Halal – the next frontier

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Two years ago, the idea of the Penang International Halal Hub (pihh) had yet to reach the drawing board and references to Penang’s “halal industry” were a nod to kampung-based kuih makers. Fast forward to 2010 and pihh is turning heads inside and outside the global halal industry. The concerted efforts of the Penang government to position the state as an international halal hub is not an exercise in affirmative action, but a strategic move to build on its existing export-oriented infrastructure and global connectivity.

Chief Minister Lim Guan Eng and Haji Abdul Malik Kassim at mou signing at mihas 2009.

The global halal industry

International experts place the worth of the global halal industry in the region of US$10.5 trillion1 and the concept of halal goods and services is fast gaining acceptance in many non-Islamic countries as well. To many consumers the halal issue is primarily centred around how food is prepared and whether animals have been slaughtered according to age-old Muslim practices. This is the traditional image of “halal” – which means permissible in Arabic. For some years now, Malaysia has been pushing the frontiers of halal to include more than just the food and beverages that can be consumed by Muslims; today’s international halal industry comprises goods and services as diverse as pharmaceuticals, finance, logistics and bio-tech. It is more than just about how livestock is prepared; it is the integration of many separate industries linked by a unique set of Islamic-based guidelines. This growing awareness of halal is creating new commercial possibilities, just as green development and the organic movement have done.

Malaysia has been a key player in this global phenomenon, leading the way in Islamic finance, education, certification and food production. In fact, many of the world’s most established halal expos take place in Malaysia, including the World Halal Forum and the Malaysia International Halal Showcase (MIHAS) which promotes itself as the “world’s largest platform for halal products and services”. Despite the federal government’s concerted efforts to promote the halal industry nationwide – with halal industrial parks being built and incentives being dished out – it was widely ignored in Penang. It took a visit by Penang Chief Minister Lim Guan Eng to MIHAS 2008, two months after his new government was elected into office, to change that. Lim’s visit was highly significant as it marked the first visit to MIHAS by a chief minister from Penang and sparked a 180-degree turn in the way the state perceived the halal industry.

Penang Halal’s booth at mihas 2009.

Penang takes to the stage

Less than a year after Lim was inspired by the potential of the halal industry, the Penang International Halal Hub (PIHH) or Halal Penang came into existence, spearheaded by Haji Abdul Malik Kassim, the State Minister for Religious Affairs, Domestic Trade and Consumer Affairs. As Lim pointed out: “You could say we entered the halal industry at Ground Zero, practically from scratch. Thankfully we have an existing talent pool, as well as the tenacity to push ahead and get the job done.”

Abdul Malik laughed when he recounted the involvement of the previous state government. “Our predecessors only saw the halal industry in very limited, traditional terms. To them, halal meant that only the Muslim community should get involved and that the enterprises they pushed were small cottage-type businesses, people making juices, cakes and so on. This was a very narrow view. Luckily the (present) CM saw the big opportunities the industry held for Penang and gave me the green light to do something different and which leveraged on the state’s established strengths.”

Although Penang is a relative newcomer to the halal industry, the state has taken the lead from more recognised halal parks in Malaysia. “All the other states are certainly more established in the industry than we are, but they are only creating halal parks for investors to come in and put up factories,” Abdul Malik said. “They’re just offering potential investors land. In Penang we take a more integrated, complete approach similar to what we have done with the manufacturing industry. We are providing a businessfriendly environment for investors, an environment with world-class R&D, excellent connectivity by air and sea and all the necessary support services. In Penang there is an infrastructure in place with over 35 years of experience serving international markets. We are just tapping into this existing network to leverage the halal industry. For instance, we can offer a fully traceable halal supply chain for the F&B sector, from farm to fork. I don’t believe that other halal parks in the country can offer the same.”

Today’s international halal industry comprises goods and services as diverse as pharmaceuticals, finance, logistics and bio-tech. It is more than just about how livestock is prepared…

Getting Halal Penang up and running was an exercise in expediency. In November 2008 a task force was set up, and by the time MIHAS 2009 came around, Halal Penang was ready for business. The state government set up an entire pavilion at the expo, clearly stating it intentions. “There was positive response to our participation at MIHAS,” said Abdul Malik. “In a relatively short period of time we were able to set up Halal Penang and effectively communicate to potential investors why they should seriously consider the state. Halal Penang signed nine MOUs and facilitated the signing of three more between Penang state agencies and the private sector.”

Abdul Malik has big ambitions and he believes in creating national and international partnerships to place Penang’s halal industry on the international stage. “The business of government is not to be in business,” he emphasised, “which is why Halal Penang’s nine clusters (see page 14) are governed by steering committees headed by industry leaders. I bring organisations together, introduce people and then it’s up to them to work out the business side of things.”

Chief Minister Lim Guan Eng and Abdul Malik officially launching the Penang International Halal Expo and Conference 2010 at the Penang International Sports Arena.

Like a global halal matchmaker, Abdul Malik has set up direct channels of communication between Penang Port Sdn Bhd (PPSB) and the Port of Rotterdam, the world’s largest halal port. He has high hopes that PPSB and the Port of Rotterdam will be able to cooperate by marketing halalcompliant logistics globally. Penang Port is the world’s second halal-certified port after Rotterdam; in May 2009 it was awarded MS1900:2005 accreditation certifying that its operations are Shariah compliant.2 “Having halal port facilities is an important part of the halal chain of traceability. A number of international ports have approached us (Halal Penang) about possible consultancy projects. Now it’s up to PPSB to take it a step further.”

Captain Kees J Weststrate, senior project manager of Port of Rotterdam International, believes that Penang Port can capitalise on its recent halal certification if “it can convince halal exporters and importers to ship through Penang; none of the other ports in Malaysia are halal ports.”

Captain Kees Weststrate: Other than Penang’s, no other port in the country is halalcertified.

Creating a halal R&D cluster in Penang is also close to Abdul Malik’s heart. He envisages cooperation between Universiti Sains Malaysia (USM) in Penang and Universiti Putra Malaysia (UPM), and Thailand’s Chulalongkorn University and Prince Songkla University, to drive commercial ventures and share research in halal technology. “Both Thai universities are world leaders in halal research and it would be beneficial for the state if USM could tap into their expertise and vice versa. There is plenty of potential for Penang and the state government is more than happy to put in the legwork to facilitate investment. Once I get international business people excited about investing in Penang, the private sector, education sector and government agencies all need to play their part to get things moving,” he said.

Abdul Malik: “People have been impressed with what Halal Penang has achieved in a relatively short time.”

Halal Penang has already established close ties with the United Kingdom’s Halal Industries Group (HIG) to work on a number of UK-based projects, including a proposed halal park in Wales. In a report on the Welsh park by BBC Online, HIG chairman Mahesh Jayanarayan said: “The halal market is not going away, it is not some fad.” In the long term Abdul Malik is confident that other consultancy projects will materialise very soon in Pakistan and Indonesia. “People have been impressed with what Halal Penang has achieved in a relatively short time and we have been approached by a number of governments. In terms of niche areas such as F&B and bio-tech, we are far ahead of the other (Malaysian) states.

Abdul Malik conceded that not everyone understands his broader vision for Halal Penang. “Lots of people have said to me, ‘Why would someone want to stay at a halal hotel?’ or ‘Why would non-Muslims be interested in halal food?’ They are missing the point. By offering halal certified goods and services we are offering consumers a choice, and creating choices is simply good business sense to me! Halal goods and services have to abide by very stringent quality and high standards of ethics, and this is what modern consumers, whether Muslim or non-Muslim, want. People want to be assured that their food is safe to eat, that animals have been treated humanely, that child labour has not been used.”

Unlike other Malaysian halal parks that are little more than industrial parks, the entire Penang state is being treated as a halal hub. “Look, there’s no point in just clustering all providers of halal goods and services in one area and thinking that our job is done,” Abdul Malik emphasised. “We need to constantly add value for the benefit of our investors. We need to look at providing easy access to halal raw materials, at access to R&D, logistics, the supply of halal-trained K-workers as well as proper certifications systems.”

Abdul Malik at the Penang International Halal Conference 2010, held in Equatorial Hotel early this year.

Penang Deputy Chief Minister I Mansor Othman and Abdul Malik visiting the Port of Rott erdam, the world’s largest halal port.

Abdul Malik recently oversaw the restructuring of the halal certification systems carried out by Jabatan Agama Islam Pulau Pinang (JAIPP, or State Islamic Religious Department) which now fall under the scope of a single dedicated department, the Halal Management Division. Tthe restructuring exercise was to enable a more professional approach to certification, he said. “I believe that the process (of halal certification) should be transparent and streamlined so that more local companies will be encouraged to become halal-certified. We want to speed up the process without compromising our standards which are already internationally recognised. Soon we’ll be opening counters at Komtar to bett er serve the business community.

“People may think that I’m mad, pushing so hard for Penang to be at the forefront of Malaysa’s halal industry, especially as we have yet to reap any tangible financial benefits. It took a long time for Penang to enter the global halal scene. Now we finally have the momentum and we have all the right ingredients for success!”

Branding halal penang

Penang isn’t a location that springs to mind when discussions of the halal industry crop up.The state’s demographics and reputation as the world’s Silicon Island make the idea of it being an international halal hub seem incongruous. Whatever potential investors’ preconceptions of the state, Haji Abdul Malik Kassim, the State Minister for Religious Affairs, Domestic Trade and Consumer Affairs, is determined to brand it as a modern halal hub that encompasses more than the F&B industry.

All the travelling and tireless networking appears to be paying dividends as Abdul Malik lists the approaches of international governments, organisations and educational institutions seeking Halal Penang’s expertise in establishing halal parks and setting up halal systems certification. Among these is Saudi Arabia’s Prince Saud University, which approached Halal Penang to find out more about the meticulous process of halal certification. The idea of Saudis consulting Penangites on halal issues may seem far-fetched, but to Abdul Malik, this is all part of Halal Penang exporting its expertise. “Because we have branded Halal Penang as more than just a halal park we are enjoying plenty of interest from international governments and organisations keen to tap our expertise.”

Salmah Aspari, general manager of Halal Penang.

He said Halal Penang is also in discussions with two British universities to provide structured training courses for halal Kworkers for the European market. The ultimate goal is to establish a UK-based halal institution to tap into the surge in demand for halal products and services. “Europe would be a great market for us because of the region’s strong purchasing power.”

Looking ahead, Abdul Malik added, “Our next push is to position Penang as a hub for Shariah-compliant financial services and we’ll be inviting more Middle Eastern banks to set up branches in the state. Of course Kuala Lumpur may be perceived as the choice location for banks, but we should try to break this cycle.” He envisaged that Penang will play a key role as the Asian centre of the Shariah Ummah Exchange, a dedicated stock exchange for Shariah compliant companies which will be based in London.

“There are many parallels between Halal Penang today and the growth of Penang’s manufacturing industry in the 1970s. We’re at the point where we are ready for take-off , where Penang can become the world’s halal hub, in the same way that people now know us as the world’s Silicon Island,” Abdul Malik said.

Penang international halal hub – at a glance

In April 2009 the Penang State Government set up a new agency – pihh Development Sdn Bhd, also known as Halal Penang – to spearhead the coordination, facilitation, promotion and development of the halal industry. Halal Penang works in tandem with the state’s investment promotion agency, investPenang, Penang Development Corporation (PDC), the State Islamic Religious Department (JAIPP), as well as federal authorities such as the Halal Industry Development Corp (HDC) and the Malaysian Halal certification authority, jakim.

Salmah Aspari, the general manager of Halal Penang, explains the nine halal clusters3 that make up the holistic halal supply chain and how Halal Penang aims to maximise the state’s existing advantages.

Agro-Based Industries

“ To date there are over 290 registered halal companies in Penang, the majority of which are in the F&B industry. PIHH can be the focal point in the sourcing of high-quality halal agricultural raw materials. Currently, Sumatra, southern Thailand and China are important sources of raw materials for F&B products,” said Salmah. “In terms of F&B the Halal Malaysia mark is highly regarded and is seen as a symbol of trustworthiness and traceability. This certification simply adds value to locally produced products, which are already of high quality. More choice for consumers if you like.”

An integrated cattle rearing, abattoir and meat processing project is in the pipeline to produce high quality halal meat under the Juru Beef label. As Haji Abdul Malik Kassim, the State Minister for Religious Affairs, Domestic Trade and Consumer Affairs explained, “The chief minister is very excited about the potential of Juru Beef which is the halal equivalent of Kobe Beef, especially as Middle Eastern consumers are big meat eaters!”

By 2011, Halal Penang will have established the International Halal Leather Trading Hub, where China-sourced halal leather will be transported to Penang for downstream processing and the finished leather exported.

Logistics

Penang also provides value-added services for the industries’ supply chain needs through its international seaport and airport. Halal warehouse and cold chain facilities are provided within the vicinity of Penang Port, Malaysia’s first halal port. Investors can take advantage of the extensive ground infrastructure connecting importers and exporters of the northern region of the country as well as the Indonesia-Malaysia- Thailand Growth Triangle (IMT-GT). “Penang has to be the most active of the northern states when it comes to participation in the IMT-GT,” said Salmah. According to her, “Penang is a strategic gateway to the international markets. For instance, many southern Thai companies prefer to export out of Penang rather than Bangkok due to the former’s proximity.”




Financial Services

Islamic banking, insurance and financial services are available in Penang through international financial institutions and off shore banking facilities and Halal Penang works closely with leading financiers in Malaysia and the Middle East to make Islamic funding and financing accessible to halal investors.












Life Sciences

“ Life sciences is an emerging sector for Penang so it was a natural progression for Halal Penang to tap into this,” explained Salmah. “Penang has a strong halal R&D base thanks to extensive research carried out by Universiti Sains Malaysia (USM). The emphasis is on a holistic approach and advancement in biotechnology, wellness and medical products and services. We also want to look at improving processes and, of course, the quality of pharmaceutical products.”








R&D

In four decades, Penang’s manufacturing sector has moved high up the value-chain allowing Halal Penang to enter the global halal industry at an advanced stage. Halal Penang aims to connect investors to some of the most advanced halal R&D centres in the region including USM, the Halal Products Research Institute, Universiti Putra Malaysia, Halal Science Center, Chulalongkorn University, and Halal Food Science Centre, Prince of Songkla University. Penang is the virtual centre for Centres of Excellence in Halal Sciences and Technology.







Tourism and Hospitality

“Offering halal or family concept hospitality services is yet another consumer choice for visitors to Penang. We’re looking at developing niche halal hotels, hospitals and eateries,” said Salmah. “This is just another way of tapping into Penang’s strong tourism sector, especially with George Town’s listing as a Unesco world heritage site.”












Manufacturing Industries

“The previous state government focused on creating a physical halal park but this had its limitations, especially as land is very scarce in Penang. Halal Penang takes a bigger and different approach that builds on the state’s strong manufacturing base. Integration is an important aspect of Halal Penang, where the entire supply chain, from raw material sourcing to the transport of finished goods, can be carried out in Penang,” Salmah explained.

The Halal Integrated Park incorporates 130 acres within the high-tech Penang Science Park (on the mainland). The first two phases of the park are ready land targeted at investors involved in niche, high value-added manufacturing activities. Future phases of the Halal Park will provide an incubation system, shared facilities, test labs, warehousing and cold chain services, as well as networking infrastructure.




K-Workers

The state is collaborating with various training providers and academies, including the Penang Skills Development Centre (PSDC) and Penang International Islamic & Technological College (KITAB), to develop modules and skill sets in halal management systems for processes, quality assurance, auditing and certification. The goal is to develop a sustainable pool of knowledge workers and professionals for the halal industry. “The focus used to be on churning out engineers but we’re still faced with a shortage!” exclaimed Salmah. “We need to start building up a pool of talented halal K-workers so that five years down the line, when the halal industry really takes off , we won’t be in the same situation.

“When I spoke to financial players in the UK they commented that they could only draw from a limited pool of Islamic banking specialists. We need to grow our talent and eventually export this,” she emphasised.



Marketing and Promotion

“Marketing and promotion is undoubtedly the biggest part of Halal Penang’s job. Luckily Penang is well-known internatio-nally, sometimes even more so than Malaysia,” she noted. “It’s only a matter of time before we’ll be seen as the world’s halal hub. So far people are very keen to work with us because of our passion, especially (Abdul) Malik’s enthusiasm and energy.

“Halal Penang has laid the groundwork; we really need all the participating industries to take a step together to promote the halal industry as a whole. What we can do is establish a halal-based association that can represent these industries overseas at trade fairs. Penang has limited physical resources, which means that we continuously have to push our human resources and prioritise certain projects to get investors to come. As a state we’ve been doing this for years and we’re good at it,” Salmah said.





1
This figure is based on the world’s 1.6 billion Muslim population and 1 billion non-Muslim consumers spending the equivalent of usd10.50 a day.

2 Penang Port is the first port in Malaysia to achieve the MS1900:2005 “Quality Management Systems - Requirements from lslamic Perspectives” for the provision of container handling services and dedicated warehouse services within Penang Port.

3 The nine halal clusters are each led by a tripartite steering committee comprising of industry leaders, academics and government.



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