Which countries lead the world in the Islamic economy?

| 12 February, 2019 | General

This article is based on the Global Islamic Economy Indicator (GIEI) developed by Thomson Reuters. For the full ranking of Islamic economies, download the State of the Global Islamic Economy 2018/19 report from HERE.

Malaysia and the United Arab Emirates had the most developed Islamic economy ecosystems in 2018, according to the Global Islamic Economy Indicator (GIEI) that measures the development of the Islamic economy in 73 countries across supply and demand drivers, governance, awareness and social considerations.

For the fifth year running, Malaysia and the UAE lead the GIEI. In 2018 the two countries put in place important initiatives across regulation, trade and industry to strengthen their status as hubs in the trade-driven Islamic economy.

However, significant changes are expected in the GIEI leaderboard going forward as more countries attach strategic economic importance to the Islamic economy.

There is a growing recognition, particularly among Muslim countries, of the need to address the substantial global trade in halal products, as well as the travel opportunity. This has translated into important movements in the leaderboard already, with a notable rise in the top 15 for Jordan, Indonesia and Sudan.

Malaysia world’s leading Islamic economy ecosystem

Malaysia has long taken important steps to establish a world-leading Islamic economy ecosystem, led by its robust and comprehensive halal standards and certification, and supported by an extensive framework that spans its halal free zones (halal hubs), well-developed halal products manufacturers, a strong Islamic finance industry, and an investor ecosystem that includes private equity, venture capital and sovereign wealth funds.

Malaysia has continued to strengthen its influence in the regulation of halal products, with the establishment of the International Halal Authority Board (IHAB) in April 2018 that will attempt to bring greater collaboration to halal certification.

UAE’s Islamic economy strategy has helped create a leading trade-driven ecosystem

The UAE saw 6 percent CAGR annual growth in its GIE Indicator score since 2014 and has taken important steps to develop its core role in the regulation of halal products.

Macro-level initiatives include the Dubai-based International Halal Accreditation Forum (IHAF), which in 2018 boosted its membership to 25 since it launched in 2016. This signals an increasing interest among national accreditation bodies to harmonise halal conformity assessment practices.

Other initiatives include the further development of an Islamic economy strategy by DAFZA, a leading free zone. DAFZA announced its Islamic economy strategy in 2017, and continued in 2018 to support companies address the Islamic economy opportunity; one new initiative was Goodforce Labs, an ethical and Islamic economy foundry based in Dubai. With the Islamic economy contributing 8.3 per cent to Dubai’s GDP, the UAE is in a strong position to act as a core trade hub.

Bahrain is third on the GIEI, led by its advanced Islamic finance ecosystem

Bahrain’s Islamic finance ecosystem is second only to Malaysia, after having gained an edge over UAE in 2018. Bahrain’s Islamic finance development was enabled by its support of Islamic fintech, notably with the launch of the FinTech Bay, following its unveiling of the regulatory sandbox in 2017.

Bahrain has also risen in the rankings for pharmaceuticals and cosmetics, where it has reached ninth, and in media, where it has climbed to sixth place, playing a bigger role in exporting products to the countries of the Organisation of Islamic Cooperation (OIC).

Saudi Arabia remains a dominant player, but with significant unrealised potential

Saudi Arabia remains a powerful leader in the Islamic economy. The kingdom ranked fourth for Islamic finance, with close to $500 million in assets across 129 Islamic finance institutions, and stood in the top 10 for pharmaceuticals and cosmetics.

Capitalising on its status as the natural centre of the Muslim world, and in line with its 2030 vision to diversify its economy, Saudi Arabia has substantial potential to become a leading market for halal travel. With a comprehensive Islamic economy strategy, supported by its sovereign wealth fund, Saudi Arabia can play a leading role in facilitating trade within the global Islamic economy.

The Global Islamic Economy Indicator (GIEI) is developed by Thomson Reuters. For the full ranking of Islamic economies, download the State of the Global Islamic Economy 2018/19 report from HERE.