Competing in a global halal market
By: Yazreen Md. Sabri, Michael Hoe
The simplest definition of halal by Abdul Latif is that which is permitted by Shariah, the code of life or law that regulates all aspects of a Muslim’s life, applying to every activity performed by man. When used in economics, it refers to business conducted in a manner that is believed to be allowed in Islam. When used in relation to food, it refers to food that acts in accordance with the laws of Islam. Institutionalization, as defined by Britannica, is the process of developing or transforming rules or norms that influence a set of human interactions. Or, in simple terms, it is the process of becoming institutionalized. As our society modernizes, the importance of institutionalizing halal has been stressed, with the government approaching it in various ways.
As global demand for halal products rises, Malaysia will inevitably become a major supplier, transforming it into one of the great players of the worldwide halal market. Indeed, the annual Malaysian International Halal Showcase (MIHAS) is recognized as one of the most influential halal-only trade shows in the world. There, the public will gain knowledge of and be able to purchase a staggering variety of halal products ranging from food, beverages, palm oil, agricultural produce, pharmaceuticals, toiletries, and cosmetics. Additionally, the showcase also greatly contributes to the country’s economy, with the 2015 showcase generating more than RM 1 billion in immediate and negotiated sales.
At the same time, however, Malaysia will face heavy competition from other players and influencers within the global halal industry, one of the more surprising ones being Thailand. Our neighbouring country had seen rapid progress in the development of its halal market, putting it among the top global halal influencers. Part of this progress is due to heavy institutionalization of the national halal industry, prioritising global demand over local and thus increasing the supply in response.
It is for that reason that Dr. Mohd Zufri Mamat of Universiti Malaya’s (UM) Department of Science and Technology Studies chose to compare Thailand’s halal development with that of Malaysia in his research on the institutionalization of halal in the hope that Malaysia can learn from Thailand’s “zero to hero” experience in its halal industry development and apply this experience to better improve its own halal industry in order to meet international demands. “By learning from Thailand’s experience in their rapid halal industry progress and development,” Dr. Zufri says “… we can enhance and encourage the involvement of industries such as those in the small and medium enterprise (SME) sectors in order to develop Malaysia’s halal industry in a sustainable manner that is able to meet demand on a global market.”
“Halal development in Malaysia utilized a ‘top-down approach’ which can be seen by the government establishing many institutions and halal agendas,” Dr. Zufri says in an interview regarding his aforementioned research. “By this time, the Malaysian halal industry showed much improvement following the development of various organizations such as the Halal Development Corporation (HDC), Department of Islamic Development Malaysia or Jabatan Kemajuan Islam Malaysia (JAKIM) and Standards Malaysia which are all placed under the Ministry of International Trade and Industry (MITI) as well as Ministry of Entrepreneur Development (MEDAC).”
“By contrast however,” he continues, “Thailand utilized a bottom-up approach instead where the role of Thai society members is given more emphasis. By targeting stakeholders such as traders, businessmen and religious leaders, the Thai government will be able espouse the benefits that institutionalizing halal will grant them, thereby earning their full support in strengthening the halal movement. This, in addition to considering the economic and business factors that will influence the industry’s movement and development.” “If the Malaysian halal industry is to survive in the extreme global market and compete with the industries of other countries such as Thailand, it needs to have a strong, systemized, and structured operational process” Dr. Zufri concludes.
As part of the institutionalization process, the Malaysian government established various engagement activities (e.g. HALMAS Halal Park) structured around enhancing and supporting the local halal industry, upgrading it into a global hub for the production and distribution of halal-certified products. Additionally, the government also enforces the requirement that all companies must be certified with the Halal Standard (MS 1500:2019) granted by JAKIM in order to operate. The HDC had taken on the responsibility and leadership for creating the resources that contribute to the halal industry’s growth, driving the development of halal skilled workers and embracing the megatrends of technology such as blockchain, the internet of things (IoT), finance technology (Fintech) and big data in order to produce a brighter future for the industry where the advancement of knowledge, data, and business partnership are key. This was all, in turn, supported by other ministries including the Ministry of Science, Technology, and Innovation (MOSTI) and the Ministry of Human Resources (MOHR).
Science and technology (S&T) also play a role in developing and institutionalizing the halal market and influencing future halal market trends, with Malaysia possessing many institutions dedicated to halal science research such as the Halal Product Research Institute (HPRI) at University Putra Malaysia. Through research and development (R&D) we can enhance halal products to make them more efficient or desirable, find areas of the global market where the halal industry can be expanded into, find halal alternatives for replacing haram raw materials and trace any non-halal substances that have possibly been adulterated in food, beverages and other products.
Despite all of the progress and development that the Malaysian halal industry has been going through, there have been some doubts regarding its ability to enhance Malaysia’s standing on the global market and improve the country’s economy. In particular, there are worries that institutionalizing halal will only further strengthen the government’s hold over it, restricting the autonomy of companies and businesses especially when it comes to planning for the global stage. “As a Muslim majority, we are heavily, if not solely, dependent on government efforts and policies in order to establish ourselves in the global market,” says Dr. Zufri. “All activities designed to bring Malaysian businesses and industries to the international level are planned by the government through selected agencies such as JAKIM, HDC and the Standards and Industrial Research Institute of Malaysia (SIRIM).”
Though the Malaysian government has excellent halal policies and standards for the world to follow, it has become clear that it needs to do better in order to reach its full potential as a world leader in the global halal market. This is especially important given that Thailand used our country’s own standards in order to become one of the largest halal producers in the world. By learning from Thailand’s success and implementing its bottom-up approach to institutionalization, we can improve our own halal industry and enhance its position on the global market. But we must also take care not to become too reliant on government involvement and planning and try to grant more autonomy and independence to stakeholders and businesses with regard to planning for the global stage.
It is clear that in order to better compete with other countries in the global halal market, Malaysia needs to do more than institutionalize. It needs to follow Thailand’s example and make fundamental changes to its system. From top-down to bottom-up. Restricted to autonomous. Government-dependent to independent. Rule-maker to enabler.
Only then are we able to reignite the country’s entrepreneurial culture and truly re-establish ourselves as leaders in the worldwide halal industry. Do you agree?
Yazreen Md. Sabri is a postgraduate candidate at the Faculty of Science, Universiti Malaya; while Michael Hoe is a Research Assistant at the Institute of Research Management and Services, Universiti Malaya. The authors may be reached at firstname.lastname@example.org