The basic concepts and main elements
Islam is the fastest growing religion in the world, estimated to have
1.6 billion followers in 2010, and 2.2 billion in 2030 as per the
projections made by the Pew Research Center for its report issued in
January 2011. In Europe, the Muslim community represents 6% of the
population in 2010 (44.1 Million people) and it should represent 8% in
2030 (58.2 Million people).
The term -Halal is applied to various aspects of the Muslim community
life. Halal is used to describe anything permissible / lawful under
Islam, in contrast to -Haram which is anything forbidden.
As per The International Halal Integrity Alliance, Halal food must be
clean and pure and made in accordance with the Islamic guidelines. (source)
The market size
According to the same source, the entire Halal industry is estimated
to be worth $2.3 trillion and includes food and beverage,
pharmaceuticals, cosmetics and personal care, excluding banking. The
Halal food industry alone was expected to reach $662 billion in 2010.
Ultimately, the development of Halal logistics is quite similar to
the one we know in the Islamic Banking, both have to respect the
principles of the Shari'ah.
With such potential in the Halal world, the logistics industry is
waking up. When one knows that logistics operations usually cost around
10% of the total revenue, it is not surprising that logistics companies
are keen to grab a piece of this growing market.
Shiping and logistics in Luxembourg
The Commission for Maritime Affairs (Commissariat aux Affaires
Maritimes, CAM - the Luxembourg supervising authority) celebrated its
20th anniversary in 2010. In 1990, Luxembourg introduced the Maritime
Act to create the maritime public registry and to create the CAM which
is under the responsibility of the Ministry of Economy and Foreign Trade
since 2004.
Luxembourg is one of the largest inland registries in the world, with
more than 200 registered commercial vessels reaching 1 million gross
tons.
In 2008, in Luxembourg, the Cluster for Logistics and the Maritime
Cluster were founded in order to enhance and strengthen Luxembourg as a
major intercontinental logistics hub in Europe and as a major landlocked
maritime jurisdiction.
With its central position and direct air, hinterland waterways,
highway and railway links, Luxembourg has become one of the European
major distribution hubs for an impressive variety of goods and products.
As per the World Banks Logistics Performance 2010 Index, Luxembourg
ranks 5th compared to 154 other countries whereas it ranked only 23rd in
2007.
The airport of Luxembourg is now the 5th largest air freight platform
in Europe and the national air freight carrier, Cargolux, has a world
market share of 4%.
Islamic Finance in Luxembourg
Despite being a non-Muslim country, Luxembourg has a long-lasting experience in Islamic finance.
In 1978, Luxembourg was the first western country that hosted an
Islamic finance institution. In 1983, the first Shari'ah compliant
insurance company in Europe was established in Luxembourg and in 2002
Luxembourg was the first European stock exchange to list a Sukuk.
The Luxembourg Central Bank became the first non-Muslim organization
member of the Islamic Financial Services Board (IFSB) in 2009.
In 2010, the Luxembourg Tax Authorities released two circulars
clarifying the tax treatment applicable to instruments of Islamic
finance in terms of income tax and indirect tax, followed in January
2011 by the Luxembourg Supervisory Authority of the Financial Sector
issuing a statement which clarifies certain rules applicable to the
sukuk. In May 2011, Luxembourg will be the first European country to
host the annual summit of the IFSB.
It is thus hardly surprising that Halal and its implications on the
maritime, logistics and finance sectors have gained increased attention
in Luxembourg.
Interest for Halal in Europe
For the time being, we see a growing interest for Halal products in
Europe. The Muslim consumers are ready to pay more for products
guaranteed as Halal from their production to their distribution.
The airport of Lige (Belgium), being in Europe the 8th biggest
freight airport, aspires to become an Halal logistics hub within two
years.
The port of Marseilles-Fos (France), being in the top 40 of the
biggest ports, will host the 3rd World Halal Forum Europe. The port
aspires to become an Halal logistics hub to attract the traffic of Halal
products coming from Malaysia, China and Brazil and then to dispatch
these goods to the Middle- East and North-Africa.
Since the 1980s the Swiss group Nestl, produces Halal-certified
products and is the worlds leading manufacturer of Halal industrial
food. In 2008, the Halal products represented 5% of Nestls annual sales,
whereas 20% of Nestls factories have an Halal certification. The French
supermarket group Carrefour has launched its own Halal brand and the
fast-food restaurants Quick has opened Halal restaurants in France.
Halal from A to Z
During a whole supply chain process, it is important that the product
remains Halal from the sourcing to the distribution. A brand owner is
responsible of his products Halal integrity.
It should be noted that the majority of Halal products are produced
in non- Muslim countries and their industries and that subsequently
these products have to be transported to their final place of
distribution, mostly in Muslim countries.
At every stage of a supply chain process, the main principle to be respected is the segregation of Halal and non-Halal goods.
A crucial stage is the storage and warehousing. The goods spend a lot
of time at this stage and are manipulated several times which makes it
sensitive to cross-contamination.
The Halal goods are not mixed on pallets or in a common transport
like a container or a bulk carrier. During the transportation, the
product conditions (cool keeping), and hygiene and sanitary requirements
have to be met.
The transported Halal goods are then unloaded in a terminal (port,
airport, etc.) which is a center of complex multimodal transportation
network giving access to other transportation means like waterway,
railway, airway and highway. Due to an impressive number of parties
involved (customs, inspection, terminal operators, etc) and the
manipulations performed, it should be ensured that the Halal integrity
is not compromised in a terminal.
Even if the Muslim community is relatively small (more than 10,000
Muslims) in Luxembourg, the country could play an important role in an
Halal compliant supply chain.
The industries from Luxembourg could be involved in several steps of
an Halal compliant process: at the sourcing (ingredients, additives and
other components), at the production (agricultural product,
pharmaceuticals, etc.), at the packaging, at the labeling, at the
warehousing and storage and at the transport, all funded via Shari'ah
compliant finance instruments.
Luxembourgs potential
Being an important logistics hub, Luxembourg should not miss the
Halal train to place its logistics industry within the top tier segment.
This move might trigger a new surge for Luxembourg corporate and
finance products, giving an additional impetus to the Luxembourg
finance, logistics and maritime sectors.
By its attractive legal and tax frameworks, its impressive list of
double tax treaties signed and the European lowest VAT rate, Luxembourg
is an ideal place to domicile several entities of an international
logistics group.
A maritime group would finance and hold its vessels fleet through
Luxembourg maritime companies. A logistics group that invests in
Research & Development could place their Intellectual Property
rights in a Luxembourg company which will then grant licenses to the
other group companies.
Functions like, for example, cash management, finance, management of
Halal certifications could be coordinated, managed and centralized via a
Luxembourg company. By centralizing its finance and corporate functions
through Luxembourg, a logistics and maritime group could realize
economies of scale, improve its internal organisation and benefit of tax
efficiencies.
About the author
Cedric Raths is Partner at Pandomus Dhow and an Accredited Maritime Manager. cedric.raths@pandomus.lu
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