Transitioning A Government Agency Towards Revenue Generation for Sustainability
By Abdul Muiz bin Abd Aziz, Vice President at PEMANDU Associates
A Halal Facilitation Agency has high aspirations of becoming a global mover in the halal industry. Under its new leadership, the agency is looking beyond its government mandate to become a revenue generating entity that is self-sustaining. This requires a shift in its organisational norms towards a high-performance, service-oriented entity to serve external clients. To guide this process, the Halal Facilitation Agency engaged PEMANDU Associates to draw from its own experience in successfully transitioning from a government-affiliated agency to a revenue generating private entity.
Breaking the Mould
The Halal Facilitation Agency is a federal body that was established as the custodian of its country’s halal economy, to position it as the most competitive in the global halal industry. The agency develops the country’s halal ecosystem through its role as a facilitator, thought leader and industry mover, ultimately delivering shared prosperity for the overall socio-economic advancement in the country.
As a federal body, the Halal Facilitation Agency had been reliant on government funding, however its budget faced annual cuts. This was compounded by its commercial training programmes generating little revenue. The agency realised that it needed to grow its commercial functions and fully realise its revenue potential to become self-sufficient. Profit was not its main goal but at the same time it needed the income in order to continue its functions as a government agency.
Balancing Objectives With A Plan
Bearing in mind the unique circumstances of the Halal Facilitation Agency, PEMANDU Associates set out to develop a business plan that would meet the agency’s two clear priorities: first to generate revenue, and second to fulfil its agency mandate.
Given the agency’s ambitions, PEMANDU Associates took a different approach from its other public sector engagements. The Halal Facilitation Agency was treated as a private sector firm with initiatives and KPIs that were geared towards achieving clear financial targets rather than focusing on budget-oriented outcomes.
The Halal Facilitation Agency’s Business Plan for 2020-2025 was developed over 10 weeks, in 3 stages:
Stage 1: Internal Analysis
The PEMANDU Associates team analysed the agency’s current state through data gathering, a stocktake of activities, reviewing KPIs and interviews with selected stakeholders. Through this exercise, the team gained an in-depth understanding of the agency for a fair assessment against the global halal industry.
Stage 2: Assessing Opportunities & Defining the Future State
Next, the team conducted a market study to determine the potential market value, key areas of opportunity and feasibility for the Halal Facilitation Agency to generate revenue in the industry. PEMANDU Associates had the advantage of deep industry insights due to the team’s prior experience in halal industry development. The firm’s extensive experience and knowledge of markets across the globe also enabled it to provide incisive intelligence in its analysis.
The study found that the global halal economy is far from reaching its full potential, with the current market at only 11% of its capacity. At present, the market is estimated to be worth USD 3 trillion, out of which the country’s share of exports is only USD 10 billion. Food and beverage command the lion’s share of the halal market, among other industries such as fashion, media and recreation, travel, pharmaceuticals and cosmetics.
This vast potential has spurred the interest of many countries outside the OIC to begin participating in the global halal agenda. However, these countries are facing common issues in developing their halal economy, such as the credibility of their halal certification, insufficient halal certified agencies, insufficient industry players as well as insufficient halal-certified resources.
Domestically, there is a potential for over 200,000 halal SMEs in the country, but only 6,500 have halal certification to date. The local halal industry also has an inadequate number of certified halal professionals. Out of 50,000 annual local graduates in Halal studies, there are only around 10,000 certified Halal Knowledge Personnel working in the industry.
Based on the analysis of market needs as well as the Halal Facilitation Agency’s capabilities, its value proposition in the industry became clear:
1. Industry facilitation services:
The Halal Facilitation Agency can position itself as One-Stop-Centre providing end-to-end facilitation for international relations, cooperation for investment, trade and information as well as expertise and technology sharing. The agency can also facilitate entry into the halal market, as well as provide advisory on developing a halal ecosystem with a fully halal and shariah-compliant value chain for the country.
2. Proprietary solutions:
With its expertise, the agency can advise on opportunities throughout the halal market and value chain, as well as facilitating halal-related initiatives and problem-solving.
3. Global branding:
The agency can leverage on its network to promote halal brands worldwide.
4. Knowledge and thought leadership:
Leveraging on the agency’s experience in formulating halal industry strategies and initiatives to support a country’s socio-economic development agenda. On top of that, the agency can also provide talent development services to produce halal knowledge workers and provide updated and relevant Halal Industry training modules.
Once the feasibility had been determined, the team then explored operational models and best practices that the Halal Facilitation Agency could adopt. A benchmarking analysis was conducted to assess other development agencies who also practice commercial operations. The analysis compared the types of commercial services they provided, the supporting institutional framework, as well as scorecards that effectively shifted their focus to revenue. This provided an understanding on how national agencies can deliver its mandate while also undertaking commercial activities to sustain itself.
The overall observations were analysed in terms of the Halal Facilitation Agency’s Strengths, Weaknesses, Opportunities and Threats (SWOT) to determine critical factors that must be addressed in its business plan.
Stage 3: Developing the Business Plan
With the parameters established, the final step was to develop the Halal Facilitation Agency’s business plan to set its direction from 2020-2025. PEMANDU Associates facilitated clinic sessions and a 3-day workshop involving key internal stakeholders to develop strategies and initiatives for the agency. These sessions empowered the agency’s employees to explore new ways of thinking and problem-solving across different units and departments in the organisation to achieve synergy. The ultimate objective was to develop detailed action plans that include critical success factors, gaps and methods in mitigating risks to ensure the success of the initiatives.
For the Halal Facilitation Agency to achieve its objectives effectively, PEMANDU Associates proposed a new organisation structure that separates its commercial operations from its agency work, with central supporting functions. This would enable the agency to have dedicated units focused on meeting their respective goals.
Thus, the agency’s strategy is underpinned by 3 key pillars, operationalised by 59 initiatives ranging from existing government-related projects to new revenue generating activities and internal process enhancements:
1. Business Sustainability
To drive income and enhance the agency’s prominence internationally, a commercial arm will be established with four revenue generating units. The Halal Integrated Platform (HIP) would link the industry to governments and service providers. The World Largest Halal Hub initiative will facilitate connectivity of the global halal ecosystem. At the same time, the Halal Consultancy Department will provide branding, marketing and technology services, while the Halal Training Department will provide talent development services for the industry.
2. Effective Industry Ecosystem
The agency’s government functions will be streamlined according to the country’s halal master plan. The agency will focus on policy, thought leadership and strategy to enhance the industry. These operations will also synergise with the commercial arm by facilitating G2G engagements and providing strategic market research through its Halal Knowledge Centre.
3. High Performance Culture & Business Synergy
The last pillar aims to enhance project execution and problem-solving through internal process improvements. This includes instituting a performance management framework and a change management programme. A corporate branding campaign will be developed to support its other operations, for greater visibility of the agency’s value proposition and proprietary solutions. To further enhance its prominence, a Smart Halal Business Centre will be established locally as well as expanding into 5 countries by 2025.
For the plan to be successful, an effective delivery management structure must be implemented to monitor its 60 KPIs. A total budget allocation of USD 266 million would be required to execute all of these recommendations.
The Halal Facilitation Agency’s Business Plan 2020-2025 establishes the agency’s commercial targets, synergises between its commercial activities and developmental mandate, and accelerates the enhancement of its internal processes, in line with its country’s shared prosperity vision and national master plans.
The implementation of all proposed initiatives is estimated to increase:
- The Halal Facilitation Agency’s revenue by USD 1.13 mil in 2020 with revenue growth at 24% CAGR y-o-y
- Potential sales of halal products by USD 112.85 mil
- Investments in accredited halal parks by USD 112.85 mil
The business plan will also future-proof the Halal Facilitation Agency, taking into account holistic considerations of its organisational mechanics, strategic branding and revenue generating plans, towards a self-sustainable organisation.