The global Islamic economy continued to grow in 2014, and Dubai made solid progress towards its ambitious target to be the hub of the estimated $6.7 trillion market by 2016.
But significant challenges remain if the emirate is to become the “capital of the Islamic economy” in the tight deadline set by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
Sheikh Mohammed set the goal in October last year for Dubai to reach top slot in Islamic finance, goods and services within three years, and charged a select number of the emirate’s top executives to achieve that goal.
It is a dazzling prize, but a daunting ambition. The global Islamic economy is potentially the fourth largest trading bloc in the world, after the United States, China and the European Union, with 1.4 billion Muslims across five continents and with a growing demographic profile that makes it a boom market.
For Dubai to become its leader would be a huge step forward for the emirate’s overall economic development.
Abdulla Al Awar is at the sharp end of the Islamic strategy. As chief executive of the Dubai Islamic Economy Development Centre, his job is to implement the policies set by a top-level executive appointed by the Ruler.
This month, Mr Al Awar gave a progress report which showed significant advances in sectors, such as halal foods, cosmetics and Islamic tourism, but with a gap to bridge in Islamic finance, the most important single contributor – at $4 billion – to the total global value of Sharia-compliant goods and services.
Dubai, despite major advances in Islamic finance, is still trailing Malaysia, the global leader in the financial market.
But Mr Al Awar can look back on a year of solid progress, and prepare for another year of high-growth in the Islamic economy.
Seven “pillars” need to be built to support Dubai as the capital of the global Islamic economy: Islamic finance; the halal industry; tourism; digital infrastructure; arts; knowledge; and standardisation.
A more granular approach breaks down those seven pillars into more than 40 initiatives which must be accomplished, but Mr Al Awar was aware of the dangers of micromanagement. “I don’t see this just as a box-ticking exercise. This is a long-term initiative and we do not stop when we have achieved one launch,” he said.
Discussions are continuing in these areas with governments, food firms and financial groups, but the highlight of the public face of Islamic economy came at the World Islamic Economic Forum in Dubai in October.
Winning the right to stage the forum was a coup for the emirate, moving it away from its home in Kuala Lumpur, Malaysia, for only the second time in its 10-year history. Over three days, 3,200 attendees were given an opportunity to see the attractions of the emirates as a place to do global Islamic business.
In finance in particular, the event was a watershed in how the Islamic world viewed the attractions of non-conventional banking and financial services.
Khalid Howladar, head of Islamic finance at ratings agency Moody’s Investor Services, said: “I could never have said this five years ago, but I think we are seeing a sea change in thinking about Islamic finance. This is where Islam meets capitalism, and where Islamic finance truly becomes a global concept.”
Alongside the financial sector, the forum took a major step forward on one of the crucial aspects of Islamic economy: the need for global standards in the halal food industry.
Mohammed Al Gargawi, UAE Minister of Cabinet Affairs, called for common halal food standards between Malaysia and the UAE, an area where discussions are continuing; while Hamad Buamim, chief executive of the Dubai Chamber of Commerce and Industry, urged financiers to set up a standardised Sharia-compliance system.
In the all-important financial sector, Nasdaq Dubai, the emirate’s international capital market, pulled off some big sukuk listings to make up ground on Kuala Lumpur and London as a hub for trade in these Sharia-compliant corporate bonds.
Two big issuances by Chinese institutions highlighted the growing appeal of Islamic finance, and underlined the success of Nasdaq Dubai’s strategy in seeking these listings, promoted by its chief executive Hamed Ali: in September, the government of Hong Kong brought a $1bn sovereign sukuk to Dubai. In the same month Agricultural Bank of China listed a Dh600m sharia-compliant corporate bond on the market.
Essa Kazim, the DIFC governor, said Dubai’s “sophisticated financial infrastructure” would help to promote an offshore yuan market, and hinted that Chinese and other Asian corporates might want to use Nasdaq Dubai as their primary capital market next year.