Indonesia Sees $1.6 Billion Windfall From Halal Labeling Rule
(Bloomberg) -- Indonesia is set to make halal labeling mandatory for consumer products and services this year with the government assuming greater control of the certifying process from the Muslim-majority nation’s Islamic cleric council.
Issuing halal certificates to consumer goods from shampoos to toothpaste and cosmetics may net the government about 22.5 trillion rupiah ($1.6 billion) in annual revenue, said Sukoso, head of the Halal Product Guarantee Agency, known as BPJPH. The draft regulation on mandatory halal labeling is awaiting President Joko Widodo’s approval, he said.
Indonesia is overhauling the halal certification rules as the country’s Shariah economy is set to swell to $427 billion by 2022, with halal food alone accounting for more than 50 percent, according to Bank Indonesia estimates. Under a law passed in 2014, the country will need to implement compulsory halal labeling latest by Oct. 17. Halal products and services cater to Muslims by complying with the religion’s tenets.
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The new rules also aim to usher in greater transparency in the certification process and guarantee a steady stream of revenue for the government, Sukoso said. The rules require certification for all goods and services related to food, beverage, drugs, cosmetics, chemical, biological and genetically engineered products as well as all consumer goods, he said.
Once the regulation comes into force, the BPJPH will start managing halal certification requests in partnerships with the Indonesian Ulema Council -- the issuer of religious edicts -- and auditors under a so-called halal inspection agency, Sukoso said.
The labeling requirement will be gradually implemented and it may take three to five years before covering most food and beverage products and five to seven years for health products, Sukoso said.
“We will first focus on food and beverage. If some products are still unable to meet the halal requirements, there is a period of as long as five years for the producers to fix the issues,” Sukoso said.
The agency also sees potential revenue from certifying unpackaged products as well as slaughterhouses, training services and sponsorship. The number of halal certificates issued last year more than doubled to 17,398 last year from a year ago as firms rushed to label their products ahead of the implementation of the law, according to Muti Arintawati, a deputy director at the cleric council’s Food and Drug Analysis Agency.
The government agency wants to issue at least 100,000 certificates next year and plans to boost the number of auditors to 5,000 by 2020, Sukoso said.
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