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Monday, May 04, 2009

In search of a global standard, Halal sector poised for growth

By Paul Cochrane in Beirut, Executive magazine

The Halal sector, which covers food, pharmaceuticals, cosmetics, finance and tourism, is at the cusp of exponential growth in the Middle East and worldwide. Valued at $1.5 trillion globally, the sector has been growing by 10-20 percent a year, even during the financial crisis, according to Ramez Shehadi, senior partner at consultancy firm Booz and Company.

Other estimates put the sector at over $2.1 trillion, and set to rise even further as companies start cottoning on to the potential of a sector that directly appeals to some 1.5 billion Muslims.

But what has been holding back the roll out of the Halal sector is the labeling and certification of products as Halal. With no global certification body, there is minimal standardization and coordination between national certifying bodies, such as in Australia, Malaysia, the USA, Britain and Brazil. It is the same story in the Middle East, with separate bodies in every country, and further compounded by the GCC importing an estimated 80 percent of Halal food from Brazil, Argentina and Australia. The Halal food market in the GCC was estimated at $9 billion in 2007, according to Canada's Agriculture and Agri-Food Trade Service.

“Halal is one of the last industries to have a common standard that producers and governments can abide by, and also a logo that consumers can look to,” said Jamaatun Azmi, Managing Director of Kashedia in Malaysia, and the creator and founder of the World Halal Forum.

With globalization resulting in products made from ingredients from numerous sources, the need for certification is even more pressing. As a result, the non-profit International Halal Integrity Alliance was established last year to create a global Halal standard, later endorsed by the Organization of the Islamic Conference.

“The whole idea of standards are they are voluntary but of benefit to manufacturers, jut like the ISO standards,” said Azmi. “You can compared to this to the growth of the organic food sector, which has become quite established, although it took decades to achieve.”

In early May, the Fourth World Halal Forum will be held in Kuala Lumpur to thrash out a global certification. But it will not be easy given the technical and scientific issues involved, such as whether mechinal fodder is considered Halal or not.

We have to have something 100% Halal that no one can debate. If we had waited for Muslims to come to an agreement we wouldn't be where we are now,” said Saleh Abdullah Lootah, CEO of UAE-based Al Islami, the largest producer of Halal food products in the Middle East through franchises Al Islami Foods, Al Islami Cart, Al Islami Meat Shop, and fastfood chain Al Farooj Fresh.

We went back to the book, to the Qu'ran, and adapted to that. There is a gray area, such as machine slaughtering of animals, but for us that is not acceptable,” he said. Lootah draws a line between what some say is Halal and 'real Halal,' which is meat that is hand slaughtered without stunning, as according to Islamic Sharia law.

He added that while multinational companies and others may want to get into the Halal sector, they should go all the way, as having some operations that are Halal and others not can result in confusion for consumers.

The new generation of Muslim consumers are very sophisticated and more demanding, like it used to be with our grandfathers,” said Lootah. “With Halal it is about trust and integrity, this doesn't take days but years; it's not easy for companies to portray the message we have.”

Indeed, part of the need for certification on products – which could be as simpe as a logo of H for Halal – is that there have been a number of causes of fraudulent claims by companies marketing their products as Halal. “We have examples of pork having Halal certification, and it's pork!” said Azmi. “We also found Halal certification on knives, so there is clearly no education among manufacturers of what is actually Halal.” Just last month (APRIL), the Indonesian Agency of Drug and Food Control warned Muslims that five of out of every 35 meat flosses sold in the country contained shredded dried pork.

But it is not just in food – whether meat, processed food or in the restaurant sector - that Halal certification has potential. Cosmetics and pharmaceuticals are multi-billion dollar industries that manufacturers can tap into as Muslim consumers start to demand Halal sourced products. For cosmetics this could be big money, with the sector in the Middle East valued at $2.1 billion a year, according to trade experts Epoc Messe Frankfurt.

Sparking such potential growth is the fact that certain cosmetics have ingredients derived from pig fat and alcohol, while in pharmaceuticals, gelatine capsules also come from swine. “It opens a Pandora's box and a wealth of opportunity for generating demand by simple awareness in the Muslim world that this is really the case,” said Shehadi.

Interestingly, while Halal certifying bodies and governments in majority Muslim countries are aware of the non-Halal ingredients of products, a Halal gelatine has not yet been developed, which poses a quandry: inform the public or keep the matter quiet as people's health could be jeopardized if they stop taking certain drugs.

Some governments are looking at this carefully to try and not create panic or chaos, as if we know the extent of non-Halal medicine it is not going to be good,” said Azmi.

But while Malaysia is taking the lead in certifying Halal, Shehadi said the Middle East has to get its act together. “It is counter intituitive that the home of Islam is not leading in Halal. The region should be a beacon, developing Halal standards and products suitable for the world. And by investing in Halal it can generate online content, entrepeneurism, small and medium sized enterprises, tourism, education and healthcare, which will have a snowball effect for development,” said Shehadi.

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