A Fast Growing Halal Economy
One reason for the rise of the halal economy is that the global customer group of nearly two billion Muslims are younger and, in some places at least, richer than ever. Halal is used to describe anything permissible under Islamic law, in contrast to "haram" – which is forbidden. (source)
This covers aspects such as behavior, speech, dress, conduct, manner, and dietary laws. Halal encompasses not only production and consumption food, but also include products and services in cosmetics, pharmaceuticals, clothing, financial services, travel and tourism, real estate and logistics. The projected figures are staggering. According to Euromonitor, the global trade for Halal market is estimated at US$2.1 trillion annually, food constitutes 30% (US$635 billion). As the Halal industry has until very recently not been viewed as a market in its own right, there has been complexity in articulating the world market size for Halal products and services. Approximately 67 percent of potentially Halal products are categorized as Fast Moving Consumer Good (FMCG). Food FMCG and primary meat together account for 62% of the market.Indonesia has the world's largest Muslim population with approximately 88% of its 237 million country population (data 2010). It's a huge potential market for Halal products. The increasing awareness of Muslim consumers on their religious obligations is creating greater demand for Halal products. Frost & Sullivan estimates Indonesia total Halal market size is at USD 122.4 billion in 2009.
Halal Logistics – An Opportunity for the Industry
Benefiting from the boom in the global halal industry is the logistics sector. 3PL service providers have in fact coined a new term 'halal logistics' which involves shipping and freight forwarding, warehousing and handling facilities exclusively for halal products.
Halal logistics, meanwhile, is a newer phenomenon, where the Shariah is being applied to the logistics discipline. This development is quite similar to Islamic banking, where a banking system is developed according to the principles of the Shariah. The main objective of logistics is the integral management of physical goods flow and information flow against optimal costs meeting the customer requirements. As the Muslim consumer requires the consumption of halal products, not only is the production of the halal products important but also the logistics to the consumer, in order to ensure the integrity of the product at the point of consumption.
Most immediately and visibly associated with the Halal industry is the food industry. Halal compliance is extending along the value chain, both upstream towards farms and downstream towards food services and towards transportation, warehousing and handling of halal products at ports and airports. A supply chain approach ensures integrity from farm to plate. The basic requirement in halal logistics is segregation of halal and nonhalal food items, to avoid cross contamination and mistakes and to ensure that operations are consistent with the expectations of the consumer and other stakeholders.
The Halal industry is a large and fast growing industry, having moved from a niche market to a mainstream industry embraced by multinationals worldwide. Halal Logistics has taken off globally and provides many opportunities for both the manufacturing industry as well as the logistics industry in establishing Business Excellence through adopting Halal Logistics practices.
The Future of Indonesian Halal Logistics
Malaysia has cleverly pioneering the development of halal logistics and traceability. Malaysia is aggressively promoting itself as a world halal hub. Malaysia for example is developing an International Halal Park acting as a Global Halal Hub to facilitate imports, manufacturing and exports from a Halal economic zone. These zones not only provide Halal logistics facilitation, but comply with the environmental standards and provide a sustainable production in a Halal cluster supported by education, research, trading and financial services. On the other side, Thailand is keen to project itself as the hub of the halal industry in terms of services like hospitals, restaurants and tourism. In the Netherlands, the Port of Rotterdam started with a consortium back in 2005 with Eurofrigo and VAT Logistics to provide halal logistics services and promote the halal gateway to Europe. Over in France, the Port of Marseilles is developing a halal regional distribution center in collaboration with Malaysia. Then, what about Indonesia?
Frost & Sullivan believe that the adoption of halal logistics in Indonesia has the same characteristic with the adoption of Islamic banking. Around 18 years after the first Islamic banking was established, at the moment Indonesia is still in its infancy in Islamic banking with has only a 2% share of the banking sector in the country. Islamic banking which was firstly known in 1992 along with the issuance of the Law No. 7 year 1992. This law enabled the bank to operate its business with the profit sharing system. Right now, the deliberation of the bill on halal products is still in process on the House of Representatives, with pro and contra from public.
Some barriers facing Indonesia in the halal orientation are institutional barriers, economic barriers, organizational barriers and informational barriers. Procedures are considered as too rigid in certification and add more cost to make it high cost economy. Engaging in halal logistics involves two types of cost: direct cost and transaction cost. Organizational barriers related to the difficulty of implementing fundamental change (organizational goals, core technology etc). Informational barriers include problems of standardization, exchange and control of halal information.
Still early in the game
What the logistics industry is quickly realizing when doing the money-making equation is the huge potential for profitability from the halal industry. With an increasing number of companies that are producing halal goods to tap into the billions of dollar global demand – there is no question that the logistics sector will have to adjust to meet their clients needs and even more important – consumers demands. Frost & Sullivan estimates Halal logistics revenue for Indonesian market is at USD 29.2 billion in 2011.
As with Islamic finance, for the first time a number of countries and associations have embarked on various enterprises to create and develop formal certification, standardization and trade processes for the Halal industry. There is a sudden sense of recognition of the importance of this sector by all players, both private and public. Nonetheless, it is still early in the game.
Source : http://www.frost.com/prod/servlet/market-insight-top.pag?Src=RSS&docid=236707916 - July 1, 2011
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