Rising awareness of halal products a boon to sector

By ISHUN P AHMAD

The halal industry in Malaysia is poised to post continued growth on the back of rising awareness and acceptance of halal products and services worldwide.

As it moves forward, one element that may boost the sector further will be non-fiscal incentives like green lane facilities, suggested one halal industry executive.

As for Malaysia, seen as a leader in the sector, halal exports are expected to grow between 5% and 6% this year, said Halal Industry Development Corp Sdn Bhd’s (HDC) CEO Datuk Seri Jamil Bidin. Malaysia’s halal exports grew 7.1% to RM42.18 billion in 2016. It grew 4.5% to RM39.38 billion a year earlier.

China and Singapore were featured as the largest export markets in 2016. The total exports to China amounted to RM5.4 billion and RM4.8 billion for Singapore. They were trailed by the US (RM2.9 billion), Japan (RM2.7 billion), the Netherlands (RM2.3 billion), Indonesia (RM1.9 billion), Thailand (RM1.5 billion), Australia (RM1.4 billion), India (RM1.3 billion) and South Korea (RM1.3 billion).

In an interview, Jamil told The Malaysian Reserve (TMR) that the fast-growing Muslim population will also provide a good growth impetus for the halal industry. In addition, he said growth in the halal industry is also expected to come from increasing new markets for halal products and services.

Some of the non-traditional and new markets include China, India, Africa and Europe. Locally, he said rising awareness and acceptance for not just halal food and beverages (F&B) products, but also other halal products and services are fuelling growth.

Consensus from the investment fraternity has pinpointed that a core driving force for the halal industry is the sheer size of the Muslim population worldwide. They contended that as the halal industry is relatively new, the market potential is tremendous.

Once largely associated with the F&B industry, halal standards have grown to become a driving force for many other lifestyle and business practices, says Syed Abu Bakar (Pic by Ismail Che Rus/TMR)

World Islamic Economic Forum Foundation (WIEF) MD Datuk Syed Abu Bakar S Mohsin Almohdzar said the foundation has also projected robust opportunities for the halal industry well beyond 2017.

For a start, he refers to the sheer numbers. Muslims currently make up a majority of the population in 49 countries around the world; with the global Muslim population in 2017 standing at 1.7 billion and projected to grow to 2.2 billion in 2030.

“At the back of this development, the halal label has grown beyond its religious underpinnings towards gradually becoming a universal symbol of quality and wholesomeness. Today, the global halal market is estimated to be worth US$2.3 trillion (RM9.89 trillion); encompassing a broad swathe of goods and services — from cosmetics and health products to logistics, marketing and financing,” he said in a recent email response to TMR.

Fashion Industry

Syed Abu Bakar said WIEF believes that there are three key growth drivers for the halal industry: A large and growing youthful population, halal values increasingly driving universal lifestyle and business practices, and the growing strength of halal economies in general.

“Once largely associated with the F&B industry, halal standards have grown to become a driving force for many other lifestyle and business practices, giving rise to an endless array of industry verticals.

“For example, the modest fashion industry is currently witnessing a boom; with established fashion brands like Uniqlo and Japanese-British designer Hana Tajima investing heavily in modest fashion wear.”

As a category, the modest fashion industry is expected to grow to US$368 billion by 2021 — larger than the current combined clothing markets of the UK (US$107 billion), Germany (US$99 billion) and India (US$96 billion),
he said.

SynQ Resource (M) Sdn Bhd entrepreneurship development executive Busra Yahya told TMR that there is a strong potential for Muslim entre-preneurs to venture into the halal industry on the back of rising acceptance of halal products in Malaysia. Persatuan Usahawan Muslim has appointed SynQ to conduct marketing and entrepreneur development for its members.

“For example, there is a huge potential for Muslims in the clothing industry as there are not many of them in it,” said Busra.

Busra said generally Muslim consumers are more comfortable and confident with Muslim halal operators. This provides an added advantage for Muslim entrepreneurs who venture into the halal industry. 

Incentives

On incentives, Jamil said the government could also consider non-fiscal incentives such as green lane facilities to further promote the halal industry.

For example, he said the government could provide green lane facilities in their procurement that gives priority to halal products and services.

Jamil said non-fiscal incentives can also be used to help promote new halal sectors like medical devices.

He said incentives have been helpful to the halal industry in terms of spurring growth and investments. It has, for example, helped spurred investments in halal parks.

Jamil said the government has been proactive in the promotion of the halal industry and had announced more incentives last year for the halal industry.

“The government has given out grants and soft loans for new technologies to encourage more research and development in the halal industry. Financing facilities that were given out to small and medium entreprises (SMEs) were also very helpful,” he said.

Some of the incentives given are full income tax exemption for a period of 10 years or 100% income tax exemption on qualifying capital expenditure with a period of five years to halal park operators.

Halal park operators also enjoy an exemption on import duty and sales tax on equipment, components and machinery used directly in the cold room operations subject to current policies under the purview of HDC, a government body responsible for promoting the halal industry.

These incentives are also given to companies operating in halal parks. In addition, they are given a double deduction on expenses incurred in obtaining international quality standards for compliance for export markets such as food and traceability from farm to fork.

Syed Abu Bakar, meanwhile, said tax and duty exemption have enabled SMEs to continuously grow in the halal industry.

“Incentives are definitely a boost for businesses that unlock faster growth. What is more important is to create a powerful synergy between private entities and government to provide education, space and funding for innovative projects in the burgeoning halal sector, with a focus on SMEs to help expand the untapped and lucrative areas in the halal industry,” added Syed Abu Bakar.