In conversation with Hairol Ariffein Sahari, CEO - Halal Development Corporation

Salaam Gateway interviews Hairol Ariffein Sahari, chief executive officer of Halal Development Corporation, Malaysia's government-backed agency, mandated to develop the country's integrated halal ecosystem.

Established in 2006, HDC is positioned as a central coordinator, promoting participation and facilitating the growth of industry players in developing Malaysia's halal landscape. 

SG: What are the key steps taken by Halal Development Corporation (HDC) to strengthen the Malaysian brand on the global forum?

HDC: As custodian of the Halal Malaysia brand, HDC offers co-branding initiatives through country-to-country engagements via business conferences, buyer/seller missions and overall stakeholder engagements.

HDC provides an international platform for local and foreign government leaders, industry captains, thought leaders, entrepreneurs, academic scholars and researchers, along with civil societies worldwide, to convene for knowledge sharing and innovation exchanges to achieve the common aspirations of an integrated globalised halal economy through the annual World Halal Business Conference Circuit (WHBCC) and World Halal Excellence Awards (WHEA) events. These encourages global trade, boost investments, support the export of talents and knowledge workers, as well as promote networking, thought leadership and overall global collaboration.

This year, the WHBCC will be held in London, United Kingdom, on October 27-28, showcasing halal business brands and ecosystem partners that are seeking new partnership opportunities globally with retailers, distributors and governments. 

WHBCC 2023 also co-promotes market enablers that have embraced emerging trends. These include players that have opted to adopt environmental, social and governance (ESG) approaches, or included new-age technologies such as nano-technology into their production - which is expected to expand and enhance, if not reinvigorate, global halal ecosystems altogether.

SG: Please share an overview about the Halal Industry Master Plan 2030, its biggest challenges and biggest strengths supporting its implementation.

HDC: Malaysia is known to be a leading supplier of a wide range of halal certified products and services, namely food, cosmetics, pharmaceuticals, finance and tourism.

In promoting the growth of Malaysia’s halal economy, the government had launched the Halal Industry Master Plan 2030 (HIMP2030) in March this year.

The HIMP2030 sets out clear action plans on how Malaysia can strategically capitalise on the growing global demand for halal products and services, as well as strengthen the country’s leadership role by leveraging our halal industry ecosystem and cumulative expertise.

There are seven strategic thrusts within the HIMP2030 to address challenges we are currently facing, which include enhancing policies and legislations which can be more halal industry-friendly, creating new and bigger market spaces for Malaysia’s halal industry and establishing a larger halal talent pool of experts and professionals, to name a few.

SG: Medical devices and modest fashion have been identified as emerging sectors in the halal industry – How is the HDC encouraging them?

HDC: Besides Islamic finance and halal products and services, namely F&B, it is anticipated that the next emerging sector in halal would be in healthcare i.e. medical tourism (Muslim-friendly healthcare tourism) and medical devices.

To this end, HDC has already engaged various internal stakeholders to develop a Halal Sector Roadmap for Medical Devices for the industry. 

The halal medical devices sector saw positive growth in its exports, with the rise of regional and global demand during the Covid-19 pandemic, and its current situation in post-pandemic normalization. Currently, around 90% of medical devices manufactured through Halal Malaysia are exported, which suggests that Malaysia is actively meeting international standards and buyer expectations. We are gaining recognition as a country that can produce the highest quality or achieve the highest performance, whilst complying with halal requirements.

This is done through continuous support for development, policies and the improvements of standards, regulations and certifications by Malaysia’s Medical Device Authority (MDA).

The holistic support for these businesses remains progressive through the processes of encouraging, and easing companies to obtain IPs, patents, rights, and the necessary regulatory requirements, whilst providing a suitable and conducive business environment, and through international cooperation which venture into halal alternatives, and its subsequent international distribution.

Meanwhile, the modest fashion or modest dressing term refers to a fashion trend in women wearing less skin-revealing clothing, especially in a way that satisfies their spiritual and stylistic requirements for reasons of faith, religion and personal preference. This is also reflected in many common elements of Muslim dressing i.e., wearing longer-length garments, non-transparent fabrics, or looser fits.

The global demand for modest fashion is expected to grow at a compound annual growth rate of 3.9%, almost reaching $311 billion in global consumer spending.

Expansive collaborations and support from established global brands, retailers and marketspaces, along with cross-branding strategies with consumer brands, allow for modest fashion segmentation efforts to be developed.

It also enables reach to new or existing consumers through alliances between local manufacturers, retailers and distributors with local artisans, influencers, or overall modest fashion enthusiasts, whom by their sheer fashion consumer influence are able to pivot general fashion in accordance with modest standards.

Malaysia’s modest fashion is one of HDC’s promoted halal sectors. Home-grown brands such as DucK, Ariani, LILIT is gaining traction locally and it is anticipated that in time, it will be regionally known.   

SG: How is HDC supporting halal parks/industrial estates from an investment perspective?

HDC: Through HDC’s Designated Halal Park Guidelines, HDC continues to provide industrial land development consultancy and advisory services, locally and internationally towards planning for interconnectivity, clustered network of manufacturers, and overall planning, governance and maintenance of said halal industrial park/estates. This also includes being mediators between public and private entities, in exploring partnerships or stand-alone ventures.

Currently, HDC aspires all halal industrial parks and halal estates to be developed as gateway infrastructures and infostructures, acting as the critical component for local, regional, and worldwide transhipments to and from global locations – within a larger and globalised halal supply chain.

Current incentives include: 

Halal Park operators:

• Total exemption from income tax for a duration of 10 years, or 100% income tax exemption on capital expenditure for a duration of five years.
• Exclusion from payments that pertain to import duties on equipment, components, and machinery that are utilized in the Cold Room Operations in compliance with existing policies.

Halal Industry players (manufacturers):

• Total exemption from income tax for a duration of 10 years, or 100% income tax exemption on capital expenditure for a duration of five years.
• Exclusion from payments that pertain to import duties on raw materials that are utilized for the development and production of halal promoted products.
• Double deduction on expenses that results from obtaining international quality standards including HACCP, GMP, Codex Alimentarius (food standard guidelines of FAO & WHO), Sanitation Standard Operating Procedure and regulations for compliance for export markets such as Food Traceability from farm to fork.

Halal logistics providers:

• Total exemption from income tax for a duration of five years, or 100% income tax exemption on capital expenditure for a duration of five years.
• Exclusion from payments that pertain to import duties on equipment, components, and machinery that are utilized in the Cold Room Operations in compliance with existing policies.

SG: How is it encouraging training and skilling of halal professionals across technical and scientific fields?

HDC: Malaysia continues to enhance its competency in halal skilled workers based on a government-backed framework. This includes incorporating halal technical, vocational and knowledge into major educational and training programmes. 

Traditionally, training in halal addresses the basic fundamentals of halal and its application in the F&B sector. HDC offers training courses through its HDC Training Centre, wherein the syllabuses encompass awareness, governance, competency and certification aspects. In addition to this, HDC has also initiated a community of practice framework to develop the skills required and demanded in building the halal talent pool versus industry needs.

Regarding supply required by industries, there are 35 Malaysian Qualification Agency (MQA) accredited programmes related to halal being offered in Malaysian Institutions of Higher Learning (IHL) ranging from diploma to PhD courses. The IHLs are fine-tuning their syllabuses and training modules to suit these industries’ requirements for knowledge workers.

SG: What are the key challenges in ensuring end-to-end Shariah compliance of the halal supply chain?

HDC: Halalan Toyibban or the observance of end-to-end Shariah compliance within the halal supply chain holistically, encompass sourcing and procurement, manufacturing and production, distribution and logistics, marketing and financing in order for businesses to achieve their operational integrity in tandem with meeting Maqasid Shariah (Shariah objectives) requirements. 

This is also in line with the ESG stance mooted by many countries and governments alike globally in meeting the sustainable development goals of preserving the Earth and its people for the future. 

In general, halal certification requirements usually focuses on the aspect of ensuring that the ingredients sourced for production are halal. Aside from this, end-to-end Shariah compliance would need to be looked at within all activities of the business from both the upstream and downstream levels, incorporating Islamic finance.

Based on the Central Bank of Malaysia or Bank Negara Malaysia’s (BNM) definition of Shariah-compliant, there are two main criteria for companies to fulfil.  

Firstly, 95% of all business operations and throughout its supply chain must comply with halal certification(s). Secondly, 95% of all financing instruments must be through the adoption of Islamic finance, with a leeway of less than 20% from revenue or profits received by companies through Shariah non-compliant businesses and activities for e.g shares trading, stockbroking, and rentals.

The challenges faced by halal industry players is neither the adherence to Halal Malaysia Certification(s) throughout critical points within the halal supply chain, nor the adoption of Islamic finance, but more on the awareness of leveraging capital markets for business expenditures. 

Due to this, Bursa Malaysia’s promoter agency, Capital Market Malaysia (CM2) has since jointly-developed an entry-point guideline for micro, small and medium enterprises (MSMEs) to adopt Shariah-compliant standards by providing them access to the Islamic Capital Markets through fund-raising from investors within ecosystems of venture capitals, equity crowdfunding (ECF) and peer-to-peer (P2P) funding, to initiate interest in considering business funding through the capital markets.

As Halal Malaysia’s ecosystem keeps progressing, there have been more investments pivoting into halal and Shariah-compliant businesses through Bursa Malaysia - which remains the main component of the Malaysian capital markets, accounting for 64.3% (2.32 trillion ringgits) of market capitalization.

Furthermore, the application of ESG elements by companies that claims to be Shariah-compliant had outperformed the traditional ESG indices. 

SG: Malaysia's halal mutual recognition agreement with Indonesia - what has been the expected impact? Which other jurisdictions are of interest?

HDC: There has been increased jurisdictive reinterpretation of Islamic law by Muslim-majority countries, that places Halal production as being either compulsory, or the need to utilise each domestic Halal authority(es), in seeking religiosity protection of sustenance for its citizens.

In Malaysia, the Halal Malaysia value-add is specifically designed to enhance the quality of production of goods by including sophisticated value-adds to products and services. Each certification places different restrictions depending on the markets they seek. Malaysia’s stance is to engage any countries with these changes, in a constructive manner, to benefit both economies and markets.