Dubai Islamic Investment Group and two partners will set up a firm to look for halal-based investment opportunities, the company's managing director said on Tuesday.

Marwan Hassan Al Khatib said the company's partners in the venture are Malaysia's pilgrim fund, a state fund that helps Muslims save for their Haj pilgrimage to Mecca, and Malaysian state-owned Halal Industry Development Corporation.

Dubai Islamic, a shariah compliant investment company, is part of the Dubai Group, a financial services company focusing on banking investments and insurance.

Khatib said the new company would invest in agriculture, food processing, restaurants, grocery firms and hypermarkets. The company was expected to be established before the end of the year, he said.

"We are trying to identify the best possible investment opportunities," he said on the sidelines of a halal forum. "As long as the investment criteria justifies the capital or investment needed, there should be no problem."

Dubai wants to diversify its economy to reduce reliance on the energy sector. Part of that strategy is to develop financial services.

Halal, an Arabic word meaning permissible, forbids consumption of pork, blood and alcohol and stresses that investments must meet ethical Islamic standards and avoid industries that involve usury and gambling.

Islamic assets are growing at an annual pace of around 20 per cent and are set to hit $2 trillion in 2010 from $900 billion now, Ernst & Young forecast in February.-Reuters