The UAE is making a bold move to dominate the global Islamic finance and halal industry with its newly approved National Strategy for Islamic Finance and the Halal Industry, approved on May 6, 2025. This ambitious strategy aims to increase the assets of Islamic banks from Dh 986 billion to a staggering Dh 2.56 trillion (approximately $700 billion USD) within six years. Additionally, the UAE intends to elevate the value of Islamic sukuk issuances listed in the UAE to over Dh 660 billion by 2031. To ensure the successful execution of this plan, a dedicated committee has been established to oversee its implementation.
This aggressive push raises the question: can Malaysia and Indonesia, already significant players in the halal sector, keep pace? Malaysia, with its RM61.5 billion in halal product exports in 2024 and an ambitious target of RM45 billion in global halal trade at MIHAS 2025, is a key contender. Indonesia, with Bank Syariah Indonesia (BSI) launching innovative digital platforms like BEWIZE at the BSI Global Islamic Finance Summit (GIFS) 2025, demonstrates its commitment to modernizing and expanding its Islamic finance capabilities.
The Halal Landscape: A Quick Look
The halal sector encompasses a wide range of industries, including:
- Food: The halal food market is experiencing substantial growth, driven by an increasing Muslim population, rising disposable incomes in Muslim countries, and heightened awareness of halal certification. Key segments include meat, dairy, processed foods, and beverages.
- Finance: Halal investing is gaining traction as an ethical and rapidly expanding market. This includes halal-compliant investment funds and sukuk bonds.
- Cosmetics: Halal cosmetics are witnessing a surge in popularity within the beauty industry, focusing on permissible ingredients and ethical considerations.
- Tourism: Halal tourism is on the rise, with destinations catering to Muslim-friendly needs, including halal-certified hotels and restaurants.
Challenges and Opportunities
For Malaysia and Indonesia to remain competitive, several factors come into play:
- Innovation: Continuous innovation in financial products and services is crucial. BSI’s digital platform is a step in the right direction.
- Certification: Streamlining and standardizing halal certification processes can reduce barriers to entry for businesses.
- Market Access: Expanding market access and promoting halal products and services globally is essential.
- Investment: Attracting investment in halal industries, particularly in technology and infrastructure, will be vital.
Conclusion
The UAE’s ambitious strategy presents both a challenge and an opportunity for Malaysia and Indonesia. While the UAE’s financial resources and strategic focus are formidable, Malaysia and Indonesia possess established halal ecosystems and growing economies. By focusing on innovation, certification, market access, and investment, Malaysia and Indonesia can continue to thrive in the global halal market and potentially collaborate with the UAE to further expand the industry’s reach and impact.