The UAE is a major international centre in the global Islamic economy, and Dubai is key for Islamic finance in particular, hosting the stock exchange with the largest listing of sukuk (Islamic bonds) by value, as well as one of the world’s largest Islamic banks. The emirate has been seeking to further expand its sharia-compliant economy by crafting a strategy for the sector and establishing a think tank devoted to its development.
Plans aim to position the emirate as the capital of the global Islamic economy, and increase output of sectors such as manufacturing and tourism. The strategy should give Dubai a larger share of the global halal market, estimated to be worth $2.3trn, and become a hub for international halal standardisation.
The UAE is home to one of the largest and most developed halal economies in the world. The country ranked second out of 73 nations in Thomson Reuters’ “State of the Global Islamic Economy Report 2016/17”, behind Malaysia. The report, which aims to capture the extent of the development of a country’s halal economy, ranked the UAE first in five out of six categories – halal food, halal travel, modest fashion, halal media and recreation, and halal pharmaceuticals and cosmetics – but came in second to Malaysia in the category of Islamic finance.
In January 2013 Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime minister of the UAE, and ruler of Dubai, first voiced plans to make the emirate the global capital of the Islamic economy. These were crystallised in the “Dubai: The Capital of the Islamic Economy” initiative announced later that year. In October 2013 the authorities also reported plans to launch an Islamic economic development programme by 2016, focusing on financial services, food, education and tourism. “Developing the capacities of the sharia-compliant economy is a huge area of focus for the government, which has been undertaking initiatives such as seminars to help companies comply with relevant standards in order to boost the industry,” Abdulla Mohammed Al Awar, CEO of the Dubai Islamic Economy Development Centre (DIEDC), told OBG.
The DIEDC was founded in 2013 with the intention of making sharia-compliant activity a key driver of Dubai’s GDP growth and transforming it into the capital of the global Islamic economy. The centre focuses on seven main pillars: the finance sector, halal food, tourism, digital infrastructure, art, knowledge and Islamic standards. In January 2017 the centre launched an updated strategy for the 2017-21 period, which aims to make progress towards both of these goals. The strategy is organised around identifying key performance indicators for areas of the Islamic economy and assessing their contribution to GDP, and boosting Dubai’s status as a global reference for the Islamic economy.
In 2015 the centre established an online Islamic economy portal, known as Salaam Gateway, on which local companies can register as sharia-compliant. Some 6500 entities were registered by mid-2017.
Dubai has already established itself as a major centre for Islamic finance. Nasdaq Dubai – one of the emirate’s two stock markets, based in the Dubai International Financial Centre (DIFC) – has been the world’s largest lister of sukuk since 2015, with the value of sharia-compliant debt standing at $53bn in November 2017. The DIFC is working to encourage Islamic financial technology (fintech) start-ups as part of its wider fintech accelerator programme, FinTech Hive, announced in January 2017 (see analysis). The first group of finalists was selected in August (see Banking chapter). The emirate also has the world’s first fully fledged Islamic bank, Dubai Islamic Bank, which is the largest sharia-compliant financial institution in the UAE and the third-largest in the world.
The DIEDC is working to make Dubai a leader in international standardisation and regulation of the industry. One initiative aims to create standardised legislation on Islamic financial products that any country can easily implement (see Islamic Financial Services chapter).
The large size of the Islamic banking industry in Dubai and the wider UAE also offers significant financing opportunities. Although Islamic banks are currently more constrained than conventional ones in terms of lending, the segment has a strong incentive to develop the local sharia-compliant economy. If Dubai further develops as a centre of the global industry, the rewards could be substantial. The “State of the Global Islamic Economy Report” 2016/17 put the asset value of the worldwide Islamic finance market at $2trn in 2015, and projected this would nearly double to $3.5trn by 2021 – a compound annual growth rate of 9.5%.
A Wide Scope
Dubai is developing other halal industries, which could yield major returns. Thomson Reuters’ report estimated revenue in the halal food and beverage market totalled $415bn in 2015, female Islamic fashion generated $44bn and halal tourism $24bn.
While neighbouring Sharjah is a popular destination for halal travel given that the sale of alcohol is not allowed there, Dubai offers a wide range of accommodation and tourist facilities, including sharia-compliant institutions. In 2016 Dubai won “best destination” in the first edition of Muslim travel awards by Salam Standard, a halal tourism website, with judges noting its appeal to numerous source markets due to “the wide availability of halal food, prayer facilities, cultural experiences and accommodation”. In another international ranking, the Global Muslim Travel Index by MasterCard and CrescentRating named the UAE the second-friendliest country out of 130 for Muslim travellers in 2016, up from third place in 2015 and behind only Malaysia.
Developing Dubai as an international manufacturing centre for halal goods is a pillar of Dubai Industrial Strategy 2030, launched in 2016. Dubai’s economy is largely services-based, and at less than 10%, manufacturing’s contribution to GDP is relatively small. However, the government plans to grow this at the emirate and the national level, with halal products to play a key role. The UAE imports around $20bn worth of halal products annually, offering opportunities for import substitution. As local capacity expands, the segment has strong potential in exports and re-exports from the emirate. “There is an enormous market around Dubai for halal products,” Al Awar told OBG. “Saudi Arabia, Turkey and Egypt, for example, all have very large populations and are easily serviceable from the UAE.”
Dubai and the UAE plan to become leaders in the standardisation and accreditation of halal manufacturing and processing. In 2014 the DIEDC created measures in collaboration with the Organisation of Islamic Cooperation, which Al Awar said was significant progress towards the development of the halal economy. The UAE also launched the Halal Accreditation Forum in 2016 to supervise and accredit halal certification bodies for food. In addition, the emirate hosts the annual Halal Expo Dubai, the largest regional business-to-business, sharia-compliant products event, the ninth edition of which was held in September 2017.
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