Why this is important to Wisconsin businesses: Both markets rely on imports to meet demand.
Two Southeast Asian countries—Malaysia and Indonesia—are seeking to increase their market share in the global market for halal food and other goods, which is estimated to hit $3 trillion by 2023. This bodes well for exporters from Wisconsin, as expansionary efforts of both countries mean opportunities to supply agricultural and food and beverage) products for retail and manufacturing purposes.
The Arabic word halal means lawful or permitted in accordance with Islamic law as written in the Quran. The term is commonly applied to food, pharmaceuticals, cosmetics and personal care products.
Malaysia’s exports of halal products were valued at about $10 billion in 2018, contributing 11% to the country’s GDP. Most of these halal exports were foods, followed by cosmetics, chemicals and other goods. Aside from exports, Malaysia’s domestic market is also strong, as 60% of its population of 32 million practices Islam and the country is also a leading destination for Muslim travelers from around the world.
Many of the raw materials used by the Malaysian food processing industry are imported—from basic commodities (e.g., soybeans, cacao and beef) to semi-processed food materials (e.g., dairy powders and dried fruits and nuts) and highly processed ingredients (e.g., flavorings and additives). Meanwhile, on the retail side, Malaysia also imports consumer-oriented food and beverage products to supplement its domestic supply, and the U.S. is one of the leading suppliers of these imports.
Companies looking to cater to the Malaysia market should be aware of its strict halal requirements, with mandatory halal certification for poultry, beef, dairy and egg products. For other products, halal certification is not a legal requirement, but having the certification ensures access to the market, as most retailers, food service operators and food manufacturers would ask for halal certificates even for non-meat-based food products and ingredients.
The Department of Islamic Development Malaysia (JAKIM) is Malaysia’s halal certifying body, and as of 2019, it recognizes three U.S.-based halal certification bodies, including the Islamic Food and Nutrition Council of America (based in Illinois) and the Islamic Services of America (based in Iowa).
As guided by Islamic sharia law, JAKIM uses the Malaysian Standard on Halal Food (MS 1500:2009) to govern halal food production, preparation, handling and storage, which many suppliers find much stricter than the multilaterally agreed Codex Alimentarius halal standard. For example, MS 1500:2009 requires slaughtering plants to have dedicated halal facilities and separate transportation for halal and non-halal products. For halal packaging, Malaysia uses MS 2565:2014.
Indonesia is home to 270 million Muslims, or nearly 15% of the world’s Muslim population—the largest concentration in the world. With a large domestic market, Indonesia is also the number-one Islamic food consumer market in the world, with consumer spending of $173 billion in 2018, according to the State of the Global Islamic Economy Report 2019-20. Moreover, Indonesia’s sharia economy is projected to grow to $427 billion by 2022, with halal foods accounting for more than 60% of this total.
In Indonesia, despite the potential, halal manufacturing is not yet as developed as in Malaysia, and is constrained by a lack of capacity. Here, the retail market is dominated by suppliers from non-Muslim countries. However, Indonesia is aiming to become a major producer in the global halal industry by 2024. This constitutes a good opportunity for American suppliers of raw materials, since presently the U.S. is Indonesia’s top supplier of agricultural products—primarily soybeans, cotton, feeds and fodders, wheat, dairy, distillers’ grains, fresh fruit, and beef and beef products.
As in Malaysia, suppliers should be aware of halal requirements in Indonesia. In October 2019, Indonesia started to implement mandatory halal labelling, with food and beverage products named as the top priority. This comes after the signing in 2019 of Government Regulation No. 31/2019, covering provisions for implementing Indonesia’s 2014 Halal Product Assurance Law. Key provisions include guidelines for halal product manufacturing processes, accreditation processes for domestic and international halal certifiers, and the transfer of certification responsibility to a new government agency, the Halal Product Assurance Organizing Agency from the Indonesia Ulema Council, the country’s top Muslim clerical body. At present, Indonesia recognizes five halal certification bodies from the U.S.: Islamic Services of America (Iowa); Halal Transaction (Nebraska); The Islamic Food and Nutrition Council of America (Illinois); Halal Food Council USA (Maryland); and American Halal Foundation (Illinois).
