In recent years halal tourism has grown substantially and occupies an important segment of international tourism. Statistical data shows that the value of the Muslim market worldwide stood at $2.3 trillion. With an estimated growth of up to 20% per year, this global halal industry has become the fastest growing consumer segment in the world.
There are two fundamental reasons for this. First, the halal industry has now expanded beyond the traditionally-known scope of the food sector. Halal products today include cosmetics, pharmaceuticals, toiletries, and penetrate into the service industry, such as Islamic financing, logistics, tourism, marketing, travel agents, and mass media. Second, the Muslim market share is very large, with total followers of around 1.8 billion people. However, the halal market is non-exclusive to Muslims. Halal product requires a set of rules that must be fulfilled because they must uphold ethical values, social responsibility, economic and social justice, animal welfare, etc. Due to the promotion of ethical consumerism, the demand for halal-certified products from non-Muslim consumers continues to increase.
With such an extraordinary prospect, there are many questions about the development of the halal industry in Indonesia, which is a country with the largest Muslim population in the world. It is interesting to examine whether Indonesia is able to take advantage of the momentum and make this market a dark horse that will strengthen the resilience of its national economy.
A Peek at Indonesia’s Halal Industry
Basically, the halal industry has received attention from both the government and domestic industry players in Indonesia. This is evident by the holding of the International Halal Lifestyle Conference last October by Bank Indonesia (BI) as a business forum to help unlock Indonesia’s potential in the global halal industry chain. However, as cited by the Jakarta Post, Anwar Bashori, Bank Indonesia’s Sharia finance director said, “However, today we are still consumers. Indonesia needs to be a position to become a producer of halal products … And that we (still) don’t have a regulation to establish a halal ecosystem.”
It is unfortunate that despite being the largest Muslim population with a strong economic outlook, Indonesia is only ranked 11th in the Islamic finance indicator based on the latest data from the Global Islamic Economic Report 2017/2018. It lags behind its neighboring country, Malaysia, which came in the first. It is hoped that, with the support of many parties, Indonesia can catch up. Considering that 13% of the world’s Muslim population, estimated to be around 207 million individuals, are situated in the Archipelago, Indonesia could emerge as a major producer of halal products in addition to supplying its huge domestic market.
The strategy to gradually transform Indonesia towards the position of halal-product producer certainly requires careful planning. For this reason, with limited resources and funding, the government needs to look at which sectors have the most significant economic potential. Seeing the advantages and competitive advantages that Indonesia has, there are two main industrial sectors that can develop rapidly, namely the food industry and tourism.
Halal Food Industry
In contrast to the popularity of the Islamic finance industry which is relatively new to the people of Indonesia, the demand for halal product certification, especially for food, already exists. In fact, the LPPOM MUI (The Assessment Institute for Foods, Drugs, and Cosmetics Indonesian Council of Scholars) which provides halal certification was established in January 1988. Operations in the form of inspection/audit, determination of fatwa, and issuance of halal certificates issued by MUI have been recognized, and some have even been adopted by overseas halal certification institutions, which have now reached 42 institutions from 25 countries.
Because the system of certification and standardization has been well regulated, the food industry can become the frontline for Indonesia to fly its wings and become a global producer of halal food products. However, even though the existence of halal-certified products is already large, in practice MUI regulations have not yet been fully implemented. This is because, there are still many products, both local and foreign, that are not halal certified and are circulating freely on the market.
The rules that require halal certification are actually regulated in Law No. 33 of 2014 concerning Guaranteed Halal Products. Nonetheless, according to Executive Director of Indonesia Halal Watch (IHW), Ikhsan Abdullah, the provisions are planned to be implemented in 2019. He also said that due to the complexity of the permit scheme, time, and the high cost of obtaining halal certification made the majority of products, especially from the MSME industry, many had not obtained halal certification on the products they produced.
Due to the lack of firmness of the government in requiring halal certification and the lack of awareness of industry players to register their products, the role of exports of Indonesian halal products is still relatively small, namely 21% of total exports overall, despite growing demands. Indonesia has many programs to maximize the potential of halal food industries, including the need to create a supportive industrial halal ecosystem by strengthening regulation, monitoring its practices, effective promotion, and bridging close coordination between related sectors.
Halal Tourism Industry
Halal tourism is a segment that continues to grow globally. In fact, the global Muslim traveler’s expenditure is the largest in the world for the tourism sector, reaching $169 billion in 2016 and estimated to continue to grow to $283 billion in 2022.
The good news is that Indonesia has made a significant contribution to this sector in the eyes of the world. Occupying 4th place of the number of Muslim tourists with a total of domestic tourists on a scale of millions, the people of this country are even able to spend $9.7 billion annually. Clearly, halal tourism industry has the potential to become a lucrative economic field for this maritime country.
Tourism is always changing depending on the trends. The high demand for halal tourism that comes from both domestic and outside must be quickly responded to by the government so as not to lose momentum. However, it should be noted that making Indonesia a halal tourism destination does not mean eliminating the value of culture which is regional originality.
In terms of industry, Halal tourism is actually an extension of tourism products that are more inclusive with additional facilities to accommodate the needs of Muslim tourists. Namely, the addition of recreational facilities that provide places of worship, special ablution places, have a list of halal-certified restaurants, Sharia hotel facilities, availability of halal labels for souvenir products, Sharia travel agent services, religious destinations, and others. The availability of these facilities can not only be enjoyed by Muslim tourists, but non-Muslim tourists can also enjoy the facilities provided.
A nation that has no less than 800,000 mosques scattered throughout the region has actually begun to gain international recognition as a Muslim friendly tourist destination. In the 2016 World Halal Tourism Awards competition in Abu Dhabi, Indonesia won 12 of the 16 award categories, including the World Best Airlines for Halal Travelers, the World Best Airport for Halal Travelers, World Best Halal Beach Resort (Novotel Lombok Resort), World Best Halal Destination (West Sumatra), World Best Halal Honeymoon Destination (Sembalun Village Region, Lombok), World Best Halal Culinary Destination (West Sumatra), and World Best Halal Cultural Destination (Aceh )
This victory is expected to encourage the government, relevant stakeholders, and the Indonesian people to continue to work to improve the tourism competitiveness index by adding the characteristics of halal tourism to its promotion scheme. The increase in Middle Eastern tourists that grew by 32% in 2016 has also contributed positively to the country’s foreign exchange earnings reaching $13 billion. Along with that, coordination from the tourism ministry with related parties must be effective so that the existing budget can be focused on improving infrastructure, HR readiness, and integrative promotion so that it can accelerate the growth of halal tourism in this country.