Halal Industry

After almost 30 years’ wait, is Indonesia’s halal law coming too soon?

| 13 February, 2018 | General
 Richard Whitehead
After almost 30 years’ wait, is Indonesia’s halal law coming too soon?
Photo: A woman holds packs of noodles at a Hypermart supermarket in Jakarta October 7, 2010. REUTERS/Beawiharta

Things are getting very real for companies facing mandatory halal certification in Indonesia, and for the authority that will govern it, with just 20 months to go before Law 33/2014 comes into force.

The final piece of legislation passed by outgoing President Susilo Bambang Yudhoyono a little over three years ago will see a transformation in the country’s hitherto opt-in halal certification system, which has been in place since 1989.

When Law 33/2014 takes effect next year, companies will be required to have certification for all products that are halal, across a wide range of categories from food and beverage to cosmetics and vaccines.

The official charged with processing halal certification applications, Professor Sukoso, a former academic who like many Indonesians goes by a single name, admits that he is critically under-resourced.

The head of the new Halal Product Assurance Agency, which is known by its Indonesian initials BPJPH (Badan Peyelenggara Jaminan Produk Halal), has only 60 staff—an improvement over the 45 he had last year, but a far cry from the minimum of 150 he needs just for BPJPH’s Jakarta office.

“This is still far from enough, and we need more,” Prof. Sukoso told Salaam Gateway.

With a secretariat and three divisions in Jakarta, comprising a halal registration and certification department, a team working with small- and medium-sized enterprises (SMEs) and another that focuses on standardisation and partnerships, current staffing levels are a drop in the ocean compared to the resources that will be needed when the agency opens regional offices across the archipelago.

Prof. Sukoso was appointed BPJPH head in August and the body was only officially launched in October. Under the terms of Law 33/2014, it must begin certifying products by October 17, 2019,—five years after the legislation was passed.

Companies in the food and beverage segment, which will be the first in a staggered roll-out of mandatory certification across a number of industries, will be given a grace period of three years before all their products are required to be halal-certified.

Until October 2019, Majlis Ulema Indonesia (MUI), the country’s top Muslim clerical body and halal certifier for almost 30 years, will continue in its current role until all of BPJPH’s systems are in place. After that, the non-governmental organisation will work with BPJPH to provide accreditation for halal auditors and MUI’s Fatwa Commission will continue to decide the status of halal products thereafter.

“Under the current process, companies contact our assessment division, LPPO MUI, for halal certification, whereas the new law will require them to apply to BPJPH. One of Indonesia’s various auditing bodies will then visit the company’s plant to check for halal compliance,” explained Hendra Utama, head of the organisational co-operation division of LPPOM MUI.

Photo: A saleswoman helps visitors at Wardah's cosmetic booth, an Indonesian brand specialising in products for Muslim women, at Indonesia Fashion Week in Jakarta, Indonesia February 2, 2017. Wardah says on its website that its raw materials and manufacturing processes are "proven halal". REUTERS/Darren Whiteside

CHALLENGES

Prof. Sukoso says his agency has made good progress so far. His team has developed a framework of the regulations needed to implement halal certification within the context of Law 33/2014, which has been passed to the Ministry of Religious Affairs, the government agency that oversees the work of BPJPH. Once this is approved, companies will know in detail the processes they face.

The agency has also been compiling a schedule of costs to govern how much companies must pay for halal approval, and working on an online registration system which Prof. Sukoso believes will streamline the process for Indonesian and international businesses and introduce greater transparency.

Still, he acknowledges the challenges.

“It will be a big task for small- and medium-sized businesses in our country,” he said. He pointed out, though, that some support is expected to come from the central government, local governments and perhaps even some big companies to subsidise the financial burden of certification for SMEs.

Though of considerable concern to companies that manufacture multiple product lines requiring new halal certification, cost is not the only issue exercising members of GAPMMI, Indonesia’s food and beverage industry body. Its chairman, Adhi Lukman, worries that the time-consuming process of certifying an entire industrial segment will be prone to logjams.

It is anticipated that tens of millions of products will require inspection over the short grace period, and Lukman claims the experienced MUI cleared just 35,000 applications from 2010 to 2015.

Moreover, the association has estimated that each certificate will initially take 50 days to process at an overall cost of up to $3.25 billion to the industry, with over 1.5 million food and beverage companies requiring certification.

“[The new law] will be a big problem for companies that do not currently have halal certification, even if their products are already halal,” Lukman told Salaam Gateway from his office in Jakarta.

“Then they won’t be able to sell and distribute their products, except if they label them non-halal.”

This might spell ruin for such companies in a nation of over 260 million residents where close to 90 per cent of the population is Muslim.

Under the current system administered by MUI, the scale of costs has been relative to the size of the companies seeking certification.

“But we don’t know if this will be the case under BPJPH. We are ready to discuss this when BPJPH is ready to draft it,” said Lukman.

DIVIDED RESPONSE

Likewise, GAPMMI is still waiting to see a draft of the agency’s regulations that will govern the law when it is implemented—and to find out if Law 33/2014 will be enacted fully, in part or even at all.

There have been rumours in Indonesia that moderate lawmakers are concerned that the law will harm business and are keen to stop it, though the policy has proven popular with religious Muslim consumers, who feel it will safeguard Islamic standards in the products they buy.

Trade officials also approve of the law, which they see as a means to make Indonesia a major player in the international halal industry, just as neighbouring Malaysia has achieved with its almost ubiquitous halal standards.

Many food and beverage manufacturers hope that Joko Widodo, Indonesia’s current president, will delay Law 33/2014’s implementation until after the 2019 general election and put it on indefinite hold, should he be re-elected.

“We believe that [the law] is a concern for all stakeholders, including the government. We believe that the government will decide wisely after considering all aspects,” was Lukman’s take on the matter.

Photo: An employee of PT Unilever Indonesia arranges a health care rack at Foodmart Fresh supermarket in Jakarta, Indonesia, October 31, 2016. Picture taken October 31, 2016. Personal care, toiletries and cosmetics products that claim to be halal would have to be halal-certified under Indonesia's Law 33/2014. REUTERS/Beawiharta

INTERNATIONAL RESPONSE

Internationally, the scheme also has its critics.

In a note to its members in August, the U.S.-ASEAN Business Council predicted that the new regulations, which will require imports in categories covered by Law 33/2014 to be certified by a halal body that has been approved by BPJPH, will disrupt business operations and reduce the attractiveness of Indonesia as an investment destination. The Council is the advocacy organisation for U.S. corporations operating within the ten-member Association of Southeast Asian Nations.

“Implementation of the Halal Law regulations in their current form will have several unintended consequences that will create additional costs for consumers, potentially impact public health, reduce efficiency, hamper businesses and even create openings for corruption and unofficial tariff collection,” it wrote.

The European Union, meanwhile, has claimed the legislation will “no doubt put in place one of the most extensive and draconian halal regimes of any country”. Its delegation to Indonesia, Brunei Darussalam and ASEAN even questioned whether Law 33/2014 appears to be in contradiction to Indonesia’s World Trade Organisation obligations, claiming “the impact will be more negative for imported products” than domestic goods.

Despite the criticism from interested parties, though, Prof. Sukoso is pleased with the shape the transition from MUI to BPJPH is taking.

“Of course you will get some reaction but now it’s going very well,” he said. “When I first arrived as head of the agency, there was some friction, which is only natural because some figures didn’t understand the requirements of Law 33/2014. But this halal certification is important for Indonesia.”

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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