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Malaysia: A Leading Global Halal Food Hub

World Demand for Halal Food

The Arabic word halal refers to anything that is lawful and permitted under the terms of Sharia (Islamic) law, any item/service that is to be consumed by Muslims has to comply with its precepts. At present, it is estimated that the global Muslim population is about two billion, representing around 25% of the global population. In line with this, the international halal market is estimated to be worth more than US$2.3 trillion. Within this market, the food sector is widely seen as having the greatest potential for growth.

According to the State of the Global Islamic Economy Report (DinarStandard 2016/17), a total of US$1.2 trillion was spent on food and beverages by the global Muslim population in 2015, representing 17% of the total expenditure in that sector. Factoring in accelerating population growth and rising incomes, the world’s Muslim population will be spending US$1.9 trillion on food and beverages by 2021. Based on an expected average annual growth rate of 9%, this will account for 18.3% of the total global expenditure in this sector.

In light of this growing demand for halal food, the Malaysian government is keen to establish the country as an international halal food hub. While the growth of the halal food market will primarily be driven by the increasing demand from Muslim, there is also a rising demand from non-Muslim consumers. This is particularly the case in China, where food safety issues remain a major concern. Given Hong Kong’s status as an international food trading hub, companies based there will be ideally placed to capitalise on the niche business opportunities accorded by the halal food industry.

What is Halal Food?

The key principle for Muslim diet is the food[1] has to be halal and toyyiban[2]. Meat products (except pork which is not permissible for Muslim) have to be sourced from healthy animals that were slaughtered with a single cut. In general, all fruit and vegetable products are considered halal, as long as they have not be been contaminated through contact with forbidden items, notably pork and alcohol. During the processing and transportation of food, the cross-mixing of halal foods and non-permitted products is strictly forbidden. In addition, clear sanitary regulations specific to halal food must be observed all the way from the abattoir to the point-of-sale. While halal and non-halal food products can be displayed side-by-side, halal food cannot be displayed with proscribed foods in supermarkets. As a consequence, many Malaysian supermarkets have a ‘non-halal’ food section, a designated area where non-permitted products (such as pork, wine and cigarettes) can be displayed. Customers are also obliged to pay for these prescribed products at a separate checkout counter.

 

Photo: Halal chicken and non-halal chicken on display side-by-side in a Malaysian supermarket.
Halal chicken and non-halal chicken on display side-by-side in a Malaysian supermarket.
Photo: Halal chicken and non-halal chicken on display side-by-side in a Malaysian supermarket.
Halal chicken and non-halal chicken on display side-by-side in a Malaysian supermarket.
Photo: Pork and other proscribed products displayed in the ‘non-halal’ food section
Pork and other proscribed products displayed in the ‘non-halal’ food section of a Malaysian supermarket.
Photo: Pork and other proscribed products displayed in the ‘non-halal’ food section
Pork and other proscribed products displayed in the ‘non-halal’ food section of a Malaysian supermarket.

 

Establishing Global Halal Standards

Many Islamic countries have their own standards and regulations when it comes to halal certification. The Malaysian government, however, has endeavoured to establish a global halal standard. Back in 1974, Malaysia introduced a national halal certification, a move implemented by the Research Centre for the Islamic Affairs Division under the auspices of the Prime Minister’s Office. In 2005, the Department of Islamic Development Malaysia (JAKIM) became responsible for implementing the halal certification system, as well as monitoring and enforcing halal compliance within Malaysia. Being a member of the Organisation of Islamic Conference (OIC), the Malaysian halal certificate is the only one which is supported by its government as an internationally standardised logo and certification system approved for use by all Muslim nations. In the case of other countries, their halal certification bodies have either been developed by individual provinces or states or have been backed by non-governmental organisations (NGOs).

Photo: The JAKIM Halal logo.
The JAKIM Halal logo.
Photo: The JAKIM Halal logo.
The JAKIM Halal logo.

In order to further strengthen Malaysia’s position as the leading global halal hub, the Halal Industry Development Corporation (HDC) was established in 2006. It was created with a remit to improve halal standards and to enhance commercial and industry development and branding. The Malaysian government has also implemented Halal Industry Master Plan (2008-2020), a blueprint for establishing the country as the global leader in innovation, production and trade within several halal-related sectors, including speciality processed foods, cosmetics and personal care, pharmaceutical ingredients, livestock and the services sector (particularly logistics, tourism and healthcare).

Both local and foreign companies can apply for JAKIM’s halal certification, with fees payable to cover document handling and site inspection. In the case of food and beverages companies utilising processing factories located outside Malaysia, all applicants are also obliged to cover the auditors’ expenses, including any required air tickets, accommodation and travel visas.

As well as its own halal certification, JAKIM also recognises 56 foreign halal certification bodies and authorities across 33 countries. This includes four bodies on the Chinese mainland (Beijing, Henan, Shandong and Ningxia) and one in Taiwan. The Recognised List of Foreign Halal Certification Bodies is revised by JAKIM on an annual basis.

The Malaysian Halal Park: An Agglomeration of Halal-oriented Businesses

The introduction of designated Halal Parks has boosted the growth of Malaysia’s halal industry. Industrial zones reserved for halal-oriented industries, these Parks allow their business tenants to share common facilities (such as storage facilities, cold chain warehousing and service supports). It also facilitates the growth of a supply chain within the park, creating a synergy between the resident businesses.

At present, there are 25 Halal Parks in Malaysia (see Appendix 1 for a list of Halal Parks), while some are already in full operation, others remain at the development stage. Certain Halal Parks have been designed to service specific halal industries. The Techpark@Enstek, for instance, has been established specifically as a halal pharmaceutical manufacturing and R&D Centre, while the Tanjung Manis Halal Hub is reserved for aquaculture and related halal food processing activities. For those in the halal processed food sector, the Prima Halal Food Park caters to their particular needs.

Creating Business Synergy: The Prima Halal Food Park

Endorsed by Malaysia’s Ministry of Agriculture, the Prima Halal Food Park is located within the Gambang Industrial Area, some 30 kilometres from the Kuantan Port. It is operated by Prima Agri-Products Sdn. Bhd. (PRIMA), a Malaysian-owned company that has been active in the delicatessen food sector since 1987. PRIMA produces a proprietary range of halal food brands for the retail sector, while also supplying a number of other businesses, including airlines, hotels and restaurants. In order to meet the increasing local and international demand for halal food products, PRIMA established the Prima Halal Food Park as a fully integrated operation back in 2008.

As the park’s operator, PRIMA provides central services and common facilities to all of the manufacturers located within the park. These include central services, such as water treatment plants and transportation and common facilities, such as storage for packaging materials, as well as cold rooms for food ingredients and finished food products.

The Prima Halal Food Park is now home to more than 70 small and medium industries (SMIs) from the halal food manufacturing sector. All of these SMIs have the option of joining the Prima Vendor Program, entitling them to produce halal food under the PRIMA brand name. PRIMA then distributes the products via its dedicated sales network. Alternatively, independent food and beverage manufacturers can produce halal food products under their own brand names. In this case, they need to develop their own distribution network, while also contributing towards the costs of the park’s central services and shared facilities.

Malaysia: A Halal Food Production Base

Photo: Made-in-Malaysia: Ice-cream with the JAKIM halal logo.
Made-in-Malaysia: Ice-cream with the JAKIM halal logo.
Photo: Made-in-Malaysia: Ice-cream with the JAKIM halal logo.
Made-in-Malaysia: Ice-cream with the JAKIM halal logo.

As well as local food processing companies, a number of multi-national companies (MCNs) have now set up their own food processing facilities in Malaysia, with the intention of distributing their halal products within the local and ASEAN markets. A case in point is Nestlé, a Swiss company which is one of the world’s largest food and beverages manufacturers.

Nestlé Malaysia has complied with halal best practise since it was first established during the early 1970s, with all of its halal products currently certified by JAKIM. At present, Nestlé Malaysia has eight halal food factories and produces several proprietary brands, including Maggi, Nescafe and Milo. Nestlé Malaysia is now exports to more than 50 countries, servicing several markets in the Middle East and Oceania. At present, all products manufactured, imported or distributed by Nestlé Malaysia are certified as halal.

As Malaysia’s halal certification system is well recognised by Muslims across the world, a number of MNCs have seen a clear advantage in having their products certified by JAKIM. Following Nestlé's lead, several other MNCs have established food processing factories in Malaysia and secured JAKIM’s halal logo. To date, these MNCs include Singapore’s Yeo Hiap Seng (Yeo’s), Netherland-based Dutch Lady, Japan’s Kewpie and US-headquartered Coca-Cola. With such heavyweights adopting its certification protocols, Malaysia has become a significant halal food manufacturing base for many overseas companies.

Rising Halal Food Exports

Many of the local and foreign food manufacturing companies operating in Malaysia produce halal products for both the domestic and overseas markets. According to JAKIM, among all the major halal certified products in 2015, 77% were food products and 23% were non-food products.

In 2015, the value of Malaysia’s halal exports was MYR39.4 billion, with food and beverages accounting for almost half of that total. Among the other significant halal exports were palm oil derivatives, halal ingredients, cosmetics and personal care items, industrial chemicals and pharmaceuticals. Overall, the level of Malaysia’s halal exports grew at an average rate of 14% between 2011 and 2015, with China being the number one destination for such products.

 

Leading Destinations of Malaysian Halal Exports

Rank2012201320142015
1ChinaChinaChinaChina
2SingaporeSingaporeSingaporeSingapore
3United StatesUnited StatesUnited StatesUnited States
4IndonesiaIndonesiaIndonesiaIndonesia
5NetherlandsJapanJapanJapan
6ThailandThailandNetherlandsThailand
7JapanNetherlandsThailandAustralia
8IndiaIndiaIndiaPhilippines
9South KoreaSouth KoreaSouth KoreaNetherlands
10PhilippinesAustraliaAustraliaIndia

Source: Halal Industry Development Corporation

 

Chart: Malaysia’s Halal Export Value 2011-2015
Chart: Malaysia’s Halal Export Value 2011-2015

 

Hong Kong: A Potential Halal Food Trading and Marketing Platform

According to current estimates, there are around two billion Muslims in the world with 62% of them living in the Asia Pacific region. Some 30 million Muslims live in China, primarily in Xingjian, Ningxia, Gansu, Qinghai, Shaanxi, Yunnan, Shandong and Shanxi. Within China, as well as the demand for from Muslim consumers, there is a growing appetite for halal food among many non-Muslims. Spurred by the continuing food safety issues in China, a number of mainland consumers are switching to halal food, largely on account of their guaranteed quality and their compliance with strict food hygiene protocols. As a consequence, the non-Muslim halal food market is now being seen as a lucrative, untapped market by many halal food manufacturers.

As an international food trading hub, Hong Kong is well positioned to establish itself as a halal food trading platform. Utilising Malaysia’s extensive halal food production resources, companies in Hong Kong could source halal food products for a number of other markets, with the Chinese mainland being one obvious option. With Hong Kong companies having many years’ experience of sourcing the kind of food products likely to appeal to mainland consumers, they are well equipped for success in this sector, especially as many of them already have extensive mainland food distribution networks in place.

Hong Kong could also introduce halal food products from other countries to the Malaysian market, as well as to other Asian nations with a sizable Muslim population. South African halal food producers, for instance, are interested in raising their export levels within Asia, with many believing that Hong Kong could play a key role in facilitating this. In light of this, several South African businesses are looking to form partnerships with Hong Kong companies, with a view to servicing the halal food markets of many of the countries associated with the Belt and Road Initiative (BRI).

In addition to functioning as a halal food trading hub, Hong Kong is also well positioned to become a major halal food marketing platform. With this in mind, HKTDC introduced a dedicated Halal Food Zone in the Food Expo since 2015. This initiative was designed to highlight the niche business opportunity that now exists for players in the food and beverage industry.

At present, there are more than 60 food outlets and restaurants serving certified halal food in Hong Kong. In order to service the growing halal market, trading companies are advised to work in partnership with such outlets, helping to distribute and market their certified food products. Food trading companies and restaurants could, for instance, jointly organise halal food tasting events or cookery classes. This, in turn, could lead to the development of other service sectors, including a dedicated halal logistics chain.

In conclusion, given the Malaysian halal food standard is internationally recognised, Hong Kong food and beverage companies could use their extensive export experience and existing distribution networks to promote halal-certified food products to both Muslim and non-Muslim countries along the BRI, as well as to consumers on the Chinese mainland. Also, the on-going concerns over food standards and hygiene, non-Muslim mainland consumers are very receptive to the halal certification’s guarantee of food safety. With this in mind, the mainland could well prove a huge growth market for the halal food industry.

 

Appendix 1

Halal Parks in Malaysia

NoHalal ParkOperatorSize (Acres)
1Selangor Halal HubCentral Spectrum (M) Sdn Bhd1,000
2PKFZ National Halal ParkPKFZ(M) Sdn Bhd100
3Melaka Halal ParkMelaka Halal Hub Sdn Bhd164
4Techpark@enstekTH Properties Sdn Bhd480
5POIC Lahad DatuPOIC Sabah Sdn Bhd272
6Tanjung Manis Halal Food ParkTg Manis Halal Hub Sdn Bhd192,500
7Penang International Halal ParkPIHH Sdn Bhd100
8ECER Pasir Mas Halal ParkECERD/PKINK108
9ECER Gambang Halal ParkECERD/PKINK200
10Pedas Halal ParkMIDF Property Berhad100
11POIC Tanjung LangsatTPMTechnopark Sdn Bhd280
12PERDA Halal ParkPERDA100
13Sedenak Industrial ParkTPM Technopark Sdn Bhd700
14Kota Kinabalu Industrial ParK.K.I.P Sdn Bhd8,320
15Kedah Halal Park, Sg PetaniPerbadanan Kemajuan Negeri Kedah35
16Perlis Halal Park, Padang BesarPerbadanan Kemajuan Negeri Perlis50
17Terengganu Halal ParkPerbadanan Memajukan Iktisad Negeri Terengganu2
18Pengkalan Chepa Halal ParkPerbadanan Memajukan Iktisad Negeri Kelantan2
19MARA Halal Park Kuala PerlisPerbadanan Memajukan Negeri Perlis
20MARA Halal Park TamnunMARA
21MARA Halal Park KuchingMARA
22Labuan Halal Distributive HubLabuan Halal Hub100
23Sabah Halal Park, Sepanggar
24Perak Halal Park, Simpang PulaiPerbadanan Kemajuan Negeri Perak
25Prima Agri Halal ParkPrima Agri100

Source: Halal Industry Development Corporation

 


[1]  This includes seasoning ingredients and food additives, etc.

[2]  Toyyiban means food that is wholesome, healthy, safe, and nutritious.

Content provided by Picture: Alice Tsang
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