Tapping a vast market

Tapping a vast market

The restoration of ties with Saudi Arabia offers a chance for Thailand to compete in the lucrative halal export segment

Visitors examine products on display at a recent edition of Thailand Halal Assembly.
Visitors examine products on display at a recent edition of Thailand Halal Assembly.

The restoration of diplomatic relations between Thailand and Saudi Arabia in 2022 following a 30-year break has created new opportunities for Thailand to tap into demand for its halal products in Middle Eastern markets.

The global Muslim population is roughly 2 billion and is expected to account for 25% of the total by 2030.

Thaweelap Rittapirom, president of the Islamic Bank of Thailand (IBank), said products sold in practicing Muslim countries must be certified as halal.

The global market for halal foods is expected to be worth more than US$2 trillion by 2027, with Thailand's share of this market around $300 billion.

Although Thailand has a minority Muslim population, the country has great potential to become a hub for halal food and beverage production in the region.

Entrepreneurs must monitor the latest trends and developments in the sector to cater to the dynamic demands of the burgeoning consumer base if they aim to secure a foothold in this highly competitive market, said Mr Thaweelap.

NAVIGATING BOUNDARIES

He said when people think of halal, most believe it only relates to food. According to Islam, halal covers every aspect of a Muslim's daily life, including clothing, working conditions and finance.

Practicing Muslims navigate between the boundaries of halal, the Arabic word for permissible, and haram, Arabic for forbidden.

Definitions of what is deemed halal or haram are based on the Islamic teachings in the Koran, which outlines the general principles relating to halal food, emphasising cleanliness and purity across the value chain, ranging from production to distribution and consumption.

Moreover, the payment or receipt of interest is considered forbidden based on an Islamic belief that money should not be used to generate more money, but should be used to facilitate trade and investment in productive activities.

This prohibition of interest has a significant impact on the economy, as it encourages the development of productive activities and discourages speculation and excessive risk-taking. Some people believe it promotes social justice by ensuring that wealth is distributed fairly and that the benefits of economic growth are shared by every member of a society.

The term tayyib means good, pure and uncontaminated. Shariah scholars and operators in the halal industry are taking a renewed interest in the concept of tayyib.

Tayyiban, which refers to sustainable practices, takes into account the protection of health, food safety, animal rights, the environment, social justice and welfare in the food production process, in accordance with Islamic teachings.

In addition to opportunities for food exports, Thailand has potential for halal tourism as the country is attracting more Muslim tourists lured by destinations that cater to practicing Muslims.

Brazil is the world's largest exporter of halal food products, while Thailand ranks third in Asia behind Indonesia and Malaysia.

A visitor looks at food items at the Thailand Halal Assembly. Patipat Janthong

MARKET KNOWLEDGE

"I think Thailand needs to truly understand the halal market and its evolving needs, implementing industrial policies that cater to the dynamic demands of this expanding consumer base, as well as continued government support," Mr Thaweelap said.

The country's halal-certified products and services are considered a commercial passport to enter the markets of Islamic countries.

However, Thailand needs to elevate its halal certification as rivals Malaysia and Indonesia raise their standards, he said.

Saudi Arabia is Thailand's second-largest export market in the Middle East, with huge growth potential as annual income is $20,000 per person and the population totals 37.4 million.

The value of trade between the two nations increased 40% in 2022 following the restoration of diplomatic ties.

Understanding the Saudi Arabian market requires reading its "Vision 2030" document that sets out the country's strategy to diversify its economy and reduce dependence on oil revenue, while attracting foreign direct investment to drive economic growth, create jobs, expand knowledge of new technologies, and enhance competitiveness, said Mr Thaweelap.

Saudi Arabia is widely perceived as a key wealth market in the Middle East, with massive consumption of luxury products, he said.

However, many migrant workers are employed in the country, particularly from South Asia, who have a lower level of purchasing power, said Mr Thaweelap.

He said if Thai products can meet the standards of Saudi Arabia's consumers, Thai entrepreneurs could become essential suppliers of food and beverages to other member states of the Gulf Cooperation Council, comprising Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.

These states are considered a "new frontier" for Thai exporters.

A combination of upheavals and civil wars in the region, geopolitical competition and the shale energy revolution has dramatically transformed the Middle East.

Saudi Arabia has more leaders in their 40s that are well-educated and have the ability to shape the country's future, said Mr Thaweelap.

They have created fertile ground for change -- from cultural and social change to ambitious investments in sustainability and innovative urbanisation through landmark projects, he said.

The future in the region looks promising, Mr Thaweelap said.

Visitors chat during the 'Halal Mahanakhon 2023: The Charm of Arabian Desert' festival showcasing Arab food and fashion at Seacon Square Srinakarin mall. Somchai Poomlard

CERTIFICATION RULES

Certification is becoming an important export standard to tap into the halal market.

Selling products to this segment requires clarity and transparency in terms of communication and adherence to standards, he said.

With the halal market becoming increasingly competitive over the past five years, entrepreneurs must distinguish themselves by improving the implementation of halal standards, as has happened in Malaysia, said Mr Thaweelap.

The scaling up of halal certification standards requires the creation of knowledge so entrepreneurs can comply with both local regulations and international standards, such as the Hazard Analysis and Critical Control Point (HACCP) and Good Manufacturing Practice (GMP), he said.

The concept of halal covers not only sharia (Islamic religious) law, but also hygiene, sanitation and aspects of food safety.

Large companies should have no problem competing in the halal market because they already produce goods of a high standard, said Mr Thaweelap.

In contrast, he said small and medium-sized enterprises will be required to improve their production standards by becoming part of a robust supply chain to ensure compliance with halal standards, or by differentiating their products and services by adding value to them.

FINANCIAL SUPPORT

Financial institutions such as IBank are ready to provide loans to entrepreneurs seeking to manufacture in accordance with halal standards, Mr Thaweelap said.

On July 15, 2023, IBank collaborated with Export-Import Bank of Thailand to implement a halal entrepreneur exporter programme and jointly held a seminar.

The seminar provided an opportunity for participants to share insights regarding the opportunities and challenges for Thai products entering halal markets, while aiming to improve understanding of halal certification.

The project also explored the potential of reaching Muslim consumer groups via online trading platforms, he said.

IBank facilitated the export of halal products by Thai entrepreneurs to Malaysia, including chicken products, processed food and cosmetics, said Mr Thaweelap.

The bank has a goal of subsequently reaching emerging markets, such as the Middle East, he said.

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