Grant Thornton Indonesia's Update

Halal is the Industry’s New Chapter

According to the Oxford Dictionary, Halal refers to any dish relating to meat prepared as prescribed by Muslim law. The law of halal can be traced back to one of surah in the Qur'an, Al - Maidah which says  “Prohibited to you are dead animals, blood, the flesh of swine, and that which has been dedicated to other than Allah, and [those animals] killed by strangling or by a violent blow or by a head-long fall or by the goring of horns, and those from which a wild animal has eaten, except what you [are able to] slaughter [before its death], and those which are sacrificed on stone altars, and [prohibited is] that you seek decision through divining arrows”. It clearly regulates what can be eaten and what is forbidden for them to consume. However, halal goes beyond food and drink, as it also defines daily life within the Muslim community. Because Indonesia is home to one of the biggest Muslim populations in the world, it has the potential to become a leader in the halal industry. This article explores solutions to the challenges Indonesia might face in setting the gold standard for the halal lifestyle.

Apart from food and drink, halal has a significant influence in areas such as finance, media and tourism, medicines, cosmetics, tourism and even fashion. The demands for halal goods are increasing, especially since many Muslims have started to raise awareness towards what they are able to consume. It is not uncommon for Muslims to only consume or use services with halal certificates, and even liberal Muslims with more "freedom" in Islamic practices in their daily lives continue to raise awareness toward Halal in recent years. People still wonder how big the halal industry is, but research from Adroit Market shows the global halal industry will reach USD 9,71 trillion by 2025. This is also supported by the more developed Islamic economy ecosystems from key players such as the Philippines, China and Thailand, whose continued and increasing investment in the halal industry will significantly increase the market concentration.

In addition, when halal is used as a standard operating procedure, it will not diminish the current procedures, but instead elevate the standards, which are recognized by many players in the industry. A recent example is Haribo, who opened up their first halal candy store in the UK in 2018. Mitsubishi also followed the same steps by investing in Al-Islami food, a UAE-based halal manufacturer. The step taken by various industry giants indicates that the halal industry is a trend that is here to stay. The main contributor to the halal industry’s success is the growing number of the global Muslim population, which is projected to remain the second largest religion up until 2050, according the Pew Research Centre. Therefore, it’s only logical to think that the biggest exporters of halal products are the Muslim majority countries; unfortunately, that is not the case. According to 2016 statistics from Dubai Islamic Economic Development Centers and Thomson Reuters, Brazil exports most of the halal food and beverages in the world, followed by Australia, India and France.

Consequently, with the largest Muslim community in the world, it’s only logical that Indonesia wants a piece of the halal pie. But even compared to the neighboring Malaysia, Indonesia’s halal industry is still struggling, only ranking 10th compared to other countries based on the Global Islamic Economy Indicator. Bambang Brodjonegoro, the head of the National Development Planning Agency, argued that there is still more potential within the halal industry in relation to the development of the national economy, but it is unfortunate that for the most part, Indonesia is currently only a consumer. Bambang Brodjonegoro further explained that the lack of regulations and facilities has resulted in the hindrance of the domestic halal industry. Among other factors like the low level of awareness in society towards halal products and services, the underwhelming connection between halal monetary sectors and the inadequate production level to meet an increasing domestic demand of halal products has contributed to the slow growth of Indonesian halal industry.

Though Indonesia’s future in the global halal industry seems bleak, according to Ahmad Akbar Susanto, a researcher from CORE, what the country needs is actually a roadmap to start developing the halal industry in alignment with the National Plan of Industrial Development. With the recent launch of Halal Park last April by President Joko Widodo, there is hope that Indonesia could still be the biggest producer in halal industry. Furthermore, Joko Widodo also mentioned that Halal Park is the embryo of the Halal District, which will later be developed in the same area with the investment value of IDR 250 billion. And with the passing of the recent bill on Halal Products Assurance, Indonesia has started to take steps towards becoming the leading producer in the global halal industry.