Malaysia: Capitalise on halal economy or risk being left behind


MAINTAINING PACK LEADER POSITION: (From left) Kontena Nasional CEO Hood Osman, HDC’s Jamil and Nestlé Malaysia Bhd executive director Zainun Nur Abd Rauf at the roundtable discussion. Jamil says halal means business and as a country, Malaysia should not miss this although it is the first mover of the industry. He says others might catch up and Malaysia may be left behind (pic: Ismail Che Rus)

Gaps in the local halal supply chain need to be addressed to ensure Malaysia continues to be at the forefront of the halal economy, by bringing small- and medium-sized enterprises (SMEs) up to par and getting more players to participate at the supply level.

There is also a need for the government and the private sector to look at the halal economy from a business perspective instead of a purely religious one, to fully capitalise on the opportunities so that Malaysia is not left behind in meeting the burgeoning global demand for halal products.

Globally, there are about 1.8 billion Muslims. By 2013, the Muslim population is expected to make up 37% of the global population. Hence, there is no question about where the demand will come from.

These concerns were raised at The Malaysian Reserve roundtable discussion on the halal economy last month, attended by industry players. The participants included Halal Industry Development Corp (HDC) chief executive officer (CEO) Datuk Seri Jamil Bidin and several industry players from across the halal economy spectrum.

The roundtable discussion was hosted by HDC and moderated by The Malaysian Reserve (TMR) chief operating officer/group editor Abdul Halim Wahab.

“Halal means business. That is why even non- Islamic countries are jumping onto the halal bandwagon now. The demand at the moment is massive but sufficient supply isn’t really there. So, why not fill the gap?

“As a country we should not miss out on this especially when we were the first movers of the industry. We could miss it because the industry is moving so fast. Others might catch up and we may be left behind. This is one business that gives big returns to our country because we are still ahead. However, it is not going to be long before the others catch up with us,” said Jamil.

He pointed out that the supply chain is not fully connected. “If we analyse the situation carefully, we can conclude that our SMEs are not quite capable. This calls for governmental intervention to strengthen the supply chain.

“Industry players must look at the whole value of the supply chain. Instead of being active only at the end segments of the value chain, why can’t we be in the ingredient segment of the value chain?,” asks Jamil, suggesting that local SMEs can be more involved in the logistics and effective marketing sectors of the halal industry.

AYS Sdn Bhd CEO Liaw Ren Jian also called on the government to play a role in helping to screen and nurture potential SMEs in order to give them room to grow in the sector. AYS is a manufacturer and supplier of pre-packaged frozen meals under the Sri Kulai brand.

SMEs can tap into the ingredients supply part of the value chain, but they will first be required to build up their capabilities, he said.

“There are a lot of parties who want to set up businesses just like us. At times we face challenges that we can’t resolve by ourselves,” Liaw added.

Banks also have a big role to play in developing the local halal industry.

To promote the involvement of SMEs, the Islamic Development Bank (IDB) is open to discussion with the government on how to promote SMEs in the halal industry, said IDB regional office officer-in-charge of Malaysia Kunrat Wirasubrata.

“IDB will provide the funds, and HDC can provide the capacity. Other banks can chip in,” said Kunrat.

Finding certified suppliers of raw materials is another important factor in the halal industry. According to Nestle executive director of human resource and group corporate affairs Zainun Nur Abdul Rauf, awareness of the halal concept needs to be created to ease the process of finding certified suppliers of raw materials.

“Let’s say we have a supplier for a certain raw material. Since, they are the only ones who can assure us of their halal status, the whole industry will be ‘stranded’ if the this supplier is hit by crisis and there is no one else (to help),” said Zainun.

According to Zainun, Nestlé often faces an imbalance in its supply of halal raw materials. As a result, the company has resorted to importing raw materials. Nestle currently imports more than 80% of its raw materials, presenting an opportunity for SMEs to play a role.

However, she says, SMEs need to change their mindset from being just producers to being suppliers of raw materials.

Meeting halal standards is of utmost priority.

“We definitely want our source to be from Malaysia but the ingredients must meet specifications,” chairman of Nestle’s Halal committee, regulatory and scientific affairs, Othman Md Yusoff explained.

He said certification plays a role in providing for a systematic reassurance to consumers.

Eventually the quality assurance will come from the quality of the product itself, rather than a consequence of certification.

Halal logistics players also play a crucial role.

As the industry is huge, there is much room for more industry players to participate in the value chain.

Halal-certified logistics services provider Kontena Nasional Bhd CEO Hood Osman said an “active” approach needs to be adopted by logistics players in the form of creating more awareness of the concept of halal applied at this level in order to create economies of scale.

“We need to promote halal logistics to the players themselves, rather than just do it alone on our side. If everyone understands the halal industry, the logistics players will not have to invest so much (in the beginning),” said Hood.

Therefore, with more logistics players embracing the concept of halal as an “inclusive concept”, would enable economies of scale in the industry as well as address the gap between suppliers and manufacturers.

“Not everyone can be an end producer. Someone needs to promote the supply chain so that you will have a stable ecosystem,” said Hood.

HDC, established in 2006 to coordinate the overall development of the Malaysian halal economy, focuses on the development of halal standards and capacity building for halal products and services.