Aimed at bringing greater global collaboration to halal certification in foodstuffs, non-food products and tourism, its role assumes much greater prominence beyond the Malaysian and regional markets.
The importance of the halal economy to Malaysia and the Barisan Nasional (BN) government, especially under Prime Minister Datuk Seri Najib Razak, is underlined by the strong pledge in BN’s just-released manifesto for the 14th General Election (GE14), “to stimulate the halal economy and ensure that Malaysia becomes a global leader in the industry, with Bumiputeras as the main driver”.
A key associated pledge is for BN to substantially increase its support to boost the role of small-and- medium-sized enterprises (SMEs) in the halal economy and to promote halal “Made-in- Malaysia” products in the regional and global markets. BN has pledged new funds totalling RM1 billion to be disbursed through the Halal Development Fund for SMEs in the halal economy.
The government will also provide technical assistance, grants, tax incentives and export credit guarantees through Danajamin Nasional and use digital transformation to help them export to new international markets.
Malaysia has been a world leader in the production of halal food, cosmetics and tourism, and is the acknowledged leader of the global Islamic finance industry, the “celebrity” component of the halal economy, and estimated to have US$2.6 trillion (RM10 quadrillion) of assets under management (AUM).
The growing importance of SMEs in Malaysia’s Islamic finance industry was highlighted by Bank Negara Malaysia (BNM) Governor Tan Sri Muhammed Ibrahim at the launch of the central bank’s Annual Report 2017. He had confirmed that the industry in Malaysia had a year-on-year growth of 9.4 per cent, “driven mainly by home and SME financing”.
Malaysia’s Islamic banking system, according to BNM, had grown from RM743.6 billion in 2016 to RM829.82 billion at the end of 2017. At the current growth rate and with the proactive policies of the BN government, the Islamic banking system’s AUM should hit the RM1 trillion target well before 2020.
Today, however, the halal economy has grown at a rapid rate. Thanks to globalisation it is no longer confined to Muslim consumers. The halal brand has become a powerful global one. Given that the global halal economy (excluding the Islamic finance industry) is estimated to be worth between US$2.5 and US$3.6 trillion, of which halal food, fashion, lifestyle, tourism and pharmaceuticals are the largest components, the reality is that it has become “too big to ignore let alone fail”.
The indications are that it is growing at a healthy rate given the rising global Muslim population (estimated over 1.5 billion), especially middle classes with more disposable income; the emergence of two-working-parent families even in conservative economies such as the Gulf states; its young demography; and the fact that halal food is now assuming global brand proportions and increasingly accepted by consumers irrespective of creed.
Not surprisingly, the production and marketing of halal products and services are no longer the confine of companies in Muslim countries and the diaspora. Swiss food multinational Nestle; Irish and Danish diary brands; Australian, New Zealand and Brazilian poultry and meat producers; food processors from Hong Kong, Singapore and even Thailand, dominate the global halal business as much as the likes of Ulker in Turkey or Savola in Saudi Arabia.
“Innovation” is not merely confined to the traditional halal economy. Capsters in Holland, for instance, has carved out a reputation in designing and manufacturing sports hijab gear, which is donned by athletes from Malaysia, the Middle East, Europe and the United States.
The BN government in Malaysia, not surprisingly, is prioritising the halal economy, whose potential is under utilised and beckoning for upscaling through bankable projects. It is keen to enhance this dimension to the Malaysian economy to further promote job creation, economic and financial inclusion especially of the urban and rural poor through entrepreneurship, microfinance, microtakaful, SMEs, alleviation of poverty and boosting the dignity of the B40 section of Malaysian society.
Jakim’s IHAB initiative is an important manifestation of Malaysia Inc’s halal economy strategy going forward, of which certification, just as syariah governance is in Islamic finance, is an essential component.
Despite the presence of Halal Certification Bodies (HCBs) in Muslim markets and diaspora countries including the US, South Africa and United Kingdom, there is no global standard for halal certification for both food and non-food products and services. Standards, quality control in processing and packaging, hygiene practices in animal husbandry, and syariah interpretations relating to the humane slaughter of animals vary from country to country.
Exposés in recent years about corrupt practices at abattoirs, livestock farms and food processing plants in Brazil, Ireland, UK and other places, have affected the halal industry too — where non-halal meat, in isolated instance, has been passed off as halal even by certified operators.
The stakes are high, not only for religious reasons for Muslims, but also in its international implications. In some countries animal welfare lobbies are vociferously campaigning against halal slaughter practices.
As such Jakim should not only collaborate with HCBs to get a universal standard of certification, but also consider inter-faith collaboration to stress that halal food production meets best practices in husbandry, slaughter and environmental protection. This way, Malaysia can further consolidate its leadership in the global halal economy.
Mushtak Parker is an independent London-based economist and writer.