Mideast war brings mounting risks for halal industry, economist warns

 Disruptions to shipping, energy and supply chains pose cost pressures, though demand remains robust.

Countries in the Middle East, particularly Gulf nations, are an important market for Malaysia’s halal industry exports.

PETALING JAYA:

 Malaysia’s halal sector faces rising operational risks from the Middle East conflict, although the industry remains resilient due to diversified export markets, says economist Barjoyai Bardai.

He said the conflict is affecting the global halal industry primarily through disruptions to logistics, higher energy costs, and shifting investor sentiment. “The conflict is more of a cost and logistics shock rather than a demand shock,” said Barjoyai, provost at Malaysia University of Science and Technology.

Barjoyai Bardai.

Certain sectors are more exposed than others, he said.

Halal food and beverage producers, especially those dealing with temperature-controlled or bulky goods, face higher freight costs, longer delivery times, and increased inventory expenses.

Palm oil-based products are vulnerable due to the Middle East’s role as a major buyer and the commodity’s sensitivity to crude oil price movements.

Halal pharmaceuticals and nutraceuticals also face risks linked to reliance on imported halal-certified gelatin and capsules, where sourcing and certification challenges can cause delays and cost overruns.

By contrast, services such as halal certification and consultancy are less affected in the short term, though travel-dependent activities like on-site audits may encounter logistical uncertainties.

Barjoyai noted that many businesses are already adapting by diversifying shipping routes and carriers, increasing buffer inventories, and expanding into alternative markets in Asean, East Asia, and with Islamic countries including Indonesia, Bangladesh, Pakistan, and Turkey.

Some companies are also experimenting with air freight or multimodal transport for high-value, time-sensitive goods despite higher costs.

Looking ahead, he warned that prolonged conflict could result in persistently high freight and insurance costs, intermittent port congestion, and unreliable shipping schedules, increasing working capital needs for exporters.

Rising input costs tied to energy and limited local capacity for critical ingredients such as gelatin, enzymes, and specialty additives also pose risks.

To mitigate these threats, Barjoyai called for stronger industry and policy measures, including developing domestic capacity in halal inputs, expanding export markets beyond traditional destinations, promoting mutual recognition of halal certification with key partners, and supporting multimodal logistics solutions to reduce lead times.

Christina Tee.

Christina Tee, president of the Malaysian International Chamber of Commerce and Industry, said that the Middle East war creates indirect pressures for the country’s halal industry through logistics, energy prices and overall trade uncertainty.

Prolonged instability in the region could affect shipping routes, insurance costs, and freight rates, which in turn may raise operational costs for exporters.

Tee said the Middle East, particularly countries such as Saudi Arabia, the United Arab Emirates and Qatar, is an important market for Malaysian halal exporters. They have long been strong consumers of halal food products, ingredients and consumer goods, and they also act as distribution hubs into the wider Middle East and North Africa region.

However, Malaysia’s halal exports are diversified across Asean, South Asia, Central Asia and other emerging markets, which may help cushion the impact of geopolitical disruptions. Recent export data has shown encouraging growth in markets like Kyrgyzstan and Uzbekistan,” she said.

Malaysia’s halal exports were valued at about RM61.8 billion in 2024, reflecting a 15% year-on-year increase. - FMT