How UAE’s Trade Agreements with OIC States Are Reshaping the Islamic Economy

Imagine a world where borders no longer limit economic opportunity. That’s precisely the future the UAE’s Trade Agreements are building through its trailblazing trade agreements. By forging powerful economic partnerships around the world, the UAE is redefining its role as a global trade hub and a driving force in the Islamic economy.

At the heart of this strategy are the UAE’s Trade Agreements, which have become essential tools for unlocking new growth opportunities. These agreements don’t just open doors—they create pathways for stronger industries, innovative investments, and exponential trade growth. To achieve this, the UAE launched its Comprehensive Economic Partnership Agreements (CEPAs), setting its sights on a bold goal: reaching $1 trillion in trade value by 2031.

The Genesis of UAE’s CEPA Initiative

To reduce its dependency on oil revenues and solidify its position as a global trade hub, the UAE launched its CEPA program in September 2021. The primary objective of this initiative is to bolster non-oil trade and achieve a colossal $1 trillion in trade value by 2031. By establishing trade pacts with nations in the Middle East, Africa, Asia, South America, and Europe, the UAE’s CEPAs touch approximately 25% of the world’s population. This global outreach aims to enhance bilateral trade, reduce tariffs, and unlock new economic opportunities for Emirati businesses.

According to UAE’s Trade Agreements and Ministry of Economy, the CEPA strategy aligns with the nation’s broader “Projects of the 50” initiative, which aims to diversify the economy and attract foreign direct investment (FDI). By forging long-term trade partnerships, the UAE has been able to establish a secure flow of goods, services, and investments, enabling sustainable growth in key industries like energy, agriculture, logistics, and the Islamic economy.

Strategic Alliances with OIC Nations

A critical pillar of the UAE’s CEPA strategy is to strengthen trade relations with OIC countries. These partnerships are designed to invigorate the Islamic economy—a sector that encompasses halal food, Islamic finance, modest fashion, tourism, and other Shariah-compliant industries. OIC countries, as part of a shared cultural and economic ecosystem, are natural trade allies for the UAE. By signing CEPAs with these nations, the UAE is not only increasing its trade footprint but also reinforcing its leadership role within the global Islamic economy.

The UAE-Indonesia CEPA includes a dedicated chapter on the Islamic economy, where both parties agreed to promote and develop halal industry sectors. Bilateral non-oil trade between the UAE and Indonesia grew by 12%, amounting to $4.6 billion in 2023. The deal sets an ambitious goal of raising annual trade to $10 billion. The UAE’s role as a global logistics hub offers Indonesian exporters better access to Middle Eastern and African markets, thereby enhancing the supply chain for halal products.

Ahmad Soffian, CEO of Sa’adah Global, highlighted that the UAE-Indonesia CEPA is a “transformative opportunity” for the Islamic economy. He emphasized how the partnership amplifies the export of halal-certified goods, facilitates the growth of SMEs, and promotes cross-border investments. This CEPA also includes measures to align halal standards, which is crucial in reducing costs and ensuring mutual recognition of certifications.

Türkiye, known as a major destination for halal tourism and halal food production, stands to benefit significantly from this CEPA. The agreement’s “halal cooperation” article is particularly noteworthy as it provides a platform for developing a memorandum of understanding (MoU) on halal certification and mutual recognition of standards. Such alignment can help Muslim-friendly products and services flow more easily between the two countries.

Bashar Al-Natoor, head of Islamic finance at Fitch Ratings, underscored the potential of this CEPA to “boost the development of the Islamic economy—not only in terms of halal certification but also in tourism, Islamic finance, and food processing industries.”

The UAE-Jordan CEPA, finalized in October 2023, was the first free trade agreement between a GCC state and an Arab country. While the details of the agreement are still under wraps, the pact aims to increase collaboration in areas like renewable energy, manufacturing, transport, and pharmaceutical production.

Malaysia’s Minister of Investment, Zafrul Aziz, described the UAE as a “gateway into the ASEAN market,” highlighting how Malaysian businesses can access regional supply chains through this agreement.

Impact on the Islamic Finance Sector

The UAE’s Islamic finance sector is one of the most advanced in the world. As of 2024, around 29% of the UAE’s banking system’s financing and deposits are Shariah-compliant. The CEPA agreements with countries like Indonesia, Malaysia, and Türkiye strengthen the Islamic finance ecosystem by facilitating cross-border sukuk (Islamic bonds) issuance and investment opportunities.

Islamic banks in the UAE—like Dubai Islamic Bank and Abu Dhabi Islamic Bank—stand to benefit significantly. Partnerships with Malaysia, a major hub for sukuk issuance, create synergies that could make Islamic finance more accessible to global investors.

The UAE’s CEPA program has yielded significant economic dividends. In the first half of 2024, the UAE’s non-oil trade hit 1.4 trillion dirhams ($381.2 billion), an 11.2% increase over the previous year. The steady rise in trade flows reflects the effectiveness of its CEPAs in driving foreign direct investment (FDI) and boosting exports. UAE’s Minister of State for Foreign Trade, Dr. Thani Al Zeyoudi, noted that “our partnerships are paying off as seen in the sharp increase in trade flows.”

The Future of UAE’s Trade Agreements

Looking ahead, the UAE’s trade strategy is expected to focus on more CEPAs with African, Latin American, and Asian countries. There is also potential for deeper engagement with the Eurasian Economic Union (EAEU) and the Gulf Cooperation Council (GCC).

The UAE’s CEPA model will likely inspire other OIC nations to strengthen their trade policies. By following this blueprint, they can unlock new market opportunities, stimulate investment, and support the growth of small and medium-sized enterprises (SMEs) within the halal economy. As more countries embrace this approach, the global Islamic economy is set to grow more interconnected, resilient, and inclusive. The UAE’s leadership in this space reaffirms its vision of becoming a global trade powerhouse and a beacon for the future of Shariah-compliant commerce.