Tech, new sectors will be priorities in Malaysia’s Halal 2.0 master plan

Technology will lead wider industries in Malaysia’s next halal industry master plan that will launch two years sooner than anticipated

KUALA LUMPUR - Malaysia must ramp up the pace of technological growth and march into new industry segments if it is to remain a leader in the halal industry at a time when a growing number of other nations have their eyes on sharing its might.

That is the rally call from ministers and officials as Malaysia gears up for the launch of its halal industry Master Plan 2.0 later this year, which it hopes will drive continued growth for the period 2018-2030.

The framework will come two years earlier than anticipated, soon after the completion of just 10 years of the Halal Industry Master Plan 2008-2020.

Explaining the hurry, Malaysia’s deputy prime minister Dr. Ahmad Zahid Hamidi said, “There have been many developments within the halal industry, and we do not want to wait until 2020 to introduce new plans.” He was speaking at the World Halal Conference in Kuala Lumpur on April 4.

Part of the plan will involve providing incentives to strengthen the country’s infrastructure to reinforce halal’s contribution to its economy, which accounted for 28,000 new jobs and around 7.5 percent of GDP last year, according to Dr. Hamidi. This level of contribution to GDP has been flat since 2016.  

Further, new ways are needed for the growing halal industry. “There is still a need for new strategies to meet the challenges and complexities of the halal economy,” said Abdul Rahman Dahlan, the minister in the prime minister’s department responsible for economic planning, who joined the deputy prime minister for the keynote address.

COMPETITION RISING AS HALAL ‘EVOLVES’

There is a firm understanding that Malaysia cannot rest on its strengths in halal standards and certification.

“Certification alone is not enough. Factors such as quality, pricing, brand positioning and logistics must not be disregarded. There is a need for new technology, while innovation plays an important role, especially so as more companies are going digital,” warned Dr. Hamidi.

How Malaysia expands its halal remit beyond the traditional areas of food, beverages, cosmetics and pharmaceuticals is largely in the hands of the Department of Islamic Development Malaysia  (JAKIM), and the Halal Industry Development Corporation (HDC), whose role is to promote Malaysia’s halal industry.

If these agencies are slow to attract new business, Malaysia would be in danger of losing out to countries such as China, Japan and Korea, which are economically powerful and where there is a growing interest in halal, said the deputy prime minister. Emerging nations including India, Pakistan and countries in Africa are also strengthening their halal game.

“An enlarged number of potential consumers means an increase in demand. Implementing sound Islamic economic frameworks must therefore be complemented by competitive products and services,” said Dr. Hamidi.

Embracing change, JAKIM stressed that it is not standing still. “Halal is not static: it’s evolving,” the certifier’s Halal Hub Division director Dr. Sirajuddin bin Suhaimee told Salaam Gateway on the sidelines of the World Halal Conference.

“We must look for markets which we can cater for through halal regulation, and the markets we can cater for as Muslim-friendly with Islamic compliance,” added Dr. Suhaimee.

With broader halal segments such as healthcare and pharmaceuticals, personal care and cosmetics, and travel and tourism under the spotlight, JAKIM, HDC and other agencies have been actively promoting Malaysian standards and halal ecosystem globally and at home.

For example, later this year JAKIM is expected to introduce halal certification for medical devices—the first of its kind and an initiative that aims to attract global firms to Malaysian certification—as a means to tap into the wider Islamic economy.

Elsewhere, 30 million Malaysian ringgit ($7.7 million) was allocated from the national 2018 Budget to the Malaysia Healthcare Travel Council, another government-backed agency, to promote health and medical tourism. This is an area in which the country is asserting its position as a leading halal destination.

“We are looking not just at the food industry … so obviously we are supporting the wider halal industry,” Jamil Bidin, chief executive of HDC, told Salaam Gateway.

“There’s the digital economy, there’s new technology, innovation and so on. Halal players need to embrace all these things—e-commerce, digital commercialisation—otherwise they will not be successful. We can’t ignore this.” 

ISLAMIC DIGITAL FRAMEWORKS

The development of an Islamic digital economy is of particular interest to policymakers and officials, who believe a combination of regulatory knowhow and generous incentives stand to put Malaysia in a position to dominate.

According to figures released by the government-owned Malaysia Digital Economy Corporation (MDEC), new technology contributed 18.2 percent of GDP in 2017 and has created more than 170,000 new jobs. Due to policies such as tax breaks for foreign start-ups, and year-long visit passes for entrepreneurs, this figure rose from eight percent in just one year, it said.

By promoting Malaysia as an Islamic digital economy hotbed for start-ups, the nation will be able to capitalise on all manner of IT, from financial technology, or fintech, and smartphone apps to logistics and corporate systems, said Dr. Suhaimee.

But first it must work out how to regulate the industry.

“We are developing Islamic frameworks to make it clear which part of Shariah compliance we are going to in this digital economy. When we talk about halal, we are usually thinking about halal food, but we know that halal is growing with technology,” he said.

Speaking at a World Halal Conference panel session, Dr. Mohd Daud Bakar, chairman of the Shariah Advisory Council at Malaysia’s central bank that is keeping a close eye on fintech developments, said that people can easily relate to the Islamic digital economy, but the challenge is to define the Islamic part of it, to make it Shariah-compliant.

“We have to look at the entire ecosystem. Interfacing technology use, automation, logistics management, Islamic content: all these things should be Shariah-compliant right from the ideation stage,” said Dr. Bakar.

In his opinion, Malaysia should also look to develop and control an Islamic cryptocurrency. This, he said, would fulfil all fatawa covering money exchange.

“Of course, we need to put the right Shariah message on it, so we have a new Islamic coin. Hopefully we can have this solution sooner rather than later,” he added.

TECH START-UPS DILEMMA

However, technology start-ups must tread a thin line between making money and being seen to profit from their Islamic principles. This is something Mazlita Mat Hassan, co-founder and chief operating officer of Recite Lab, learnt as she set out to secure funding.

“If you are seen to be too commercialised, you can be accused of making money out of your religion. So you have to come up with a business revenue model that cannot be viewed as too commercial,” said Mat Hassan, whose company provides a Quran recital validation service through an app.

In turn, she said, venture capital firms can be wary about investing in the Islamic digital economy because they cannot be sure that an idea will be accepted by the Muslim community.

Attitudes like this are likely to change as regulators develop frameworks for Shariah-compliant or Islamic technology, tech investors gain a better understanding of the potential of a vast Muslim market and entrepreneurs increase in confidence.

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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