Halal Business: Malaysia and Indonesia struggle for global dominance

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Malaysia is ahead in the global halal business. But its Southeast Asian neighbor Indonesia also wants to play a more active role.

In 2017 Malaysia exported halal-certified products worth 43.3 billion ringgit (10.5 billion US dollars). This corresponds to an increase of 32 percent compared to 2013. Almost half of exports were accounted for by food, cosmetics, chemicals and other goods. By comparison, Indonesia has exported $7.6 billion worth of halal goods, reports Nikkei Asian Review.

According to a study by Thomson Reuters and Dinar Standard, Malaysia makes the best use of the opportunities offered by the Islamic economy. It is followed by the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Jordan, Qatar and Pakistan in sixth place, Kuwait in ninth place, Indonesia and Brunei in tenth place.

Halal certification in Malaysia is strict, writes Nikkei Asian Review. The guidelines are recognised worldwide, but not in Indonesia. Negotiations have stalled. In the meantime Indonesia is working to become a greater Halal power by expanding its own certification, strengthening the production base for Halal products and boosting exports. Indonesia, with almost 260 million people, is one of the largest halal markets. Exports, however, are dominated by commodities, making the economy vulnerable to volatile commodity prices.

Certification business

Therefore, Indonesia wants to benefit from the growth of the global halal business. Indonesia has increased its trading activities and hopes to sign contracts with Iran and Turkey, among others, this year. In the country, the government is developing four halal-oriented industrial clusters to attract manufacturers of halal-compliant products as well as restaurants, shopping centres and Islamic financial institutions.

However, the main changes would concern the scope of halal certification. As of October, Indonesia would have to have a large number of goods and services halal-certified: food, beverages, cosmetics, chemicals and biological or genetically modified products as well as other consumer goods. The certification costs would be between 140 and 320 US dollars. However, further costs could also arise if production lines had to be converted to halal. With the new system, the government wants to collect 22.5 trillion rupiah (1.6 billion US dollars) annually.

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