The following article was reproduced from Nikkei Asia.
Businesses in Indonesia from the consumer and real estate sectors are confident a regulation requiring halal certification for products that comes into effect this month will prove a growth opportunity both domestically and for exports.
The government will require food and beverage companies in the world’s most populous Muslim nation and their raw material suppliers to obtain halal certification from the Ministry of Religious Affairs by Oct. 17. Those that do not comply will face fines or may their products pulled from the shelves.
While most large companies are expected to meet the deadline, according to government officials, many micro, small and medium enterprises, most of which operate in the informal sector, have found the bureaucracy challenging and expensive to deal with. The government is issuing 1 million certificates to the sector for free and they have been given an additional two years to meet the requirements. The regulation is expected to be applied to other sectors over the next few years.
“It can take several months for companies’ applications to be processed, and it costs a lot, especially for small and medium sized businesses,” said Dellvionico, a marketing officer at Indonesian food company Kecap Korma, which has already secured certification for its sauce products.
But industry players said obtaining certification was worth the hassle, considering that more than 85% of Indonesia’s population is Muslim. “Even with the high cost, we think having certification is important as it will be appealing when it comes to distributing to supermarkets and major retailers,” Dellvionico said, adding that noncertificated products would have limited sales channels, such as traditional markets where prices are usually lower.
“The introduction of halal certificates will help us expand sales because most people in Indonesia are Muslim and consumers always check if products are halal or not,” said Adinda Maharani, of the Indonesian unit of Mondelez International. Shoppers’ doubts about whether a product complies with Islamic rules should now be dispelled, prompting them to buy more, Maharani said. Mondelez, one of the world’s largest food and beverage companies, has certificates for many of its brands, including Kraft cheese products, Cadbury and Oreo.
Non-halal products can still be sold in Indonesia after Oct. 17 but they will need to be labelled as such. These products are required to highlight the non-halal ingredients on their packaging.
“This initiative is intended to bolster consumer confidence, both domestically and internationally, as well as to promote Indonesia as a leader and top producer of halal products,” said Samer Elhajjar, a senior lecturer in marketing at the National University of Singapore Business School.
Businesses appear to be embracing this goal. While Kecap Korma is currently focusing on the domestic market, it is considering exporting to markets such as Malaysia, Dellvionico said, citing the country’s similar food culture to Indonesia and its population of more than 20 million Muslims,
Meanwhile, local land developer Modern Industrial Estate believes the halal regulation can help attract foreign investors wanting to make halal products to its halal-certified industrial park in Banten, west of Jakarta. One of Thailand’s largest conglomerate, the Charoen Pokphand Group, has bought nearly 20% of the total area.
“We recognize a significant business opportunity with the government regulation set to take effect,” said Levina Siatono, a senior marketing executive with the developer. “We have noted a growing number of inquiries from investors as the regulation approaches implementation.”
She added, “With the right support and opportunities from the government, we are considering the development of a second industrial park in another area of Indonesia.”
President Joko “Jokowi” Widodo has said the certification drive is part of an effort to build confidence in Indonesia’s halal products.
“This is a big market, with big potential, which we must think about so that the existing opportunities are not lost to other countries,” Widodo said last month, adding that Indonesia had a great opportunity to become the center of the world’s halal industry.
Senior Lecturer Samer Elhajjar was first interviewed in Nikkei Asia.