By Noah Chasek-Macfoy
In the midst of an uncertain economic outlook, Minister of Investment Osama Saleh, stated in an interview that his ministry is currently considering release of government land to investors exclusively under a usufruct system rather than outright ownership.
Under a usufruct system, the investor buys the right to develop and profit from a property for a finite period, often several decades. The investor does not retain the right to sell the land.
The Egyptian government has long used usufruct as a tool to increase state returns on investment and shape the economic landscape. Dr. Tarek Shaalan, head of Al-Noor party’s economic committee, explained that the majority of investment in government land is currently under a usufruct system.
With Egypt’s huge budget deficit and high unemployment, Minister Saleh is eager to attract new investment that will fuel growth. A usufruct system for investment in government land can insure the state receives the maximum return from its land. Without the ability to resell the land they are constructing on, the investors, , often foreign, no longer have an incentive to tear down industrial facilities, develop and repurpose land for commercial ventures, and sell it off to others who shoulder the risk if the project fails.
A desire to promote Egyptian business and protect the national interest motivates supporters of Usufruct. Al-Noor party’s Dr. Shaalan noted, “without usufruct, we have no say in the future of an investment [on government land]” He went on to say that government land should be allocated to increase profit by Egyptian investors. “With usufruct, after 10 or 15 years you can reassess the project and give the opportunity to a different investor.”
Banks providing loans to investors see the policy differently. President of Banque Misr, Mohammed Barakat, said that banks would be unable to guarantee loans to investors who do not own the land they invest in. He rejected the idea that the banks could re-coup their own investments by taking over the projects of delinquent investors or re-leasing land for remaining period of usufruct.