as feared by those
scholars, is no other than the prospect of foreigners holding ownership over
Egyptian assets/project; the source of concern when it comes to the issue of
national interest or sovereignty. Although the argumentation put forward by the
government officials involved in drafting the law centered around the positive
role that can be played by sukuk in financing government public utility or
development projects, some officials even tried to play down the fear as raised
by the opposing side by saying that there would never be the sell out of the
national assets due to sukuk issuance because they said that sukuk were just financing
tools. This last argument seems to be more or less conventional in nature where
in essence sukuk are viewed more or less similar to conventional bonds where
tangible assets have very little role to play in the securitization as bonds
are debt based. But when it come to sukuk, the equation is totally different
since sukuk issuance must be backed up by real assets although at the initial
stage (after collection of the investment sum from investors as per their
subscription), sukuk represent ownership of the capital/sum collected/contributed,
but once the same is used to purchase the real assets/project such ownership
will thus extended to the acquired assets or project. (This is in line with the
relevant Resolution by Islamic Fiqh Academy on Sukuk al-Muqaradah). To say that
sukuk do not implicate ownership of the underlying assets or projects is a clear misstatement of the whole concept.
Therefore
what seems to be happening in Egypt right now as far as sukuk are concerned is
that everyone is in favor of the prospect of sukuk issuance but some have wanted
the process to take into account the issue of national interest or sovereignty.
This attitude is understandable given the current political situations in the
country that is still not stable, and as such any prospect of too much foreign influence
in the economic sector is really something that needs to be well considered
before any big move is taken to reform the economy.
