In 2020, the Halal economy contributed around 7.5 percent to Malaysia’s Gross Domestic Product (GDP). Malaysia currently leads the overall Global Islamic Economic Indicator (GIEI) rankings with respect to the size of the Halal Economy particularly for Islamic finance, halal food, Muslim-friendly travel, and media and recreation sectors[1]. In the Twelfth Malaysia Plan, one of the key strategies to boost Malaysia’s economic growth is through the enhancement of the competitiveness of the halal industry to capture a more significant share of the global halal market.
The largest component of the Halal Economy in Malaysia is the food services sector, with business revenue in the sector estimated at US$31 billion (RM128.8 billion) in 2021 and forecast to reach US$47.6 billion (RM201.02 billion) by 2025. Halal pharmaceuticals are also growing, with business revenues of US$4.0 billion in 2021, and are expected to grow to US$4.8 billion by 2025. Malaysia is regarded globally as a leader in halal pharmaceuticals due to establishing the world’s first halal pharmaceutical standard.
Malaysia’s Islamic finance landscape is well developed and adequately regulated. Islamic finance has been recognized as one of the five key enablers for implementing the strategies outlined in Malaysia’s Halal Industry Master Plan (HIMP) 2030. Nonetheless, Islamic financing to support the Halal economy varies greatly by sector and is more utilized by smaller halal-certified businesses.
The role of Islamic finance in the development of the Halal economy in Malaysia could be further boosted by increasing support for the adoption of digital payments, integrating halal advisory and marketplace, and enhancing current Islamic finance offerings through innovative Islamic finance solutions such as fintech, blended finance, alternative finance, and Islamic social finance.
To accelerate the development of a comprehensive and efficient Halal economy, the report offers the following recommendations:
- There is a need for more effective policy and strategy coordination across different policy makers and relevant financial sector stakeholders.
- Establish closer linkages between programs that support innovation and productivity improvements with Islamic finance.
- Encourage Islamic finance providers, particularly Islamic banks, to participate in public-private sector collaborations to pilot innovative Islamic finance solutions and scale-up.
- Strengthening collaboration with policymakers in other countries to advance the utilization of Islamic finance for Halal Economy.
- Enhancing the role of relevant institutional investors and expanding capital market funding for the Halal Economy.
- Enhancing data sharing on Islamic finance and Halal Economy.
[1] State of the Global Islamic Economy Report 2022