Malaysia’s Rising Halal Economy

18 December 2017

As Malaysia moves towards being a global halal hub, entrepreneurs are identifying opportunities to serve halal consumers and businesses

From a religious perspective, halal is an ethical standard that helps guide Muslims to make decisions based on the rules of the Quran and the prophet’s teachings. But these faith-based needs have created an economy of its own, with companies meeting the total lifestyle chain of Muslims from finance to travel, food, pharmaceuticals, cosmetics and more. In 2015, the Islamic economy was estimated to be worth USD 1.9 trillion worldwide, and is expected to reach USD 3 trillion.

Malaysia is the only country in the world where the halal industry development agenda is backed by the government. In 2004, Malaysia pioneered the halal economy after being the first to define halal standards.

Now, Malaysia ranks number one in Thompson-Reuter’s Global Islamic Economy Indicator score, with the industry contributing over seven percent to national GDP. The Malaysian Halal Industry Master Plan hopes by 2020 to achieve halal export revenue amounting to RM19 billion, to employ 30,000 workers in the halal industry, and to have 1,600 SMEs listed as active halal exporters. We speak to some of the entrepreneurs finding opportunities in the halal industry.

Fe Jazzareen Mor Japar Khan, Founder of Persis Management and CEO of SmartHalal
Fe Jazzareen found her niche in the halal industry after her first job as a Management Trainee at Unilever in 1997. There, she observed how procedures maintained halal standards of a product from end-to-end in the supply chain. In 2011, she founded her own halal industry consulting company, Persis, in 2011.

Fe Jazzareen

 Initially, Persis helped individual companies get certified and work through documentation and paperwork. Since then, Persis has tried to develop Malaysia’s halal ecosystem. In 2012, for example, Persis worked with the Malaysian Department of Standards to create the first competency-based training for the halal industry.

"My main worry as a halal industry practitioner is about people who are not experienced enough [with halal standards]. There are [halal] trainers, consultants, but there isn't a definition of specific qualifications for them,” says Fe.

Fe also sees much potential for improvement in halal trade, identifying issues such as standards not being recognised across countries, lack of access to knowledge and information, as well as transparency.

The combination of these challenges inspired Persis to start the SmartHalal platform, a centralised knowledge base that will help modernise the sector.

"SmartHalal is a five-year research project on consolidating the halal industry knowledge base, a brand which, when people want to know about halal, it will be the reliable, go-to place,” says Fe.

The platform will target information and industry practitioners, small and medium enterprises, as well as youth and local communities. SmartHalal will be launched next year.

Nizam Ariff, Managing Director of Utama Multimodal Logistics
As Malaysia’s halal industries develop, they are creating opportunities for new types of businesses. One of these new industries in Malaysia is logistics for halal pharmaceuticals.

After 15 years of experience in shipping and logistics, Nizam Ariff started Utama Multimodal Logistics (UML) in 2014, originally as a pharmaceutical logistics company. In 2015, he received requests from his clients that they were moving towards developing a halal supply chain. Sourcing, manufacturing, transportation, warehousing and freight handling will comply with halal standards.

Nizam Ariff

Consequently, Nizam made the decision that UML would only carry halal pharmaceuticals.

“I saw there was a missing link there. I saw a broken supply chain, and the pharma industry needed something to fill the gap,” says Nizam.

UML serves pharmaceutical giants such as Pharmaniaga and Chemical Company of Malaysia. As these companies spearhead the development of halal supply chains, other pharmaceutical companies will follow suit, and Nizam expects demand for his business to consequently grow in the coming years.

“There is no logistics company in Malaysia that is focused on pharmaceuticals, no trucking company focused on pharmaceuticals except us, and we are providing the halal service.”

Due to an overwhelming demand, UML has had to turn down some companies requesting their services this year. In 2018, they’ll be expanding their fleet and obtaining halal certification from JAKIM to keep up with demand.

Radziah Radzi, Founder of Good Hijab
Radziah Radzi was an entrepreneur for ten years, running a business in women’s retail since 2007. Last year, she decided to start a new venture in Muslimah fashion and lifestyle. But for Radziah, starting a business wasn’t enough. She also wanted to help young, disenfranchised youths in Malaysia. Radziah pitched her business idea, Good Hijab, for the accelerator program at Malaysian Global Innovation and Creativity Centre (MaGIC). She was accepted, and received RM30,000 in seed funding, as well as an additional RM30,000 from an angel investor.

Radziah Radzi

Good Hijab has two prongs. The first is to serve as an online aggregator to help young Muslim women find and buy from halal fashion labels. The second, is to empower young women to be entrepreneurs. Every week, Radziah mentors girls from an orphanage with the skills and knowledge that will help them start their own business. Ultimately, she hopes to train the girls well enough that they can be placed in internships or full-time positions with other social enterprises.

“If you give empowerment to women and girls, it can change a lot. When women have the power to [speak] for themselves, they can step out and take on new challenges. Young girls of course are the new generation. They will inform how the nation will be."

One of Radziah’s biggest inspirations is Neelofa, a Malaysian actress and hijab entrepreneur. “Neelofa is one of Forbes’ [30 Under 30] from just selling hijabs. Her brand is a Muslim brand, and it broke the ceiling of people's assumptions, even Forbes magazine recognised it.”

An industry on the rise
The global halal economy shows no signs of slowing down, especially with the worldwide Muslim population expected to grow to about twice the rate of the non-Muslim population over the next two decades.

Still, specific challenges remain on the road to Malaysia’s 2020 halal economy goals: how will halal practices be regulated and standardised? How will governments continue to regulate the economy as digital trends encourage decentralisation? How will halal industries respond to criticism of using an ethical standard as a global quality standard?

These questions open up possibilities for innovation, and it will be exciting to see how both entrepreneurs and the government respond.

"It's an economy with lots of opportunities, but lots of chaos before the real opportunities can be materialised,” concludes Fe. “But the opportunities are endless."

To learn about Malaysia’s halal certification procedures, visit www.halal.gov.my

By Lily Jamaluddin
Photos by Teoh Eng Hooi and Wong Yok Teng

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