Trade diversion risk for halal food exports

Kabir, Shahriar; Shams, Syed; Lawrey, Roger

doi:10.1108/jima-07-2019-0145

Cited by 4 publications

(2 citation statements)

References 58 publications

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“…Islam expressly states the obligation of Muslims to consume halal products according to the demands of the Al-Qur'an letter 2 verse 168 (Kabir et al , 2020). Because consuming halal products is the consumption of products that are nutritious and good for health, the returns that consumers get are increased productivity which helps the economic development of a country (Insani et al , 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

Herianingrum,

Alan Nur,

Rusgianto

et al. 2024

JIMA

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Purpose This study aims to unveil the variables that drive Indonesia’s seafood exports to organization of Islamic cooperation (OIC) countries, including a deeper analysis to understand the factors that affect Indonesia’s potential for halal seafood exports, and attempts to validate Linder’s hypothesis, which might occur as part of the determinants of Indonesia’s seafood exports, as well as one of the variables that can affect Indonesia’s potency of halal seafood exports based on economic scale similarities and relative factor endowments. Design/methodology/approach Using Poisson regression by pseudo maximum likelihood, this study applies the theory of trade gravity and Linder’s hypothesis of Indonesia’s seafood exports to OIC countries and its halal market potency over the 30 years observation period from 1992 to 2021, with 47 countries importing Indonesia’s seafood products during the observation period based on United Nations Comtrade statistics. Findings The variables that drive Indonesia’s seafood exports are the situation of the economy between Indonesia and its trading partners, the population of importing countries and the common understanding of language. On the other hand, the adjusted-Muslim GDP of importing countries, the adjusted-Muslim GDP of Indonesia and the number of Muslim inhabitants of importer countries are the factors that affect Indonesia’s potential for halal seafood exports. The study also validates the presence of Linder’s hypothesis in Indonesia’s seafood export and could hint Indonesia’s potential for halal seafood exports Research limitations/implications Owing to the absence of an Harmonized System code that explicitly accommodates trade in halal commodities, especially in halal seafood exports, it will be more accurate if data are available in the future as material for further studies. Future studies may also consider per capita consumption of seafood, food safety standards and the level of food security from OIC countries as variables that might also influence Indonesia’s seafood exports in an approach analysis using the gravity theory of trade. Practical implications This study is part of the authors’ efforts to encourage a greater contribution of the fisheries sector to Indonesia’s GDP by identifying the factors that drive seafood exports, which have so far only been around 2%–3% and have never reached more than 4% in the past two decades. While Indonesia is blessed with extraordinary marine biodiversity and hopes of being the leader of the halal food industry, the fisheries sector is expected to contribute. Originality/value Unlike previous studies that used the approach of the gravity model of trade on food exports, this study is specifically in the field of seafood exports, takes Indonesia as the main object of research and also examines Linder’s hypothesis as part of the analysis to identify what drives Indonesia’s seafood exports in the OIC countries market and fill the scant of studies highlighting the factors that could drive halal food exports, specifically in seafood.

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Section: Literature Reviewmentioning

confidence: 99%

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

Herianingrum,

Alan Nur,

Rusgianto

et al. 2024

JIMA

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“…With its exemplary halal standards and the lucrative global market for halal products and services, Malaysia could consider diversifying its food exports by targeting entry into key halal markets (Kabir et al, , 2020 [1]. The global market for halal goods and services has been valued at US$3tn and is projected to grow to approximately US$8tn by 2030 (Wilson, 2014;Husin, 2018).…”

Section: Introductionmentioning

confidence: 99%

Halal food export and Malaysia’s potential: the applicability of the gravity theory of trade

Ali

Ghaffar

Kabir

et al. 2020

JIMA

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Purpose The gravity theory of trade explains the potential for trade between nations, but its application to trade in halal food has been questioned by previous studies. This study aims to investigate this issue and the role of trading partners’ economic strength and their distance from one another to identify Malaysia’s potential to export food to key halal markets. Design/methodology/approach The gravity theory of trade was used to examine Malaysia’s top 10 food exports to key halal markets from 2000–2017. The gravity panels were estimated using the Hausman-Taylor modelling technique to control for endogeneity within the model. Findings The application of the gravity theory of trade to a halal market context provides mixed results. Although the high economic strength (gross domestic product) of the trading partners enhances halal trade, the distance between the partners does not affect the volume of halal food exports. Moreover, the study identifies Malaysia’s potential to export only a few food commodities to key halal markets. Originality/value This study challenges the applicability of the gravity theory of trade to the halal food market. The study extends the model with additional controls for behavioural aspects and applies it to commodity-specific segregated trade in halal food. The findings underscore the need to extend the theory beyond its current focus when explaining trade opportunities in halal markets.

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The impact of the Indonesia–OIC countries’ free trade agreement on the halal food sector: CGE analysis

Muchtar,

Rodoni,

Amalia

et al. 2024

JIMA

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Purpose This study aims to analyse the potential impacts of free trade agreement (FTA) between Indonesia and Organisation of Islamic Cooperation (OIC) countries by eliminating import tariffs in the halal food sector on welfare, gross domestic product (GDP) and trade balance. OIC countries as the second-largest organisation after the United Nations are the potential markets for the halal food industry. Design/methodology/approach This study used the Global Trade Analysis Project database version 10 by adopting a computable general equilibrium (CGE) model for two scenarios. The first scenario stated that Indonesia should conduct an FTA with ten potential OIC countries as export destination, while the second one stated that it should be conducted with all OIC countries. Findings Indonesia is predicted to get the highest increase in welfare by making an FTA with all OIC countries. Scenario 2 showed that Indonesia had much higher changes in real GDP with a positive change of 0.0018%. Even though it is projected to experience a surplus in the trade balance in both scenarios, Indonesia is predicted to experience a decline in exports for the particular halal food sector. The findings contribute some new insights to the existing literature, revealing an alignment between economic integration and the concept of international trade in Islam. Research limitations/implications The limitation of this study is the available data that cannot describe the population of all OIC countries. Only 31 countries out of a total of 56 OIC countries can be used in research. The scope of research is limited to analysing FTAs between Indonesia and OIC countries in the form of abolishing import tariffs and does not include non-tariff barrier issues such as halal certification. Practical implications The preferential trade agreement is considered relevant as Indonesia’s initial commitment to conduct a bilateral trade with ten selected OIC countries. The Indonesia Government, however, still needs to make several mitigation efforts in various sectors experiencing losses as a result of economic integration, such as by creating a more conducive business climate, supporting the sources of capital, facilitating bureaucratic affairs, as well as providing tax incentives. Originality/value This paper contributes to the literature by focusing on the critical aspects of the FTA’s impacts on halal food sectors by optimizing the reduction of import tariffs of OIC countries. Different from previous studies, this study applied a static CGE model to examine the impacts of FTA on macroeconomic indicators.

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Trade diversion risk for halal food exports

Cited by 4 publications

References 58 publications

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

Halal food export and Malaysia’s potential: the applicability of the gravity theory of trade

The impact of the Indonesia–OIC countries’ free trade agreement on the halal food sector: CGE analysis

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