Investing In Indonesia’s Halal Market: A US$200 Billion Opportunity For Middle East Businesses

Indonesia’s Government Regulation 39 of 2021 (GR 39/2021) sets out the requirements for businesses to obtain Halal certification for their goods and services. Under the law, products that enter, circulate, and are traded in Indonesia must be Halal certified.

To obtain certification, businesses must first apply to the Halal Product Assurance Agency. The agency will then appoint a Halal Inspection Agency to conduct the testing of the products or services of the business.

Indonesia is the world’s largest Halal market, particularly for the food, tourism, cosmetic, and pharmaceutical sectors. Before the pandemic, global spending on Halal products reached over US$2 trillion with Indonesian consumers spending some 10 percent or over US$200 billion of this total on Halal products and services.

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Indonesia’s Halal certification law, Government Regulation 39 of 2021 (GR 39/2021) which was issued in October 2021, will impact businesses in most industries. GR 39/2021 states that products that enter, circulate, and are traded in Indonesia must be Halal certified unless they are originating from materials prohibited under Islam (Haram).

GR 39/2021 is one of a number of implementing regulations of the Omnibus Law introduced in November 2020. The Omnibus Law amends some 76 laws with the aim to reform Indonesia’s business climate, boosting foreign investments, and creating jobs.

Under GR39/2021, the assessment for Halal certification covers Halal-based materials and the Halal-based production process, which includes the storage, packaging, display, and sale of products.

As the world’s most populous Muslim country, Indonesia is naturally also the world’s largest Halal market, particularly for the food, tourism, cosmetic, and pharmaceutical sectors. Before the pandemic, global spending on Halal products reached over US$2 trillion with Indonesian consumers spending some 10 percent or over US$200 billion of this total on Halal products and services.

GR 39/2021 revokes the government’s previous regulation (GR31/2019) on Halal certification.

Which products and services must be Halal certified?

According to GR 39/2021, the following goods and services must be Halal certified:

Goods

• Food and beverages;
• Pharmaceuticals;
• Cosmetics;
• Chemical products;
• Genetically modified products;
• Biological products; and
• Other goods people utilize.

Services

• Processing;
• Storage;
• Packaging;
• Distribution;
• Animal slaughter; and
• Sales.

What is the Halal certification process?

GR 39/2021 has streamlined the processing time for Halal certification with the cost for each certificate ranging from 300,000 rupiah (US$21) to 5 million rupiah (US$351). The costs are governed under Minister of Finance Regulation 57 of 2021 and include the Halal certification process, renewal of Halal certificates, the registration of foreign Halal certificates, and the addition of new products or services.

For micro and small enterprises (MSEs), the government will issue the Halal certificates free of charge. Further, the government is targeting some 13.5 million MSEs nationwide for this certification.

Submitting the Halal certificate application

Any person or entity in the form of a legal or non-legal entity that engages in business activities in Indonesia can apply for a Halal certificate. They must first submit an e-application to the Halal Product Assurance Agency (Badan Penyelenggara Produk Halal – BPJPH), the government institution tasked with implementing Halal product warranties.

Once the e-application is complete, the BPJPH and the applicant will together choose a Halal Inspection Agency (Lembaga Pemeriksa Halal – LPH) to conduct the testing of the products or services based on standards determined by the BPJPH. The inspection must take place within 15 days of registration and the LPH could be subject to sanctions if they fail to meet this time limit.

Once the inspection is complete, the LPH will deliver the results to the Indonesian Ulama Council (Majelis Ulama Indonesia – MUI), the institution that will ultimately determine if the product or service in question is deemed Halal. The MUI will issue a ruling within three business days after the MUI has received the results from the LPH. This is seen as a significant improvement to previous regulations whereby the MUI responded within 30 business days.

After the ruling has been issued, the BPJPH will issue the Halal certificate within one business day. The Halal certificate is valid for four years.

What about imported goods or services?

Foreign goods and services entering Indonesia but have been Halal certified abroad must be registered with the BPJPH.

The registration process for foreign Halal certificates must also be accompanied by:

• The applicant’s data;
• A copy of the foreign Halal certificate, which has been legalized by the Indonesian embassy or consulate abroad;
• The list of goods or services set to be imported into Indonesia, along with their relevant harmonization system codes (HS code); and
• A written statement that the documents are true and valid.

Halal certification for micro and small enterprises

MSEs must first provide a self-declaration to the BPJPH that proves they are an MSE as determined under prevailing laws. The Halal certificates are free of charge for MSEs.

Further, the MSE must meet the following criteria:

• The products do not contain or are at risk of containing materials deemed non-Halal; and
• Its production process is determined to be Halal.

The Halal certification compliance period

The government has taken into consideration the time businesses need to prepare their operations to be Halal compliant. Therefore, the government has set stages for Halal certification based on product type.

This article originally appeared on ASEAN Briefing

 

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