INTERVIEW-Malaysia’s MATRADE CEO on developing SMEs to meet rising global demand for halal

Malaysia’s small- and medium-sized enterprises will face serious challenges if they continue to slack in research and development and fail to leverage information and communication technology (ICT) to establish their businesses in the global halal market, says Malaysia External Trade Development Corporation (MATRADE) CEO Dato’ Dzulkifli Mahmud.

In an email interview with Salaam Gateway, Mahmud stressed that with the lack of emphasis in R&D, local SMEs are not competitive enough to meet the global halal demand for quality and new ranges of products and services.

“R&D findings will assist in formulation of fatwas and support traceability and quality control within the industry, identifying alternative ingredients, product development and commercialization of halal products and services,” he said.

SME involvement in Malaysia’s halal exports represents more than 70 percent of the number of exporters but their value is relatively small compared to that of exports by corporations, said Mahmud citing Halal Industry Development Corporation (HDC) data.

There are currently 5,726 halal-certified companies in Malaysia, of which 77 percent are involved in food products. However, only 14 percent, or 800, are considered to be export-ready. The Malaysian government would like to see a 100 percent growth in the number of export-ready halal-certified companies by 2020.

HALAL PRODUCTS OUTPACE ALL OTHER EXPORTS

In 2015, the country’s halal exports reached 42 billion ringgit ($10.2 billion), accounting for 5.4 percent of total exports, which stood at 779.95 billion ringgit, according to MATRADE data. While a small proportion, halal exports’ year-on-year growth was almost six times higher, at about 11 percent compared to 1.9 percent for all exports.

This year, Malaysia hopes to boost its halal exports to 50 billion ringgit, which is a much higher 19 percent year-on-year increase.

Apart from F&B, other sectors that drive the demand for halal products and services include halal ingredients, cosmetics and personal care, industrial chemicals, and Shariah-compliant business services such as those in halal logistics, tourism and Islamic finance. 

NON-MUSLIM DEMAND

In 2015, the top five export markets for Malaysia’s halal products were China, Singapore, the United States, and Japan, said Mahmud.

Noting the increasing demand for halal products among non-Muslim countries, MATRADE encourages SMEs to seize opportunities by meeting the standards required to break into the international market.

“SMEs’ failure to comply [with] international quality standard[s] and meeting consumers’ increasing demand for quality assurance and food safety could further hinder the country’s projected growth in halal export,” he said.

In an effort to help push for more Malaysian food manufacturers to obtain the international food safety standard the Hazard Analysis Critical Control Points (HACCP) certification, a fund of 20,000 ringgit per company was set up under the HACCP Certification Assistance Programme, which was launched in October. The Programme was initiated by MATRADE in collaboration with SME Bank and SIRIM QAS International, a certification, inspection and testing body under the Ministry of Science, Technology and Innovation.

The pilot project targets at least 30 companies to be HACCP-certified within six months. As of this writing, 16 SMEs have been approved under the first exercise, according to Mahmud.

“Malaysian SMEs must equip themselves with certification to fulfill the requirements by foreign markets in order to establish their footings overseas. All these standards are product assurances that ideally should be complied by manufacturers,” Mahmud said. 

Most SMEs do not comply with the international certification process due to cost barriers, which the assistance programme addresses. In the meantime, local SMEs still struggle to meet demand to grow in the domestic markets. This challenge, among others, hold back SMEs’ growth and expansion plans.

LEVERAGING ICT

Mahmud also calls on SMEs to leverage ICT to establish and participate in halal trade at the international level. He said that halal companies should follow the example of other industries that are already using ICT to conduct their businesses worldwide.

“They (SMEs) must leverage and invest in ICT among business- to- business and business-to-consumer online portals that can be utilised to market halal products and services worldwide,” he said.

PROMOTING MALAYSIA’S HALAL INDUSTRY

One of the highlights for Malaysia’s halal industry is the annual international halal showcase, or MIHAS. In conjunction with MIHAS 2016, MATRADE is organizing the one-day International Sourcing Programme as a platform for foreign buyers to meet local SMEs. The program aims to match 500 Malaysian companies with over 350 buyers from 41 countries.

Last year, the business matching program generated 443.2 million ringgit in sales while sales from the trade fair was at 655.8 million ringgit, bringing total sales from MIHAS 2015 to 1.1 billion ringgit. The organization is looking at a 5 percent jump in overall sales this year.

Organized by MATRADE, MIHAS 2016 is part of Malaysia’s World Halal Week (WHW), which will take place between Mar 30 and Apr 2 in Kuala Lumpur. Other components of WHW are the World Halal Conference 2016 and the Halal Certification Bodies Convention organized by the Department of Islamic Development (JAKIM).

($1 = 4.12 ringgit)

© SalaamGateway.com 2016