Malaysia’s Halal Crisis

In Malaysia today, halal practices, or those that adhere to Islamic law, are deeply important for increasingly devout Muslims, who make up more than 60 percent of the population. The country’s Department of Islamic Development, known by its Malay acronym JAKIM, is the sole statutory halal certifier although it has neither fully operational forensic laboratories nor experienced staff, despite having enormous and mostly arbitrary power.

Industry figures have told Asia Sentinel the agency is deeply corrupt, with bribes routinely charged to certify establishments and products as halal and with a long string of other problems that endanger the entire process of what should be serious attention to religious requirements but which has none of those characteristics.

One of the casualties is the Malaysian Halal Industry Development Corporation (HDC), established in 2006 to take over halal certification from JAKIM and promote Malaysian halal products internationally. But in 2009 JAKIM, under mysterious circumstances, took back complete halal certification from the HDC and put it into a newly established department called the Halal Hub Division.

The HDC then morphed into a white elephant operation focused on spending hundreds of millions developing warehousing facilities in what were called Halal Parks with few functions. All of these, like the Labuan Halal Complex, have few or no tenants. Asia Sentinel visited the Perlis Halal Park in Padang Besar recently and found it mainly empty except for a tenant using the park as a staging point to smuggle goods in and out of Thailand. The rest of the HDC’s activities involve organizing exhibitions as an event manager.

Traditionally in Malaysia, stalls, eateries, and restaurants were known to be halal through word of mouth. The surroundings and Islamic symbols on the walls with signs saying “bertanggung halal” were enough assurance. These businesses relied on community recognition. Any premises suspected of not being halal would just be boycotted by locals. It’s only been in the last decade that authorities have been pushing small businesses to seek halal registration.

Today, only a small fraction of Malay sole proprietors and SMEs have gained halal certification. In addition, only a small proportion of international hotels and resorts have halal registration. SME owners and food and beverage managers of hotels say the major barrier to gaining halal registration is money. For many sole proprietors and SMEs who ran traditional businesses, the on-site infrastructure requirements were prohibitive and way beyond their financial means.

A dark side to the halal certification process has cropped up, however, for a process millions of Malaysians take very seriously but know very little about. SME proprietors and F&B managers told Asia Sentinel that JAKIM officials routinely request cash payments above the statutory fees in order to guarantee registration.

In addition, they say, Municipal Councils and the fire department also request cash payments above statutory fees to issue the necessary documents required by JAKIM in halal product and premises applications. According to one F&B manager, this practice is not just carried out by a few rogue officers. It appears endemic. One officer, the manager said, brought out his immediate superior to negotiate the payment.

In another case, a Muslim Lebanese butcher from Australia was setting up a halal choice meat cut butchery in Kuala Lumpur for retail and distribution. A JAKIM official requested a RM50,000 payment for registration. Due to the company’s policy of not paying bribes due to the firm’s religious moral philosophy, investment in Malaysia was immediately aborted.

Some SMEs have tried to circumvent the issue of corruption through hiring consultants or brokers who don’t have technical or religious backgrounds but rather, as one proprietor put it, seem to be “sleazy hustlers” to “facilitate” the process.

Companies have found bucking the system by complaining only leads to drastic consequences, like have their operating licenses suspended and being put out of business.

Some JAKIM officers, the purveyors say, are arrogant and refuse to assist in the registration process, leading to a backlash against certification. The high rate of application rejection is discouraging firms to apply, they say, leading to a black market in rented halal certificates, or even bogus logos, now in epidemic proportions that JAKIM can’t handle. As a consequence, 60 percent of halal registrations in Malaysia are to non-Muslim multinational companies.

JAKIM doesn’t have its own compliance officers on the ground, relying on officers from the Ministry of Domestic Trade to assist. With Domestic Trade officers focusing on their own agendas such as price control, the whole halal regulatory system in Malaysia is undermined. Yet JAKIM’s overzealous actions over incorrect reports made by other parties have led to brand damage.

JAKIM is using the halal certification system to impose its ideas and opinions on the Malaysian community. Just recently alcohol-free beer has been banned in Malaysia, even though these products are widely distributed and sold throughout the rest of the Muslim world. McDonalds Malaysia doesn’t allow customers to bring in cakes that have not been certified halal by JAKIM. Words like ‘chicken ham’, ‘beef bacon’, and ‘chicken char siew’ are not allowed to be used on products certified by JAKIM, even though similar culturally derived food names are certifiable in other countries. JAKIM determines its own standards and opinions about the definition of halal without any recourse to appeal their rulings.

The success and credibility of the agency’s handling of Malaysia’s halal certification system are at stake with 90 percent of Malaysia’s companies outside the scheme. Research indicates that there is a public trust problem with certification, compromising the integrity of the whole halal system.

In order to keep up with the developing sophistication of the international halal trade, JAKIM’s halal certification process requires some innovation to assist Malaysian companies develop a competitive edge. At present, JAKIM’s certification lacks the supply chain tracking element that Thai exporters have perfected, called Hal-Q, and which leads the world with its Halal Science Centre at Chulalongkorn University in Bangkok, established in 1994.

The center focuses on developing standards, a haram (forbidden in Islam) ingredient detection system for certification purposes, halal food production system development with a Halal-GMP-HACCP framework, and developing consumer information systems through Apps, as well as general halal research. The Hal-Q system has not just been widely accepted by Muslim businesses in Thailand but has been taken onboard as an industry standard by many multinational food manufacturers in Thailand.

In addition, many Arab and European countries have also adopted this system and come to Thailand for training on Halal logistic management, putting Thailand more than a decade in advance of any system Malaysia has to offer. This has enabled Thailand to become one of the foremost Halal food manufacturers in the region today.

JAKIM could look at coupling halal certification with Good Agricultural Practice (GAP) and ethical business ratings, such as Tawhid compliance. Tawhid compliance would take into consideration issues far in excess of supply chain management such as management practices, employee exploitation, sustainable production, community flow-downs, and other ethical issues related to business. At the same time, there could be a special certification recognizing the issues related to sole proprietors and small businesses.

In addition to the corruption issues, JAKIM as a certification monopoly has many shortfalls. Staff are viewed as unfriendly. The online application portal doesn’t work most of the time, making applications very difficult for firms domiciled outside Kuala Lumpur. State-level accredited halal certifiers are needed to facilitate easier application and processing. The Halal Hub Division should be made independent, with JAKIM playing more of an appeal and arbitration role for aggrieved applicants.

There needs to be more science put behind the halal process such as the development of standards and enhancing detection techniques, along with much more open public policy discussion. The current method of enforcement relying on the Ministry of Domestic Trade and local government needs rethinking.

However, the major issue in the short-term which is directly related to the whole integrity of the halal application process is eliminating all types of bribery and corruption. A halal certificate issued with a bribe involved under Islam is not halal. The Malaysian Anti-Corruption Commission (MACC) needs to make an investigation of JAKIM’s Halal Hub Division one of the highest priorities to ensure the integrity of Malaysia’s halal certification system.

Murray Hunter is a Southeast Asia-based development expert and a long-time contributor to Asia Sentinel.