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Can Dubai become the capital of the Islamic economy?

Summary: Professor Laurent Marliere considers the challenges Dubai faces in becoming the capital of the emerging Islamic economy.


The term Islamic economy can be considered through various angles. Minimalists would say it refers to the economies of the 57 member states of the Organisation of Islamic Cooperation (OIC) or to products defined by Shari'ah compliance, such as finance and food. Maximalists believe it is one segment of the global economy, which focuses on Islamic consumers, regardless of location. I personally follow the approach which focuses on the consumer and demand. Islam and Muslims are a global paradigm with specific needs and requirements that need to be serviced accordingly. The fact that large forums like the World Islamic Economic Forum (WIEF) hold their annual gatherings in non-Muslim countries is evidence that the Islamic economy is a worldwide phenomenon. In Asia, people tend to refer to the 'Halal industry' to describe the Islamic economy.

From a commercial perspective, the Islamic economy encompasses products and services driven by the Muslim consumer's adherence to some form of faith-based activity. The scale of value depends on the level of faith and the market sector: ranging from pure Shari'ah compliance to Shari'ah friendliness. Core sectors of the Islamic economy are, of course, the Halal food sector and Islamic finance. They are the visible tip of a 'Halal iceberg' that includes a wide range of sectors like personal care and cosmetics, pharmaceuticals, travel and leisure, banking, insurance, transport and logistics, fashion and lifestyle, media, professional services and consultancy, among others.

In terms of figures, one could consider the 1.65 billion Muslims who constitute the Ummah as the market of the Islamic economy. I ponder this, as Muslims across the world are heterogeneous in their consumption habits and, besides, Islamic products could also be potentially interesting to non-Muslims.

According to an insightful survey conducted by Thomson Reuters in 2013, the global expenditure of Muslim consumers on food and lifestyle products was $1.62 trillion in 2012 and is expected to reach $2.47 trillion by 2018. Islamic financial assets in 2012 were estimated at $1.35 trillion in total disclosed assets, growing at 15-20 per cent a year in most core markets. This report estimates the potential value of Islamic banking assets in its core markets to be $4.1 trillion.


The main challenge is the lack of understanding of the Muslim consumer and their needs. Economic and political actors have clearly understood the potential of the Islamic community of consumers and speak in their name but the reality on the ground is very different.

Islamic finance, which is one of the most mature sectors of the Islamic economy, is unable to make a real breakthrough because it is industry- driven and not market-driven. Financial institutions like Noor Islamic Bank have erased the term 'Islamic' from their brand; HSBC Amanah no longer offers Shari'ah-compliant products and services in the UAE and the UK; and the Islamic Bank of Britain (IBB) has yet to turn a profit. At a recent conference held in Dubai on how to develop Islamic finance in Africa, there were no Africans in the panel or in the room.

Let us draw a historical parallel with the 'conventional economy'. In the 1970s, the West was producing junk items and services and using publicity to sell them to consumers who were treated like sheep. We lived then in the so-called 'production economy' that eventually led to the consumerist movement. Consumers organised themselves and forced the industry to produce according to their needs and demands. We stepped in the 'consumption economy'. In my opinion, the young Islamic economy is in many ways still a 'production economy'.


The vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, the Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai, to transform Dubai into the capital of the Islamic economy has given a different resonance to this fast-growing sector of global economy. Observers throughout the world know that Dubai and its authorities have the capacity to pool the means to achieve such ambitious plans.

Dubai has indeed a row of strengths to take on that status. However, several challenges and weaknesses have to be met and handled carefully.


u[cedilla]CaIts vision: The Islamic economy is one of the most innovative segments of the world's economy. It still needs to be conceptualised and therefore offers tremendous opportunities for an authority with sound leadership. The fact that this initiative has been launched with enthusiasm at the highest level of government sends a strong and credible message to the world.

u[cedilla]CaIts means and faith: Dubai has proved in recent years that it has the capacity to handle financial challenges and great infrastructure projects. If the vision is backed by righteous means both in terms of finance and knowledge, the rise of Dubai as key player of the sector can be achieved. International macro financial institutions like the Islamic Development Bank (IDB) or the World Bank should step into the project.

u[cedilla]CaGeography: The world map is no longer focused on the Atlantic or the link between the US and Europe. The new planisphere is focused on the Pacific and makes Dubai a potential regional capital, a metropolis of Asia and, perhaps even the business capital of Africa, which fails to develop a secure centre. The geo-economics of Dubai makes it more accessible than Malaysia from Europe and easily reachable to the Muslim populations of Africa, the Levant, the GCC and Asia.

u[cedilla]CaIts business culture: The Islamic economy does not solely belong to Muslims. It is a universal industry segment. Dubai has managed to combine an Eastern and Western cosmopolitan culture, which makes it easier to carry out business and trade than in other neighbouring countries.

u[cedilla]CaThe rule of law: The legal and judiciary systems in Dubai guarantee the necessary security for business and foreign direct investment.

u[cedilla]CaThe blank page: Starting from scratch is a strength - everything can be invented! However, it would be unwise to simply mimic what others have done. Merely copying what Malaysia has done is unrealistic because the Malaysian model, although a great lesson to the world, is not a complete success since it has not managed to conquer more than a regional space; it has failed to become global.

u[cedilla]CaTax incentives: To become a capital, Dubai is going to need to attract new companies, corporations and investors to its soil. Tax can play a decisive role. Dubai authorities may underestimate that factor, as it appears exotic to their local daily life. However, tax pressures in the West are climbing at the same time as traditional tax havens are under scrutiny and pressure from strong political and legal measures, mainly issued by the US and the UK, whose citizens are heavy users.

In most off-shore jurisdictions, one only finds a tax haven and a beach haven. In Dubai, you find a tax haven, a beach haven and a trade haven... a real added value for many Western corporations willing to relocate.

If handled properly, and kept an on-shore jurisdiction, Dubai and the UAE can pretty much play the role of Luxembourg in the European Union. The GCC will increase its integration in the coming years, like the EU did. Dubai can be a competitive player in this economic union.

u[cedilla]CaProfessional services: The development of the Islamic economy will require support services of high standards, such as law firms, audit and accounting services, banks, certificatory bodies and brokers. These are abundant in Dubai.

Dubai can use the professional services firms' home networks and client portfolios to facilitate the relocations of their clients to the Dubai International Financial Centre (DIFC) and elsewhere. There are 68 international law firms and 400 banks there already. There is great potential to create a spider effect boosted by tax incentives.


A short-term or even mid-term view is problematic

If the sole aim is to make Dubai a nice- looking facade to present at the World Islamic Economic Forum (WIEF) in October then you risk building on sand instead of concrete. The project deserves, and requires, a long-term plan based on pillars that will explain what the Islamic economy will be in 10 or 20 years!

A myopic short-term plan to simply state that 'we are the capital' is not enough. A careful strategic analysis on how to sustain this leadership position needs to be implemented.

In such a huge macroeconomic project, the micro management of smaller items can carry people away - that's what I call the camel view! But success requires a falcon view from the top down...

People need to be realistic on the calendar and agenda. It should take at least a year to create a solid roadmap. Before you build a Burj Khalifa, architects require time to plan the work of art. Otherwise, you create a mere gadget and risk disappointing or upsetting people. Many observers in the Muslim world are now looking at Dubai with a smile on their face. Will the promise be kept? What will be the outcome?

Duplicating the mistakes of the Islamic finance industry

Islamic finance is a mix of money and regulations. It should be a mix of money, marketing and fewer regulations. It is likely that the Islamic economy is embarking on a similar journey, where simple things are made complicated by regulators, lawyers and scholars, excluding the one who should be the real beneficiary of the Islamic economy: the consumer!

The Islamic financial industry is struggling with its products and needs some clearly-defined directions, or strong recommendations, to address its major issues: growth and profitability.

The market positioning of the majority of Islamic products is religious, not financial. Hence, IFI (Islamic Financial Institutions) are failing to penetrate into the mass segments of the Muslim consumers, let alone attracting non-Muslim customers. The religious positioning of the products helps them attract the religious segment, which is thin and shallow. Once this segment is exhausted, institutions find it very hard to penetrate the remaining segments of the market, including the most valuable segments. Religious consumers buy conventional products because they do not see the value of the Shari'ah-compliant products. Dubai should learn from the mistakes of the Islamic finance industry and launch a smarter paradigm.

The Islamic economy cannot be based on what regulators see fit, but on the needs expressed by consumers. We will see the rise of Islamic consumerism, which will shape the Halal industry and the Islamic economy.

Global scale

The Islamic economy goes beyond Islamic countries. It is a de facto global endeavour, as most suppliers to the Islamic markets are based in the West! Besides (although it should not be overestimated), Halal products can be attractive to non-Muslim consumers.

Cultural heterogeneity

Becoming a global economic capital implies that you have a hinterland. Sixty five per cent of Muslims are Asians. Dubai is an Arabic market. Islam unites them, but Muslims differ in their economic behaviour according to their cultural origin. In order to tap into the substantial Asian markets, Dubai will need to submit a tailor-made offer to that market or play the card of universality.

Missing out on useful sectors

Based on the report provided by Thomson Reuters, which strongly inf luences the Dubai authorities, seven strategic sectors have been chosen. I personally think that the Islamic economy is much broader than these sectors and that it is too limiting to restrict it to those chapters. Although relevant, these seven sectors exclude other key areas, which make up the Islamic industry.

If it is an economic choice to limit Dubai's area of inf luence to these sectors, then it is a strategic choice and, although questionable, it is conceivable. But from a scientific point of view, what I call the 'Halalization' of the industry will imply far more dimensions which should not be ignored.


The sectors of the Islamic economy belong to a unit, which is the set of values behind it and the market it addresses. Separating them and running them independently of each other is unwise.


Succeeding in the Islamic economy implies success in the academic sector. One should not confuse information and education. Dubai can buy or attract all necessary information and data suppliers to its soil, but building a first- class academic system is a very different story. The fact is that other Islamic hubs have much stronger academic records and highly ranked institutions. These universities or business schools provide an elite who can manage the different chapters of the industry. They provide in-depth and long-term strategic thinking and development of products that cannot necessarily be provided by commercially-minded information suppliers.

The Islamic economy needs to be built. This requires content, which in turn requires strong academic relays. Building such an education system will not happen in three years... So you have to look at the matter from a long-term perspective.

Thinking big

Dubai has proved that it can see BIG! It has to create standards in the Islamic economy and invent a new paradigm in the Halal industry. Unlike many local observers, I do not believe that Dubai will beat London in the near future as the capital of Islamic finance. The City of London still has an historical status as a top international financial centre that Dubai has not yet achieved. But in the segment of the Islamic economy, Dubai can definitely become the leader provided that its authorities put proper resources and intelligence into the project. If Dubai becomes the world capital of the Islamic economy than it can become the world capital of Islamic finance... Not the other way around.


Clearly, Dubai has set an exciting and challenging mandate for itself. Success for Dubai will raise the performance bar across the Islamic markets internationally. The primary risk however will remain the execution and implementation of a great theoretical challenge.

At a recent conference held in Dubai on how to develop Islamic finance in Africa, there were no Africans in the panel or in the room

A myopic short- term plan to simply state that 'we are the capital' is not enough

Laurent Marliere lectures in "Marketing for the Islamic markets". He is the London- based CEO of ISFIN, a worldwide advisory present in 65 countries and focusing on the Islamic markets. He can be contacted at

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Publication:Islamic Business & Finance
Article Type:Company overview
Geographic Code:7UNIT
Date:Jul 13, 2014
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