Malaysia Leads Southeast Asia in Global Islamic Economy
Malaysia’s Increasing Halal Exports, Especially to OIC Countries, as Well as Its Strong Awareness and Governance on Halal, Had Contributed Largely for Retaining the Top Spot
Malaysia again emerged highest in the annual Global Islamic Economy Indicator (GIEI) for year 2020/21, its eighth year in a row, when it came out tops in four out of six categories, including for Halal Food, Islamic Finance, Muslim Friendly Travel, and Pharmaceutical & Cosmetics sectors.
Malaysia was also ranked second and fourth in the Media & Recreation and Modest Fashion sectors respectively, in the annual State of the Global Islamic Economy (SGIE) Report produced by international strategy research and advisory firm DinarStandard.
Supported by the Dubai Islamic Economy Development Centre (DIEDC), the SGIE Report presents an annual update on the Islamic economy, encompassing Halal products, Islamic finance, and lifestyle sectors and services.
It offers a comprehensive picture of countries that are currently best positioned to address the multi-trillion dollar global halal economic opportunity.
A total of 81 countries comprising Organisation of Islamic Cooperation (OIC) countries and non-OIC countries with a prominent halal industry presence were covered in the SGIE Report.
Following closely behind Malaysia are Saudi Arabia in second place, the United Arab Emirates in third while Indonesia and Jordan came in fourth and fifth place respectively.
Three Southeast Asian countries – Malaysia, Indonesia and Singapore – were scored among the top 15 world economies for the Islamic market.
Fourth-ranked Indonesia’s score was lifted by its Islamic finance market, and Singapore, which was 15th in the world, was buoyed by its halal food market.
Malaysia’s increasing halal exports, especially to OIC countries, as well as its strong awareness and governance on halal, had contributed largely for retaining the top spot.
In the Muslim-Friendly Travel category, the Malaysian government even ranked highest in two out of four benchmark dimensions, including in governance, which refers to regulations related to the tourism industry, and awareness in terms of media coverage and stakeholder training.
In the other two benchmark dimensions, Malaysia was placed second in Financial Support for inbound tourism spend, and third in Social Dimension, which refers to the sector’s impact on employment.
“Malaysia has shown consistent growth across all the sectors, with export to OIC numbers increasing in food, pharmaceuticals, and media and recreation,” said Rafi-uddin Shikoh, CEO and Managing Director of DinarStandard.
“Strong awareness and governance credentials have allowed Malaysia to rank higher than other countries with larger export volumes,” he added.
He said Malaysia is also a recognised leader in Islamic banking knowledge, and its plans to send its Islamic finance graduates abroad to help build the industry globally, especially in non-Muslim majority countries, is also a very strong plus point.
Malaysia is also ranked as the world’s best country to invest in or do business in by CEO World Magazine in 2019.
These, in addition to the fact that Malaysia is also ranked as the world’s best country to invest in or do business in by CEO World Magazine in 2019, which speaks to its strong trade partnerships with fellow OIC countries, are just some of the factors that made Malaysia able to retain first on overall Global Islamic Economy Indicator for 2020/21.
Under the theme of ‘Thriving in Uncertainty’, the eighth edition of the report aims to provide insights on capturing opportunities in the resilient Muslim market amidst the ongoing COVID-19 global pandemic.
“This year’s SGIE Report highlights the emerging opportunities that stand out amidst the repercussions of COVID-19, such as global supply chain disruptions, job losses, health services crises, and food security challenges,” said Rafi-uddin.
He pointed out the 33 ‘signals of opportunities’ identified in the Report, which include the tokenisation of sukuks within Islamic fintech and the accelerated digital transformations across all sectors prompted by the COVID-19 pandemic.
“Other signals identified pertain to Halal products, supply chain shifts, food security investments, and nutraceutical demand,” he said.
The Global Islamic Economy Indicator measures how leading national ecosystems are best able to support the development of Islamic economy business activities.
This year’s report estimates that Muslims spent US$2.02 trillion (RM8.23 trillion) in 2019 on food, pharmaceuticals, cosmetics, modest fashion, travel, and media.
In the Muslim-Friendly Travel sector alone, 200.3 million Muslim travellers contributed a total of US$194 billion (RM790 billion) in travel spending in 2019, attesting to its enormous potential.
The ongoing COVID-19 pandemic has crippled growth in this sector, however, with recovery to pre-pandemic levels expected only by 2023.
While the total Muslim 2019 spending reflects 3.2 per cent year-on-year growth, spending in 2020 is forecasted to contract by eight per cent due to the effects of the pandemic, before rebounding back by end of 2021.
“Consumer spending, excluding travel, is forecast to rebound by end 2021, and is estimated to reach US$2.3 trillion (RM9.37 trillion) by 2024, at a cumulative annual growth rate (CAGR) of 3.1 per cent,” said the Report.
The global cosmetics market meanwhile, could make some US$76 billion (RM309.5 billion) in sales to Muslim consumers by 2024, as it is set to grow by 2.9 per cent per annum post-COVID-19.
With an estimated US$4 billion (RM16.3 billion) of Malaysia and Indonesia’s combined market demand for halal cosmetics in 2019, Southeast Asia may just be poised to capture a major slice of that pie, according to the Report.
It added that halal cosmetics brands have adapted to the shifting consumer trends during the demand downturn of the COVID-19 pandemic.
Strategies such as marketing in local languages, especially in Southeast Asia, and releasing special Ramadan ranges to capture the seasonal pick-up in sales, have proven to be successful. “Brands have also built up new product ranges tailored to pandemic lifestyles,” it said.
In Indonesia, L’Oreal saw growth in at-home beauty treatments and above-the-mask eye products, while Wardah launched a halal-certified face cream targeting blue light from scenes, and Rose All Day produced a mask-and-sanitiser kit.
Cosmetics companies can rebound from the pandemic through regional expansion, with Malaysia, Indonesia and India highlighted as growth markets, the report suggested.
In Islamic finance, assets are estimated to have reached US$2.88 trillion in 2019 and are estimated to remain at the same level in 2020. The report also added that following a record year in 2018/19, investments in Islamic economy-relevant companies globally slowed down in 2019/20; dropping by 13% to US$11.8 billion.
“Over 54% of investments were within the halal products category, while Islamic finance and Islamic lifestyle attracted 41.8% and four per cent of investments, respectively.
“Growth figures were driven by corporate-led mergers and acquisitions, venture capital investments in tech startups, and private equity investments,” it added.
Key Takeaways from SGIE Report 2020/21
- Muslim world spent $2.02 trillion on Halal food in 2019.
- Global spend on Halal food and beverage is forecast to hit US$1.38 trillion by 2024.
- Investments in Islamic economy relevant companies totalled US$11.8 billion in 2019/20, a decline of 13 per cent compared to the previous year.
- Indonesia (#1) and Malaysia (#2) ranked ahead in terms of investment activities, while Halal food sector expanded by 219% to $6.3 billion in total deal value.
- 33 key signals of opportunities identified including:
i. tokenisation of sukuks (Islamic bonds) within Islamic fintech,
ii. supply chain shifts
iii. food security investments
iv. nutraceutical demand
v. domestic tourism, and
vi. accelerated digital transformations.
