Economic View


Does the halal industry have the potential to compete against conventional industrial global value chains?


MOHAMMAD AZUL SHAH: As prescribed by the Quran, halal means “lawful” or “permitted”. In other words, halal products are free from any component that Muslims are prohibited from consuming, according to Islamic law. Despite being around for centuries, the development of halal as a global industry is relatively recent, particularly when compared to the conventional industrial global value chains that started emerging in the wake of the industrial revolution. However, today’s integrated and globalised economy offers the perfect conditions for the growth of the halal industry.

First, the halal industry can capitalise on the demographic expansion of the Muslim world. Today, Muslims make up approximately 23% of the planet’s population, and by 2030 they are expected to make up 26.4%. Given the young demography of the Muslim world, future consumption patterns will be shaped by the so-called millennials, a technology-savvy generation with unprecedented access to information.  

Second, halal is much more than food. Even if wholesome foods emerge as the leading sector, the halal industry encompasses other growing areas, including pharmaceuticals, nutraceuticals, cosmetics, tourism, fashion, media and recreation.

Third, if we focus our attention on the food segment, around 90% of the world’s food is produced by non-Muslim companies. In recent years a greater number of foreign companies have aimed to become halal certified, not only because of the stringent quality control processes, but also because certification opens the doors to a market of 1.7bn Muslim consumers. By recognising the potential of the halal economy, non-Muslim-majority countries such as China, South Korea, Japan and Mexico are looking to develop their own halal ecosystems and industries.         


What are the main challenges hindering faster growth of the halal industry globally?


SHAH: Across the globe, the halal industry is already worth more than $2trn. The sector has been growing steadily in recent years, but greater growth could potentially be unlocked if the sector manages to address some existing communication problems. In this context, one of the main challenges hindering growth is the misconception that some non-Muslim consumers have of halal. They tend to tie it to being only for Muslim people, and fail to understand halal as a global concept based on a holistic approach involving systems and solutions that ensure products are safe, wholesome and meant for the benefit of mankind at large. Better education and information is therefore essential to enhance growth. We hope halal will enter the global lexicon after the 2020 Olympics in Tokyo, Japan, which as a country is targeting the halal sector as a key economic driver.  

At the same time, the halal industry would benefit from the development of a more integrated market for its products. In particular, the industry and national governments should work together to harmonise halal certification processes and rules. Today, differentiated requirements and, in some cases, non-transparent criteria of halal certification and assurance pose challenges for manufacturers, who have to meet different standards to be granted access to different markets.       


In which ways is Johor positioning itself to become the halal hub of Malaysia? 


SHAH: Malaysia is widely perceived as the global leader in the halal industry. In recent years the government has been able to build an ecosystem through comprehensive and proactive policies, such as the New Economic Model and the Halal Industry Master Plan, to propel the development of the sector. Given its privileged geographical position, availability of land and capacity to attract investment, Johor is looking to take full advantage of South-east Asia’s efforts to deepen economic integration with the ASEAN Economic Community. By utilising Malaysia’s reputation as one of the world’s most successful halal markets, Johor is simultaneously investing in infrastructure, with the construction of the country’s first 100% halal park, Johor Halal Park, and the creation of a standard model for halal verification and certification. Malaysia is building a comprehensive legal and regulatory framework for halal. The Global Halal Alliance is working closely with the State of Johor Islamic Religious Council and other halal regulatory bodies to support the global harmonisation of halal standards and audit framework in order to build an integrated halal ecosystem.