Economic luminaries from China are set to descend on Dubai on the 23 November for the Boao Forum, in which Asia’s investment in the Islamic economy will be comprehensively discussed. V Shankar, CEO of Europe, Middle East, Africa and the Americas at Standard Chartered – and one of the speakers at the 2014 Boao Forum – makes the important point that the Islamic economy is crossing religious and cultural boundaries to become a global way of doing business for people of all nations
Islamic economies are already a significant part of the global economy and are set to become even more important over the next decade. Contrary to popular belief, the Islamic economy is more than just Islamic finance and halal food. Early emphasis on halal finance and food is progressively transforming into broader commercial activities as users seek sharia-compliant alternatives across the full range of goods and services. To get an idea of the current size and growth potential of the Islamic economy, consider the following facts:
Islamic finance sector assets are estimated to be around US$1.4tn and are expected to grow at 15 to 20 per cent a year. Islamic finance is becoming an important part of emerging economies in the Middle East and Asia as well as in the OECD countries. Expenditure in the halal food and lifestyle sector was estimated to be US$1.6tn in 2012 and is expected to grow by 50 per cent by 2018.
Similarly, in the travel and tourism sector, Muslims spent about US$137bn in 2012, or, put differently, one out of every eight dollars spent on tourism globally. This is again set to grow by 30 per cent in the next five years. Meanwhile, four of the five fastest growing airports in the world happen to be Dubai, Istanbul, Jakarta and Kuala Lumpur – all Muslim majority countries.
Roughly half of the major sovereign wealth funds globally are based in Muslim countries. This is complemented by the ever-growing emphasis on foreign trade by the OIC (Organisation of Islamic Cooperation) countries, which between the 57 member states increased from US$3.9tn in 2011 to US$4.1tn in 2012, accounting for 11.3 per cent of world trade.
Global companies from the West, as well as governments in countries with Muslim minorities, are recognising this trend. For instance, General Electric, International Finance Corporation and Tesco have all issued sharia-compliant bonds. Hong Kong, Singapore and South Africa have all considered or issued sukuks (Islamic bonds). Many African governments, including Nigeria and Kenya, are considering legislation to promote the development of a local Islamic finance industry.
Post the past decade’s financial crisis, many parts of the world are facing the twin challenges of rising unemployment and growing inequality in the distribution of wealth and incomes. Businesses, and the capitalist system itself in many ways, are fighting to restore their credibility. The focus of companies is changing from the singular pursuit of maximising share holder value to a more nuanced theme of wider stakeholder value creation and engagement. In this context, the value system of Islam, with an emphasis on ethics and social responsibility, has much to offer.