Halal industry can help Indonesia in international trade

| 02/05/2018 | Reply

Rahmat Hidayat Efendi – The Jakarta Post

There are 1.8 billion Muslims around the world, amounting to around 27 percent of the global population. Muslims collectively support the halal product market, which is currently valued at more than US$2.3 trillion according to the Emirates Authority for Standardization and Metrology (ESMA).

Indonesia passed Law No. 33/2014 on halal product assurance in October 2014, which requires all products to be certified halal in 2019. This law also created the Halal Certification Agency (BPJPH) to oversee the process and provide ongoing certification for products. This means even non-halal products have to go through the exhaustive process.

The law requires halal certificates and labels for three sectors – food and beverage, cosmetics and pharmaceuticals – and goes further than most in that it requires not just final products but also all equipment and raw materials used during the production process to be acceptable under sharia.

Unfortunately, the halal law is considered burdensome for businesses because it is difficult to apply; the law may also potentially disrupt the investment climate in Indonesia, which would potentially work against the government’s efforts of trying to achieve an investment-friendly environment at the global level.

For example, the obligation of halal certification on pharmaceutical products, under the law, means the BPJPH will have to supervise each stage of production of any product, distribution and how it is served to consumers. The requirement for halal certification adds one more regulatory layer for pharmaceutical companies looking at the market. Products not only have to move through more traditional regulatory pathways, complete with various clinical trials, but also meet halal requirements that often ban the use of porcine products. Aside from rising high production costs, this will certainly make it difficult for the halal certificate institutions to verify. As a result, pharmaceutical industry would be vulnerable to sanctions and will affect the uncertainty of the pharmaceutical business that will ultimately disrupt the supply of drugs to the public.

There is also ambiguity in articles 4 and 26 of the law. Article 4 can be interpreted that “all products in Indonesia must be certified halal”. In the context of international trade law, “must” means “obligatory and necessary with legal consequence”. This will result a restriction of non-halal products in Indonesia because importers who do not obtain halal certification cannot enter and trade in Indonesia. However, in Article 26, the law provides an opportunity for entry and distribution of non-halal products if they attach non-halal information on the products. This ambiguity will make importers confused and difficult to market their products in the territory of Indonesia and regarded as trade restriction.

Key takeaways

The World Trade Organization (WTO) allows each country to apply halal standards to protect Muslim consumers in accordance with GATT Article XX (general exception), that each WTO member country for the benefit of the consumer may apply its own technical regulation. However, the halal standard must be established and implemented in accordance with the Technical Barrier to Trade (TBT) Agreement, in order to gain international trade benefits.

Hence, the writer believes that the Government should observe the provisions of the TBT Agreement in implementing halal standards in measuring the consistency of the Halal Act with WTO law. There are several measures need to be achieved.

First, the establishment of halal assurance standard should be efficient; the government should simplify the processes and procedures for obtaining halal certificates, whether those processes are related to additional tests or procedures in obtaining halal certificates. Simple processes and efficient procedures will cost the production much cheaper. Efficiency can also be a fairly short time limit in obtaining a halal certificate. One-stop shopping is required for the process and procedures for obtaining halal certification.

Second, the BPJPH should be able to cooperate with halal certification bodies in some exporting countries in order to recognize halal certification of the countries concerned. This will reduce discriminatory treatment between imported products and domestic products that have halal certificate.

Third, trade restriction should be eliminated; this can be done by providing additional rules or explanatory in the application of articles 4 and 26 of the law. The rules should also describe procedures relating to ‘non-halal products’, so it is interpreted vary and non-halal products can enter the territory of Indonesia.

Fourth, Indonesia should uphold the International Standards; government should adhere to halal standards regulated in Codex Alimentarius as part of Indonesia’s commitment to the TBT Committee in the WTO. This would also reduce trade restrictions for foreign importers who market their products in the territory of Indonesia.

In conclusion, logically, this halal law can support Indonesia in international trade since many countries have opened the opportunity for the entry of halal certified products. Take for instance Malaysia. According to the Deputy Prime Minister Datuk Seri Dr. Ahmad Zahid Hamid, the halal industry contributed approximately 7.5 percent to Malaysia’s gross domestic product (GDP) and created a total of 28,000 jobs. The industry shared an annual export value of RM43 billion ($11 billion) and attracted investments worth RM13.3 billion in 2017.

Thus, Indonesia shall facilitate the trade by consistent and conducive halal assurance. The regulations itself need to align with other collective standards from Organization of Islamic Countries (OIC) and Muslim-majority countries worldwide.

It is possible that Indonesia can champion the global halal standard by leading the harmonization of the standard that would be applicable for business to navigate, and support simple, transparent and straightforward procedures. With this in mind, the domestic business and investment environment will be highly developed, and the notion to increase Indonesia’s share to global trade and commitments to WTO would be tangible. (kes)

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Category: Asia, Halal Integrity, Halal Trade, Indonesia, Research

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