The Halal industry: Better protection for Muslim consumers in Indonesia

The global Halal industry, excluding Islamic finance assets, is estimated to be worth around US$2.3 trillion as per the Global Islamic Economy Report 2019. With progressive growth at approximately 5% annually, spending on the Halal industry was valued at about US$2.2 trillion in 2019. Thus, it has become one of the biggest consumer segments in the world, particularly in Indonesia where it achieved tremendous movement in 2018 by jumping to fifth from 10th in the Global Islamic Economy Indicator 2019. NI PUTU DESINTHYA and YUNICE KARINA TUMEWANG

The Global Islamic Economy Report 2019 mentions that the Muslim populations worldwide spent a total of US$1.4 trillion for Halal food and beverages in 2018. This significant amount was driven by the growing role of ethical consumerism and the enhancement of digital connectivity. Indonesia, for several years in a row, is consistently ranked as the highest spending country worldwide for Halal food with a total expenditure of US$173 billion. This is not merely because of Indonesia’s large number of Muslims but also because of the increasing awareness of Halal consumption among Indonesians — the country is third when it comes to the importance of religion in people’s lives, according to the Pew Global Attitudes Survey 2015.

The establishment of Law No 33 of 2014 concerning Halal Product Guarantee (UU JPH) is indeed a true commitment of the government to maximize Indonesia’s potential as the largest Halal food market in the world. The law is to be implemented this year as a mandatory requirement for all industry players. UU JPH is highly expected to provide legal certainty for consumers as well as competitive value for business players. Nevertheless, a few protested and cynical criticisms were voiced as it can be a double-edged sword due to its potential to either kill or flourish SMEs in Indonesia. From an optimistic view, most business players welcome the mandatory Halal certificate, considering it as valuable support by the government to accelerate the development of the Halal industry in Indonesia. However, there are still expectations for more affordable Halal certification costs or even free if possible.

UU JPH regulates the ‘Halal mandatory certificate’ and not the ‘mandatory Halal’, which means that non-Halal products are still allowed to be circulated among society and should be openly known as not Halal. Halal products, however, need to be checked and approved by the government through certification before Halal declaration. Given the fact that Indonesia is home to the largest Muslim population in the world, theoretically it should not be difficult to build a Halal supply chain system as cattle ranchers, meat butchers and retailers in Indonesia are all dominated by Muslims. However, the reality is not as simple as imagined. Cases of ‘tiren chicken’ (chicken that is dead without going through the slaughtering process), traditional food mixed with chicken blood for flavoring and coloring, unhygienic cattle cages and an ‘un-Islamic’ animal slaughtering process still exist. It is then hard to assume in the first place that all products are Halal in Indonesia.

 Shifting from a Halal to a Haram label can also be problematic since the word ‘Haram’ has a negative connotation even for non- Muslims, thus, the Halal label is inevitable. Therefore, it becomes the responsibility of the Halal Product Guarantee Agency (BPJPH) to guarantee the certification process and its credibility. Furthermore, the moving of goods manufactured from the supply factory to consumers has several consequences on the environment in terms of carbon emissions. The relevant stakeholders should keep in mind that it is important to optimize the Halal industry in line with environment preservation as it is part of the Islamic principles. For that, green supply chain logistics is one of the ways to ensure that the Halal industry can contribute not merely to the country’s wealth but also to sustainability.

The existing data on the potential of the Halal food market presented so far is merely on the growth of the Halal food expenditure by Muslim consumers. What about potential penetration among non- Muslim consumers? Research conducted in the UK (Ayyub, 2015) and Malaysia (Mathew, Abdullah, and Ismail, 2014) showed that non-Muslim consumers in these two countries argue that Halal food products reflect only the expected value of purchasing Halal food that is healthy, hygienic and safe to consume. For this reason, socialization and education are highly required in global society. It is important to note that Halal certification is not a kind of discrimination of a certain religion over others, but rather about the protection of the rights of all consumers.

Nowadays, the concept of Halal is not exclusive to religious teachings since it is promoting a healthy and sustainable lifestyle. Halal requirements effortlessly meet many of the conventional quality standards, such as ISO, Codex Alimentarius, Hazard Analysis and Critical Control Point as well as Good Hygienic Practice. Above all, the BPJPH also needs to involve stakeholders in the Halal auditing process as stakeholder participation will assist in organizing a better known and more credible Halal assurance. If the law is agreed by the stakeholders within the industry, the Halal certification costs can no longer be seen as a liability but as an investment. The internal and external process to build a good organizational governance system must be controlled and monitored. For that, strong leadership is greatly needed