The Islamic economy is an idea whose time has come. Ever since the initiative in February by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, to position the emirate as the capital of the Islamic commercial world, the pace has accelerated.
The subject is now near the top of the agenda for international conference delegates. This month, the World Islamic Economic Forum takes place in London, with a strong contingent from the UAE.
Soon after, the Global Islamic Economy Summit will be held in Dubai, under the auspices of the Dubai Chamber of Commerce and Industry and Thomson Reuters.
This latter event – heralded as the “Davos of the Islamic world” – was showcased by the organisers in Dubai this week, and it was a strong presentation.
The economy of the Islamic world is estimated to be worth some US$4.8 trillion, of which half is in the financial world: sukuk (Islamic corporate bonds), takaful (Islamic insurance) and other forms of Sharia-compliant investment and financial products.
Finance is probably the most advanced element of the Islamic economy, but there is still huge potential. For instance, an estimated 72 per cent of Muslims around the world do not have basic banking facilities.
The global halal food business is probably the next best developed, with a value of $685 billion, of which $83bn is attributable to the GCC countries, which import 12 per cent of the world’s food.
Muslim travel and tourism are other huge areas of potential. Worth some $126bn in 2011, the sector is expected to grow at nearly 5 per cent through to 2020, even excluding Haj and Umrah tourism into Saudi Arabia. Muslims are also big contributors to the global tourism industry.
In many other areas – hotels and leisure, lifestyle products, media and entertainment, financing for small and medium-sized enterprises and economic infrastructure – there is clear value to be exploited in the Islamic world.
If anybody needed further convincing after Sheikh Mohammed’s initiative, there should no longer be any doubt about the financial and commercial opportunities presented by the global Islamic economy, nor the wisdom of a strategy aimed at putting the UAE at its centre.
But recognising potential is not the same as realising it. After the February announcement, there was a rush of new strategies, policy initiatives and endorsements.
Hitherto, however, little of real substance has actually materialised to advance Dubai’s ambition to be the capital of the global Islamic economy.
There are several areas policymakers and business people could focus on in the next few months to cement Dubai’s claim.
One area is in the field of standardisation. One of the drawbacks of the halal industry, for example, is that it is largely unregulated.
A global standard needs to be put in place as soon as possible, and Dubai – as the head of the standards committee of the Organisation of Islamic Cooperation – is in a good position to do this.
If the emirate comes up with an acceptable standard, food-exporting countries and food conglomerates would likely rush to sign up. It’s an opportunity waiting to be seized.
Food distribution is another area. One idea floated this week was to use DP World’s chain of more than 60 ports across the world – many in Islamic countries or countries with sizeable Muslim populations – as a global network for the halal industry.
It is a very good idea, potentially using Dubai’s flagship ports company as a global distribution network, but it’s still only at the drawing-board stage. DP World itself is so far unaware of the suggestion.
The big opportunity, however, remains in Islamic finance. Accounting for half of the value of the global Islamic economy, finance has proved to be a difficult nut to crack for Dubai.
London and Kuala Lumpur, for example, continue to dominate international markets in sukuk trading, with significant cost advantages compared with Dubai. Most professionals in secondary trading in sukuk would rather go to these two centres, and attempts to start a trading platform in Dubai appear to have stalled.
For Dubai, the prize of being the capital of the global Islamic economy is a big one. But after lots of discussion and talk, it’s surely time for some action.