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TRADE IN GLOBAL HALAL INDUSTRY: MALAYSIA’S PERFORMANCE AND

PROSPECT

Conference Paper · October 2014

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TRADE IN GLOBAL HALAL INDUSTRY: MALAYSIA’S PERFORMANCE AND

PROSPECT
Shahriar Kabir
School of Business and Economics
Monash University Malaysia
shahriar.kabir@monash.edu

ABSTRACT

With a Muslim population of over 2 billion, market for halal food and products occupies an
important place in global trade. The literature on Halal issue, however, is at an initial stage. The
aim of this study is to contribute to the underdeveloped Halal literature by exploring Malaysia’s
export opportunities in different sectors of Halal food industry. This study analyzes 11 food
commodities, which are taken from Malaysia’s top 20 export food commodities list published by
FAOSTAT. Analyzing the export data from 1991 to 2012, this study finds that the Halal market is
well focused by Malaysian exporters for most of the selected commodities except Palm oil, Palm
Kernel Oil and refined sugar. However, high unrealized potential exists for further Halal market
penetration for most of these commodities. This study contributes as an important guideline for
policy makers in developing policy for Malaysia’s halal industry expansion.

Keywords: Trade, Halal, Food, Halal market, Malaysia

1.0 Introduction

With a Muslim population of over 2 billion, the Halal issue appears as an important trait in global
trading system. The issue is significant not only from religious and social perspective but also from
economic and business perspective. The size of global Halal market exceeds USD 650 billion in
2010, and the projected size of this market is USD 2.1 trillion per year (International Markets
Bureau, 2011). This growing and highly prospective market appears as an unexplored opportunity
of the next era. The literature on Halal issue, however, is at an initial stage and substantially
suffers from shortage in number of published materials. Who are the major players in this global
market segment and what factors have contributed to their global trade success are little known.

In response to the incremental demand of global Halal product and services, Malaysia has recently
taken some long-term initiatives for participating in national and international Halal market. These
initiatives include development of production and supply infrastructure and establishment of
international Halal hub in Malaysia. HDC and JAKIM were launched in 2006 to support the Halal
industry framework. A number of institutions such as HPRC and IKIM are working to develop Halal
knowledge nationally and internationally (Azman & Tajul, 2012). According to the Ministry of
International Trade and Industry (MITI), 20 Halal parks have been established in Malaysia to
facilitate the Halal industry operation.1

Despite extensive infrastructure development and investment plan in the Halal industry, lack of
evidences from structured academic research to support Malaysia’s competitive advantage in

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global Halal market is substantial. Very limited research that is available in the public domain
depicted very glim picture on Malaysian Halal industry performance in global market. For instance,
Azman & Tajul (2012) report that in spite of HDC’s promotion of Malaysian manufacturing exports
to Islamic countries, Malaysian exports share to these countries are very negligible. In another
study on Malaysian meat-industry, Othman et. al. (2009) cast doubt on Malaysia’s competitive
advantage in Halal meat and meat-based market with locally produced raw meat. They rather
advise for establishing international supply chain with Malaysia being involved at the high-end
processing accomplishments. Similar suggestion comes from Kabir (2014) when discussing about
the collaboration possibility between Malaysia and Australia for expansion of Australian Halal
Bovine meat industry.

The aim of this study is to contribute to the underdeveloped Halal literature by exploring
Malaysia’s trade performance in different sectors of Halal food industry. The study investigates
Malaysian exports of 11 food commodities, which are taken from the list of Malaysia’s top 20
exporting food commodities published by FAOSTAT (FAOSTAT, 2010). Analyzing data from 1991 to
2012, the study finds that the Halal market is well focused by Malaysian exporters for most of the
selected commodities except Palm oil, Palm Kernel Oil and refined sugar. However, the Halal
market shows high unrealized potential for most of these commodities. The study outlines an
important guideline for policy makers in developing policy for Malaysia’s Halal industry expansion.

The article is organized as follows. The next Section gives an overview on the prospect of Halal
market and reviews the existing literature to identify the prostect for Malaysia to participate in
global Halal industry. Section 3 explains the theoretical framework of the study, followed by
discussion of results in Section 4. The last Section concludes the work.

1.1 Trade Prospect Of Halal Market: An Overview

Growth of Muslim population and their increasing buying power leads to a high growth of Halal
food demand. Since many Muslim countries depend on the world market for a large portion of
their food consumption, the growing Halal market enhances the prospect for international food
trade. Canadian Government has identified 19 countries as the Key Halal market (Agriculture and
Agri-Food, 2011). This study focuses to those 19 countries.2 In 2001, total import value of food
commodities by the key Halal market was about 23.7 billion USD, which increased to 35.5 billion
USD in 2006 and about 90 billion USD in 2011 (see Figure 2). Unfortunately, Malaysia’s current
position as Halal food exporter is not very optimistic. Malaysia was not been able to capture even
1 per cent of this growing Halal food market during 2001 to 2011.

Countrywise, Saudi arabia appears as the highest importer of Halal food. Their average food
import during 2001-2011 amounts 9 billion USD (detail is shown in Figure 3). Indonesia stands in
second position in the list with 6 billion USD of average food import, followed by UAE, Egypt and
Algeria with average food import of 4.5 to 5 billion USD. The average food import of other
countries of the key Halal market varies from 600 million USD to 3 billion USD. Malaysia’s market
shares in most of these countries for Halal food are below 1 per cent with few exceptions such as

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Bahrain, Indonesia, Pakistan and UAE. Malaysia’s highest market for Halal food is Indonesia with
148 million USD average export. This is only 2.43 per cent of Indonesia’s total Halal food import.

90000000
80000000
70000000
60000000
50000000
40000000
30000000
20000000
10000000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Import Import from Malaysia

Figure 1: Key Halal markets for food and live animal and Malaysia’s share (in 1000 Dollar)
[source: Authors’ calculation based on data provided by UNComtarde through WITS]

Substantial growth of Halal food market is observe during 2001 to 2011, however, the growth was
much faster during 2007-2011 (Detail calculation of average growth of the key Halal food market
is shown in Appendix Table 1). From 2001 to 2006, the average growth of key Halal food market
was about 8 per cent, which increases to 22 percent during 2007-2011. Clearly the growth rate of
key Halal food markets has increased by three times during the second half of the observation
period. However, the growth rate of Malaysia’s share in key Halal food market is only doubled
during this period. For Malaysia, the average growth of Halal market share was more than 13 per
cent during 2001 to 2006, which increases to 29 per cent during 2007 to 2011. Clearly, Malaysia
maintains high growth to capture the global Halal food market, however, fails to maintain the
pace with the growth of the market itself. Under proper policy guideline, Malaysia’s actual growth
of Halal market share will likely align with potential growth.

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10000

8000

6000

4000

2000

Total Average Import Average Import from Malaysia

Figure 2: Average food and live animal imports by key Halal markets from 2001 to 2011 (in
million USD) [source: Authors’ calculation based on data provided by UNComtarde through
WITS]

Since Malaysia aims to develop an International Halal Hub, an in depth investigation of Malaysia’s
trade performance in Halal market is essential for effective policy designing. The study
investigates Malaysia’s performance of 10 major exporting food commodities to international
Halal market. Before explaining the methodology and results of this investigation, existing
literature has been reviewed in the next sub-section.

1.2 Barriers in Halal Market and Opportunity for Malaysia: Review of Literature
With approximately 25% of the world population, the growing Muslim community around the
world enhances the significance of Halal food market and makes up Halal food market as one of
the largest consuming markets (Zakaria & Talib, 2010). The Halal market does not only expand in
Muslim countries but also in non-Muslim countries where number of Muslim immigrants increases
(Esfahani & Shahnazari, 2013). According to Adams (2011), some factors have actively worked
behind the recent surge of Halal food demand. These factors include globalization of production,
migration of Muslims to different part of the world, and strong urge of Muslim community to hold
their religious identity when staying in non-Muslim countries.

Though Halal market appears as highly potential, entry to the market entry is quite challenging for
the suppliers. Literature identifies two important forces that work as major barriers for the Halal
market entry (Zakaria & Talib, 2010; Wilson & Liu, 2011). The first one is external force which is
Muslim preferences or needs based on the culture or demographic background. The second one is
internal force such as organization’s norms, values and attitudes. These forces are reflected in

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practices, principles and beliefs of the employees within the organization. Naturally, firms in
Muslim countries can get advantage in controlling the internal forces compare to the firms based
in non-Muslim countries. In that sense, Malaysia is at advantageous position in expanding Halal
food industry.

Controlling the external forces of the Halal market, however, is highly challenging even for
producers based in Muslim countries. The first challenge that appears is trust and confidence.
Authenticity of the Halal certification and transparency of information play important role in
establishing trust and confidence (Talib & Razak, 2013). Besides, Zulfakar, Jie, & Chan (2012)
emphasized integrity as an important issue when explaining the importance of supply chain.
Traceability, asset specificity, quality assurance and trust and commitment are highlighted as
useful attributes for Halal supply chain integrity. For firms based in non-Muslim countries, meeting
these challenges is quite difficult, which sometimes discourage them from entering the Halal food
market. Australian bovine meat producers are good example of facing such difficulty. Being a
world leader for bovine meat producers, Australia supplies only 10% of total demand of Halal
meat. Both internal and external forces discourage Australian producers to enter Halal market. On
the other hand, by controlling the external and internal issues, India and Brazil have captured
more than 80% of Halal bovine meat market (for detail, see Kabir, 2014).

Similarly, lack of confidence on suppliers can discourage consumers of Halal products to go to

certain suppliers. This has been observed in the UK meat market (Ahmed, 2008). Research shows
that 90% of meat sold in UK is non-Halal. This leads Halal meat consumers to have more
confidence on local meat shops which are run by Muslim people. Comparatively they show less
confidence and trust on large super markets.

Besides trust and confidence, consumer preference is another challenge for Halal food producers.
Preference for Halal standard often varies based on consumers’ cultural and religious background
(Alam & Sayuti, 2011). Non-Arab Muslims are observed to show higher Halal consciousness
compare to Arab Muslims (Hashim & Othman, 2011). Halal logo has also been highly emphasized
by non-Arab Muslims. However, both non-Arab and Arab Muslims are highly cautious when
purchasing meat. In Malaysia, both positive attitude and social pressure are observed to influence
consumers’ Halal food purchase (Alam & Sayuti, 2011). Kamaruddin, Iberahim, & Shabudin (2012)
observes that many consumers are not very willing to pay for the additional cost of Halal logistics,
however, accepts the pressure in response to the religious requirement.

Some of the challenges for the Halal market entry are not very critical to deal with for Malaysian
firms. Since Malaysia is a Muslim country, it’s easier for Malaysian firms to hire Muslim workers
and thus reduce the effects of internal forces involved in Halal industry. These firms can also take
control over some external forces such as consumer confidence, trust, integrity and transparency.
In fact Malaysian government has already achieved some advancement to develop confidence and
trust. They have established organizations like Halal Development Corporation (HDC) and
Department of Islamic Development Malaysia (JAKIM) to support the framework for Halal industry
development. Some institution such as Halal Product Research Centre (HPRI), Halal Industry
research Centre, Institutes of Islamic Understanding of Malaysia (IKIM) are working to develop
widely accepted Halal standard (Azman & Tajul, 2012). Some OIC member countries are convinced
by the generalized Halal standard developed in Malaysia (Rahman, et. al. 2013). With proper

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guideline and coordination, Malaysia might be able to develop a globally accepted Halal standard,
which can be followed by the local firms as well as the international firms.

If Malaysia can successfully standardize the Halal concept, it would enhance confidence and trust
of Muslim consumers around the world on Malaysian producers’ integrity. Besides, with a widely
accepted Halal standard, it would be easier for producers to deal with diversified preferences
worldwide Muslim community. Besides, Wilson & Liu (2011) emphasize on Halal branding to
enhance consumer confidence and trust. Establishment of particular brands for Halal products
could help both producers and consumers know each other.

With the pace of growing Halal market, Halal literature is also developing bit by bit. The existing
literature, however, mostly emphasize the normative issues rather than investigating the positive
issues. Relying on the normative scenario, Malaysia has taken initiative to establish international
Halal hub (Ministry of International Trade and Industry, 2013). The Halal hub will consist of 20
Halal park to support the Halal industry infrastructure and framework. Among few studies that
focus the positive issues related to the Halal hub, Borzooei & Asgari (2013) identifies human
capital, marketing strategy, infrastructure, country's capability, research and development, media,
events, and public and government support as major factors for the success of Halal hub. Othman
et. al. (2009) highlights that Malaysian Halal industry suffers from high production cost of the raw
materials particularly for the Halal meat industry.

The literature, however, does not investigate Malaysia’s current export performance for the Halal
commodities. Export performance analysis for Malaysian local Halal industry is important for
designing a future policy guideline for the international halal hub. This study develops a model for
analyzing Malaysia’s export performance and for identifying the potential food commodities
which are suitable for Malaysian local Halal industry to focus. Next section discusses the
theoretical framework of the model.

2.0 Theoretical Framework

The framework of the Halal trade model developed in this study follows the methodology
suggested by Kabir (2014). The model is based on the three directional trade flows, which are
shown in Figure 1. The trade flows originate from two sources, one is Malaysia and the other is the
global market. From Malaysia, trade flows to two directions. First, trade flows towards the global
market, which is Malaysia’s total export for a particular commodity. In this paper, I term this trade
flow as Malaysia’s Global market position (MyGMP). The second trade flow is towards Halal
market, that is, exports of Halal food from Malaysia to the countries which are identified as Halal
market. This trade flow identifies Malaysia’s current position in exporting a particular commodity
to the Halal market; hence I term this as Malaysia’s Halal market position (MyHMP). The third
direction of the model is from the global market towards Halal market. More specifically, this is
the total imports of Halal food by the identified Halal market from the world. I term this trade flow
as Halal Market Potential (HMPt).

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Key Halal Market (18

countries excluding
Malaysia)
Malaysia’s Halal
Halal market
market position
Potential (HMPt)
(MyHMP)

Malaysia’s Global
market position
(MyGMP)
World market for Malaysia as
selected commodity exporter
Figure 3: A three directional trade flow model for understanding Malaysia’s trade performance
in Global Halal food market

The first direction of Halal trade model is pretty straight forward. Malaysia’s Global market
position (MyGMP) is simply Malaysia’s total exports for any particular commodity. However,
calculating the other two directions require concentration to each country of the key Halal
market.

The value of Malaysia’s Halal market position (MyHMP) for a specific commodity is the summation
of exports of that commodity to each country of the key Halal market. Thus, the equation stands
as:
n
MyHMPt   exp ortsi ,t … … … (1)
i 1

Here, i denote to the country that belong to the key Halal market, n is total the number of
countries that are included in key Halal market (for this study, n=18), and t is the specific year.

Similarly, the value of Halal Market Potential (HMPt) of any specific commodity is the summation
of imports of that commodity by each country of the key Halal market from the global market.
Thus, the equation for Halal market potential stands as:
n
HMPtt   imports j ,t … … … (2)
j 1

Here, j denote to the country that belong to the key Halal market, n is total the number of
countries that are included in key Halal market (for this study, n=18), and t is the specific year.

After calculating the Malaysia’s Halal market position (MyHMP) for a specific commodity and the
Halal Market Potential (HMPt) for that commodity by a trading partner, I try to answer two
important questions. First, how much focus has Malaysia given to the key Halal market in
proportion to their global export for a particular food commodity. This is the division of Malaysia’s
Global market position (MyGMP) by Malaysia’s Halal market position (MyHMP). This ratio is
termed as Halal Market Focus (HMF). Mathematically,

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MyHMPt
HMFt  … … … (3)
MyGMPt

HMFt interprets that out of each dollar of Malaysian total export to the world for a particular
commodity, what value of exports goes to the key Halal market.

The second question is, for a specific commodity, what proportion of Halal market potential has
Malaysia been able to realize. This ratio is termed as Realized Halal Market Potential (RHMPt).
This is the division of Malaysia’s Halal market position (MyHMP) by the Halal Market Potential
(HMPt). Mathematically the term can be defined as:

MyHMPt
RHMPtt  … … … (4)
HMPtt

RHMPtt interprets that out of every dollar of import of a commodity by the key Halal market, how
much how much has been supplied by Malaysia.

Calculation of HMFt and RHMPtt ratios explain whether Malaysia has focused much to the Halal
market for export of their major food commodities. Even if Malaysia has focused much to the
Halal market, how much potential of the Halal market has Malaysia realized? Results for
calculation of HMFt and RHMPt ratios are presented in the next section.

3.0 Data Analysis and Findings

This study concentrates to Malaysia’s top 11 food export commodities, which are Beverage (non-
Alcoholic), Cocoa Butter and powder, Coconut (copra) oil, Coffee Extracts, Fatty acid,
Hydrogenated oil, Palm oil, Palm kernel oil, Pastry, Soybean oil and Sugar Refined.3 Trade data has
been collected from UNComtrade Database for the year 1991-2012. For each commodity, the
trade destinations are 18 major Halal markets suggested by the Government of Canada (Global
Halal Food Market, 2011). These countries are Algeria, Bahrain, Egypt, Indonesia, Iran, Iraq,
Jordan, Kuwait, Lebanon, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Syria, Tunisia, Turkey,
United Arab Emirates and Yemen. For each food commodity, results for the calculation of HMFt
and RHMPtt are presented in the following subsections 4.1.1 till 4.1.11.

4.0 Beverage (non-Alcoholic)

Based on the time plot, the RHMPtt ratio non-alcoholic beverage, that is, trade of from Malaysia to
Halal market versus the World to Halal Market increase at a steady rate and has an upward trend.
Out of the total imports from Halal Market, Malaysia exports a total of 1.89% in 1991 which rises
up to 8.15% in 2012. The lowest export of non-alcohol beverage from Malaysia falls in 1998 with
the value of 0.17% whereas the highest result in 2012. Along the steady increase throughout the
years, a slight spike occurred in 1997 and a sudden decline arose in 2009 to 2010 with values of
1.77% and 3.00% respectively. Generally, it is sufficient to presume that Halal Market is importing
gradually more non-alcohol beverage from Malaysia over the years.

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An upward trend is also observed in the HMFt ratio which is the export of non-alcohol beverage
from Malaysia to Halal Market versus from World to Halal market. Out of the total exports of non-
alcohol beverage from Malaysia, 8.66% enters the Halal Market which later increased to 11.49% in
2012. Although the trade ratio declines in the earlier period, it rose steadily until it reaches the
peak at 2008 which has the highest export value of 26.79% during the studied period. However, it
slowly falls until it reaches 11.49% in 2012. This specifies that although the export value differs,
the value of the final year for the studied period is still relatively higher than the value at the
beginning which shows that Malaysia is in general, exporting more to Halal Market.

Figure 4: HMFt and RHMPtt for 11 selected commodities

Trade Ratio of Beverage Non-Alcohol

30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
1996

2005
1991
1992
1993
1994
1995

1997
1998
1999
2000
2001
2002
2003
2004

2006
2007
2008
2009
2010
2011
2012

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

Trade Ratio of Cocoa Butter and Powder

25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
1997
1991
1992
1993
1994
1995
1996

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

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Trade Ratio of Coconut (Copra) Oil

80.00%

60.00%

40.00%

20.00%

0.00%

2001

2011
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000

2002
2003
2004
2005
2006
2007
2008
2009
2010

2012
Halal Market Focus (HMF)
Realized Halal Market Potential (RHMPt)

Trade Ratio of Coffee Extract

14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

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Figure 4: HMFt and RHMPtt for 11 selected commodities (cont.)

Trade Ratio of Fatty Acid

80.00%
60.00%
40.00%
20.00%
0.00%

2004

2011
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

2005
2006
2007
2008
2009
2010

2012
Halal Market Focus (HMF)
Realized Halal Market Potential (RHMPt)

Trade of Hydrogenated Oil

60.00%
40.00%
20.00%
0.00%
2007
1991

1993

1995

1997

1999

2001

2003

2005

2009

2011

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

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Trade Ratio of Palm Oil

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
1991

1995

1999
1992
1993
1994

1996
1997
1998

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Halal Market Focus (HMF)
Realized Halal Market Potential (RHMPt)

Trade Ratio of Palm Kernel Oil

100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

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Figure 4: HMFt and RHMPtt for 11 selected commodities (cont.)

Trade Ratio of Pastry

20.00%

15.00%

10.00%

5.00%

0.00%
1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011
Halal Market Focus (HMF)
Realized Halal Market Potential (RHMPt)

Trade Ratio of Soy Bean Oil

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
1991

1999

2007
1992
1993
1994
1995
1996
1997
1998

2000
2001
2002
2003
2004
2005
2006

2008
2009
2010
2011
2012

Halal Market Focus (HMF)

Realized Halal Market Potential (RHMPt)

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Trade Ratio of Sugar Refined

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

2009
2010
2011
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

2012
Halal Market Focus (HMF)
Realized Halal Market Potential (RHMPt)

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4.1.1 Cocoa butter and powder

An increase in trend is seen in the RHMPtt ratio for exports of cocoa butter and powder. Out of
the total imports from Halal Market, the total exports from Malaysia compromise of 3.70% in
1991 which later rises up till 13.99% in 2012. The total amount in 1991 is considerably the
lowest whereas the highest amount falls in 2011 with a total of 23.49%. Although an increasing
trend is seen, there are several noticeable plummet in certain years such as 2001 to 2002 and
2008 to 2009. Nonetheless, it is evident that Halal Market is importing substantially more from
Malaysia from year to year.

On the other hand, the HMFt ratio of cocoa butter and powder exports increases in a steady rate
throughout the studied period from 1991 to 2012 with minor fluctuations in particular years.
The total exports from Malaysia to Halal Market started at 0.38% in 1991 which rises until 3.16%
in 2012. Out of the 21 years, the lowest export from Malaysia to Halal Market is in 1996 with a
total export of 0.24% whereas the highest amount of exports is at 2011 with 4.75%. Overall, this
specifies that Malaysia is exporting at slightly higher ratio to the Halal market compared to the
World.

4.1.2 Coconut (copra) oil

The RHMPtt ratio for coconut (copra) oil illustrates an upward trend over time. Out of the total
import of coconut oil from Halal Market, Malaysia exports a total of 20.81% in 1991 which
increased up till 57.04% in 2012. The lowest and highest total amount of export result in 1993
with a total trade ratio of 10.36% and 2011 with a total trade ratio of 58.41% respectively. Thus,
it is evident that over time, Halal Markets are importing more coconut oil from Malaysia
compared to the World.

Conversely, the time plot of HMFt ratio noticeably has a downward trend whereby it is
decreasing slightly over the years. Out of the total exports of coconut oil from Malaysia, 16.15%
enters the Halal Market which declined to 15.46% in 2012. The lowest and highest export
throughout the studied period falls in 1992 with a value of 8.43% and 2001 with value of 73.52%
respectively.

4.1.3 Coffee extracts

The export of coffee extract shows that the RHMPtt ratio rises over the studied period from
1991 to 2012. Out of the total imports from Halal Markets, Malaysia exports a total of 0.12% in
1991 which increased to 11.05% in 2012. There were no exports of coffee extract from Malaysia
to Halal Market in 1994, 1995 and 1996. Despite that, it is seen that Halal Market import more
from Malaysia from time to time.

Likewise, the HMFt ratio of export of coffee extract is increasing. Out of the total exports from
Malaysia, 0.97% entered the Halal Market in 1991 which increased to 6.61% in 2012. The
highest export ratio of coffee extract from Malaysia to Halal Market falls in 2005 by 12.29%.

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Meanwhile, the lowest falls in 1994 and 1996 whereby out of the total exports from
Malaysia, no coffee extract enters the Halal Market. Nevertheless, it is shown that over the
years, Malaysia is exporting progressively more to Halal Market compared to the World.

4.1.4 Fatty Acid

The RHMPtt ratio for export of fatty acid drops over the studied period from 1991 to 2012. Out
of the total imports from Halal Markets, Malaysia exports a total of 53% in 1991 which declines
to 27% in 2012. However, maximum fatty acid import by Halal Market from Malaysia is observed
in 1992, which is 57% of their total import.

Likewise, the HMFt ratio of export of fatty acid also declines. Out of the total exports from
Malaysia, 15% enters the Halal Market in 1991 which decreased to 3.86% in 2012. In fact, the
ratio continues to drop since 2006.

4.1.5 Hydrogenated oil

The RHMPtt ratio for hydrogenated oil is increasing over the years. Out of the total import from
Halal Markets, Malaysia exports 11.52% in 1991 which increased to 42.44% in 2012. The total
exports fluctuate with the highest export validated at 42.50% in 2009 whereas the lowest
constitute of 11.52% at the beginning of the study period. This expresses that Halal Markets are
importing gradually more hydrogenated oil from Malaysia from year to year.

As well, the HMFt ratio of hydrogenated oil export is increasing but at a slower rate. Out of the
total exports from Malaysia, 1.61% enters the Halal Market in 1991 which later rise up to 6.50%
in 2012. Over the studied period of 21 years, the lowest amount of export is shown at 1991
while the highest result at 9.57% in 2001. Typically, this indicates that Malaysia is exporting
more to the Halal Markets compared to the World.

4.1.6 Palm oil

The RHMPtt ratio for export of palm oil is gradually decreasing over the years. Out of total
import of palm oil by the Halal Markets, Malaysia exports 92.05% in the beginning of the study
period at 1991 which falls to only 51.40% in 2012 with the lowest exports constituting of 39.33%
in 2006. Thus, it is likely that over the past 21 years, Halal Market is importing progressively
more palm oil from the World compared to Malaysia.

Similarly, the export of palm oil shows a decreasing trend of HMFt ratio but at a steady rate. In
1991, out of the total export of palm oil from Malaysia, 29.21% enters the Halal market which
later falls to 11.57% in 2012. The highest and lowest export ratio of palm oil from Malaysia to
Halal Market constitute of 38.29% and 11.12% in 1995 and 1994 respectively. This indicates that
there are higher chances that Malaysia is exporting gradually more to the World instead of
exporting to Halal Market over the studied time period.

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4.1.7 Palm kernel oil

The RHMPtt ratio for export of palm kernel oil fluctuates in a declining manner over the studied
period from 1991 to 2012. Out of the total imports from Halal Market, Malaysia exports 67.49%
in 1991 which later decreases to 52.87% in 2012. Malaysia contributes the highest amount of
palm kernel oil in 1993 which totals up to 85.49%, however, the lowest falls in 2002 at 31.11%.
This specifies that Halal Market started off by importing a great amount of palm kernel oil from
Malaysia but slowly decreases over the years.

In contrast, the HMFt ratio of total exports of palm kernel oil has been approximately similar
throughout the years but with two peaks at 1993 and 2001. Out of the total exports from
Malaysia, 10.75% enters the Halal Market in 1991 whereas 9.71% enters in 2012. The two peaks
contribute 35.64% and 27.83% of exports in 1993 and 2001 respectively. Over the studied
period, the export from Malaysia to Halal Market has not changed much.

4.1.8 Pastry

Based on the time plot of the RHMPtt ratio, there is a clear upward trend in exports of pastry
from 1991 to 2012. Out of the total imports from Halal Market, Malaysia exports a total of
1.43% in 1991 which increased to 5.84% in 2012. During the studied period, 1991 has the lowest
trade ratio whereas the highest falls in 2005 with a total of 5.95%. This indicates that Halal
Market is progressively importing more pastry from Malaysia from time to time although there
are slight declines in certain years.

Likewise, the HMFt ratio of pastry also shows an upward trend. Out of the total exports from
Malaysia, 3.74% enters the Halal Market in 1991 which increased to 5.84% in 2012. The lowest
trade ratio value falls in the beginning of the studied period which is 1991 whereas the highest
value resulted at 2007 with a value of 15.35%. Although the time plot shows an upward trend,
the trade ratio is declining in the recent years. This signifies that the exports of pastry from
Malaysia to Halal Market increases in the earlier period but starts declining recently.

4.1.9 Soybean oil

The export of soybean oil shows that the RHMPtt ratio remained almost unchanged with two
slight peaks throughout the study period from 1991 to 2012. Out of the total imports from Halal
Market, Malaysia exports a total of 0.95% in the beginning of the study period and has a total
value of 2.17% at the end of the period. Two significant peaks occurred in 1993 and 1995 with
values of 2.36% and 6.72% respectively. This specifies that over the years, Halal Market has
been importing relatively the same amount of soy bean oil from Malaysia.

On the other hand, out of the total exports from Malaysia, 8.98% enters the Halal Market in
1991 which increased slightly to 13.21% in 2012. Though the value differs slightly from the
beginning and at the end of the period, two huge spikes occurred in 1993 and 1995 with values
of 39.05% and 54.38% respectively which later fluctuates at the lower values throughout the
years until 2012. The lowest trade ratio export results at 6.36% in 1994. From this time plot, it

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indicates that Malaysia is exporting progressively more soybean oil to the Halal Markets
although at a slower rate.

4.1.10 Sugar Refined

Based on the time plot of the RHMPtt ratio, it is comprehended that the exports of refined sugar
remained relatively constant with only a minor peak throughout the years. Out of the total
imports of sugar refined from Halal Market, Malaysia exports 0.95% in the beginning of the
studied period in 1991. Meanwhile, the total exports from Malaysia accumulated to 0.86% at
the end of the studied period in 2012 whereby the difference of trade ratio is only a slight
decline of 0.09%. Furthermore, the minor peak resulted in a trade ratio of 5.03% in 2007. Hence,
it is likely that Halal Market has been importing roughly the same amount of refined sugar from
Malaysia in the period of 21 years with only a minor change in 2007 whereby the imports from
Malaysia increased fairly.

Similarly, the time plot of HMFt ratio 0f refined sugar is seemingly unchanged with fluctuations
from 1991 to 2004 followed by a significant growth until 2007 which later declines at a steady
rate. Out of the total exports from Malaysia during the studied period, 12.07% and 4.53% enter
the Halal Market in 1991 and 2012 respectively with the lowest constituting of 0.43% in 1999.
Conversely, the sudden growth in 2004 which reaches its peak in 2007 contributes a total export
of 53.82%. Albeit the sudden surge, Malaysia is likely to be exporting more of refined sugar to
the World compared to Halal Market.

4.2 Discussion of Results

The above results reflect some important aspects about Malaysia’s participation in the global
Halal market. Malaysia has increased their focus for participating in the Halal market for certain
commodities such as Beverage (non-Alcoholic), Cocoa Butter and powder, Coffee Extracts,
Hydrogenated oil, Pastry and Soybean oil. Over time, a higher percentage of total Malaysian
exports for each of these commodities has entered the key Halal market. As a result, Malaysia
has been able to increase their Halal market share for these 6 commodities. However, except
Cocoa Butter and powder (Halal market share is 15-20%) and Hydrogenated oil (Halal market
share is 30-40%), Malaysia’s Halal market shares for other four commodities are below 10% or
even much lower than that. Thus these commodities show high potential for export growth in
the Halal market.

On the other hand, Malaysia has lowered their focus towards the Halal market of Coconut
(copra) oil, Palm oil, Palm kernel oil, Fatty acid, and Sugar Refined. Interestingly, Malaysia has
been able to increase their Halal market share for Coconut (copra) oil in spite of their lowered
focus. Thus, Coconut (copra) oil appears as a potential Halal market for Malaysia. In fact,
Malaysia currently supplies 50-60% of total Halal market demand for Coconut (copra) oil. For
Palm oil and Palm kernel oil, Malaysia’s Halal market shares have highly declined over last 20
years. However, Malaysia currently supplies 40-50% of total Halal market demand for Palm oil
and 30-40% of total Halal market demand for Palm kernel oil. Refined sugar supply from

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Malaysia to Halal market is negligible compared to total demand (below 1%). Further study is
required to understand the potential for refined sugar export in the Halal market.

5.0 Conclusion and Future Recommendation

This study investigates Malaysia’s export performance and potential in the Halal food market.
Two factors are analyzed in this study. The first factor is the percentage of total food import by
the Halal market that is supplied by Malaysia. Second, the weight of Malaysia’s Halal market
export compared to their total export.

From Malaysia’s top food export list, 11 commodities have been analyzed in this study. During
22 years’ observation (from 1991 to 2012), it is observed that Malaysia’s focus for Halal market
goes to Beverage (non-Alcoholic), Cocoa Butter and powder, Coffee Extracts, Hydrogenated oil,
Pastry and Soybean oil. However, they are able to successfully grab substantial portion of the
Halal market for Cocoa Butter and powder and Hydrogenated oil. For other 4 commodities,
Malaysia’s Halal market share is reasonably low with high unrealized potential. Coconut (copra)
oil shows potential for further penetration of Halal market, however requires more focus for
doing that. Export of refined sugar needs further investigation to understand its Halal market
potential.

The results found in this study face an important policy question. A number of food
commodities are identified which show existence of unrealized potential for Halal market
exports. However, Malaysia is well known for exports in manufacturing sector compared to the
agricultural sector. Further penetration of Halal food market should not go against Malaysia’s
comparative advantage. Future research on comparative advantage analysis would answer the
policy question about whether Malaysia should further concentrate on local Halal industry
expansion, or should focus on collaborating with international Halal producers as suggested by
Othman et. al. (2009). Solving this policy issue is important for setting an effective guideline
for successful completion of International Halal hub.

Acknowledgement: This research is partial outcome of a project funded by Halal Ecosystem (HE)
Multidisciplinary Platform, Monash University Malaysia. I thank Associate Professor Yunus Ali,
Associate Professor Ruhul A Salim and Dr. Grace Lee for their valuable support in the project.

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Appendix:

Appendix Table 1: Growth of the Key Halal Markets for Food (Excluding Livestock)

Growth Average growth

Total
Total Import
Import from Import
by the key Malaysian Import Import
Malaysia by the Total
Year Halal market market from from
(in 1000 key Import
(in 1000 share Malaysia Malaysia
Dollar) Halal
Dollar)
market
2001 24207501.41 154643.17 0.64%
2002 22523138.06 167074.404 0.74% -6.96% 8.04%
2003 22682502.83 146101.548 0.64% 0.71% -12.55%
2004 27815927.25 204357.206 0.73% 22.63% 39.87% 7.9% 13.6%
2005 35074486.32 269067.151 0.77% 26.09% 31.67%
2006 34092596.89 271415.061 0.80% -2.80% 0.87%
2007 52182110.76 459484.07 0.88% 53.06% 69.29%
2008 70418239.98 548787.786 0.78% 34.95% 19.44%
2009 47185896.06 292939.392 0.62% -32.99% -46.62% 22.8% 28.7%
2010 67970339.57 513644.938 0.76% 44.05% 75.34%
2011 78023994.35 647259.377 0.83% 14.79% 26.01%

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