The latest initiatives by Dubai Government to a set up a comprehensive platform of Islamic economy products and services will strengthen its position as a global centre for Islamic economy, analysts say.
The move will see new comprehensive regulatory regime being set up to standardise and regulate Islamic products, services and practices that will strengthen a ‘parallel economy’ – free from conventional and interest-based financial practices.
“UAE is a regional business and trade centre. The country already has world class ‘hard’ infrastructure. The initiative intends to add to the ‘soft’ infrastructure to encourage and attract Sharia compliant activity in, for example, financial services and the food industry,” Dr. Giyas Gokkent, Chief Economist of National Bank of Abu Dhabi, told Gulf News.
“Officials have indicated that this is also part of an effort to increase inward foreign direct investment which would boost economic growth.”
With Islamic economic principles playing a growing significance in today’s global business environment, with Islamic economy size reaching $2.3 trillion and a growing community of 1.6 billion Muslims, the new initiatives are expected to further promote investments in Dubai, especially from economies spanning the Middle East, Africa, South Asia and Southeast Asia, Dubai Government said in a statement.
“This appears to be an initiative to attract foreign investment and establish the country as a centre for Sharia compliant finance and so on,” Gokkent says. “Sharia compliant activity in various sectors already exists and is subject to regulation.
Bahrain is also pursuing a strategy to become a hub for Sharia-compliant finance.
“The GCC accounts for a large proportion of Islamic finance activity given the size of its economy (13th largest in the World in aggregate). For example, about half of the global Sharia compliant mutual fund activity is in the GCC,” Dr Gokkent says.
Azhar Nazim, Partner, Global Islamic Banking Centre of Excellence at Ernst & Young, told Gulf News, that the move needed to be backed by a solid roadmap and set of actions. “Following the announcement, implementation will be key and it needs to be backed by roadmaps and actions,” he said.
Global Islamic banking assets are expected to reach $1.8 trillion by 2013, according to Ernst & Young’s World Islamic Banking Competitiveness Report 2013, up from the $1.3 trillion of assets held in 2011. This forecast is significantly higher than some of the earlier industry estimates. Globally, the Islamic banking industry continues to record robust growth, with the top 20 Islamic banks registering a growth of 16% in the last three years and Saudi Arabia emerging as the largest market for Islamic assets, it says.
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