Indonesia’s halal certification process should not be burdensome for businesses, Finance Minister Sri Mulyani Indrawati said on Monday, calling for the use of technology to simplify the certification process to support the halal economy.
The finance minister told a virtual discussion on Monday that halal certification should be provided without risking competitiveness, adding that the use of technology coupled with good policy could support businesses.
“Technology can help boost competitiveness, but policy and institutions need further reviews to support an efficient, innovative and competitive halal industry,” she said.
Indonesia is in the process of obliging all non-haram products and services to obtain halal certification, according to the 2014 Halal Products Guarantee Law. The rules will be implemented gradually, starting with food and beverage products, followed by medicines and cosmetics, among other products.
However, various business players, especially micro and small enterprises, have complained of the complicated and expensive procedures to obtain halal certification.
Despite becoming the fifth largest halal economy in 2019 based on the Global Islamic Economy Indicator, Indonesia has yet to fully benefit from it, pushing the government to boost the halal industry through several measures such as promoting sharia financial services and developing halal tourism.
The world’s 1.8 billion Muslim consumers spent an estimated US$2.2 trillion in 2018 across different sectors of the halal economy, which indicated 5.2 percent year-on-year growth. The overall halal economy is projected to be worth $3.2 trillion by 2024, based on the 2019 “State of the Global Islamic Economy” report by research and advisory firm DinarStandard.
Indonesia Halal Lifestyle Center chairman Sapta Nirwandar explained in a webinar on April 24 that Indonesia’s Muslim consumers spent around $218.8 billion across core sectors of the halal economy in 2017 and that the figure was estimated to reach $330.5 billion by 2025.
The food and beverage sector will see the biggest growth in value as spending in the sector is forecast to hit $247.8 billion by 2025, up from a recorded $170.2 billion in 2017, he stated.
At the same time, Indonesia’s Islamic finance development was considered the best in the world last year in terms of leadership and potential, beating other Islamic countries, according to the 2019 Global Islamic Finance Report (GIFR) published by the Cambridge Institute of Islamic Finance.
The report said that the country was bound to become an “unrivaled global leader” in the industry supported by the government’s commitment to promoting Islamic finance, regulatory developments and significant improvement in the Islamic finance ecosystem.
Although the industry has grown significantly, the role of Islamic banks has been conspicuously muted compared with conventional banks, Sri Mulyani went on to say. “Sharia banks should be improved by providing efficiency, technology and profitability so that the benefits can be felt by society.”
