- The Washington Times - Thursday, September 2, 2004

KUALA LUMPUR, Malaysia — This Southeast Asian country, known in recent years for its impressive economic growth, once again is thinking big, this time with small- and medium-size businesses in mind.

The plan, says the government, is to become a major provider of halal food by providing 5 percent of world consumption.

Halal is the Islamic equivalent of kosher food — that is, meeting religious standards of purity and handling. The target is ambitious for this country of 25 million, which currently supplies less than 1 percent of the world market.

But then halal food is an industry that earns $150 billion a year, and it’s growing.

“Since September 11 [2001], Muslims want Muslim products. They’re diverting their center of reference back to their Muslim brothers,” said Ahmad Nadzer Idris of Prima Agri-products, a leading Malaysian exporter of halal products.

Not only Muslims are showing interest.

“The halal logo’s becoming almost as recognizable as the kosher logo,” said a New York disc jockey visiting Malaysia.

People in the industry say market potential for halal is vast but competition is fierce. Even countries where Muslims are not the majority — such as Thailand, the Philippines and China — are trying to gain a foothold in the market.

Thailand is negotiating with Carrefour — Europe’s largest supermarket chain and No. 2 worldwide — to distribute its halal products across Asia. The retail-food giant based in France has 150 “hypermarkets,” which it invented, in Asia.

Some say Thailand, whose government has tended to provide more support for small- and medium-size businesses than does Malaysia, is in a better position to tap the global market. Thailand also produces more raw food materials than its neighbor.

But Malaysia hardly appears daunted. It recently opened four government-subsidized halal food-manufacturing centers, averaging nearly 100 acres each. The government is setting up a technical committee to speed up and coordinate certification of halal products and services.

As an Islamic country, Malaysia has an edge, and its halal logo, say Malaysian officials, is reputed throughout the Muslim world. Food accounts for 20 percent of trade among countries of the Organization of the Islamic Conference.

There are other reasons for optimism in Kuala Lumpur. Manufacturing licenses for halal food in Malaysia doubled from 50 to 100 last year, said the International Trade and Industry Ministry. Food consumption throughout much of Asia is up, as is interest in packaged and processed foods, or value-added products — which is where Malaysia stands to make the bulk of its money from halal exports, because this country doesn’t specialize in the raw materials of food production.

But regional economist Song Seng Wun cautions against optimism against this argument, noting that only 30 percent of Malaysian small- and medium-scale enterprises export their products.

Meanwhile, other countries are trying to tap Malaysia’s halal market, a reflection of the fact that Muslims in the country do not manufacture and distribute enough for their own needs — and reason for the success of some large foreign providers.

Government incentives to turn the tide include a 10-year, 100 percent tax exemption, and the government is promising additional favors. But more than incentives will be needed.

As Maamor Osman, vice president of the Malaysian Muslim Consumers Association, told the government’s Bernama news agency this year, the country needs technological development, changes in legal policies as a result of globalization and deregulation, and regional understandings.

Mr. Idris of Prima Agri-products recommends patience and a focus on the long term. His company has been exporting throughout Asia since 1999, and would like to tap the European and U.S. markets.

But gaining food approval in some countries can take more than five years, he said.

He also warned that some neighboring countries, such as Thailand, can produce cheaper goods because production costs are lower, and in some instances they produce raw materials.

For now, it’s wiser and more efficient for Malaysia to import raw materials, said A.B. Rahman Awang, principal assistant director of the International Trade and Industry Ministry. “But it will eventually become an obstacle to keep importing,” he said.

He said the government is trying to make the transition by encouraging more foreign investors to produce raw materials jointly.

This is happening at an industrial park in Perak state. There, the government has allotted about 500 acres for construction by early next year of an eventual hub for halal meat production. A large-scale Australian meat producer will supply meat to be repackaged and distributed by companies set up in the park.

“This will help us gain more value added from a single raw material,” Mr. Awang said.

In 2003, food accounted for 2.2 percent of total Malaysian exports. Oil, gas and electronics accounted for most exports. But the government is increasingly turning to agriculture as an engine of economic growth.

This approach is humbler and perhaps more practical than that taken under Prime Minister Mahathir Mohamad, who sought to inspire a technological revolution. Mr. Mahathir retired in October, the dream unfulfilled.

By some accounts, tapping the halal market is more suited for Malaysia. But global hub? Mr. Song says the term reeks of Mahathir-era sloganeering, when the trend was to gain public support and international recognition as much through hype as substance.

“But this may be doable. It’s less fuzzy than projects like Cyberjaya,” he said, referring to a planned city intended to attract international high-tech companies in droves that stands desolate five years later.

“Food is dear to everyone’s heart,” he observed hopefully.

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