Halal Hub

Malaysia

Economic News

22 Jul 2010
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Malaysia is taking steps to develop its halal food and related industries, which is expected to provide the country with a major competitive advantage, and tap into an emerging global market for halal-certified goods.



Halal is a set of Islamic dietary laws that govern the preparation of food and can influence the production of other products. The Malaysian ministry of international trade and industry estimates that the global market for halal food and non-food - such as pharmaceuticals and cosmetics - industries is worth US$2.1 trillion, of which the food sector alone is worth US$155bn. There is currently no country or market that dominates the industry, and is serious business for the Islamic faithful - both reasons why Malaysia's government, which prizes Malaysia as a model Islamic country, is pushing so aggressively to become a leader in the field.



Early this month, the government announced that the 2007 Budget would provide almost RM100m (US$27.1m) toward boosting Malaysia's status as an international hub for halal industries.



The government has set up the Halal Industry Development Corporation (HIDC) to streamline and coordinate the development of the industry. The corporation, to be placed under the prime minister's department, will have a launching grant of RM25m ($6.8m). It will create strategies and find niche markets for moving the industry forward. It has been tasked with the responsibility of developing halal standards, auditing and certifying procedures, directing and coordinating the development of the halal industry for both the public and private sectors.



Other spending measures include RM50m (US$13.6m) to establish and set up four halal industry parks in the states of Kelantan, Pahang, Terengganu and Perlis. The parks will be tailored to lure manufacturers of halal food products. A specific fund for the halal products industry has also been introduced by the SME Bank, which has allocated RM20m ($5.4m) in seed money to finance entrepreneurs in halal-related industries.



Halal Journal magazine managing director Jumaatun Azmi told local press that the budget is the strongest indicator from the government since Malaysia voiced its intention to become a halal hub.



Indeed these steps are consistent with the Third Industrial Master Plan (IMP 3). It is envisaged that by 2008 Malaysia will be the centre for the production and distribution of halal products and services and a reference point for halal standards, and a research and development (R&D) base for halal matters.



Malaysia's halal certification standard, the MS 1500:2004, was released two years ago. It offers guidelines for the production, preparation, handling and storage of halal food products. Malaysia hopes that the strict standard will be adopted globally, and is taking measures to direct the market accordingly.



As part of the IMP 3, a campaign and branding strategy has been developed to increase global awareness of Malaysia as a centre of the halal industry. The government will push for a "country of origin" label for all of Malaysia's halal products. Additionally, the plan calls for increased use and awareness of the halal logo, and continuous push for the association of Malaysia and halal products and services in all promotional and trade exhibitions overseas. A slogan, "Malaysia, taste of Asia" is also part of the new branding.



But the plan goes beyond slogans, as there are 11 different thrusts to the IMP 3 in addition to awareness of Malaysia as a halal centre. Managing competition, leveraging upon outward investments to gain access to raw materials, enhancing R&D and developing halal services also figure prominently.



This week MISC, the country's largest shipping company, launched the world's first halal shipping container service. According to reports, the service will carry beef from Australia and New Zealand, as well as other food items that meet Islamic dietary requirements to markets in the Middle East.



Four container vessels will be initially dedicated to the halal service and more will be added as demand increases.



A MISC unit is developing a dedicated logistics hub in Port Klang, on the country's west coast. The hub is spread over 47 acres, and will have three warehouses, scheduled to be completed by the end of 2006. Next year, the company expects to complete cold storage facilities, a unit to sterilize containers after each voyage, and a laboratory to test products to ensure they are not contaminated by non-halal elements such as alcohol and pork.



This development not only highlights how Malaysia's private sector is taking advantage of a huge global market. It additionally demonstrates how the industry is becoming large enough to create entirely new sectors like Islamic warehousing, packaging, and shipping.



According to the same report, MISC's logistical subsidiary signed a joint venture agreement in May with a Middle East company to build a smaller halal logistics hub in Dubai. Elsewhere, major ports like Rotterdam in the Netherlands opened a halal products gateway last February. The Philippines and Australia have also taken steps to grow their halal foods industries.



But unlike these countries, Malaysia is not only fashioning itself as a leading exporter of halal products and services. The country's ambition is to become a one-stop centre for other activities related to halal production such as legislation, inspection, certification, enforcement, R&D, testing, analysis and setting up of laboratory facilities. Much as it does in the Islamic banking industry, Malaysia is leveraging its Muslim credentials to demonstrate its cachet in these regulatory fields.



These new government measures are remarkably more aggressive and focused than previous halal development initiatives, and there are signs that word is getting out. The UK supermarket chain Tesco recently ordered $272.3m worth of halal products from Malaysia for its Muslim customers. With the continued push in marketing and infrastructural development, coupled with private sector moves to become a leader in the global halal supply chain, Malaysia's halal industry looks set for long-term growth.

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