Abdulla Mohammed Al Awar, is CEO of Dubai Islamic Economy Development Centre
There has been much debate around the need to harmonize Islamic finance standards. But the issue of sharia compliance is much broader than just the finance sector. It extends to the whole halal industry supply chain. It does not only include the raw materials, it also encompasses the integrity of production processes, packaging, storage, delivery and point of sale.
Globally the halal sector – food and beverage, pharmaceuticals, cosmetics and personal care and fashion, but excluding finance – is forecast to be worth USD 1.6 trillion by 2018, with double digit year-on-year growth continuing. But, as impressive as the figures are, the lack of global, or even local and regional, regulations is stunting the industry’s potential at a time when the Muslim population is booming, multinationals are eager to cater for growing numbers of Muslim consumers and discerning non-Muslim customers are attracted by the values inherent in halal products and services.
Historically, halal is a process associated with religious belief. As such, it has been seen as trade that is difficult to control and to guarantee process standards. This has meant consumers have had to rely on the seller and to trust the information provided on labeling to guide their purchases, without legal recourse in the event of fraud. This absence of surety has been and continues to be a significant impediment to global halal trade.
It must be acknowledged that harmonizing halal standards is an emotive topic, particularly in Muslim majority countries. Defining what is halal, and what is not, engenders hot debate among Islamic scholars, which makes agreement on global standards challenging. Cadbury’s problems in Malaysia, earlier this year, are testament to how heated the debate can become, especially when social media can rapidly spread news and views, beyond national boundaries, in a matter of seconds.
The Dubai Islamic Economy Development Centre has been tasked, as part of Dubai’s Capital of the Islamic Economy vision, to work with appropriate stakeholders to develop universally accepted standards. The centre is working closely with stakeholders, in multiple jurisdictions, to find common ground and harmonize regulations, in such a way that local and regional differences can be accommodated. I believe such an approach, that recognizes interoperability among standards, offers the best chance of achieving the widest possible acceptance.
If the Islamic economy is to achieve its full potential, the halal industry cannot continue to operate in local, or regional, silos. With Muslims expected to make up 25% of the world’s population by 2020, multinationals, faced with slow economic activity at home, have identified Muslim consumers as a significant growth market. The ensuing rivalry for a slice of the halal industry has introduced a further complicating factor in the search for common standards. In the absence of globally recognized standards, the main players are being pushed to issue their own version of halal certification, introducing further uncertainty into the market.
Dubai’s holistic approach to the Islamic economy requires a broad approach to harmonization of halal standards. Given the geographic and ethnicity differences that result in variations in halal concepts, it makes sense that the search for harmonization should be broad based, encompassing scholars, governments and the industry itself. If we look outside the halal sector, the most commonly used standards in the world, whether it is for food, health or safety, are industry-supported private standards. So we have to take account of the realities that already exist in the market. If we have strict standards that satisfy the majority of Muslims but which the industry cannot implement, we will get nowhere. We have to find middle ground which is widely accepted, by scholars, producers and consumers.
The debate amongst scholars will always be there. But for the Islamic economy to take its place in the world economy we must find the means to globalize the halal industry. In my view, the best way forward would be for the key markets in the Gulf and South East Asia to come together and adopt halal standards that take into account established standards within the global business cycle. If the biggest halal markets were to set aside their differences and take the lead, I believe the rest of the Muslim world would follow.