News Analysis: Egyptian economists debate necessity of Al-Azhar's approval of Islamic bonds
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E-mail Xinhua, May 2, 2013
As Egypt's legislative body unanimously approved Tuesday the controversial Islamic bonds ( sukuk) bill and referred it to the president for final endorsement, Egyptian economists are in debate on the necessity of the approval of Al-Azhar, the country's highest Islamic reference, of the bill and the assets to be offered in sukuk.
Al-Azhar has rejected the draft law more than once over concerns that the new finance system might allow foreigners to own key state assets, besides suspicions about its fixed interests that are not allowed in Islam.
Finally, on Tuesday, all the remarks of Al-Azhar's Senior Scholars Authority have been "completely endorsed," before the Shura Council, the upper house, approved the draft law and sent it to President Mohamed Morsi.
OBLIGATORY OPINION
Ibrahim Abdullah, economics professor at both the American University and Al-Azhar University in Cairo, stressed the significance of Al-Azhar's opinion on such issues.
"A Sharia commission from Al-Azhar must be consulted over sukuk projects and its opinion has to be obligatory not optional," Abdullah told Xinhua, emphasizing that "Al-Azhar is the lighthouse of modern Islam for the whole world."
Abdullah said the sukuk law without endorsement of Al-Azhar's opinions would be "useless and invalid," noting that the constitution requires referring all draft laws that need a religious opinion to Al-Azhar to review them and then refer them back to the legislative body for amendment or approval.
Al-Azhar's Senior Scholars Authority called for amending some articles of the original version of the bill that they thought contrary to Sharia principles -- such as Article 4 that is related to issuing sukuk for state-owned assets, for concerns about the possibility for the country's properties to be owned by foreigners.
Based on the amended version after endorsing Al-Azhar's notes, fixed or movable "private" state-owned assets could be offered in sukuk only for "usufruct," while "public" state-owned assets are " prohibited" to be issued in sukuk at all.
Moreover, "private" state-owned assets could only be offered in sukuk through a cabinet decision based on a report from the Finance Ministry after the approval of a Sharia commission from Al- Azhar, while the evaluation of such assets will be done by one or more specialized commissions formed by the cabinet.
TOO STRICT
"I believe that the opinion of Al-Azhar on sukuk is too strict and exaggerated," said economic expert Ehab al-Desouki, head of Economic Research Center of Al-Sadat Academy.
Desouki said sukuk is just like any kind of debentures, bonds or shares that does not require "all this debate from Al-Azhar."
"There is also no need for a permanent Sharia commission to study and approve sukuk projects because they are offered only for usufruct for a specific period of time," Desouki said, claiming that Al-Azhar's strict position on sukuk is based on its "lack of understanding" of the basic principles of economy.
Al-Azhar could only categorize the projects prohibited in sukuk instead of assigning a Sharia commission to study each project separately, he said. "Al-Azhar could for example prohibit sukuk for liquor projects or any projects that contradict the Sharia without having to refer each sukuk project to the Sharia commission."
Desouki's opinion is echoed by Ramadan Battikh, professor of constitutional law at Ain Shams University and a member of the Shura Council, who downplayed Al-Azhar's view on such economic matters as "merely consultative not obligatory."
The parliamentarian and constitutional expert pointed out that state-owned assets and properties could be offered in sukuk -- for usufruct not ownership -- after the president approves the final version of the bill and orders its publication in the official newspapers.
EXPECTATION WITH CAUTION
At the ongoing Africa Global Business Forum in Dubai, Mohammed Omran, chairman of the Egyptian Exchange, said Wednesday that the passing of the bill could trigger an investment windfall for the highly indebted country.
He said the underdeveloped bond market at the Nile could get a boost by the new law which increases certainty for foreign investors.
A previous official finance report said that sukuk, to be issued by the Finance Ministry, is expected to generate about 10 billion U.S. dollars per year for the Egyptian government.
However, some economists doubted that sukuk could bring that much due to the country's continuous political instability and deteriorating security conditions that might not encourage foreign investors to pump huge amounts of funds into the country as expected. Endi
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