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Indonesia Expecting USD 1.6 Billion Annually From Mandatory Halal Labelling

RETAIL / FMCG - Indonesia
February 2019

Indonesia is on the road to make halal labeling compulsory for consumer products and services. The draft on mandatory halal rule is currently awaiting the president’s approval. Once approved, the regulation will require all goods and services, pertaining to food, beverage, drugs, cosmetics, chemical, biological and genetically engineered products and consumer goods to be certified. The deadline for implementation is October this year. The labelling requirement will be implemented over time and will take three to five years before most food and beverage products are covered. It will take longer for health products, with estimation of five to seven years.

It is estimated this new regulation will net the government around USD 1.6 Billion in annual revenue. The country’s Shariah economy is set to grow to USD 427 billion by 2022, with food contributing around 50%, according to estimates from Bank Indonesia.

The Halal Product Guarantee Agency, also known as BPJPH, which was established in October 2017, will be responsible for managing halal certification requests in partnership with the Indonesian Ulema Council. Previously, the Majelis Ulama Indonesia (MUI or Indonesian Ulema Council) was the governing body issuing the Halal Certification for food and drink products. BPJPH is supposed to work together withh MUI for handling halal certification. The process of verifying whether or not a product is halal will be carried out by the Halal Inspection Institution (Lembaga Pemeriksa Halal or LPH), who will check and verify if the raw materials and manufacturing process are halal.LPH may be established by the government and public institutions such as universities and they must be accredited by BPJPH, employ at least 3 inspectors, and have its own laboratory or cooperate with another party that has a laboratory. 

The government is targeting a steady stream of revenue from halal labelling mandate, starting from certifying unpackaged products and slaughterhouses, to providing training services and sponsorship. It is looking to issue at least 100,000 certificates next year and increase the number of auditors to 5,000 by 2020.

Meanwhile, Indonesia’s National Committee for Islamic Finance (KNKS), formed by the government in 2017, will launch an Islamic economy masterplan in March to boost development of the country’s real economy and halal industries. 

(Source: Bloomberg; Salaam Gateway)