The issue of Halal authenticity is a major concern for many Muslims today. In Islam, an important factor for Muslim consumers is whether a product is Halal (lawful) or Haram (unlawful). Halal products are defined as being pork-free, alcohol-free, following a specific method of slaughter in animal husbandries and only permit the use of Halal-certified raw material suppliers. They also mustn’t be prepared, processed or manufactured using equipment or utensils used on products that are considered Haram, nor shall they be stored next to them.

Halal products are not only limited to food and beverages. The term halal applies to all aspects of life of Muslims. Therefore, the scope of halal products extends to finance, travel, pharmaceuticals and even fashion. The demand for goods and services that are permissible for Muslims are increasing as economic power of Muslims rises, and medical devices are no exception to this trend. In this article, we will thus walk you through the market potential of halal medical devices in Indonesia and Malaysia.

Market Opportunities in Indonesia

The Halal Market is an overlooked niche market where there is a promising demand with very few competitions. It is often considered that niche markets tend to create small profits only. This is partly true; however, if you wisely pick the right country to tap into, there are nevertheless significant profits that one can expect from the halal market.

In fact, Muslims are the second largest religious group across the world. Surprisingly, more than 60% of the entire Muslim population are located in the Asia-Pacific Region, while Indonesia has the largest population of Muslims (203 million) in the world.

 

Estimated Muslim population

% of population that are Muslim

% of world’s Muslim population

Indonesia

202,867,000

88.20%

12.90%

Pakistan

174,082,000

96.30%

11.10%

India

160,945,000

13.40%

10.30%

Bangladesh

145,312,000

89.60%

9.30%

Iran

73,777,000

99.40%

4.70%

Turkey

73,619,000

~98%

4.70%

Afghanistan

28,072,000

99.70%

1.80%

Uzbekistan

26,469,000

96.30%

1.70%

China

21,667,000

1.60%

1.40%

Malaysia

16,581,000

60.40%

1.10%

Population of Muslims by Country

(Source: Pew Research Center)

Indonesia is one of the greatest destinations for the halal industry because it shares a large part of the halal market, where its people have high awareness of halal products. Indonesian people have spent USD 218.8 billion in 2017 across the various sub-categories of the halal lifestyle market, whereas the global halal market size was valued at USD 4.75 trillion. Indonesia halal Lifestyle Center (IHLC) has recorded 10 potential halal business sectors, in which halal pharmaceutical and health are introduced as growing segments.

Indonesia’s growing huge halal market isn't the only one element that makes it the greatest destination for the halal Industry. In 2019, Indonesia’s halal Product Law

came into effect. With this law, now most of the consumer products and services that are imported and distributed in the country must be halal-certified, and medical devices are no exception. On a practical level, currently this law only remains as a voluntary certification, yet it is self-explanatory that once this law is fully implemented, Indonesia’s market will be associated with the extremely high demand of halal product in the future.   

The implementation of the halal Law creates good opportunities for foreign manufacturers while Indonesia’s manufacturers of medical devices, pharmaceutical products, and biological products are facing significant challenges under this law. That is the halal Law does not only apply to finished products, but also raw materials, processed materials of such finished products. The law brought many complaints and concerns by Indonesian manufacturers - many of which are micro to medium enterprises – who highlighted that they have limited supply of raw materials available that complies to the halal standard. As many local manufacturers being unable to meet the demands of the huge halal Market, foreign manufacturers will see a large number of promising opportunities in Indonesia.

Market Opportunities in Malaysia

Malaysia has developed world-class regulation, driving new initiatives to accredit halal certifiers worldwide, Malaysia’s halal market size is estimated at USD 1.9 billion. The market size seems much smaller than Indonesia, however several researches find Malaysia has a strong outlook that follows Indonesia.

State of the Global Islamic Economy Report 2016/2017 by Thomson Reuters and Dinar Standard reports that millennials in Malaysia have the second strongest insight of halal products among Islamic countries. Their research studied the number of interactions of millennials (age between 18 to 34) that engaged to the Islamic economy sector on Facebook for three weeks. They found out that Indonesia has the highest number of interactions (126k interactions) and Malaysia has the second highest number of interactions (84.7k interactions).

 

Islamic Finance

Halal Food

Modest Fashion

Halal Travel

Halal Media and Recreation

Halal Pharmaceutical and Cosmetics

Total

Indonesia

37,500

4,200

68,500

4,600

42,00

7,800

126,800

Malaysia

60,600

7,400

5,300

1,900

1,400

8,100

84,700

Pakistan

4,000

1,200

1,500

500

48,500

200

55,900

USA

2,500

6,800

1,100

1,500

2,200

500

14,600

Philippines

400

7,700

1,200

100

200

1,300

13,900

India

1,800

2,500

500

300

5,200

-

10,300

Saudi Arabia

900

600

900

100

5,300

-

7,800

UK

600

2700

400

300

1000

100

5100

Turkey

-

-

0

-

4900

-

4900

UAE

300

300

200

-

3000

-

3800

Volume of Interaction that Millennials Engaged to Islamic Economy

(Source: State of the Global Islamic Economy Report 2016/2017)

2018/2019 version of the State of the Global Islamic Economy Report also addresses that there is a high potential in Malaysia’s halal market. The report derives market potential by an indicator called the Islamic Economy Indicator. The Indicator measures the strength of the Islamic economy for 73 countries, across supply and demand drivers, governance, awareness and social considerations. The report says Malaysia ranks first among countries best-positioned to seize opportunities in the Islamic economy.

 

Global Islamic Economy Indicator

Islamic Finance

Halal Food

Travel

Fashion

Media and Recreation

Pharma & Cosmetics

Malaysia

111

147.9

74.3

95.5

35.6

64

60.6

UAE

79

70.7

91.5

72.7

95.2

86.6

81.3

Bahrain

60

78

42

26

20.7

47

51

Saudi Arabia

50.2

57

50

35

15

33

45

Indonesia

49

54

47

52

37.9

17

42

Oman

48.7

51

54

34

25

36

45

Jordan

47.2

53

43

42

23

34

58

Top 10 Global Islamic Economy Indicator Scores

(Source: State of the Global Islamic Economy Report 2018/2019)

Halal Certification for Medical Devices in Indonesia

Being the country with the largest Muslim population in the world, Indonesia’s government is trying to regulate and guarantee that all products circulating in Indonesia are Halal. Part of this effort is the introduction of Regulation No. 33 dated October 17, 2014, concerning the Halal Products Guarantee (henceforth mentioned as Halal Law 2014). Article 67 states that the obligation for halal certificates for products circulating and traded in the territory of Indonesia will come into effect 5 (five) years after the regulation was issued.

Animal elements containing and animal-derived medical devices are all henceforth be regulated by this Halal Law 2014. Before they can be Halal-certified, they must first be registered with the Ministry of Health. The application of halal certification for these products is carried out in stages with a grace period for each of them. Medical devices are divided into 4 risk classes with the following grace periods, respectively:

Risk Class A – 7 years (up to October 17, 2026)

Risk Class B – 10 years (up to October 17, 2029)

Risk Class C – 15 years (up to October 17, 2034)

Risk Class D – (set in President Regulation)

According to this law, the obligation to seek halal certification for medical devices which contain animal-derived materials came into effect on October 17, 2019. However, based on Qualtech’s insider information with industry regulators, this law is not fully implemented yet, and remains as only a voluntary certification, until further notice. This is largely attributed to the lack of proper regulations and guidelines issued by the authorities, to smoothen the transition position.

The Halal Law mandated the establishment of the Halal Products Certification Agency (BPJPH), a new government agency under the Ministry of Religious Affairs that will issue halal certificates through a one-stop-shop system. All halal (end to end) certification processes are under the BPJPH. Products which have passed halal certification process will be accorded the halal certification logo, to be affixed on the medical device label. Once the above-mentioned grace period has ended and this law is fully implemented, animal-derived medical devices which did not pass the halal certification process must bear a non-halal annotation on the device label/ packaging.

This halal certification process will be carried out by Halal Auditors, whereby the entire manufacturing process will be inspected, right from raw materials procurement until storage facility. For foreign companies looking to import products that require halal certification into Indonesia (voluntary for now), they first must be halal-certified by an agency from their own country, and that agency must already be registered with the BPJPH. The full list of international partners is forthcoming; however, the terms have been defined by the BPJPH. For now, businesses will have to wait for implementing regulations from the Ministry of Finance regarding the payment of fees, which the BPJPH says will be dependent on the applicants’ type of products or services, and the type of business.

The implementation of a new law is frequently hampered by the absence of implementing regulations to provide the necessary details and guidelines. There continues to be a significant degree of uncertainty surrounding the Halal Law 2014. However, once this law is fully implemented, getting all animal-derived medical devices imported into/ manufactured in Indonesia in accordance with this law will become compulsory.

Halal Medical Device Landscape in Asia: A Comparison

In September 2019, the Malaysia halal medical device standard was published, known as, MS 2636: 2019 Halal Medical Device - General Requirements. This MS 2636 standard application is on voluntary basis and a value-added guideline to the industry, to serve the users requiring halal affirmation. Standards Malaysia strongly urges industry players who are interested in certifying their products to refer to the Department of Islamic Development Malaysia (JAKIM).

Just like in Indonesia, this voluntary standard refers to halal medical devices, that are animal-derived, chemically and biologically. This new standard specifies the requirements in the manufacturing and handling of medical devices and covers products such as (a non-exhaustive list):

  • surgical mesh 
  • contact lens 
  • dental floss 
  • dialysis solution 
  • hemodialysis solution 
  • water injection 
  • suture 
  • humidifier
  • wound wash
  • eye lubricant 
  • bone graft

Medical Device Act 737 does not require medical devices to be halal. In Indonesia, with the implementation of Halal Law 2014, animal derived medical devices are required to be halal certified by the end of transition period, even though this is considered a voluntary practice for now.

However, all registered animal-derived medical devices may be placed in the Malaysian market without halal certification, as the application of MS 2636 is completely voluntary. The requirements to be adhered to while submitting an application for halal certification are mostly similar in Indonesia and Malaysia, right from raw material sourcing until the storage facility, and will have to be audited by certified Halal auditors.

Unlike in Indonesia, the facility for foreign manufacturers who wish to import their animal-derived medical devices into Malaysia to be halal-certified by foreign Halal Regulatory Agencies is not available. The entire process has to be audited by an auditor from JAKIM, including overseas processes.

Conclusion

Malaysia and Indonesia are fully committed to strengthening the Halal industry and achieving the vision of making ASEAN a global Halal Hub. At present, various halal aspects have become a concern in the production and application of various products. Despite being a promising industry backed up by a growing demand, multiple regulation uncertainties and inconveniences dampen its growth. However, with proper navigation through these regulations, the opportunities promised by this industry are encouraging. Qualtech remains as your trusted partner to bring your medical devices into up and coming ASEAN medical device markets. For more information on how to successfully break into ASEAN markets, feel free to be in contact with us.

Reference:

  1. Law of Republic of Indonesia Number 33 Year 2014 (Halal Law 2014)
  2. MS 2636: 2019 Halal Medical Device - General Requirements
  3. Development of halal medical devices in Malaysia: Recommendation and challenges
  4. Global Islamic Economy Report 2016/2017
  5. Global Islamic Economy Report 2018/2019
  6. Malaysia and Indonesia rush to slice up $3tn global halal market
  7. Mapping the Global Muslim Population
  8. Indonesia: Questions Remain Around Halal Certification Compliance in Indonesia
  9. Indonesia’s huge, unmet potential in Halal Market
  10. Global Halal Market Size 2017 By Product (Finance, Food & Beverages, Media & Recreation, Tourism, Pharmaceutical, Fashion, Cosmetics), By Region and Forecasts From 2018 to 2025
  11. Halal Market Size and Forecast, By Product (Food & Beverages, Travel, Media & Recreation, Finance, Fashion, Pharmaceutical, Cosmetics), And Trend Analysis, 2014 To 2024
  12. Indonesia Halal Economy and Strategy Roadmap 2018/2019 Launched

 

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