Malaysia is a paragon of a thriving halal industry. Here's why.

Malaysia is a pioneer in the halal industry space, in more ways than one.

It started courting the sector back in 1974 when the research centre for the Islamic affairs division at the Prime Minister’s office began issuing halal certification letters for Shariah-compliant products.

There has been no looking back since, as the country has grown from strength to strength, taking its place in the sun, vis-à-vis the halal industry.

Numbers back the claim: Malaysia - for the ninth year – has topped the world in the Global Islamic Economy Indicator (GIEI), according to DinarStandard’s State of the Global Islamic Economy Report 2022.

The GIEI ranking benchmarks leading national ecosystems that can best support the development of Islamic economy business activity in relevance to their size. Malaysia also led in several individual verticals, such as Islamic finance, halal food, travel, and media and recreation. 

The country’s ambition for the sector is clear, structured with a top-down approach. Several dedicated entities and plans have been launched to facilitate the development of the halal industry via initiatives, partnerships, and synergies.

Halal Development Corporation, a government agency established in 2006, spearheads the development of the country’s integrated halal ecosystem, helping create a business-friendly environment. There is also the department of Islamic Development Malaysia (JAKIM), which is responsible for Islamic affairs in the country, including halal certification.

Strategically, Malaysia has identified and reposed the halal industry among its strategic and high impact industries and activities that will catalyse economic growth, in its Twelfth Malaysia Plan, 2021-2025 (12MP), a roadmap to steer the national development agenda.

The industry’s evolution is also backed by a dedicated roadmap - the Halal Industry Master Plan 2030 (HIMP 2030), which was launched in March this year to concentrate on further developing a dynamic halal industry ecosystem that will advance the country’s products on a global scale and position the industry as a lucrative business opportunity.  

Pursuant to its aim of enhancing the development of the industry, the master plan targets the creation of a wider talent pool, improved integrated infrastructure, and the acceleration of value-added products and services produced in the country. In short,  the master plan aims to draw on Malaysia’s existing halal industry ecosystem to help transition it from a leading player to a global leader. Detailed in the masterplan are 23 initiatives that anchor seven strategic thrusts and address opportunities as well as challenges.

Likened to initiatives, the country's aim is equally distinct: Malaysia aims to propel halal exports to 63.1 billion ringgits by 2025 and to 75.2 billion ringgits by 2030.

“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 on our halal industry ecosystem and cumulative expertise, which is globally recognized,” Encik Hairol Ariffein Sahari, CEO of Malaysia’s Halal Development Corporation tells Salaam Gateway.

“There are seven strategic thrusts within HIMP2030 to address the 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,” he adds.

However, nation-wide plans are best enforced with an integrated, multi-stakeholder approach, complemented by strategic initiatives, cross-border partnerships, and platforms to enhanced communication, collaborations and success.

The recently held trade exhibition, Malaysia International Halal Showcase, was a testament to Malaysia’s historic and long-standing focus on the halal industry sector. Hosted by the Ministry of Investment, Trade, and Industry (MITI), the 19th edition of the event, also known as MIHAS, welcomed 1,900 exhibitors from 44 countries in contrast to 1,300 exhibitors received from 33 countries last year. Economically, it offered an impetus to the industry, clocking in 3.11 billion ringgits in sales, eclipsing its 2.5-billion-ringgit target by 24%.

The 2023 version of the marketplace shot the spotlight on helping local and global players focus on innovation and sustainable initiatives to spearhead growth for the halal economy.

Sri Reezal Merican Naina Merican, chairman of Malaysia External Trade Development Corporation (MATRADE), noted that the event also placed due emphasis on collaboration on all fronts. “More than 30 MoUs were exchanged between Malaysian and foreign organisations throughout MIHAS. MATRADE also expended considerable effort to engage other government organisations, resulting in the participation of 34 federal and state agencies in this year’s MIHAS.”

Encapsulating the ecosystem

Malaysia’s pursuit is not just focused on the industry, but rather the wider ecosystem. The 12MP blueprint suggests the halal professional board under JAKIM will be restructured based on new regulations to expand the accreditation of halal professionals for global markets. This recognition will help construct a larger halal talent pool and establish the country as a key contributor and centre of halal professionals.

Malaysia aims to expand its workforce in the industry, from 390,000 employees last year to 480,000 by the year 2025 and 690,000 by end of the decade. 

One of the seven strategic thrusts outlined in the HIMP 2030, state the establishment of a larger pool of halal professionals to meet global demands. Talent development/upskilling services are also mentioned as a key enabler in the masterplan.

"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,” adds Sahari.

“Traditionally, training in halal addresses the basic fundamentals of halal and its application in the F&B sector. HDC offers training courses in halal 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.”

Halal industrial parks are also an integral element of the overall ecosystem, with key focus placed on developing and promoting them for business and operational efficiency.

“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. In a bid to make Malaysia a strong competitor in the global halal market, all companies that operate within the scope of the market will be given a complete exemption by the government from income tax for a duration of 10 years or 100% income tax exemption on capital expenditure for a duration of five years plus an exemption on import duty on plant & equipment and raw materials and double deduction on specific expenses,” adds Sahari.

Managing impediments

However, key challenges exist for companies in terms of capacity-building, global access and halal standards unification.

Norhariti Jalil, partner at DinarStandard, outlines several challenges for Malaysian small and medium sized companies looking to establish a global presence. These include small-scale production capability and capacity as well as limited market access; lack of guidance and assistance when exploring new export markets; obtaining necessary halal certification; determining ‘which standard’ would actually provide market access; and scarcity of Muslim talents to perform audits and advise on compliance matters across manufacturing standards, among others.  

To counter these challenges, HIMP2020 has detailed how to oil wheels for enterprises looking to capture the global market. One of the seven strategic thrusts in the master plan is focused on producing more home-grown halal champions, which include three key initiatives – increasing the competitiveness of Malaysian micro, small and medium enterprises (MSMEs) to produce high value-added halal products and services; encourage government-linked investment companies and venture capital firms to invest in the country’s halal MSMEs, and to strengthen the halal home-grown champion brand to encourage participation from local MSMEs.

Beyond boundaries

Stepping beyond borders, Malaysia has been successful in forging key alliances with countries to leverage its domestic industry and help gain global footprint.

In May, Malaysia and the UAE agreed to start negotiations on a bilateral trade agreement to boost ties. Non-oil trade between the two countries totaled $4.6 billion in 2022. In June, Malaysia inked a cooperation agreement with Indonesia, on the mutual recognition of halal certificates for domestic products exported between the two countries.

“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 country with these changes, in a constructive manner, to benefit both economies and markets,” notes Sahari.

Going forward

Catapulting the ‘Malaysia’ brand on an international level and helping it grab a gargantuan slice of the global halal industry will require a multi-dimensional effort.

“Establishing halal industry-enabling agencies in MITI’s ecosystem, together with continuously close work with JAKIM, can develop Malaysia’s leadership at the global front by building consumer confidence in Malaysian products and services at the international level,” adds Jalil.

“[Also], attracting more high-tech and high-value investors to Malaysia as various multinationals are now trying to shorten their value chains, and diversify regional production sources, to build supply chain resilience; additionally creating opportunities, investments, trade, jobs, information sharing and technology transfer in the halal value chain.”