26 June 2014
Halal in Malaysia: beyond food and drink sector
Most people living in places without a large Muslim community, such as Hong Kong, tend to associate halal with dietary restrictions – in other words, the food and drink that Muslims are allowed to consume under Shariah law. As well as prohibitions on alcohol and pork, this also extends to the ways in which food should be prepared. Halal, however, extends beyond the food and beverage (F&B) sector and has an impact on many other products and services. It is also worth noting that, while Muslims are the main halal consumers, interest is now growing apace among non-Muslims.
Malaysia, a hub for halal products and services (see also “Malaysia: marketing to Muslim consumers”, offers a range of opportunities across F&B, logistics, fashion, tourism and financial services. Notably, it is one of the world’s leaders in Islamic finance, for example. In short, Malaysia offers Hong Kong companies an excellent starting point for exploring halal business.
Halal logistics, from farm to fork
Malaysia was the first country in the world to introduce halal logistics standards and halal certification for logistics operators. Given the credibility of its standards, a halal certification granted by Malaysian authorities will be recognised in many other Islamic countries, helping certified logistics operators to develop extensive halal distributions network across Asia, the Middle East and North Africa (MENA). Nippon Express, a Japanese logistics operator, is currently seeking halal certification in Malaysia with the aim of building a worldwide halal food delivery business. This would allow it to use the country as a springboard for accessing halal markets the world over.
Halal logistics involves managing the supply chain – from procurement to movement, storage and handling – of both food and non-food products, in compliance with the principles of Islamic Law. The objective is to prevent contamination and to ensure the integrity and purity of halal goods on the journey from producer to consumer (or “from farm to fork” as it is described in the F&B industry).
The growth of the halal trade globally has created opportunities along the halal supply chain in a number of areas, notably manufacturing, warehousing and transportation. Regional halal trading hubs, including Malaysia and the UAE, have emerged to support this expansion. This has facilitated the supply of high quality and verifiable halal products to Muslim consumers around the world. Hong Kong logistics companies can tap into the halal value chain in partnership with Malaysian firms, leveraging their expertise and benefitting from their experience and systems.
Practical tips on halal logistics
The Malaysian government provides incentives for halal logistics operators, including exemptions on income tax, and on import duties for equipment, once they are certified as halal-compliant. To qualify, operators must provide integrated services that include forwarding, warehousing and transportation, and at least one of the following: (1) distribution, (2) related value-added services (such as labeling, packaging or bulk breaking), and (3) supply chain management. Applicants must also own at least 20 commercial vehicles and at least 5,000 sq metres of warehousing space.
Halal fashion – the beauty of modesty
So-called 'halal fashion' is a booming sector and one driven by the rising incomes of many Muslims and by the growing desire of (particularly female) young Muslims to look fashionable while observing their religious faith. According to the State of the Global Islamic Economy 2013 report , global Muslim expenditure on clothing and fashion amounted to US$224 billion in 2012, accounting for over 10% of the global total. It is now expected to grow by a compound average growth rate (CAGR) of 6%, reaching US$322 billion by 2018.
Halal fashion is based on the Islamic mandate for Muslims to dress modestly. This generally means that clothing should cover the entire body in a loose and opaque manner, while Hijabs (headscarves) are also commonplace. After the age of puberty, Islamic women are traditionally required to wear such items in the presence of any adult male from outside their immediate family.
In practice, what exactly constitutes “modesty” may vary across different countries and cultures. In Malaysia – following direct observation in Kuala Lumpur, Penang, Johor Bahru, the country’s three major cities - halal clothing standards tend to be less stringent than in other Islamic territories. For instance, women are less likely to wear the more conservative niqab, a type of hijab that reveals only the eyes and is typically black. Their hijabs and other items of clothing indeed often eschew black and other plain colours for a more fashionable take on this essentially modest dress.
Malaysia is a country with a young population and typical incomes are rising fast. Those factors, combined with the fact that 60% of the country’s 30 million-plus people are Muslim, make it obvious that opportunities abound for those Hong Kong companies who wish to venture into the emerging halal fashion market. The opportunity here is to cater to the demand for creative designs that are also in-keeping with local notions of modesty.
With Malaysia now striving to be a global Islamic fashion centre in its own right, it is also home to the world renowned Islamic Fashion Festival (IFF). Established in 2006, IFF events – aimed at promoting “the beauty of modesty” – have been staged in various fashion hubs around the globe, including Kuala Lumpur, Abu Dhabi, Dubai, Jakarta, Monte Carlo, New York, Singapore, London, Milan and Paris. However, to date, the lack of any truly international Islamic fashion labels – although there are numerous aspiring regional brands – indicates that Islamic fashion is still relatively a niche market and, therefore, one ripe for Hong Kong apparel designers, manufacturers and traders to explore and expand into.
With demand for halal fashions lower than that for mainstream apparel, production costs per unit are likely to be higher, meaning local manufacturers are less likely to produce halal clothing – particularly items in different colours and styles – on a comparable scale. These higher costs will also be reflected in higher price points, which may also lower the products’ appeal. While this may present production hurdles for Malaysian manufacturers, it also creates business opportunities for outside fashion companies. This includes those from Hong Kong, many of whom are accustomed to smaller production runs on higher value items.
Practical tips on fashion brand marketing
Halal tourism – targeting the Muslim traveller
Malaysia is the top tourist destination among ASEAN member states (see also “Malaysia: opportunities in its dynamic and diversified consumer market” ). The number of Muslim visitors to the country surged to over 5 million in 2012, more than triple the number in 2000, with the government expecting it reach 6.5 million in 2015. In order to further develop its halal tourism industry, the government has been encouraging hotels to provide Shariah-compliant facilities. Such facilities usually include a non-alcoholic environment, adequate prayer facilities, gender-segregated swimming pools, an ample choice of halal food and in-room signage indicating “qibla” (the direction of Mecca).
Ranked as the top holiday destination for Muslims from more than 50 OIC countries by Crescentrating, a Singapore-based Muslim travel specialist, Malaysia represents a tourist market via which Hong Kong lifestyle products companies can potentially extend their reach to Muslim consumers worldwide. Notably, Hong Kong is ranked among the top Muslim-friendly destinations in East Asia. Local tourism service providers may be able to leverage that reputation to their advantage in order to capture a share of what is a distinct and substantial tourist market.
While it may seem logical to assume the sector is dominated by OIC countries, in fact many of the global speciality halal tourism companies are from non-Muslim countries, including Signapore’s Crescentrating and Halaltrip.com, and the UK’s Crescent Tours and Halalbooking.com. Hong Kong travel agents should work in collaboration with their Malaysian counterparts to develop outbound travel opportunities to Malaysia and other parts of Southeast Asia, for Muslims from the Greater China region. They can also cater for the needs of overseas halal tourists coming to Hong Kong, such as by offering halal travel packages with Shariah-compliant hotel, travel and catering services.
To date, however, Hong Kong travel operators have faced notable challenges. In particular, there is a lack of a standardised rating structure for hotels and destinations and a lack of relevant knowledge among staff. To address the first problem, Crescentrating has established a five-level rating standard for hotels and resorts to which Hong Kong travel services providers may refer. To help with building knowledge and awareness among staff, meanwhile, Hong Kong companies can access a wealth of relevant information and expertise from the Halal Industry Development Corporation (HDC) of Malaysia and other worldwide Islamic tourism institutions and companies, including many of those mentioned here.
Related information: Malaysia infographics
 The report was produced by Thomson Reuters in collaboration with DinarStandard. (www.zawya.com/files/islamic-reports/tr-state-of-islamic-economy-2013.pdf)