Egypt's Islamic Bonds law still suffers from numerous ambiguities, said Ahmed Al-Gabali, Technical Advisor for Islamic bonds at the finance ministry. Al-Gabali had taken to reviewing the country's Islamic bonds law, in particular that related to the construction of new wheat silos set to be built along the Shubra-Banha agricultural road, at an estimated cost of EGP5bn. The road extends 35 kilometers and is expected to require upwards of EGP 7bn in funding. This comes in addition to construction of the Rod Al-Farag-6th of October road, expected to cost upwards of EGP 8bn and help relieve the country's ongoing traffic problems. Four electricity producing stations are set to be constructed along the road, whose constructions costs are estimated between EGP 3bn to EGP 4bn. Other plans include construction of stations to produce black and crystalline sand, used to create silicon and gas, in addition to that of new lines linking 46 public sector factories, which were "saved" from privatisation for a period of 7 years at a cost of EGP 100bn. Al-Gabali temporarily left his post at the Ministry of Finance due to his conviction that not enough political and economic support currently exists to push Egypt's Islamic bonds law. This, he said, will cause returns on any Islamic bonds that are issued to be significantly less than previously estimated. He added that the government's vision regarding the future of Islamic bonds, or sukuk, will not become clear until the end of the year, a fact which led Al-Gabalito leave the country. He stated that he has not signed any agreement with the Ministry requiring him to continue working. He stated that the fate of Egypt's Islamic bonds law changed after the events of 30 June and the ouster of former president Mohamed Morsi. He maintained, however, that Islamic bonds would remain a powerful finance tool in the future, considering recent statements made by Saudi Arabia and the United Arab Emirates to support the project in the coming months and years. He added that Islamic bonds' strength is in their reliance on encumbered assets, explaining sukuk have existed for over 40 years in a number of countries that do not operate under an Islamist or a Brotherhood regime. Al-Gabali called on the government to refrain from adopting ideological stances when implementing Egypt's Islamic bonds program, and to ignore its connection and relationship with the Brotherhood. He stated that if Egypt's Islamic bonds program was released now it would reap anywhere from $5bn to $10bn in returns by the end of the year. This number would be limited due to previous agreements signed with international banks and financial institutions limiting maximum subscription rates to $10bn. Many of these banks, however, stated that their involvement in such projects would require political stability in Egypt. Magid Shabita, aid to the finance minister for Contracts, International Agreements and Constitutional and Legislative Affairs, stated that he should have been sent a copy of the law's rules and regulations by the Islamic bonds division within the Ministry of Finance, in order to first review its legal status and analyse the extent to which it should be applied before being opened up to discussion. The way in which Egypt's Islamic bonds law would be applied would be contingent on the makeup of its future governmenthe said, as the law itself was first introduced by Morsi's Freedom and Justice Party. Abdullah Al-Adali, chairman of the taxes division at Price Waterhouse Coopers, stated that he supported keeping the country's Islamic bonds law as it was despite the removal of Morsi. He added that bonds in general were considered a strong source of financial funding for development projects in many countries throughout the world, including the US and the UK. He continued saying that Islamic bonds did not require that limits be placed on the rate of profits or losses incurred by their owners, saying that responsibility for such numbers was solely on the shoulders of the owners themselves. Al-Adali added that Egypt's Islamic bonds law had been most heavily criticised for distinguishing between tax rates for Islamic bonds and that of other financial instruments, as stipulated in Article 24 of Islamic bonds law 10 passed in 2013. The law states that all real estate activity linked in any way to the release of Islamic bonds would be exempt from taxation, and that all transfer of real estate between the beneficiaries and other parties would be recorded, in addition to the release or extension of Islamic bonds, or the devolution of assets to special purpose entities after the recovery of bonds. The law further states that asset contracts, benefits, services and intellectual property rights that are traded between beneficiaries and other parties, in addition to special purpose entities, whether through the release or extension of Islamic bonds, or the devolution of assets to special purpose entities after the recovery of bonds, the distribution of profits to bond holders, in addition to capital profits coming from the trading of Islamic bonds, are to be recorded and brought under its jurisdiction. Hani Ganini, Chairman of the Research Department at Pharos Holding for Financial Investments, stated that he would continue to review the country's Islamic bonds law, considering that it is a strong financial tool supported by a number of investors who prefer to operate within an Islamic based system. He stated that returns on Islamic bonds according to the country's law have been predetermined, with the exception of those reaped from the export of petroleum products. Such returns differ from well to well he said, and are determined after production has taken place. Ganini suggested that interest rates on Islamic bonds be set at 10%, the same rate as government bonds, with this number expected to decrease over the coming weeks. Translated from Al-Borsa
