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.
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.