Empowering the Halal Industry in the Islamic Capital Market
INVEST SHARIAH INDUSTRY DIALOGUE SERIES 2022
Date: 12 April 2022
MR HAIROL ARIFFEIN SAHARI
CHIEF EXECUTIVE OFFICER
HALAL DEVELOPMENT CORPORATION BERHAD
YBhg. Prof. Dr. Ashraf Md Hashim
Chairman of Shariah Committee, Bursa Malaysia Berhad
Encik Mohamad Damshal Awang Damit
Chief Investment Officer, Lembaga Tabung Haji
Encik Ridzham Zaidi Rizlzuwan
Deputy General Manager, Islamic Capital Market Development, Securities Commission Malaysia
Speakers and Distinguished delegates,
Ladies and Gentlemen,
Assalamualaikum Warahmatullahi Wabarakatuh. Salam Sejahtera and a very Good Afternoon
It has been an interesting Invest Shariah Industry Dialogue 2022 for all of us. Our gratitude to our co-organiser, Bursa Malaysia and for the support from the Securities Commission Malaysia. And I would also like to thank our panellists and speakers for the insights, the perspectives, experience and for the knowledge that they have shared with us.
The chosen theme of “Empowering the Halal Industry in Islamic Capital Market” is apt and timely as Malaysia had emerged as the number one nation for nine consecutive years that supports the multi-trillion-dollar global Islamic economy in addressing the growing Islamic economy opportunity1 in the DinarStandard in its State of the Global Islamic Economy (SGIE) Report 2022.
Malaysia now enjoys a mature Islamic finance ecosystem with resilient players, advantageous market size, diverse demographics within a comprehensive infrastructure. And with the Halal economy and the Islamic capital market being natural economic partners, Halal players should be a major component of the capital market.
Our over 1.1 million micro-small and medium-size enterprises or MSMEs have always been one key driving factor for our Halal economy as well as an integral part of the Malaysian economy contributing 38.9% or more than RM500 billion to our gross domestic product or GDP 2. They form 97.2% of the total number of business establishments in Malaysia, employing close to 70% of the country’s workforce.
While there are available government’s stimulus packages and in the Budget 2022 for this group, it may not be enough as that this is a funding / budget in a pandemic. And to grow their respective sectors, they need to look beyond these fundraising activities.
To its credit, Malaysia had also diversified its market-based funding avenues by developing its Islamic Capital Market or ICM, with commendable progress, expanding from RM294 billion as at end-Dec 2000 to RM2,256.4 billion, a 65.9% of the entire domestic capital market, as at end-Dec 2020.
And in this recovery economic post pandemic, raising funds through listing on Bursa Malaysia presents an alternative fund raising that will also increase the number of listed Shariah-compliant companies.
Ladies and gentlemen,
ROBUST GROWTH OF THE HALAL INDUSTRY
Malaysia as the leading Global Islamic Economy Indicator has a longstanding journey of halal industry dating from 1974. And through the Halal Industry Master Plan (2008-2030), Malaysia is aiming to be the global halal centre.
The sizeable market for Halal products catering to 1.9 Billion Muslims in the world which accounts for 24 per cent of the global population will be further increased by non-Muslim practitioners. Pew Research Centre had highlighted that the number of Muslims worldwide is expected to increase by 75% to 2.8 billion in 2050.
And of equal significant is the breadth of the Halal products and services made available to the commercial sector; no longer confined to food and food-related products, but rather to include pharmaceuticals, cosmetics, health products, toiletries and medical devices as well as service sector components such as logistics, marketing, print and electronic media, packaging, branding, and financing.
HDC is expecting the global halal economic growth of 3.1 per cent in terms of compounded annual growth rate or CAGR for the next five years with the Halal industry projected to reach USD3.1 trillion by 2024.
The global Halal market is expected to grow to USD 5.0 trillion by 2030, while domestic growth is estimated to reach USD 113.2 billion from the USD 68.4 billion in 2018. With our existing comprehensive Halal ecosystem, now is the time for Halal players to capitalize on Islamic capital market to ride on this expected growth.
Ladies and gentlemen,
HALAL INDUSTRY IN THE ISLAMIC CAPITAL MARKET
Halal industry is expanding fast and becoming the new market paradigm with its own unique set of challenges and opportunities. And in Malaysia’s drive towards a global halal centre / marketplace, the Islamic Capital Market is well suited to further unlock the potential of the Halal economy, providing a comprehensive end-to-end shariah-compliant ecosystem for emerging businesses in the Halal economy.
As at November 2021, there are 751 shariah-compliant securities from the various sectors listed on Bursa Malaysia, making up 79 per cent of the total 948. 5
Halal industry is now the engine of economic growth in the 12th Malaysia Plan, expected to contribute 8.1 per cent to the country’s GDP and generate RM56 billion export revenue in 2025 compared to RM30.6 billion in 2020. This would be strengthened to produce competitive domestic halal industry players in capturing a bigger global halal market share.
Against this backdrop, the Halal economy holds excellent potential locally and globally, with plentiful opportunities for MSMEs to play a greater role to develop, progress and sustain their business in global halal market complemented by ICM to improve as well as expand their businesses.
Fundraising through listing on Bursa Malaysia, would empower these entrepreneurs to seriously benchmarking with other successful companies for improving their businesses and services. In the long term, it also provides the necessary discipline to better manage their cash flows and finances.
Integrating halal industries with ICM should not be deemed separately as they are under the same umbrella of Shariah. And the collaboration of the industry can lead to harmonious system that can support each other; the Islamic financial system through Islamic banking and capital market instruments will channel their long-term funding to other Halal industry, especially as more sectors enter the Halal sphere.
A listing status provides good company profiling as they are more visible and recognizable as compared to other companies. It improves investor’s confidence as the share prices publicly arrived at on the basis of demand and supply; generally reflective of the real value of the security. Ultimately, it can attract new customers and market.
And with Malaysia’s strong Islamic finance footprint, HDC will work with the Halal players, notably the MSMEs, to allow them to drive the respective Halal sectors and in turn empower the Halal industry to fortify ICM’s growth.
HDC had over the years worked tirelessly on building a comprehensive Halal infrastructure to support the nation’s Halal economy for both existing and potential Halal players as well as consumers.
This is in fact the first HDC’s collaboration with Bursa Malaysia, and we look forward for many more partnerships in the future. We hope that at the end of this engagement, there would be more Halal micro-small and medium-size enterprises including ICM as part of their business operations. This will put the Halal eco-infrastructure on a stronger footing and at the same time, to grow the Halal industry both locally and globally.
And to conclude, it is my sincere hope that the participants that are here today use the opportunity to attain the required details on the benefits of the Islamic Capital Market, and in turn empower themselves to pave the way for concrete action on this new and important alternative funding front. Thank you and I sincerely hope that everyone has had a good engaging session.
Wabillahi taufiq wal hidayah, Wassalamualaikum Warahmatullahi Wabarakatuh.