Islamic and Halal Export Opportunities to the Philippines

6.5 million Muslims are based in the Philippines Bangsamoro Province, a region showing 7% annual GDP growth. Islamic experienced exporters should be looking to take early steps into this growing South Asian market.

Introduction

The Philippines is generally known as being the only Catholic nation in South East Asia, however its Bangsamoro southern province has long been Islamic, with settlements dating back hundreds of years with ties to Malaysia’s sultans. Bangsamoro’s southern coast is just a few km from Malaysia’s northern coast, Asia’s second largest Islamic nation.

The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) is an autonomous region in the southern Philippines formed in 2019. It comprises the provinces of Basilan, Lanao del Sur, Maguindanao del Norte, Maguindanao del Sur, Sulu, and Tawi-Tawi. After decades of war, the BARMM offers a hopeful and peaceful future for this majority-Muslim region. Only 8% of the Philippines’ total population are Muslims, however those that are, mainly reside here. In total, the Philippines has a population of about 6.5 million Muslims.

After many years of talks, a plebiscite to ratify the Bangsamoro Organic Law (BOL) was held in 2019, which became the backbone for the abolishment of the ARMM and the establishment of the BARMM. A transitional body, the Bangsamoro Transition Authority (BTA) was established pending elections for the new region’s government, which is expected to take place in 2025.

Indonesia, Malaysia, and the Philippines also signed a Trilateral Cooperation Agreement (TCA) in 2016, which aims for coordinated patrols in the Sulu and the Celebes Sea and airspace, including coastguard collaboration.

As such, the BARMM has untapped economic potential, especially through increasing maritime trade with neighbors Indonesia and Malaysia through which the BARMM coastline borders in addition to sharing their Malay-inspired cultures.

Economic growth in the BARMM region: High potential but investments will take time

The fragility of the BARMM still hinders investments and the possibility of strengthening economic linkages with neighbors like Indonesia, Malaysia, and Brunei. Although violence has receded compared to decades ago, there are still varying levels of civil unrest in the region. As such, the investment climate will likely take time to stabilize (the region only saw PHP 2.8 billion (US$48.6 million) in investments in 2021) and will be contingent on the future of BARMM’s security environment.

BARMM did see its economy grow by 7.5% in 2021, emerging as the second-fastest growing region among the 17 regions in the Philippines. The top industries that recorded the most growth were:

• Health and social work (22 percent);
• Mining and quarrying (20 percent);
• Accommodation and food services (17.9 percent);
• Construction (12.2 percent); and
• Financial and insurance activities (10.6 percent).

The government’s innovative approaches to facilitate more sub-regional trade, such as improving connectivity between the islands and the establishment of barter ports will benefit the BARMM. Barter trade had been banned by the government as officials believed it would increase the illicit trade of goods and people. The Sultanate of Sulu and the Sultanate of Maguindanao had barter trading partners with businesses in Borneo and China when their maritime economies were booming.

Halal industry potential in the Philippines

BARMM has the potential to be a Halal hub in the Philippines given it has the largest concentration of Muslims in the country and its strategic location in the southern part of the Philippines, close to the large Muslim market of Indonesia and Malaysia, the latter of which already has a well-developed Halal industry supply chain.

The Philippine Economic Zone Authority is aiming to develop a special economic zone in Mindanao that targets Halal food producers and investors and will boost the country’s share of the global Halal industry, estimated to be worth US$3 trillion. The country saw over US$500 million of Halal food exports in 2018.

Further, the Department of Trade and Industry is encouraging more small and medium-sized businesses to explore the global Halal market. In 2016, the government issued the Halal Export Development and Promotion Act of 2016 as a guide for companies looking to produce and promote their Halal goods. Through the Act, the government has provided training modules that have benefited more than 400 MSMEs and helped develop more than 10 Halal certifying bodies.

Improving connectivity in BARMM can boost trade

After decades of unrest, BARMM is slowly seeing important investments in its infrastructure. In June 2022, Philippines Airlines became the first airline to operate regular flights within the BARMM through a direct flight between Cotabato City in Maguindanao province and Bongao in Tawi-Tawi province. Previously, travellers had to first travel to Manila or an airport outside of BARMM, which often entailed an overnight stop. The waters surrounding Tawi-Tawi are rich in marine diversity and improving connectivity can unlock its tourism potential.

Middle eastern based businesses with experience of dealing with exports to Muslim consumers may wish to consider making inroads into, or studying the Islamic opportunity into the Philippines. With this sector of the Philippines economy currently growing at over 7% per annum, with a relatively concentrated market of 6.5 million people, early bird exporters may find a niche hub in examining the potential for Halal and other products to this market.

Dezan Shira & Associates have a partner firm in the Philippines who can assist with market research and import-export issues in the Philippines. Please contact us at philippines@dezshira.com for further assistance.

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