The COVID-19 pandemic has had a colossal impact on the global economy including the Halal industry. Even though we are still facing many uncertainties in the battle to fight against the pandemic, 2021 marked the positive development of vaccine approval by various countries all over the world and contributed to the fall in COVID-19 cases. Responding to pandemics with social distancing measures, e-commerce platforms have flourished across multiple sectors. Innovative ideas were used by businesses in most sectors to adapt and survive, including virtual clothes fittings, virtual tours and travel, as well as artificial intelligence/virtual reality media and recreation. Some of the world’s top exporting countries have been severely affected by COVID-19 as well. The manufacturing and logistics industries have been disrupted causing major supply chain disruptions in various Islamic economic sectors that led to local manufacturing development in essential sectors such as food and pharmaceuticals.
Review of 2021
The Halal industry development drivers are demand and supply. In terms of demand, the drivers are (i) fast-growing, huge and young Muslim population, (ii) Islamic values driving lifestyle practices and ethical consumption and (ii) digital connectivity. According to a report by Pew Research Center (2017), the total population of Muslims will be nearly twice as big between 2015 and 2060, with an increase by 70% from 1.8 billion in 2015 to nearly three billion in 2060. The report also estimates that the Muslim population will remain predominantly young in 2050, with 60% aged between 15 and 59 and 24% below 15.
Religion is rated as ‘very important’ by Muslims while only 54% of the general population shares the same opinion, according to the report. Nowadays, Muslim consumers are increasingly asking for Halal products and services in line with the increase in their awareness.
Digital connectivity is another driver for demand which plays an important role in creating borderless shopping. The demand for digital Islamic economic solutions is gaining momentum, covering various sectors from Islamic finance services, Halal food, cosmetics and pharmaceutical products. All these drivers for demand will be a good opportunity for Halal industry players across multiple sectors to develop and enhance their services and products.
The drivers for the supply side could enable the Islamic economy to flourish, particularly Halal industrial development such as (i) government regulations, (ii) participation of global top brands and (iii) national strategies for the Islamic economy.
There is increasing government involvement in regulating and certifying Halal products in Muslim-majority countries. Designated national bodies such as the UAE’s ESMA, Saudi Arabia’s SFDA, Indonesia’s BPJPH and Malaysia’s JAKIM monitor and provide accreditation to Halal certification bodies. Government involvement has raised awareness of specific Halal product requirements and led to increased compliance, leading to the growth of Halal certification products. Apart from the government, the participation of providers of services and products in the Islamic economy is also coming from the private sector.
Deutsche Bank, HSBC and MasterCard offer Islamic financial services while Nestle, Unilever and Carrefour provide Halal retail products. The involvement of top global brands underlines and focuses attention on the growing importance of the Halal industry.
Furthermore, to search for new economic growth areas, many countries — both Muslim-majority and others — are now seriously focusing on the Islamic economy to diversify their economic portfolio in strengthening national economic resilience.
For many of the oil-producing Muslim-majority countries, March 2020 marked the steepest drop in oil prices, while the pandemic caused a further collapse in demand. Consequently, countries such as Saudi Arabia, the UAE, Nigeria, Kazakhstan, Indonesia and Malaysia have increased their focus on the Islamic economy (GIEI 20/21).
Preview of 2022
In terms of the investment outlook in the Halal industry, there are some highlights in multiple sectors according to the State of the Global Islamic Economy Indicator 2020/21. In the Halal food sector, ready-to-eat meals and food delivery segments witnessed explosive growth. In terms of total deal value, Halal food grew by 219% to US$6.3 billion. Investments in the Halal food sector are expected to increase, especially in delivery, health-based and functional food segments.
In the Muslim-friendly travel sector, the number of deals fell from the previous year, with a total deal value of US$560.8 million to US$340 million due to the global pandemic. Given the push toward digital transformation across all sectors, especially the travel sector, it is no surprise that online travel agencies dominated the list. Muslim arrivals dropped to 42 million in 2020 from an all-time high of an estimated 160 million in 2019. As all countries start this recovery journey, the Muslim travel market is projected to return to the 2019 levels by 2023 (GMTI 2021).
Other critical sectors that will have positive investment growth in the near future are Halal pharmaceuticals and cosmetics. Health has assumed greater importance at both the individual and government levels during and post the pandemic era. Immunity-boosting supplements, telehealth apps and at-home medical devices will see significant growth in the short term. In addition, online cosmetic marketplaces, apps and delivery will become more popular with customers. In the short term, self-care products will play a more critical role than makeup and cosmetics as consumers stay at home.
COVID-19 will become a part of everyday life in the short to medium term, as the new COVID-19 variants threaten the already fragile efforts to recover multiple sectors in the Halal industry. Global vaccination effort remains pivotal to accelerating the recovery. Societies and all industries will have to adjust and adapt to a world in which the ways people interact, shop, work and live are fundamentally different. The pandemic has accelerated the digital transformation of the Halal industry especially in the essential sectors such as Halal food, pharmaceuticals, cosmetics and Muslim-friendly travel. Those sectors have an opportunity to have positive investment growth in the post-pandemic world. Developing a digital-first and contactless customer experience will be a key driver in the Halal industry’s recovery. As the world begins to open again, understanding how best to meet the needs and drivers of supply and demand in the Halal industry will be crucial to ensuring that the Halal industry’s recovery is both sustainable and inclusive.
Dr Sutan Emir Hidayat is the director of the Islamic Economy Supporting Ecosystem at the National Committee for Islamic Economy and Finance (KNEKS). He can be contacted at [email protected]