Kolom

Strengthening the Domestic Halal Industry

10 March 2017



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By Randi Swandaru
MSc Student in Islamic Finance and Management – Durham University, United Kingdom

Based on the latest Global Islamic Economy Score, as the largest Muslim country in the world, Indonesia’s halal industry is still far left behind compared to other Moslem countries. With $154.9 billion of halal food market; $5.5 billion of halal pharmaceutical market; $3.3 billion of halal cosmetics market, Indonesia only ranks 10th, whereas Malaysia ranks 1st despite the fact that Malaysia has much smaller population. This illustrates that Indonesia has failed to optimize its huge Moslem population as the key to boost its domestic halal industry and economy.

To improve the situation the government has taken serious intervention by issuing the act no 33/2014 about halal product assurance which aims to assure and provide convenience, security, safety, and availability of halal products for the society and to increase the value added in halal products so that the halal industry will grow by igniting the private sector to produce and sell them. The main impact of the issuance of this act is every product that being traded and entering Indonesia’s market has to be halal certified five years after the ratification of this act and puts the Halal Products Assurance Agency (BPJPH) as the main administrator of the halal certification process.

Another impact of this act is an opportunity for the government or society to establish new halal auditing body. This entity will act just similar to which LPPOM has been done for years in conducting halal audit. Nonetheless, this act requires some quite tough prerequisites for opening a new halal auditing body such as holding accreditation from BPJPH, owning office and laboratory, employed at least three halal auditors and the request of the establishment should come from Islamic organization entity. Those requirements are very important in order to make sure the high quality of halal certification process.

Moreover, this act also emphasizes the existence of halal auditor by giving six requirements to anyone who wants to be a halal auditor such as particular educational background and holding halal auditor certificate from Indonesian Ulema Council (MUI). Likewise, this act also points out several roles of halal auditor which is basically putting the halal auditor as the core element for the quality of halal certification process.

Four Challenges

However, this industry has still four main challenges. First, the act creates much complexity in halal certification process in compare to the current one which held by LPPOM and MUI. This act requires the BPJPH to appoint particular halal auditing body to run a halal audit process for every halal certification request. Then this auditing body will give the result back to the BPJPH which will use this result to request halal fatwa from the MUI. BPJPH will issue a halal certificate based on the fatwa but if the product failed in the halal certification process, the process will loop from the beginning.

This will create a more complex and longer process since it involves four institutions, namely the requester (company), BPJPH, halal auditing body, and MUI in compare to the current process which only involves company, LPPOM, and MUI. This is not just about BPJPH as an additional institution to the current procedure but the information transfer will be much difficult since every institution may vary in their information system and there is a backtracking during the process.

Hence, the BPJPH should set up national information system in halal certification process which should be adopted by all halal auditing body. Failure to provide this national information system will lead to inefficiency, accountability and transparency problems which contradict with the principles of this act.

Moreover, the information system should be utilized to create a halal auditor database across the country which can show auditor’s performance, experience and competency. By doing this it will force the halal auditor to enhance their capability and comply the auditor’s code of conduct.

Second, at the institutional level, BPJPH just resides under the Ministry of Religious Affair (MORA) but it holds a huge responsibility and authority such as enacting any regulation, norm, standard, and criteria regarding halal certification process; issuing and revoking halal certificate; registering halal certificate of imported products; accrediting halal auditing body; and doing socialization, education, and publication of halal product.

The position of the BPJPH under MORA limits its function and tends to lead its activity into administrative process rather than playing a significant role as a leading organization in developing halal industry. Placing BPJPH directly under President will suit this institution with its responsibility and authority. Moreover, put MORA as the controller and supervisory institution which will prevent any power misused on the BPJPH

Third, in the long run, the government should pay attention to human development and knowledge infrastructure in this particular industry. Thus, opening specific major or department related to halal industry and management in national university in Indonesia is indispensably needed in order to make sure we have adequate potential number of halal auditor as the core of halal certification process and we have knowledge infrastructure that will sustain the knowledge creation in the halal industry. Likewise, the government should support the initiative from some institutions that currently have started to establish halal research center.

Fourth, BPJPH should be careful in registering the halal certificate of imported products and acknowledging foreign halal auditing body since it could distort the local halal industry. Giving loose filter for this role will lead the private sector to import more halal products or raw material from abroad rather than produce it domestically. BPJPH also needs to educate and promote halal certification process to Indonesia’s small medium enterprises (SME’s) so that they can compete with foreign halal products.

Finally, the issuance of halal products assurance act shows the government’s political will to boost domestic halal industry. However, several challenges need to be solved such as providing national halal certification information system, institutional structuring, and strengthening the halal auditor as well as the domestic SME’s in regards to halal regulation.

*image courtesy of dreamstime.com