Halal industry: Pakistan has more potential than Malaysia to thrive
Sitting in McDonald’s in Pakistan, one cannot help notice the halal sign on the packaging of their delectable quarter pounder. Although there is uncertainty on who issues halal certification for McDonald’s food sold in Pakistan, there is no ambiguity at all on the importance of eating halal in the life of over 1.6 billion Muslims in the world.
Consequently, a new and dynamic global halal industry is thriving. The halal brand is not only relevant to food but also pharmaceuticals and fashion including make-up, leather bags and shoes. In countries like Malaysia, the government is pushing hard to make the country a global hub for halal products. This is in addition to the central position that Malaysia has already acquired for itself in the field of Islamic banking and finance.
As Pakistan is another country where Islamic banking and finance is thriving – with over 8% share of Islamic banks in the national banking sector – the relevance of the halal industry is even more important. Malaysia is a country with approximately 29 million people, with about 60% Muslim population. Pakistan, on the other hand, has a population of over 170 million, and predominantly Muslim. Furthermore, unlike Malaysia where production and consumption of non-halal items like alcoholic beverages and other food items like pork are readily available, Pakistan has a more pure regime where consumption of alcohol is banned except for a tiny non-Muslim population and the use of pork and other non-halal food items are virtually non-existent. Hence, Pakistan stands a better chance of emerging as a global hub for the halal industry.
There is a definite need to create a link between the halal industry and Islamic finance. It is true that halal products cannot be deemed fully halal if they are produced through a process that is not entirely Shari’a compliant. As it happens, many halal manufacturers use interest-based borrowing or other Shari’a-repugnant methods of finance, therefore their products cannot be considered 100% halal. Although from a strict Shari’a viewpoint, sale and consumption of such products is not considered impermissible, there is little doubt that such products are not produced through a Shari’a compliant process.
One way of promoting the link between the halal industry and Islamic finance is to ensure Islamic banks and financial institutions only finance halal manufacturers. This can be done by requiring all those seeking finance from Islamic banks to provide a halal certificate before the final approval of their financing application. This halal certification should come from a private body or one sponsored by the government, which should draw its legitimacy from representation of Shari’a scholars from around the world. This body should also be a member of the Organisation of Islamic Conference (OIC).
A similar kind of requirement should be introduced for investing in stocks of listed companies. Although it will be difficult to make this a strict general requirement for investing in global equities because there are not very many halal businesses listed on stock exchanges around the world, it is feasible to construct global, regional and national halal indices. There have been some attempts in this direction in the past, but there is a need to give it an industry level push to promote investment-level linkages between Islamic finance and the global halal sector.
It must not be difficult to identify halal stocks on the stock exchanges in Pakistan. At present, there are about 90 Shari’a compliant stocks on the Karachi Stock Exchange (KSE). Al Meezan Investment Management Limited, a subsidiary of Meezan Bank, applies a rigorous Shari’a screening methodology to calculate and maintain KSE Meezan Index 30 (KMI-30), which comprises 30 top Shari’a compliant stocks on the KSE.
Pakistan, with a huge Muslim population, stands a chance of becoming a global centre of excellence for halal business, if the government pays attention to this lucrative business sector. Halal in the Muslim world is like “organic” in the West, and Pakistan can claim to be a global halal hub if the government spends some time and resources on delineating a halal strategy for businesses in the country.
THE WRITER IS AN ECONOMIST AND A PHD FROM CAMBRIDGE UNIVERSITY
Published in The Express Tribune, August 6th, 2012.
COMMENTS (25)
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Other day I was in a Pakistani Store. I saw a HALAL sign on a bottle of Mango Chutney. How can a vegetarian product be HALAL? The amount of meat consumed in Europe can not be literally HALAL. In the slaughter houses, no religious person is performing live KALMA. There are digital recordings and repetitive replays of KALMA in the slaughter houses. I agree with one of the commentators that HALAL is a brand rather than HALAL in the religious sense.
This is a great article ......very good thought out article can change the dimension of Pakistan in the World.
@AS . you dont know the market size of halal products. its huge. we can export more than our textile exports. Look at New zealand their dairy product product export is more thn our textile export n thr per capita income is $27000. 26 times more thn Pakistan. good article
We've heard this sad story before, Pakistan has more potential in x,y and z than country B, but country B will win because they have security, rule of law and education.
Today nobody would invest in Pakistan with a ten foot pole. The rulers should be ashamed. But perhaps they want it this way.
Who cares about halal food. It's a silly thing to lead the world in. Instead try and excel at cheap manufacturing and a destination for out-sourcing.
The people are ready to stand behind the false claims of the water kit "Engineer" but are un-willing to accept the ideas of an Economist. Who ironicaly is also talking about the betterment of society by developing an industry. What is happening with this nation? Seems like the majority is not willing to have a meaningful dialouge!!
In general Muslims consider Halal means better in quality.When author says if company borrowed money on interest than food is not halal. I think author has no concept of food indutry.Most food is produced under Good Manufacturing Practice and no Muslim or secular Scientist has ever compared food manufactured under GMP and Halal and declared Halal better than GMP. Hence Halal is nothing but a brand name nothing more or less to fool fellow Muslim community members.
@Shaukat: Though I am not a muslim, I understand, courtsy through a large number of muslim friends, that in the matter of HALAL and HARAM there are no dispute among different school of thoughts in Islam. If it is other wise, could you please quote one such FATWA each from those school of thoughts...I just would like to enlighten me.
Man! eighty to ninty% population of pakistan is deprived of red meat because of it's soaring price.And what availble is.is of such a low class particularly beef,that even locals are hardly satisfied with quality of red meat let alone quality conscience foreign consumer.My mouth is always filled with bad taste when i hear such things a as pakistan is one of the bigest milk producing country , or any third class project and with lofty boasts as asia's bigest etc What a self delusion.
This article shows the disconnect between academic world and reality. Malaysia has a head start in Halal industry and islamic finance. They have a good repute because they have pretty good standards on implementing the halal brand. Next time the author goes to a desi store in a western country and buys frozen desi food have look where it is made.
How can "profit" be sharia-compliant? If its not, then any business of halal food will function based on the universal notion of what exactly? By the way, is "loss" sharia-compliant. Can a business lose money and stay sharia-compliant?
@AS(s) Ummmm mate your reasoning is naive and people in the sun become ugly? WHAT?! how educated are you mr. Indian troll! sooo by that reasoning all the western models who work on their tans by staying in the sun are ugly? seriously stupid reasoning!
Though it is true that some univerties have lowered their standards to accommodate few students from backward countries due to their compromised intellectual level, but standard to this level, just can't believe it. Quality of an ecnomist with a PhD. from the Cambridge University has to be much better than this here. Is this an opinion or Mr. Dar's thesis? Is it on economic or religion, what is it? Please, help!
@Ghassan Khan: You're comment was unneccessary and irrelevant.
Pakistan can become a major food supplier to the world in form of real Juices, Fruit pulps, tinned fruits, Dairy products, Vegetables, Ready to eat products prepared from vegetables, Meat, Poultry products, Fish and sea foods, real Silk, Honey and what not. We need planning, training and guidance. Heavy investments are not needed.
@AS , I beg to differ, currently in the halal food industry of the world I have seen 3 countries excelling, Australia, Denmark, and Brazil, and by no means these three countries are poor. Read the article again Malaysia is also trying to improve it. Food industry does not require that the animals be kept in wild, do you think bhains colony in Karachi is arrable land?? On the other side if planned carefully this can also be a minor source of Methane gas production. I would complete agree with the author.
@AS: it is very embarassing to see that we have apologists in our midsts who suffer from the 'brown' complex. The author has made a very strong case for what's already a multi-billion dollar industry. Due to our lack of vision, even large western businesses including wal-mart is trying to serve this niche across Asia, Europe and N america. So you just want to manufacture high technology and export that abroad - classic myopia. But then, perhaps you believe that wannabe copycat is the way to achieve growth. That's fine, there's nothing wrong with that. However, at least if you don't understand another industry, at least not comment on it in such a tone.
Would greatly appreciate if the author or someone else could explain just how can "stocks" be "Shari’a compliant"?
The basic argument here is that we have an advantage in "halal" foods because we have more Muslims than Malaysia, (and no alcohol and pork)...that is some weird reasoning there. Do many people reject Halal products from Malaysia saying "Oh no! They have so many icky non-Muslims there! Ew." ?
One might expect some mention of costs, efficiency, resources, comparative advantage etc. from an economist.
Author did not take into account the various percentages of kick-backs that govt. bereaucracy will want, all the way from the top to bottom. This is just one opportunity that we have squandered.
We need change at the top, and fast!
The only 'hub' Pakistan can be is of radicalism, fundamentalism and extremism. Pakistan is way too unstable to support such a huge industry. This role can easily be carried out by Iran (if the economics restrictions are removed) or Turkey.
Just Saying ....
@AS .. You cant rubbish the author in such a harsh way. He has his views and they sound very valid. The article is about taking inspirations from a country like Malaysia which does not have as much potential then Pakistan in a certain sector but still has done very good. You cannot compare Malaysia with a struggling African nation
only if our govt has the slightest vision....may ALLAH help us ...
The Muslim belief are not univerisal and hence what may considered halal for hanafi maybe not be halal according to hanbali,Maliki or shafi.
There can never be a defacto halal. System, so to create a halal meat or business practice will never possible.
It's a pipe dream of some Muslims, untill We can get all the madhabs to agree or each madhabs create there only halal meat certification and business practice or finance.
Very embarassed to see that someone from Cambridge is so unbelievably and inadvertently hurting his own country. This is what you get from "Islamic Economics" degree (even if its from Cambridge).
We don't want halal foods exports we would like skilled manufacturing of high technology. The foods can be imported from Africa and other developing countries. Countries that are used as "food baskets" are usually the poorest and suffer pollution from the industrial activity.
Pakistan barely has 40% of its land that is arable. Of the 40% land only 10% is grazable. If you expand the grazable land you will cause deforestation , desertification and a general loss in arable land. Pakistan already has very little that is livable. Millions live in hot deserts and become ugly as a result. This man is hiding behind "Islam" to exploit his own people. Shame!