RUSHDI: Halal industry — Fact, fiction or ‘faction’?

Is the halal industry similar to how Winston Churchill described Soviet Union foreign policy: A puzzle inside a riddle wrapped in an enigma?

The key for halal industry growth development entails separating fact from fiction and ‘faction’, much like its more established brethren, Islamic finance. There are many myths (halal can be prepared only by Muslims),misunderstandings (if not meat based, like pharmaceutical or cosmetic, doesn’t need certification) and even mayhem (‘halal for cash’ certification bodies) associated with the halal industry.

This requires dialogue and discussion, and, the upcoming (April 9/10) World Halal Conference: Global Food Security: The Halal Prospective, in Malaysia, may be a good start.

Assertion: The halal industry, like Islamic finance, is only for Muslims.

Fiction: Halal is for all mankind, but the [religious] reality is the term confines its reach and usage only to Muslims. Thus, halal faces similar challenges as ‘Kosher,’ food only for Jews. Yet, it’s only the Muslims that are saying ‘Halal’ is not just for Muslims.

Assertion: Islamic finance is much larger than halal industry with greater reach and penetration.

Fiction: Islamic finance, estimated at $1.3 trillion, is about financial intermediation for real economy sector development. The $2.6 trillion halal industry includes Islamic finance plus six other (lifestyle) sectors: Food/beverage, pharmaceutical, cosmetic, fashion/clothing, travel, media/entertainment. Furthermore, Islamic finance, at best, is in 60 countries, whilst halal industry is in more than 160 countries including all OIC (57 Muslim countries), G-20 and BRICS.

Assertion: Islamic finance and halal industry have much inter-play.

Fiction: There is very little over-lap between these two inter-related niche markets ‘separated at birth’ now requiring unification. For example, a Muslim may be able to consume company’s halal certified products, but may not be able to invest in the same company as it violates the financial screen ratio, i.e., interest based debt.

Assertion: Halal is just about religious slaughter.

Fiction: First, halal, lawful or permissible, is about a holistic way of life as prescribed by the Koran and Hadith. Second, it entails the seven sectors as described above, including ingredients that form the final product. Third, relating to livestock stock slaughter, it’s about ‘farm to fork,’ from humane treatment of animals (no factory farming), including free range grass fed (non-GMO feed), to slaughter (invocation of Creator’s name), to non-cross contamination with impermissible animal (pork) during distribution, hence, it’s about organic, accountability, transparency to minimize leakage.

It must be noted, where retail outlets have signs stating ‘no pork/no lard,’ it does not mean the product is halal.

Assertion: Muslims control the halal food supply chain.

Fiction: It’s estimated the 80-90% of halal food is manufactured by non-Muslim owned companies, hence, perceived integrity risks for complying with halal certifications. Putting in context, Islamic finance allows minor amounts of interest or impermissible income (with purification), whereas if a DNA spec of pork is found in say, halal burger, it cannot be consumed by Muslims.

Assertion: The halal industry has international industry body, like Islamic finance with AAOIFI or IFSB, for standards.

Faction: The Turkey-based Standards and Metrology Institute for the Islamic Countries (SMIIC), includes 29 of 57 Muslim countries, mission is ‘... develop harmonized standards and other relevant specific standards through voluntary standardization process to expedite exchange of goods and services among member bodies/states targeting the uniformity in metrology and laboratory services, standardization, certification and accreditation activities ...’

The reality is not many certification bodies use SMIIC as reference point for halal. Thus, there are more halal certification bodies, at country level, than Islamic financial institutions, hence, creating more chaos than clarity.

Assertion: Halal industry certification bodies are free from conflict of interest

‘Faction’: The certification bodies, much like rating agencies in the financial sector and Shariah Boards in Islamic finance, are paid by the clients, hence, independence perception scrutinized. Ideally, the certification body should be led by government agency (its own budget), under Ministry of Agriculture (?) or even a non-profit entity, with the understanding the certification payment is transparent. For example, Indonesia’s MUI recent ‘halal for cash’ scandal on certification [for Australian halal manufacturers] has negatively impacted certification bodies.

Assertion: Halal Industry can build bridges to non-Muslims

Fact: The ban on religious slaughter in Poland, Denmark, and comments by incoming President of BVA, John Blackwell, questioning its ‘humane’ aspect, has brought Jewish and Muslim leaders/communities together defending each other’s religious slaughter practice. Furthermore, halal’s linkage to organic is immediately obvious in treatment of animals and their diet before the knife, yet, halal industry, unfortunately, focuses on the slaughter.

Assertion: Halal is hygienic (meat shops monitored), healthy and provides uniform taste

‘Faction’: Tina Jamaluddinn, halal industry expert, recently stated ‘food quality and food safety means it's fit for human consumption, but not necessarily that it's good for your health, i.e., breakfast cereals that are high in sugar, soda, processed products, etc.’

Assertion: Halal is an investable asset class

Fact: In 2011, the SAMI Halal Food Index was launched in Malaysia, and recent press release from Dubai Exports is talking about a Halal Index for Dubai. Its well accepted indexes are DNA for investing, from funds to venture capital to private equity. This is innovation in halal, and it extends to R&D, i.e., finding alternatives to pig-based gelatin, vaccines, etc.

Conclusion

Yes, halal has challenges on stunning, labelling, politics, food supply chain, etc., but the fact is that it’s a global growth story in growth markets with growth demographics.

[This article appeared in his column 'Halal Corner' in THE MALAYSIAN RESERVE,  24 March 2014. Rushdi Siddiqui is former global director at Dow Jones Indexes and global head at ThomsonReuters in Islamic finance]