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

Study on Halal Industry Investment in Brunei Darussalam9 2. Halal in Brunei Overview of Brunei Halal Brunei Halal is an official Halal certification issued by Ministry of Religious

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Page 1: Study on Halal Industry Investment in Brunei Darussalam9 2. Halal in Brunei Overview of Brunei Halal Brunei Halal is an official Halal certification issued by Ministry of Religious

Study on Halal Industry Investment in Brunei Darussalam

Final Report (August, 2016)

Smart Shield International Sdn Bhd

Page 2: Study on Halal Industry Investment in Brunei Darussalam9 2. Halal in Brunei Overview of Brunei Halal Brunei Halal is an official Halal certification issued by Ministry of Religious

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Agenda for Today

Muslim population in ASEAN, India and Middle East

Halal food market potential

1. Halal in the World

Halal industry promotion in Brunei

Overview of Brunei Halal Certification

2. Halal in Brunei

Uniqueness of Brunei Halal Certification

Investment incentives in Brunei

3. Competitiveness of Brunei

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1. Halal in the World

Page 4: Study on Halal Industry Investment in Brunei Darussalam9 2. Halal in Brunei Overview of Brunei Halal Brunei Halal is an official Halal certification issued by Ministry of Religious

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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.

204,847,000

178,000,000

172,000,000

145,607,000

80,024,000

75,728,000

74,819,000

40,400,000

39,027,950

32,381,000

31,108,000

29,047,100

26,833,000

25,493,000

25,037,646

Indonesia

Pakistan

India

Bangladesh

Egypt

Nigeria

Iran

Algeria

Sudan

Morocco

Iraq

Afghanistan

Uzbekistan

Saudi Arabia

Ethiopia

① Indonesia

② Pakistan

③ India

④ Bangladesh

⑤ Egypt

⑥ Nigeria

⑦ Iran⑧ Algeria

⑨ Sudan

⑩ Morocco ⑪ Iraq ⑫ Afghanistan

⑬ Uzbekistan

⑭ Saudi Arabia

⑮ Ethiopia

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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.

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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.

JapanFood Ave. MFN Rate:Cosmetics Ave. MFN Rate: 1.42%

ROKFood Ave. Pref. Rate: 23.2%Cosmetics Ave. Pref. Rate: 18.5%%

ASEAN

Brunei Darussalam

AustraliaFood Ave. MFN Rate: 2.6%Cosmetics Ave. MFN Rate: 3.3%

IndiaFood Ave. MFN Rate:51.8%Cosmetics Ave. MFN Rate: 23.06%

Middle EastSaudi ArabiaFood Ave. MFN Rate: 5.1%Cosmetics Ave. MFN Rate:5.2%

UAEFood Ave. MFN Rate:33.7%Cosmetics Ave. MFN Rate:10.8%

ChinaFood Ave. MFN Rate:17.2%Cosmetics Ave. MFN Rate: 14.6%h

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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 204,847,000 87.2 675 138,292

Pakistan 178,000,000 96.4 1,486 264,526

India 172,000,000 14.2 3,931 676,098

Bangladesh 145,607,000 86.3 202 29,413

Egypt 80,024,000 94.7 2,785 222,859

Nigeria 75,728,000 47.9 552 41,787

Iran 74,819,000 99.7 2,785 208,363

Algeria 40,400,000 99.0 658 26,583

Sudan 39,027,950 97.0 NA NA

Morocco 32,381,000 99.0 NA NA

Iraq 31,108,000 98.9 1,281 39,837

Afghanistan 29,047,100 99.8 NA NA

Uzbekistan 26,833,000 96.5 NA NA

Saudi Arabia 25,493,000 97.1 1,807 46,056

Ethiopia 25,037,646 34.0 1,174 29,392

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2. Halal in Brunei

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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 Remarks

Regulated authorities

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)

Logo

Halal Certificate and Halal

Label Order, 2005Law that is basis for Brunei Halal

Brunei Darussalam Standard

for Halal Food PBD 24: 2007Standard of Brunei Halal

Brunei Darussalam Guideline

for Halal Certification, BCG

HALAL1

Official guideline for applicants for Brunei Halal

It explains application, auditing and certification procedures

BCG HALAL 2-4 2、3、4 are guidelines for auditing

Related Laws

Guidelines

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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).

SurveillancePermitAuditingApplication

Auditor

Applicant

Remarks

Submission

of Application

Form

45 days or longer Every 6 months

Surveillance

Every

6 months

Permission from

Inspection

Committee

On-site

Auditing

Document Audit

(Including oral test

to supervisors)

Currently, cost for surveillance is

not billed to applicants

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2. Halal in Brunei

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.

Reference

Alcohol detection labHalal science and metrology centre

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2. Halal in Brunei

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.

Reference

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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.

Food

Company name Overview

Ghanim InternationalNational company owned by Ministry of Finance.

Sells 25 products (as of June 2016) sourced by OEM and their own factory

Golden CorporationTaiwanese company.

Processes seafood of Brunei and exports them.

Hana Soy & WorldJV between a Japanese venture company and locals

Manufactures soy related products

Super WaterLocally owned company

Purify tab water and manufacture oxygen added premium water

Artestian FreshLocally owned company

Purify groundwater using RO filter and produce filtered bottled water

Simpor PharmaJV between Canadian pharmaceuticals and local investors

Manufactures consumer cosmeticsPharmaceuticals

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2. Halal in Brunei

National Company For Brunei Halal Promotion(Ghanim International) National company established in 2009. 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.

Reference

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2. Halal in Brunei

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.

Reference

Product with both Brunei Halal and MUI logosTablets and toiletries of Simpor Pharma

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2. Halal in Brunei

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.

Reference

Packing shripsProcessing plant

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2. Halal in Brunei

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.

Reference

Pet bottle production lineProduction line

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3. Competitiveness of Brunei

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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 ArabiaSaudi

ArabiaGSO

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 JapanJapan Several

There are no government certification. Instead, several organizations

issue their own, JAKIM or MUI certifications.

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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 Remarks

Government certificationSome Halal Certifications are issued by private organization

Brunei Halal is a government certification and thus more reliable

Auditing done by governmentAuditing is also directly done by Ministry of Religious Affairs and not

outsourced.

Brunei imposes Sharia LawBrunei 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.

Zero alcohol contentAny alcohol content is not allowed. In some other certification, low alcohol

content is tolerated.

Non halal food production not

allowed in the same premiseNon-halal food are not allowed to be produced in the same premise

Stringency

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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.

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3. Competitiveness of Brunei

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.

Cost Comparison

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)

Engineer

(Middle)

USD 525 / month

(BND 700)

USD 924 / month

(MYR 3270)

USD 408 / month

(IDR 5,138,000)

USD 2701 / month

(SGD 3604)

ManagerUSD 1125 / month

(BND 1500)

USD 1715 / month

(MYR 6070)

USD 974 / month

(IDR 12,265,000)

USD 4163 / month

(SGD 5556)

StaffUSD 375 / month

(BND 500)

USD 915 / month

(MYR 3238)

USD 411 / month

(IDR 5,174,000)

USD 2336 / month

(SGD 3117)

ManagerUSD 1125 / month

(BND 1500)

USD 1877 / month

(MYR 6643 / month)

USD 1153 / month

(IDR 14,509,000)

USD 4224 / month

(SGD 5638)

Apparel

Staff

USD 375 / month

(BND 500)

USD 424 / month

(MYR 1500 / month)

USD 291 / month

(IDR 3,666,666)

USD 937 / month

(SGD 1250)

Restaurant

Staff

USD 263 / month

(BND 350)

USD 311 / month

(MYR 1100 / month)

USD 230 / month

(IDR 2,900,000)

USD 787 / month

(SGD 1050)

Ma

nu

factu

ring

Offic

e w

ork

er

Re

tail

Source) Interview、JETRO

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3. Competitiveness of Brunei

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.

Cost Comparison

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)

Electricity

(Residential)

USD 0.008 – 0.09 /kWh

(BND 0.01~0.12)

(Progressive)

USD 0.06~0.16/kWh

(MYR 0.22~0.57)

USD 0.11/kWh

(IDR 1352)

USD 0.19/kWh

(SGD 0.25)

Water

(Commercial)

USD 0.5/ m3

(BND 0.66)

USD 0.58 ~ 0.64 / m3

(MYR 2.07 ~ 2.28)

USD 1/m3

(IDR 12,550)

USD 1.67/m3

(SGD 2.25)

Water

(Residential)

USD 0.08~-0.33/ m3

(BND 0.11~0.44)

USD 0.16 ~ 0.56 / m3

(MYR 0.57~2.00)

USD 0.78/m3

(IDR 9800)

USD 1.45~1.85/m3

(SGD 1.93~2.47)

Industrial

Complex

USD 0.13-0.21 /m2/month

(BND 2-3.3/m2/year)

USD 5.37 /m2/ month

(MYR 19)

USD 7-9 / m2/month

(Billed in USD)

USD 0.92-6.43/m2/month

(SGD 1.28-8.58)

Commercial

OfficeUSD 5-20/m2/month

USD 20/m2/month

(MYR 70/ month,

Central KL)

USD 50/m2/month

(Billed in USD,

Sudirman)

USD 28-145/m2/month

(SGD 38-194,

Raffles Place)

Retail

ShopUSD 5-20/m2/month

USD 18/m2/month

(MYR 62,

Central KL)

USD 80-150/m2/month

(Billed in USD,

Plaza Senayan)

USD 279-292/ month

(SGD 372-390,

Orchard Road)

Utility

Re

al-e

sta

te c

ost

Source) Interview、JETRO

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3. Competitiveness of Brunei

Tax in Brunei Tax in Brunei is very competitive. For new entrants, corporate income tax can be zero present.

Cost Comparison

Category Brunei Malaysia Indonesia Singapore

Corporate

Income

Tax

18.5%

(0% for condition)20% or 25% 25% 17%

If pioneer status is approved, 0%

for 8 years

(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 companies75% 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 individualsProgressive

25% for over MYR400,000Progressive Progressive

VAT

0% 6% 10% 7%

No VAT VAT, Standard rate VAT, Standard rate VAT, Standard rate

Source) Interview、JETRO

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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 Remarks

Pioneer status 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

Strategic

Development Capital

Fund (SDC)

Government owned fund which can make equity investment into companies enters into

Brunei

Research &

Development (R&D)

Grant

Provides up to BND 5 million R&D budget for R&D conducted in Brunei

Training Grant By training local Bruneians, up to BND 5 million per annum or 10% of fixed asset,

whichever lower will be provided for 5 years

100%

Foreign Ownership 100% foreign ownership is allowed

One-stop

Service

Government owned entity Darussalam Enterprise established Business Support Centre in

2016. It helps SMEs to resolve disputes with governments

FDI

Promotion

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3. Competitiveness of Brunei

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.

Reference

Source) Interview、Brunei Gov Document

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 FeedmillFeed production for fisheries

Taiwanese company

Hana Soy & World Manufacturer of soy related products Golden CorporationSeafood processing

Taiwanese company

HLDS Steel Manufacture of steel related products SEC MASHIBAH Manufacture of steel related products

MC BiotechAstaxanthin production

Invested by Mitsubishi CorporationSC Tubular Solutions Manufacture of steel related products

Fatakun Chemical productionBrunei International

GatewayITC

Ayamku slaughter house Slaughter house and packing PDS meat industries Processing and packaging of halal meat

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4. Summary

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4. Summary

Suggestions to Build Win-Win Relationship Between Brunei and Japan

Proposal

Winning Point What to Do to WinCurrent Situation

1

2

3

Maximum use of

incentives

Target export from the

beginning

Increasing

Recognition of Brunei

Halal

1 Use available investment

incentives as much as

possible

2Develop business model

to market product both

domestically and

internationally

3 Increase recognition

of Brunei Halal and its

stringency abroad

Land and utility cost in Brunei is competitive

Relatively low labor cost

Small domestic market

Good location (close to major Muslim countries)

Such stringency can be a differentiating factor for Brunei Halal Brand

Stringent certification

Many investment incentives

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Appendix 1. Media Coverage of This Study

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Appendix 1. Media Coverage of This Study

This Study Was Widely Covered by Local Media

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Researched Organization

Smart Shield International (B) Sdn BhdInquiry [email protected]