The economics of halal

Not long ago, our astronaut, Datuk Sheikh Muszaphar Shukor, launched Aladdin, the country's first exclusive halal and shariah compliant e-market shopping platform. Just like the Rayani Airlines episode, the news was greeted with dismay and ridicule from a significant segment of our society.

I think there is a lot more going on about the halal industry than we care to notice. Maybe we ought to get to know the industry and disentangle the religious aspects to get a clearer picture.

Hence, last week, a colleague and I went to the Penang International Halal Expo and Conference.

To my surprise, many visitors and participants in the halal expo are non-Muslims. Even half the competitors in the Halal Chef Championship were Chinese. In fact, I was told that non-Bumiputeras own 66% of the halal-certified companies in Malaysia.

It has more to do with economics than religion

There could be many layers of explanation for this, including the ambiguous scope of the halal industry (distributor of ingredients and palm oil derivatives can be considered halal products too) and the long-standing Chinese presence in our business sector. But one thing that this reveals is that the halal industry is not a completely Muslim phenomenon.

According to the Ministry of International Trade and Industry (Miti) and the Malaysian Industrial Development Authority (Mida), the halal industry brought RM14 billion investments and generated over 200,000 jobs.

The 2014 halal export revenue was RM37.7 billion. We have over 5,000 halal certified companies and more than 700 small and medium enterprises which act as halal SME exporters.

In terms of the global market, the halal industry is a quickly expanding and emerging market. The global halal industry is valued at between US$2.3 (RM9.51 trillion) and US$3.2 trillion. There are roughly 1.8 billion Muslims around the world, and there are 12 countries where the Muslim population exceeds 3 million.

What does these data tell us? There’s a lot of money there! The halal industry is more than the religious aspects. It is an ecosystem within a national and global economy.

The Kuwait Finance House states that by 2018, the global halal economy is forecasted to double to US$6.4 trillion.

In Malaysia, food & beverage  (RM15.5 billion) account for most of our halal exports, followed by ingredients (RM12.2 billion), palm oil derivatives (RM5.3 billion), cosmetics and personal care (RM2.3 billion), industrial chemical (RM1.9 billion), and pharmaceutical (RM0.5 billion).

Our key halal export destinations are China (RM4.6 billion), Singapore (RM3.6 billion), the United States (RM3.4 billion), Indonesia (RM2.3 billion), and Japan. I find this interesting because if we look at the global Muslim population, the export revenue has yet to match with the population market.

For example, though China is our main halal export destination, they have only 23 million Muslim population compared with Indonesia’s 205 million, Pakistan’s 178 million, India’s 177 million, Bangladesh’s 149 million, Egypt’s 80 million and Turkey’s 75 million.

Of course, not all halal consumers or buyers need to be Muslims. But Muslim consumers and buyers are a huge market for the halal industry.

If Malaysia and our halal industry’s players could penetrate into those countries with substantial Muslim population, we may harvest these untapped potential and establish ourselves as a big player.

Free choice v over-regulation?

While the economic aspects of the halal industry can shed light on the expansion of the industry (perhaps more than the religious aspects), we still have to deal with some potential repercussions.

A host of issues could prop up with regards to the expansion. Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi was quoted in a mainstream paper saying that it was sad that much of the halal industry is controlled and owned by non-Muslims.

On the one hand, they preach that halal products are not only for Muslims and that non-Muslims can benefit too. On the other hand, the halal industry is seen by some to supplement the bumiputera agenda, as in to help Malay-Muslim traders and companies.

Such sentiment echoes what I would call “the halal dilemma”. Can we open up the market while maintaining hegemony, ownership, and distribution of benefits?

On another front, could the expansion of the halal industry lead to over-regulation and segregation?

I have written previously on the fears of segregation if Malaysians were to be paranoid about this whole halal thing.

The concept of halal, and of the halal industry, if understood in the wrong light and its policy executed with the wrong intentions, can lead to segregation along ethnic and religious lines as exemplified by the “halal trolley” fiasco.

Could we, and should we, have a “halal supermarket” in the near future? Should it be marketed explicitly as such, or should we just make sure the major supermarkets (Tesco, Giant, etc) are halal-certified and let it be a non-issue?

There is also a potential problem of over-regulation in the halal industry. Because all halal products have to go through a procedure to get the certification, there must be a mechanism to ensure that it is done in a transparent manner. Otherwise, as with many regulations, it is a feeder to inefficiency and corruption.

Should one agency monopolise the certification process? Should we liberalise the halal industry, or carry a pro-bumiputera agenda within the industry? Is it even possible to have it both ways?

The concept of halal industry is more broad than the non-pork criteria, and more wholesome than the religious aspects. We should not completely ridicule and cast it aside as the industry can be beneficial to our economy and our population.

At the same time, we should be careful as to how to mould the image of the halal industry so that it is inclusive and non-alienating. – February 6, 2016.

* This is the personal opinion of the writer, organisation or publication and does not necessarily represent the views of The Malaysian Insider.