Malaysia dominates the Islamic economy, butthe United Arab Emirates is hoping to close the gap

New research has found that the gap isnarrowing between leading Islamic economies Malaysia and the UAE.

The Dubai Islamic Economy DevelopmentCentre wants to make Dubai the global capital for the Islamic economy.

Islamic banking is attracting interest fromboth Muslims and non-Muslims alike for its focus on socially-responsiblepractices.

Malaysia can lay claim to be the center ofthe world's global Islamic economy, but the United Arab Emirates (UAE) is hoton its heels, according to new research.

The "State of the Global IslamicEconomy Report 2018/19," commissioned by the Dubai Islamic EconomyDevelopment Centre (DIEDC) and produced by Thomson Reuters, shows a narrowinggap between the two hubs. The Islamic economy is the Muslim-majority countriesthat have financial sectors and economies which comply with Islamic law.

"Although Malaysia once again tops theGlobal Islamic Economy Indicator, the UAE ranks in first place across theremaining five sectors ? halal food, halal travel, modest fashion, halal mediaand recreation, and halal pharmaceuticals and cosmetics ? compared to threesectors in 2017/18," the research said. The report evaluates the qualityof the overall Islamic economy ecosystem including social considerationsrelative to a country's size.

Malaysia's lead is supported by itsdominant Islamic finance ecosystem, but the UAE (which consists of seven sevenemirates including Abu Dhabi and Dubai) is making progress to narrow the gap,according to the man tasked with that job.

"The Islamic economy sector has grownin importance over the last few years, and the year-on-year growth has beenquite significant," Abdulla Mohammed Al Awar, the CEO of the Dubai IslamicEconomy Development Centre, told CNBC's "Capital Connection."

The center aims to make Dubai the globalcapital for the Islamic economy, and position Dubai as a leading engine ofIslamic finance and a solutions provider for the halal industry.

"Ever since the launch of our strategyin 2013, we've witnessed the local growth of the Islamic economy in the Emirateof Dubai," Al Awar added.

"We did a measure of that in 2017, andrealized that the contribution of the Islamic economy sectors in the Emirate ofDubai was close to 8.3 percent, which is close to $9 billion in terms of thecontribution to GDP (gross domestic product), so that's significant that thereis another layer of economic contribution that was in place after thatvision," Al Awar said.

Rustam Azmi | Getty Images

A General view of Dubai Downtown at Sunseton December 10, 2016 in Dubai, United Arab Emirates.

Capturing the opportunity

Islamic banking penetration is on the rise,most notably in the UAE, attracting interest from both Muslims and non-Muslimsalike for its focus on socially-responsible practices and investments.

"The value of assets in the burgeoningsector was estimated at $2.4 trillion in 2017, and is expected to surge to $3.8trillion by 2023," the report said. To lean into this trend, the DIEDC hasplans for developing the sukuk (Islamic bond) market and increasing sukukissuances and listings in Dubai.

"Dubai is making tremendous strides inboosting the Islamic economy through the growing activity in all areas ofIslamic finance, including the largest value of sukuk listed at any globalposition of $59.7 billion from 72 lists," said Hamed Ali, the CEO ofNASDAQ Dubai, in a recent statement.

But Al Awar says there are still bigchallenges to overcome. "One of the significant challenges also lies inawareness, or the lack of awareness," he said.

"I believe there is a little bit ofconfusion out there, especially in the non-Muslim jurisdictions, about what theIslamic economy sectors entail and what are the products and services that aredeemed within the Islamic economy," Al Awar said.

"Another is the lack of harmonizationof standards," he added, particularly in Islamic finance.

"One of the significant prioritieswill be for us to launch initiatives that will harmonize those standards andstreamline the economic activities across the globe."

Link->https://www.cnbc.com/2018/11/06/malaysia-dominates-islamic-economy-but-the-united-arab-emirates-close-the-gap.html