Study on Halal Industry Investment in Brunei Darussalam. Final Report (August, 2016) Smart Shield International Sdn Bhd

Transcription

1 Study on Halal Industry Investment in Brunei Darussalam Final Report (August, 2016) Smart Shield International Sdn Bhd

2 Agenda for Today 1. Halal in the World Muslim population in ASEAN, India and Middle East Halal food market potential 2. Halal in Brunei Halal industry promotion in Brunei Overview of Brunei Halal Certification 3. Competitiveness of Brunei Uniqueness of Brunei Halal Certification Investment incentives in Brunei 2

3 1. Halal in the World 3

4 1. Halal in the World Muslim Population in the World The world Muslim population is about 1.8 billion. Mostly lives in South East Asia, Middle East and North Africa. Muslim population is expected to grow continuously, and is expected to two fifth of world population. Indonesia 204,847,000 Pakistan 178,000,000 India 172,000, Uzbekistan 8 Algeria 7 Iran 10 Morocco 5 Egypt 11 Iraq 12 Afghanistan 2 Pakistan 9 Sudan 14 Saudi Arabia 4 Bangladesh 15 Ethiopia 3 India 1 Indonesia Bangladesh Egypt Nigeria Iran Algeria 145,607,000 80,024,000 75,728,000 74,819,000 40,400,000 6 Nigeria Sudan 39,027,950 Morocco 32,381,000 Iraq 31,108,000 Afghanistan 29,047,100 Uzbekistan 26,833,000 Saudi Arabia 25,493,000 Ethiopia 25,037,646 4

5 1. Halal in the World Strategic Location of Brunei ASEAN s major Halal markets, Malaysia, Indonesia and Singapore, are located within almost 1500km from Brunei. 5

6 1. Halal in the World Trade Tariff for Major Markets Tariff among ASEAN countries are exempted. ASEAN is currently negotiating FTA with GCC and OIC (Organization of Islamic Cooperation) is also discussing streamlining trades among member countries. Middle East Saudi Arabia Food Ave. MFN Rate: 5.1% Cosmetics Ave. MFN Rate:5.2% UAE Food Ave. MFN Rate:33.7% Cosmetics Ave. MFN Rate:10.8% ROK Food Ave. Pref. Rate: 23.2% Cosmetics Ave. Pref. Rate: 18.5%% China Food Ave. MFN Rate:17.2% Cosmetics Ave. MFN Rate: 14.6%h Japan Food Ave. MFN Rate: Cosmetics Ave. MFN Rate: 1.42% ASEAN India Food Ave. MFN Rate:51.8% Cosmetics Ave. MFN Rate: 23.06% Brunei Darussalam Australia Food Ave. MFN Rate: 2.6% Cosmetics Ave. MFN Rate: 3.3% 6

7 1. Halal in the World Halal Food Demand Muslim population, food expenditure per person, and expected halal food demand of world top 15 countries in terms of Muslim population are shown below. The halal food market potential is expected to be 1,723 billion USD with these 15 countries. Country Muslim Population Muslim Population % Food Expenditure [USD/capita] Halal Food Demand [million USD] Indonesia 204,847, ,292 Pakistan 178,000, , ,526 India 172,000, , ,098 Bangladesh 145,607, ,413 Egypt 80,024, , ,859 Nigeria 75,728, ,787 Iran 74,819, , ,363 Algeria 40,400, ,583 Sudan 39,027, NA NA Morocco 32,381, NA NA Iraq 31,108, ,281 39,837 Afghanistan 29,047, NA NA Uzbekistan 26,833, NA NA Saudi Arabia 25,493, ,807 46,056 Ethiopia 25,037, ,174 29,392 7

8 2. Halal in Brunei 8

9 2. Halal in Brunei Overview of Brunei Halal Brunei Halal is an official Halal certification issued by Ministry of Religious Affairs. It is mainly handled by Ministry of Religious Affaires but it is also supported by Ministry of Energy and Industry. Overview Item Regulated authorities Logo Remarks Ministry of Religious Affaires, Dept of Syariah Affairs, Halal Food Control Division (Responsible for certification) Ministry of Energy and Industry, Brunei Halal Industry Development Division (Responsible for promotion) Related Laws Halal Certificate and Halal Label Order, 2005 Brunei Darussalam Standard for Halal Food PBD 24: 2007 Law that is basis for Brunei Halal Standard of Brunei Halal Guidelines Brunei Darussalam Guideline for Halal Certification, BCG HALAL1 BCG HALAL 2-4 Official guideline for applicants for Brunei Halal It explains application, auditing and certification procedures are guidelines for auditing 9

10 2. Halal in Brunei Brunei Halal Certification Procedure After application, document auditing and on-site auditing will be conducted. A certification can be obtained in 45 days at fastest. Cost is BND 90 for Certificate(issued to companies) and BND 50 for Permit (issued to products). Application Auditing Permit Surveillance Auditor Document Audit (Including oral test to supervisors) On-site Auditing Permission from Inspection Committee Surveillance Every 6 months Applicant Submission of Application Form 45 days or longer Every 6 months Remarks Currently, cost for surveillance is not billed to applicants 10

11 2. Halal in Brunei Reference Halal Science and Metrology Centre This lab was established by Ministry of Energy and Industry and has MOU with Osaka University and Japan Food Research Lab. It provides DNA analysis and the like to identify whether applied products are truly Halal. Currently, testing cost is not billed to applicants. However, cost will be billed to applicants in the future when their service lines are prepared. If such analysis is strictly conducted during auditing process, such strict process of Brunei Halal can be a differentiator towards other Halal certification mechanisms. Halal science and metrology centre Alcohol detection lab 11

12 2. Halal in Brunei Reference Difference between Halal Certificate and Halal Permit There are two types of certificate in Brunei Halal: Certificate and Permit. Certificate is issued to companies and restaurants. Permit is issued to each product. If one company wish to sell a Halal product, the company needs to obtain certificate for its factory and permit for each product they wish to sell. 12

13 2. Halal in Brunei Major Products Certified by Brunei Halal Major companies certified by Brunei Halal are shown below. Although most companies sell their products domestically, some companies, including Golden Corporation, export their products too. In addition, many local bakeries and restraints obtain Brunei Halal Certification. Company name Ghanim International Overview National company owned by Ministry of Finance. Sells 25 products (as of June 2016) sourced by OEM and their own factory Golden Corporation Taiwanese company. Processes seafood of Brunei and exports them. Food Hana Soy & World JV between a Japanese venture company and locals Manufactures soy related products Super Water Locally owned company Purify tab water and manufacture oxygen added premium water Artestian Fresh Locally owned company Purify groundwater using RO filter and produce filtered bottled water Pharmaceuticals Simpor Pharma JV between Canadian pharmaceuticals and local investors Manufactures consumer cosmetics 13

14 2. Halal in Brunei Reference National Company For Brunei Halal Promotion(Ghanim International) National company established in It sells 25 products as of 2016 (of 21 products sourced externally). Products are sold both domestically and internationally, using Tesco and Lulu Hypermarket networks. It provides marketing channel for SMEs in Brunei. However, it also aims to their own production capacity. One Japanese company supplies soy related products called Supersoya as OEM to Ghanim. As Ghanim can provide package design and marketing functions, Ghanim can be a good partner for SMEs with limited sales network. 14

15 2. Halal in Brunei Reference Simpor Pharma JV between Canadian pharmaceutical company and investors in Brunei. It mainly manufactures vitamin tablets and toiletries. It has its own brand and markets their products by themselves. Over 90% of sales are from abroad. Malaysia, Middle East and Singapore are their major markets. It recently entered Hong Kong, where Muslim population is limited, but sells well due to positive Halal Brand image. Simpor obtained both MUI and Brunei Halal certifications and some products have both MUI and Brunei Halal certification logos as each has different customer recognition and image. Tablets and toiletries of Simpor Pharma Product with both Brunei Halal and MUI logos 15

16 2. Halal in Brunei Reference Golden Corporation Established in 2010 as FDI from Taiwan. BND 30 million was invested. Initially, Golden processed shrimps supplied by Semaun Marine Resources, a company established bymipr. It now conducts aquafarming and fishing along with seafood processing. It markets both domestically and internationally, exporting to East Asian countries including Indonesia, Malaysia, Thailand, Vietnam and Japan. Processing plant Packing shrips 16

17 2. Halal in Brunei Reference Super Water Super Water manufactures Halal Water. Owned by Brunei investors, it purify tab water, add oxygen and sell them as premium oxygen water called Rain Fresh. It also supply them to Ghanim International as OEM. It currently sells their products in Brunei and does not export them. It has over production capacity and aim to export about 80% of their products to foreign markets in the future. They are currently negotiating with an agency in Malaysia to export their products to Malaysia due to its proximity to Brunei. Production line Pet bottle production line 17

18 3. Competitiveness of Brunei 18

19 3. Competitiveness of Brunei Comparison of Halal Certifications Brunei Halal is the only certification that an government directly audit applied entities. Halal Certification Country Issuer Remarks Brunei Halal Brunei Ministry of Religious Affaires Ministry of Religious Affaires, Dept of Syariah Affairs, Halal Food Control Division directly audit applied entities Malaysia Halal Malaysia JAKIM Auditors certified by JAKIM conduct auditing Indonesia Halal Indonesia LPPOM-MUI Not government certification mechanism In 2014, Halal Product Guarantee Act was enacted and Halal Product Security Agency (BPJPH) is to be formed Saudi Arabia Saudi Arabia GSO Import of non Halal foods is prohibited. It follows Halal Standard made by GSO UAE UAE Government In principle, foods sold in UAE are Halal and non-halal foods are soled separately under special approval. All food products are registered before importing and sample examination are conducted at customs. Certifications in Japan Japan Several There are no government certification. Instead, several organizations issue their own, JAKIM or MUI certifications. 19

20 3. Competitiveness of Brunei Strength of Brunei Halal Brunei Halal is a government official certification and auditing is also conducted by staff of Ministry of Religious Affairs. It is understood that Brunei Halal is one of the most stringent Halal certification mechanisms. By increasing Brunei Halal recognition along with its stringency, it is expected that Brunei Halal will become premium Halal Certification. National certification mechanism Item Government certification Auditing done by government Brunei imposes Sharia Law Remarks Some Halal Certifications are issued by private organization Brunei Halal is a government certification and thus more reliable Auditing is also directly done by Ministry of Religious Affairs and not outsourced. Brunei imposes Sharia law, and thus certification issued by Brunei can be more attractive to faithful Muslims No stun gun Use of stun gun is not allowed unlike some other certifications. Stringency Zero alcohol content Any alcohol content is not allowed. In some other certification, low alcohol content is tolerated. Non halal food production not allowed in the same premise Non-halal food are not allowed to be produced in the same premise 20

21 3. Competitiveness of Brunei Examples of Troubles in Other Certifications In other certifications, auditing is done by third party auditors, and therefore there is a case that non-halal products are accidentally certified. Example Remarks South Africa auditing body Delisted JAKIM delisted Muslim Judicial Council Halal Trust of South Africa because it does not meet an international standard McDonalds franchise in Detroit McDonalds franchise in Detroit allegedly sold non-halal food as Halal Midamar falsely marketing meat as Halal US meat company Midamar falsely marketed meat as Halal Cosmetics Halal in Indonesia Since Halal Product Guarantee Act 2014 was enacted, there is a movement to make it compulsory that all cosmetics sold in Indonesia to be Halal Certified. However, Indonesia Cosmetics Association (Perkosmi) said it is unrealistic given many number of cosmetic products and ingredients. 21

22 3. Competitiveness of Brunei Cost Comparison Cost Competitiveness of Brunei:Low Labor Cost(1/2) GDP per capita in Brunei is high but labor cost is relatively competitive because of foreign workers. Category Brunei Malaysia Indonesia Singapore Worker (Staff) USD 375 / month (BND 500) USD 418 / month (MYR 1480) USD 252 / month (IDR 3,173,000) USD 1526 / month (SGD 2036) Manufacturing Office worker Retail Engineer (Middle) Manager Staff Manager Apparel Staff Restaurant Staff USD 525 / month (BND 700) USD 1125 / month (BND 1500) USD 375 / month (BND 500) USD 1125 / month (BND 1500) USD 375 / month (BND 500) USD 263 / month (BND 350) USD 924 / month (MYR 3270) USD 1715 / month (MYR 6070) USD 915 / month (MYR 3238) USD 1877 / month (MYR 6643 / month) USD 424 / month (MYR 1500 / month) USD 311 / month (MYR 1100 / month) USD 408 / month (IDR 5,138,000) USD 974 / month (IDR 12,265,000) USD 411 / month (IDR 5,174,000) USD 1153 / month (IDR 14,509,000) USD 291 / month (IDR 3,666,666) USD 230 / month (IDR 2,900,000) USD 2701 / month (SGD 3604) USD 4163 / month (SGD 5556) USD 2336 / month (SGD 3117) USD 4224 / month (SGD 5638) USD 937 / month (SGD 1250) USD 787 / month (SGD 1050) Source) Interview JETRO 22

23 3. Competitiveness of Brunei Cost Comparison Cost Competitiveness of Brunei:Utility and Land Cost(2/2) Utility cost is very competitive: For residence US 0.09/kWh, and for commercial US 0.07/kWh. Land cost is also very low due to vast assistance from governments. Category Brunei Malaysia Indonesia Singapore Electricity (Commercial) USD 0.15~0.04/kWh (BND 0.20~0.05) (Reverse progressive) USD 0.1/kWh (MYR 0.34) USD 0.09/kWh (IDR 1077) USD 0.10~0.17/kWh (SGD 0.14~0.23) Utility Real-estate cost Electricity (Residential) Water (Commercial) Water (Residential) Industrial Complex Commercial Office Retail Shop USD /kwh (BND 0.01~0.12) (Progressive) USD 0.5/ m3 (BND 0.66) USD 0.08~-0.33/ m3 (BND 0.11~0.44) USD /m2/month (BND 2-3.3/m2/year) USD 5-20/m2/month USD 5-20/m2/month USD 0.06~0.16/kWh (MYR 0.22~0.57) USD 0.58 ~ 0.64 / m3 (MYR 2.07 ~ 2.28) USD 0.16 ~ 0.56 / m3 (MYR 0.57~2.00) USD 5.37 /m2/ month (MYR 19) USD 20/m2/month (MYR 70/ month, Central KL) USD 18/m2/month (MYR 62, Central KL) USD 0.11/kWh (IDR 1352) USD 1/m3 (IDR 12,550) USD 0.78/m3 (IDR 9800) USD 7-9 / m2/month (Billed in USD) USD 50/m2/month (Billed in USD, Sudirman) USD /m2/month (Billed in USD, Plaza Senayan) USD 0.19/kWh (SGD 0.25) USD 1.67/m3 (SGD 2.25) USD 1.45~1.85/m3 (SGD 1.93~2.47) USD /m2/month (SGD ) USD /m2/month (SGD , Raffles Place) USD / month (SGD , Orchard Road) Source) Interview JETRO 23

24 3. Competitiveness of Brunei Cost Comparison Tax in Brunei Tax in Brunei is very competitive. For new entrants, corporate income tax can be zero present. Category Brunei Malaysia Indonesia Singapore Corporate Income Tax 18.5% (0% for condition) If pioneer status is approved, 0% for 8 years 20% or 25% 25% 17% (1)Market capital less than 2,500k MYR;20% for < 50k MYR and 25% for above (2) Market capital more than 2,500k MYR:25% 20% for some listed companies 75% of first 10k SGD and 50% of next 290k SGD are exempted Personal Income Tax 0% 0-25% 5-30% 2-20% No income tac for individuals Progressive 25% for over MYR400,000 Progressive Progressive 0% 6% 10% 7% VAT No VAT VAT, Standard rate VAT, Standard rate VAT, Standard rate Source) Interview JETRO 24

25 3. Competitiveness of Brunei Investment Incentives in Brunei There are several investment incentives in Brunei as shown below. It is important to take maximum advantages of these schemes when one company enters into Brunei. Tax Incentives Equity Investment Grant Menu Pioneer status Strategic Development Capital Fund (SDC) Research & Development (R&D) Grant Training Grant Remarks For industries which are new to Brunei, corporate tax and tariff for ingredients and machineries are exempted Exemption is valid for 8 years with options to extend 3 years Government owned fund which can make equity investment into companies enters into Brunei Provides up to BND 5 million R&D budget for R&D conducted in Brunei By training local Bruneians, up to BND 5 million per annum or 10% of fixed asset, whichever lower will be provided for 5 years FDI Promotion 100% Foreign Ownership One-stop Service 100% foreign ownership is allowed Government owned entity Darussalam Enterprise established Business Support Centre in It helps SMEs to resolve disputes with governments 25

26 3. Competitiveness of Brunei Reference Companies Obtained Pioneer Status (Extract) Major companies obtained pioneer status are listed below. For instance, several pioneer statuses are given in the food industry since each company manufactures different products. Company Overview Company Overview Brunei Methanol Company Methanol production from natural gas Invested by Mitsubishi Gas Chemical and Itochu Simpor Pharma Halal pharmaceuticals production Invested by Viva Pharmaceuticals and others Cryogas & Chemical Industrial gas production Gold Coin Feedmill Feed production for fisheries Taiwanese company Hana Soy & World Manufacturer of soy related products Golden Corporation Seafood processing Taiwanese company HLDS Steel Manufacture of steel related products SEC MASHIBAH Manufacture of steel related products MC Biotech Astaxanthin production Invested by Mitsubishi Corporation SC Tubular Solutions Manufacture of steel related products Fatakun Chemical production Brunei International Gateway ITC Ayamku slaughter house Slaughter house and packing PDS meat industries Processing and packaging of halal meat Source) Interview Brunei Gov Document 26

27 4. Summary 27

28 4. Summary Proposal Suggestions to Build Win-Win Relationship Between Brunei and Japan Winning Point Current Situation What to Do to Win 1 Maximum use of incentives Land and utility cost in Brunei is competitive Relatively low labor cost Many investment incentives 1 Use available investment incentives as much as possible 2 Target export from the beginning Good location (close to major Muslim countries) Small domestic market 2 Develop business model to market product both domestically and internationally 3 Increasing Recognition of Brunei Halal Stringent certification Such stringency can be a differentiating factor for Brunei Halal Brand 3 Increase recognition of Brunei Halal and its stringency abroad 28

29 Appendix 1. Media Coverage of This Study 29

30 Appendix 1. Media Coverage of This Study This Study Was Widely Covered by Local Media 30

31 Researched Organization Smart Shield International (B) Sdn Bhd Inquiry 31