Indonesia’s mandatory halal labelling leaves firms in disarray

by BLOOMBERG/ pic by BLOOMBERG

JAKARTA • Indonesia is all set to make halal labelling mandatory for consumer products and services from this week, but the high cost of securing the licence and absence of clear guidelines mean millions of local producers are still without certificates.

The compulsory labelling will first apply to the food and beverage (F&B) products and services from Oct 17 before being gradually expanded to include drugs, cosmetics and other consumer goods, according to the nation’s Halal Product Guarantee Agency (HPGA).

But a large number of small and medium companies are struggling to meet the rules without detailed technical guidelines, the Indonesian F&B Producers Association said (GAPMMI).

Indonesia is seeking to position itself as one of the Shariah economic and finance centres as demand for halal products in the world’s largest Muslim-majority nation surges.

Companies from Nestle SA to Unilever are developing more halal products to capitalise on population growth and mushrooming middle classes in Muslim-majority countries, according to Bloomberg Intelligence.

“Almost all businesses in various sectors, whether big or small ones, have concerns on the halal product guarantee policy,” said Shinta Widjaja Kamdani, the deputy chairwoman of the Indonesian Chamber of Commerce and Industry.

“If it’s implemented without any clear guidance, it can be abused and will be detrimental for businesses.”

The government has yet to detail how it plans to subsidise small and medium enterprises (SMEs) and how it will treat products without the halal label.

That’s posing a challenge to even producers who have met all the criteria for halal labelling but haven’t been able to secure certification, said Adhi S Lukman, chairman of GAPMMI.

The F&B industry consists of 6,000 medium to big-sized players and about 1.6 million micro and SMEs, the association estimates. That’s the segment set to benefit the most from soaring demand for halal products among Asia’s one billion Muslim population, according to Bloomberg Intelligence.

Indonesia’s Shariah economy is expected to soar to US$427 billion (RM1.78 trillion) by 2022, with halal food alone accounting for more than 60%, according to central bank estimates.

That’s spurred PT Unilever Indonesia to secure halal certification for all its factories to make its customers “feel safe and comfortable”, director Sancoyo Antarikso said.

For the smaller companies, the cost of securing the licence can be a burden and the HPGA has asked the Finance Ministry to subsidise micro and small businesses.

They shouldn’t be paying no more than 1.5 million rupiah (RM444.51) to secure the halal certificate, compared to seven million rupiah for large firms, Sukoso, head of the agency, said.

“The biggest risks will be on producers of consumer goods, particularly of products which by nature are difficult to be made halal such as vaccine. So, the pressure will be in sectors like food, cosmetics and pharmaceutical,” Kamdani said.

Some sectors are better prepared than others in meeting the halal rules. Most of the cosmetic makers have secured the halal certificates, according to Cosmetics Companies Association chairwoman Putri K Wardani.

The policy would be positive for top halal cosmetics producer Wardah, said brand activation manager Shabrina Salsabila.

The Indonesian Ulema Council, currently the sole authority to issue halal certificates, expects a rush for certification after the labelling becomes mandatory on Oct 17.

With the spending on halal products set to rise, companies will not miss the opportunity because of compulsory certification, according to Bank Indonesia deputy governor Dody Budi Waluyo.

“Opportunities in the domestic halal market are wide open and it’s a captive market,” Waluyo said. “In the future, many halal products, whether those produced by big companies or SMEs, will flood the domestic market. Besides boosting the GDP, it will also help improve the trade balance by cutting imports.”

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