Halal certification is big business. According to the Dubai-based International Halal Accreditation Forum (IHAF), the cost of certifying halal products is set to reach $1 billion by 2025. With demand for certification on the rise as the Islamic economy expands its offerings, from halal food to pharmaceuticals, cosmetics, and tourism, there is a need for halal certification bodies (HCBs) to be enablers of such an expanding market.
However, critics say the dominant HCB model is hindering rather than advancing the halal ecosystem, being driven by profit rather than consumer well-being and Islamic ethics, while in certain countries there are certification monopolies that are driving out competition in the sector.
Scandals have also emerged of certifiers and regulators refusing or delaying certification unless back-handers are paid.
“The majority of HCBs globally are for-profit and privately limited entities. That is a problem because there isn’t any accountability and transparency, unlike with, say, a publicly-listed company,” Moulana Navlakhi, Theological Director of the South African National Halaal Authority (SANHA), told Salaam Gateway.
The for-profit model is considered a particular problem in non-Muslim majority countries, lacking effective oversight at the government or theological level while imposing high fees on companies wanting the halal logo for sales and export purposes.
“We need a new approach, to go back to why halal certification is done and then identify the shortcomings in the system and, basically, who is responsible,” Mohamed Saleh Badri, managing partner of Prime Group, a halal consultancy in Dubai, told Salaam Gateway. He was formerly an official of the Emirates Authority for Standardisation and Metrology (ESMA), and the inaugural secretary-general of IHAF until mid-2019.
Without any effective oversight of HCBs there is the possibility of malpractice, with annual inspections not being carried out or a facility approved without adequate checks that a company has appropriate halal controls and facilities in place, Shoeeb Riaz, Operations Director at the UK’s Halal Trust, told Salaam Gateway.
RISE OF HCBs
Part of the problem is historical. HCBs in non-Muslim majority countries were established to cater to Muslim minorities in the USA, Europe and elsewhere in the 1970s and 1980s, and effectively operated as monopolies until newcomers started to enter the market as demand for halal products rose over the past 15 years.
The established HCBs had the upper hand as they had created strong relationships with large national halal regulators and theologians, and were able to squeeze out competition from newer HCBs, said Shoeeb Riaz.
“The current HCB monopolies involve a lot of backhanders and there is corruption going on. This keeps the status quo and prevents the sector from developing,” said the director of the UK’s Halal Trust.
Mohamed Saleh Badri agrees. “People have been taking advantage of the process, and there has been corruption due to (HCB) monopolies,” he said.
Estimates vary over the number of HCBs worldwide, with the IHAF stating on its website there are over 120.
More HCBs have certainly been established over the past two decades as halal certification has become more important to consumers and governments. For instance, Pakistan did not have one qualified HCB 15 years ago, said Moulana Navlakhi, yet today Malaysia’s JAKIM recognises two bodies and the government introduced the Pakistan Halal Authority in 2019.
JAKIM is also recognising more foreign HCBs and authorities, rising from 66 HCBs in 42 countries in 2018, to 81 HCBs in 45 countries in 2019.
NATIONAL HALAL AUTHORITIES AND HCBs
National bodies like JAKIM and Indonesia’s MUI, or new government body BPJPH, have considerable influence over HCBs.
If a HCB is recognised and approved by such bodies, it can certify companies to export to key Muslim markets such as Malaysia and Indonesia. HCBs aim to be recognised by regulators such as JAKIM, BPJPH, the UAE’s ESMA, and Saudi Arabia’s SFDA, in order to give their clients access to big Muslim markets. HCBs must agree to oversight by the relevant national body if it wishes to remain recognised.
JAKIM says that for the purpose of halal certification, it has to “ascertain the halal status of the product at every stage and at every process involved by carrying out an official site inspection…” and that because of this, it “requires reputable and credible foreign halal certification bodies as JAKIM representatives to monitor/verify the halal status of these raw materials and products with responsibility and integrity.” The national regulator adds that this recognition “is based on the capability of the foreign halal certification bodies that comply with Malaysian procedures and guidelines.”
JAKIM approves a foreign HCB for a period of two years and the body needs to submit an annual report to the authority, with JAKIM saying that it “shall carry out the review audit after the expiration of the appointment period”.
This is the same rationale that underpins why other national authorities such as BPJPH and SFDA recognise foreign HCBs to issue halal certificates. Such recognition is meant to provide a degree of assurance to consumers.
“South Africa has three HCBs recognised by JAKIM out of six or seven HCBs. The others haven’t applied as they know they cannot meet JAKIM’s standards, or don’t want recognition as they’re not exporting,” said Moulana Navlakhi.
Such non-internationally recognised HCBs are often not subject to any oversight by government bodies due to separation of church and state – halal certification being considered a religious matter in many countries - and not required to follow other good manufacturing practices such as ISO standards.
“Out of all the HCBs globally, only 50 odd are certified to ISO standards, which tells you a lot,” added the South African.
Yet while the number of HCBs is increasing, there are not enough to certify new halal products or be able to effectively handle audits and inspections of halal manufacturing facilities. “We need more HCBs. There are about 50,000 poultry houses and 20,000 beef plants in the USA, how can a few HCBs handle all of that?” Habib Ghanim, president of the USA Halal Chamber of Commerce, Inc., which manages the ISWA Halal Certification Department, told Salaam Gateway.
It is a similar issue in the UK. “There are two or three internationally recognised HCBs in a country of 65 million people. From a practical perspective, how can they cater to thousands of British manufacturers wanting halal certification?” said Shoeeb Riaz.
More HCBs would arguably open up the market, creating more choice for companies and leading to more certified products. “If HCBs were all competing they would have to improve their service and lower the certification price,” he added.
Mohamed Saleh Badri is also a proponent of more competition. “The more players there are, the more competition, and prices will go down and the quality of service will be higher,” he said.
NEED TO BE BETTER REGULATED
But rather than have quantity over quality the HCBs need to be better regulated. One idea is to change the nature of the relationship between HCBs and foreign accreditation bodies to better hold HCBs liable, such as being fined for any shortcomings in certification.
More due diligence on certifiers, as the financial sector does before onboarding companies to check for risks and economic viability, is one such way, said Shoeeb Riaz.
This would require greater transparency from HCBs through external audits and greater accountability.
A grading system could also be implemented.
“When an HCB is audited it could be given a score, so when a company decides which HCB to use for certification they have a reference point, such as given a ‘C’ by the UAE’s ESMA, or Indonesia’s MUI, or JAKIM, but another HCB has an ‘A’. This would incentivise HCBs to improve professional standards,” said Riaz.
Ghanim thinks a ‘halal police’ is required.
“We need a halal police to verify certifiers and shut down businesses if necessary. We need to have an independent body of compliance officers paid for by the government or accreditation bodies to go and check outlets. Who certified it? Who supplies it? This is how it can be done,” said Ghanim.
Another alternative is for governments that have not already done so to establish national certification or accreditation bodies, although in non-Muslim majority countries this may not be viable, either due to political opposition, bureaucratic obstacles or budgetary constraints.
Even in OIC countries this may not be viable. In January, Indonesia waived fees for micro and small enterprises over the next four years to bolster the number of certified businesses, but the “zero tariff” programme will cost some 6 trillion rupiah ($433.18 million).
“Governments shouldn’t carry the tab for the industry as private companies are getting profit from being certified, which is a value they are getting. But certification costs should be reasonable,” said Moulana Nakhlavi.
IS NOT-FOR-PROFIT ACCREDITATION THE SOLUTION?
Mohamed Saleh Badri thinks that while HCB monopolies need to be broken up for more competition to occur, it is government-run halal accreditation bodies that have driven up costs. He suggests taking accreditation away from public entities and be given, under government auspices, to a not-for-profit, private-sector association that operates along similar lines to food safety standards bodies like the International Organisation for Standardisation (ISO) and Hazard Analysis and Critical Control Point (HACCP) certification.
“Halal certification is not any more complex than HACCP or ISO, so why is it more expensive? It is essentially the same process, but because of government accreditation it is expensive,” said the former ESMA official. “All standards and guidelines must be from the government, to make sure the system is right, but verification should be in the hands of the private sector.”
As for whether HCBs should be for-profit or non-profit, there are arguments for and against.
“I don’t think not-for-profit is a magic bullet. But HCBs don’t need to generate huge profits, as they are service-based and only need to cover operational costs,” said Shoeeb Riaz.
Requiring HCBs to be not-for-profit may not even be feasible.
“How do you dismantle structures already there for two or three decades and say, tomorrow you have to be non-profit? You are between a rock and a hard place, it’s hard to change the model,” said SANHA’s Moulana Navlakhi.
Nonetheless, he believes South Africa could be a model as most HCBs are not private limited companies but community or theologically based.
“Our yard stick for measuring the integrity of HCBs is, what are they doing for the community and how committed are they to halal as a lifestyle choice?” said the SANHA Theological Director.
(Reporting by Paul Cochrane; Editing by Emmy Abdul Alim email@example.com)
© SalaamGateway.com 2020 All Rights Reserved