Photo: PENANG, MALAYSIA - MARCH 27, 2016 - Large cargo ship load and unload goods at terminal port in the conduct of international business in Penang, Malaysia / Tuah Roslan / Shutterstock.com
As part of the Dubai Silicon Oasis Authority (DSOA) and Thomson Reuters' Free Zones Outlook Report 2017 that looks at how free zones enable growth of the Islamic economy, Dr. Mohamed Amin Mohd. Kassim who is the Corporate Advisor for Penang International Halal Hub in Malaysia, answers questions about free zones and halal hubs in Malaysia. Dr. Mohamed also shared his thoughts on halal logistics, Dubai's potential for success with a free zone strategy to support the Islamic economy, as well as the potential of establishing free zones not only for halal products, but also for modest fashion.
The report can be downloaded from HERE.
Q: Why are free zones so important?
Dr. Mohamed Amin Mohd. Kassim: Free zones are important when you talk about international trade —where you effectively need to “hub” cargo. Products may come from different countries, but those countries may not be the best places to ship out to others.
So you need a place to bring ingredients and commodities together and come up with a final product. A zone where the tax scenario is friendlier can attract investors to set up there. Likely these hubs will be very close to or linked to onward hubs for shipment.
Also, free zones tend to bring in investors that invest in production. For a long time, India had been diffcult for investors to come onboard due to strict currency controls. However, in the last 5-7 years the country started using free zones and also bringing in foreign investment and it has been very successful in doing this.
Q: Please provide an overview of halal hubs, how they became a phenomenon in Malaysia and what has your role been?
First of all, we are not the frst to look at halal logistics —in fact the Dutch did it before this. They created a portion of the Rotterdam port to handle halal.
Rotterdam —they had the foresight —to create a halal enclave in 1993 inside of a free zone, with 60% of their products being halal. Our job in Malaysia was to take it one step further. In Malaysia and other Muslim countries it is easier to have one body to oversee everything. In other countries, it is harder to have one body. So it becomes an issue —are those bodies in non-Muslim countries doing it for proft or for pure reasons?
As the volume of products increased not all facilities could cater to halal products properly. There was some talk about how we could create specialized halal hubs where only halal products are being handled. It started out from the ports themselves, led by Rotterdam. Anything related to halal is diverted to the hub and handled properly.
But when it comes to trade hubs, such as e-commerce, you need a place to store the goods. They need to be handled in a more economical way.
Penang is part of Malaysia, but we view it independently as a state. The whole of Penang wanted to become a halal state. So they made me a corporate advisor for the HDC in Malaysia and occasionally I am invited to discussions.
Q: What are some of the major success factors for Islamic economy free zones, especially those focused on halal products?
First of all, the location of the facility is important. You must be very close to a terminal —both a sea port and an airport should be close by.
The situation will depend on 2-3 things —one being where you are bringing products and commodities. It is OK if that is far from source as long as the market is closer.
If you look at gelatin —only 0.01% is a halal-related process. For a long time —because of its use in medicines, people have said it is permitted. But today the scholars are saying we have the capabilities. They may want us to provide the source ingredients, but it must be from the bones of animals that have been slaughtered in the halal way. Where can you find the abattoirs where you debone and send bones to a hub or free zone to create gelatin? The gelatin can be fed to pharmaceutical companies as long as supply is consistent.
So this is something with potential —the question is where will it happen in a big way?
But many of the promoters of free zones do not want to wait too long before companies are operational in the zone and it is up and running. They may end up dedicating only half to halal.
Q: What is Dubai’s potential to succeed with a free zone strategy to support the Islamic economy?
Let’s look at Dubai —it has created a very vibrant economy through its ports and airports.
Over the last three years there has been a big move by the government to invite more entrepreneurs and industrialists to Dubai.
For me, although I have not personally conducted an audit, Dubai should be doing well as they have the funds and the logistics hubs —it is about inviting the right industrialists.
Q: What potential is there to establish free zones for the modest fashion sector?
Globally there is currently an anti-Islamic sentiment. But in Asia it is a very different thing, even in Vietnam. They are producing Hijabs —modern, colorful designs to meet the younger generations’ requirements. However, Indonesia, Thailand, Vietnam, as well as the Middle East are seeking to address the opportunities in modest fashion.
When we think about locations such as China, Sri Lanka, Vietnam and Indonesia, they can prepare the textiles and just need to come up with the fnished product inside the free zones. It can also be done very easily on the Indian subcontinent.
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