Asia - A Major Production Hub for the Halal Industry

With 65% of the world's Muslim population, Asia is well-positioned to capitalize on the major upgrade of the Halal industry. Muslim consumers, accounting for 1.9 billion or 24.7% of the world's population, are a fast-growing group that cannot be ignored. This figure is expected to rise to 2.2 billion by 2030 and reach 2.6 billion by 2050, accounting for 30% of the world's population. The State of the Global Islamic Economy Report 2022 highlights that Muslim spending is expected to reach US$2.8 trillion by 2025, with a 4-year cumulative annual growth rate (CAGR) of 7.5%. Investment in the Islamic economy sector by the Organisation of Islamic Cooperation (OIC) and some non-OIC markets grew from US$11.8 billion in 2019/20 to US$25.7 billion in 2020/21, an increase of 118%. Apart from the UAE, the two countries with the highest investment are Indonesia and Malaysia. Investor confidence in the thriving Halal food sector has soared, driven by data showing how strong the Halal food sector is. Halal food alone reached a global market value of US$1.27 trillion in 2021 and is expected to reach US$1.67 trillion by 2025.

The Halal food sector is not limited to food, although Halal food is the second-largest sector after Islamic finance. Other sectors include fashion, media and entertainment, travel, pharmaceuticals and cosmetics. The latest State of the Global Islamic Economy Report also notes that in 2021 Muslim spending in these sectors amounted to US$2 trillion, all of which are influenced by ethical consumption demand inspired by the Islamic faith. In 2022, global Muslim consumption in Islamic economy sectors, excluding the Islamic finance sector, was expected to grow by 9.1%. Kerry is a leader in the development of taste and nutrition solutions for the food, beverage and pharmaceutical markets. It reported that from 2018 to 2020, the number of Halal foods launched globally increased from 16,936 to 20,482, a growth of 19%, of which 63% came from Asia.

Malaysia tops the Global Islamic Economy Indicator (GIEI) rankings, having been the country best able to support the multi-trillion-dollar global Islamic economy for the ninth consecutive year. The country leads in Islamic finance, Halal food, travel, and media and entertainment. Malaysia's Halal industry is developing rapidly; in 2020, the Halal industry contributed about 8.1% to the country's GDP. According to the Halal Industry Development Corporation (HIDC), by the end of 2025, the market value of Malaysia's Halal industry is expected to reach US$147.4 billion. Indonesia, the country with the world's largest Muslim population, maintains fourth place in the global Islamic economy education index ranking and ranks second in the Halal food indicator ranking. Halal food exports from Organisation of the Islamic Conference countries grew by 16%. With Muslims accounting for 87% of the total population, the potential for economic growth is enormous. The government passed the Halal Product Law, demonstrating its determination to develop the Halal industry. The law took effect in 2019 and requires many domestic consumer goods and related services to be Halal-certified. Some enterprises had to comply with certain exceptions before 2022. For example, in the Indonesian market, the government established a brand-new agency, BPJPH; this Halal product certification body under the Ministry of Religious Affairs is the only agency in Indonesia that issues Halal certificates.

Singapore entered the GIEI global top 10 for the first time, the only non-Organisation of the Islamic Conference country in the top 10. The country rose 8 places to rank 7th. Apart from Islamic finance, Singapore ranks in the top ten in all sectors. The country ranks first in pharmaceuticals and cosmetics, and second in Muslim-friendly travel, media and entertainment. The report explains that this is mainly due to positive growth in exports to Organisation of the Islamic Conference countries. Singapore also scored highly in the awareness-raising sub-indicator, having carried out many educational courses and activities across sectors. As its neighbors are mainly Muslim countries, it has great potential to further develop into a major destination for Muslim-friendly travel. This fully demonstrates the country's ambitious attempt to take a large slice of the huge pie. Notable national Islamic economy strategies launched in Asia in recent years include establishing a strategic partnership between Indonesia and the Philippines to expand their Halal trade. KerryDigest also notes that Japan and Malaysia are forming such a partnership to drive cooperation and growth. Countries such as Singapore and South Korea are reaching agreements with Organisation of the Islamic Conference countries to explore various partnerships in the import and export of Halal products and related services. Thailand is also implementing incentives to encourage food industry investors to expand the Halal food industry.

The growth of the Halal industry is driven by many factors. The growing Muslim population, rising purchasing power, and the rapidly growing young Muslim population across Asia are driving demand for Halal products and services. The increasing role of social media and influencers in the Islamic lifestyle, which strengthens consumer awareness, the role of innovation and technology in the Halal industry, and the rapid expansion of distribution channels are also often cited as reasons for the industry's rapid upgrade. The number of Muslim tourists is also increasing, especially young tourists. An article in The Straits Times quoted Fazal Bahardeen, founder and CEO of CrescentRating, as saying: 'Muslim tourists in Southeast Asia have enormous influence on the recovery of tourism. The region has all the basic elements of the Halal tourism industry. The market is large enough, and the destinations are mostly Muslim-friendly.' According to the Mastercard-CrescentRating Global Muslim Travel Index, the global Muslim travel market will rebound significantly in 2023, after the COVID-19 pandemic grounded almost all international flights and tourism over the past 20 months. According to this year's GMTI rankings, Malaysia and Singapore top the list of the most Muslim-friendly holiday destinations, both having ranked in the top two since the index began in 2015. In 2019, there were about 160 million Muslim tourists, up from 140 million a year earlier, accounting for about 10% of global tourism.

Unsurprisingly, food industry giants are paying attention to the booming Halal food sector. Japanese seasoning company Ajinomoto invested US$85 million to build a Halal production line in Malaysia, planned to be operational in 2022. Other global brands have already taken note of the Muslim economy to tap into the purchasing power of the 260 million Muslims living in the ASEAN region, most of whom live in Indonesia, Malaysia, Thailand, the Philippines, Singapore, Myanmar and Brunei. An increasing number of Halal lifestyle events and movements have largely stimulated interest in Islamic travel, food, fashion and cosmetics. A fitting example is Malaysia's effort to promote the growth of the Halal industry to a higher level by introducing 'Make Halal Your Choice' as one of the 2022 budget initiative projects. The initiative by Halal Development Corporation Berhad attracted 500 Halal entrepreneurs from the micro, small and medium-sized enterprise (MSME) sector, with the goal of increasing average sales by 20% to 30% during the campaign period from April to July 2022. In Singapore, the Halal cosmetics company Faith recently raised US$55 million in a Series C funding round led by new investor Venturi Partners. The company owns brands centered on Muslim audiences, including Lafz, ZM and Dr Rhaze, offering consumer products spanning skincare, perfume, cosmetics and hair care.

Over the past 20 years, Islamic finance has become a US$2 trillion business. Ethis is one of the new fintech providers that emerged during the pandemic, becoming Malaysia's first fully Sharia-compliant equity crowdfunding platform. According to an article published in The Straits Times on March 12, 2022, in Indonesia, technology-based lenders are leveraging Islamic banking, 'betting on an underpenetrated market with a potential customer base of 45 million.' The interest rate of such banks in Indonesia is only 7%, far below Malaysia's 29%. The possibility of exponential growth is real.

The Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC) explains that Halal products and services are not designed and produced exclusively for Muslims. Out of health or ethical considerations, people of other religions and beliefs are also interested in and indeed consume Halal products and services. SESRIC notes that the global rise in awareness of issues such as 'sustainability,' 'ethical consumption' and 'green growth' has helped the Halal industry flourish in recent years. Because Islam prohibits causing harm to any other person and the environment, Halal issues involve 'all the steps of a business route, such as procurement, production, logistics, marketing, consumption and waste management.' Halal food has evolved from an identifying mark of religious observance into a guarantee of food safety, hygiene and reliability. A Halal food lifestyle study conducted by Mastercard-CrescentRating in Singapore showed that the country's Muslim consumers most trust the Halal assurance of establishments with Halal certification. The Islamic Religious Council of Singapore (Muis) recently enabled the public to access information about listed foreign Halal certification bodies (FHCBs). Previously, this list could only be accessed through a system mainly used by enterprises. Muis said in a statement: 'As Singapore's sole Halal food certification body, Muis plays an important role in the emerging Halal food industry, with many Halal-certified catering establishments providing dining options for the community. A key part of this is the supply of imported Halal products and materials that meet the requirements of Muis Halal certification standards.'

He pledged to continue adopting rigorous recognition procedures conducted by overseas registered authorities to ensure that the public continues to have confidence in the imported ingredients used by Singapore's Halal-certified food manufacturers and producers. By implementing a rigorous regulatory framework, the Halal food industry can gain consumer confidence, and more enterprises will make good use of investment to meet growing demand. As Halal food goes global, Asia, especially ASEAN countries, is gaining a strong foothold in the industry.