Islamic finance has taken the stage in 2013

Dubai is moving rapidly to make its dream of being the leader in the field a reality. The prize for doing so is well worth the chase and both London and Kuala Lumpur are competing hard.

Two Egyptian women buy breathable nail polish from a store in Dubai. Cosmetics are among the lifestyle aspects included in the plan to create an Islamic economic centre in the emirate. Reuters

It was the year that the Islamic economy moved from vague conceptual status, an item on Dubai’s “wish list”, to being a central part of the UAE’s economic strategy.

The tone was set early on, in January, when Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, set out the emirate’s aim to become the hub of global Sharia-compliant business within five years.

It was an ambitious plan. Dubai is already a leading financial centre for the issue of sukuk (Sharia-compliant bonds) but Sheikh Mohammed’s vision went far wider than just the sukuk market.

Sami Al Qamzi, the director general of the Dubai Department of Economic Development and one of the lieutenants entrusted with implementing the Ruler’s strategy, said the aim of the initiative was to create a global capital of Islamic industry, economy and finance.

“The plans to create an Islamic economic centre will provide access to a global market for Islamic products valued at more than US$2 trillion.”

Halal food production, pharmaceuticals and cosmetics, tourism and travel, and all other aspects of Islamic lifestyle were included in the plan, as well as the essential infrastructure of standardisation and certification of halal products.

Although nobody doubts the potential market provided by the world’s 1.3 billion Muslims, it is widely spread both geographically and sectorally. Dubai’s strategy was the first time one country had set out to be the world capital of the Islamic economy.

Dubai faces serious competition. Kuala Lumpar has been the driving force in Sharia-compliant financial business, having built up its resources in sukuk and other forms of Islamic finance over the past two decades.

London, too, was keen to augment its position as the leading financial market in the European time zone by becoming the global centre for sukuk listing and trading, a lucrative part of the Islamic financial market.

Other centres, like Dublin, Luxembourg, Indonesia and Bahrain also had plans to develop their Islamic economic capabilities. To make Dubai the centre of the Islamic business world would be a challenging task. The plan was immediately backed by leaders of the Dubai business and policymaking elite. In the Dubai International Financial Centre, the Nasdaq Dubai stock market announced it was considering a trading platform for sukuk, hoping to take away some of London’s lucrative trade.

Sultan Ahmed bin Sulayem, the chairman of Dubai World, applauded the move. “Dubai is pioneering; this is another example of how it does things before anyone else in the world,” he said.

The Dubai Multi Commodites Centre advanced plans to extend Sharia-compliant business in commodities and metals trading.

Banks beefed up their Islamic financial capabilities by hiring more experts on Sharia-compliant business, making it a growth market in the emirate’s financial scene and one of the forces behind Dubai’s recovery.

For most of the summer, the task force set up by Sheikh Mohammed was working hard behind the scenes to produce a practical strategy for the implementation of the grand plan.

By October, a master plan was in place. Seven separate strategic goals, each aiming to make Dubai a global leader in one aspect of the Islamic economy, had been identified: finance; the halal food industry; family-friendly tourism; the digital economy; fashion, arts and design; economic education; and standards and certification.

“The continued developments and changes in the global economy increase the need to constantly diversify the structure of our national economy,” said Sheikh Mohammed. “Our aim from all economic initiatives we launch is to improve the quality of life and provide opportunities that ensure a prosperous future for coming generations.”

And in a typical show of confidence that the emirate could achieve its ambition, he said that the time scale would be reduced. The aim was to make Dubai the capital of Islamic economy in three, not five years.

Early steps to be taken in 2014 include the establishment of an Islamic governance centre in Dubai, and an international laboratory for the certification and accreditation of halal products is also planned for early next year. Halal food and other products form an estimated US$3.5 billion global market.

Two other initiatives are also scheduled for the first part of next year: legislation to regulate the production of halal products locally and globally, and an international endowment authority to spread the culture of waqf, or Islamic charitable endowment.

At October’s World Islamic Economic Forum (WIEF) in London, held for the first time outside the Islamic world, the competitive pace was stepped up when Britain announced its plan to be the first non-Muslim country to issue a sovereign sukuk. But Dubai managed to steal London’s thunder when, after months of careful negotiations with the Malaysia-based WIEF, it was announced that the 2014 forum would be held in Dubai.

The final showpiece of the year was the Global Islamic Economy Summit held in Dubai in November, organised by the Dubai Chamber of Commerce and the information group Thomson-Reuters. Some 3,000 leaders of global Islamic business gathered to hear Dubai’s plans, and to give their general endorsement of the strategy.

The prize for Dubai had got bigger. A new study put the overall potential value of Islamic business at $6.7 trillion by 2018, more than the value of any national economy in the world except the United States and China.