Global Halal Hub

Malaysia

Economic News

22 Jul 2010
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The word halal is an Arabic term that generally refers to products considered 'permissible' to use according to Islamic law. With over 1.8bn Muslims in the world, and commercial opportunities that extend to financing, logistics, training, and information technology, the sector is fast becoming an industry unto itself.



While never formerly measured, the sector is estimated to be worth worldwide anywhere from $150bn to $500bn a year and is said to be growing at 10 to 20% annually. Take into account non-food items, such as financial services, pharmaceuticals and cosmetics, the market for these products is estimated to exceed $1.5trn.



While large and growing in size, the sector is considered by some to be too fragmented, and in order to tap its vast potential, global standards and cooperation need to be established.



"When it comes to standards and interpretation, there is much up for debate, and it is debate that is slowing the growth of the industry. We need to harmonise as quickly as possible," Jamil Bidin, CEO of Halal Industrial Development Corporation (HDC), told OBG.



The HDC, which falls under the jurisdiction of the ministry of finance, was incorporated in September last year and is wholly owned by the government.



As a country with a moderate version of Islam that emphasises economic and scientific progress and has a strong agricultural base, competitive operating costs and the experience gained through being pioneers in contemporary Islamic finance, Malaysia feels it possesses the right ingredients to position itself as a global hub for Islamic-compliant products. Malaysia is currently in the second year of its five-year plan for the direction of the economy in which it hopes to attain developed nation status by 2020. Halal products have been identified as a key area of focus within this blueprint.



At a press conference in early May, Prime Minister Abdullah Badawi said, "Malaysia remains committed to becoming a significant player in the global halal market and ultimately, to become a world hub."



Syed Jalaludin bin Syed Salim, HDC's chairman, said to OBG, "We want halal to become a global brand, like 'Fair Trade' or 'Organic' that stands for integrity and quality. But first, everyone needs to agree on what halal is."



Earlier this month in Kuala Lumpur, Malaysia hosted its 2nd annual World Halal Forum, a two-day event that attracted 900 representatives from 30 countries. Islamic-compliant food production zones are in operating or currently being built in six Malaysian states.



While this is still considered by some to be a niche industry, non-Muslim countries and multi-national corporations are increasingly adopting compliance. For example, in New Zealand, all lambs processed for consumption are done so following Muslim dietary guidelines. Also 75 of Nestle's 481 worldwide factories produce 'permissible' foods while McDonald's is currently testing halal chicken sandwiches across the UK. aIn 1990, the Islamic Food and Nutrition Council in the US certified products for 23 companies. In 2006, this figure rose to 2000.



In addition to extending its global reach and mainstream adoption, the creation of such products is branching into ancillary industries that extend beyond food and manufacturing.



Halal goods are required to move through Islamic-compliant distribution channels, thus offering commercial opportunities in the area of shipping and logistics. Northport, Malaysia's largest shipping terminal, has recently attained full accreditation. It joins a number of ports in the Gulf, as well as the Port of Rotterdam, which uses its certification as a means to attract the shipment of goods destined for Europe's 30m Muslims.



Hassan Abdul Kader, the CEO of Northport, told OBG, "The prospects for handling and distribution of halal products must be seen as part of the value-added activities that we are fostering. Northport would like to work with emerging halal hubs, including the Port of Marseilles in France and the Port of Dubai in the UAE, which have direct access to large Muslim consumer markets."



To ensure the entire process is in accordance with Islamic principles, the associated finance arrangements must be made following the same requirement. This opens up opportunities for institutions that offer Islamic financial products.



In the area of information technology, Microsoft just recently jumped on board the bandwagon, partnering with the HDC to develop a one-stop internet portal for halal trading, as well as a research knowledge centre, and a centralized web-based system to facilitate international product certification.

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