The Financial Express

Being competitive in global halal food market

Blockchain technology may help Bangladesh to move ahead

| Updated: January 16, 2021 21:17:04

Being competitive in global halal food market

Halal is an Arabic phrase for something that is permitted according to Islamic law. Muslims across the world need to have the assurance that they are consuming products and services with halal certification. In 2019,  Muslims globally spent more than $2.0 trillion on halal products. Despite the COVID-19 pandemic, spending by Muslims is forecasted to reach $2.4 trillion by 2024 at a 5-year Cumulative Annual Growth Rate (CAGR) of 3.10 per cent. As the Muslim population is expected to grow twice as fast as the world population and reach 3 billion, about 31.10 per cent of the global population, by 2060, the halal market is expected to grow. Moreover, halal is increasingly tied to tayyib, which means clean and pure in Arabic. Food that is considered tayyib should be hygienic, exposed to minimum contamination, and free from potential toxins. This has led to an increase in demand for halal products also from non-Muslim consumers. 

To sell halal products to a quarter of the world's population, companies across the world including from the non-Islamic countries are taking several initiatives. For example, Korean companies have adopted a strategy of filling retail space with halal Korean eateries, karaoke rooms, and cosmetics stores in a four-storey Korea town in a Malaysian shopping mall. Given the current global scenario, companies in Bangladesh should take initiatives to promote and sell halal products not only to the $107 billion domestic halal consumer market (globally second top market after Indonesia) but also to capture halal export share. An increase in the halal export share will drive to promote Bangladesh's second-largest export sector of agriculture and food products, exporting $1.4 billion in FY 2018-19after the apparel industry.

Despite having potential, Bangladesh is yet to penetrate the global markets with its halal food, meat, and beverage items. Lack of authority issuing halal certificates for export and multitude of halal certifications is one of the major constraints for halal export from Bangladesh. Another certification challenge faced by companies in the halal industry is a halal certification from one country may not be recognised in another. Therefore, entrepreneurs in the sector are seeking government support to develop policy guidelines, including the development of a universally recognised halal certificate so that Bangladesh could secure a portion of the global market. Halal certification is critical, but it is a bare minimum to make products attractive to Muslim consumers. To penetrate the halal market, it is important to think from an end-to-end supply chain perspective. The inherited characteristics of the blockchain technology enhance trust through transparency from "paddock-to-plate" in supply chains.

Blockchain is a disruptive technology that has the potential to revolutionise the way transactions are recorded and stored on a decentralised network using cryptographic tokens. As the information which cannot be edited is stored in multiple locations with no one holding ownership, all parties within the network have access to each transaction and associated data. The application of blockchain is invaluable as it provides assurance on the integrity of halal-certified products and builds public confidence and trust. The application can invariably help to achieve competitiveness over other halal food exporting nations and to tap into the global halal market. The followings are specific benefits:

INCREASED TRANSPARENCY AND TRUST: Halal supply chains are complex, involving Muslim and non-Muslim countries with different halal eco-systems that are not always well regulated. Blockchain is used to record all the transactions of a complex halal supply chain right from source to the point of consumer purchase. As the transaction recorded on a halal blockchain are time-stamped and cannot be edited, it injects trust into a halal supply chain thus brand owner would be able to guarantee halal integrity. Moreover, data is stored at multiple locations on a blockchain which provides access to multiple stakeholders thus delivering full transparency. Businesses have realised building trust and transparency by investing in blockchain technology assists in managing the risks related to fraud and deception and also to demonstrate their sustainability credentials. Furthermore, it provides an opportunity for businesses to change the process such as certification, recruitment, and transactions in a way they are safe and secure.

INTERMEDIATION: Halal certification involves verifying the transactions by competent Muslims who are experts in Islamic law. Blockchain removes the need for experts to ensure an independent assessment of the integrity of a product or its network. This technology could enforce end-to-end halal assurance and alignment based on specific halal market requirements, supported by automated smart contracts in its process execution and control.

COST REDUCTION: Currently, the halal certification process is a manual paper-based process that is updated with the halal certification body twice a year resulting in outdated information. A halal supply integrated with a blockchain system has the potential to continually update the halal certification with the halal certification body thus providing accurate information as and when needed. Moreover, smart contracts of blockchain technology could automatically verify the compliance of halal certification when there is a new or change of supplier thus minimising the costs.

INCIDENT MANAGEMENT: Over the years, markets have witnessed several incidents in the supply chain where the products are contaminated, or process is compromised raising concerns of halal integrity. In the event where the halal reputation of a brand is at risk, necessary action to isolate and solve the issue or crisis should be taken instantaneously. Blockchain technology could be of assistance to immediately validate an issue and take appropriate action promptly and limit reputation damage for companies.

Smart contracts of halal blockchain could replace the role of halal certification minimising complexity from the point of view of brand owners. This could help Bangladesh to achieve competitiveness over other halal food exporting nations and gain a sizeable export market share as the issue related to the lack of globally acceptable halal certification would no longer be relevant. Moreover, the transparency provided through blockchain promotes halal integrity which addresses the compliance deficiency of Bangladesh halal exports. By addressing these challenges related to compliance and lack of regulatory bodies, the income from halal exports is likely help Bangladesh generate considerable foreign exchange. Home to one of the world's largest livestock population, the country has the potential to turn the halal industry into a vibrant and self-sustaining one.

Professor Shams Rahman is a Professor of supply chain management, and Dr Aswini Yadlapalli is a Lecturer of supply chain management at the Department of Supply Chain and Logistics, College of Business and Law, RMIT University, Melbourne, Australia.

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