Indonesia’s Halal Law Takes Effect, Impacting Products and Services

Written by: Ayman Falak Medina, ASEAN Briefing, Dezan Shira & Associates

Posted: 30th October 2019 12:42

As of October 17, 2019, Indonesia’s Halal Product Law (“Halal Law”) came into effect. Many consumer products and related services that enter and are traded in the country must now be Halal-certified, while some products and services will have until 2022 to comply.

The Halal Law regulates the processing, materials, and certification of Halal products, in addition to establishing partnerships with international Halal agencies.

The Halal Law mandated the establishment of the Halal Products Certification Agency (BPJPH), a new government agency under the Ministry of Religious Affairs that will issue Halal certificates through a one-stop-shop system.

It is worth noting that, according to the BPJPH, the compulsory Halal labeling law will initially apply to food and beverages before cosmetics, drugs, and other consumer goods, and services related to these goods, which will have until 2022 to comply.

What are the criteria for Halal certification?

Businesspeople will need to study implementing regulation (Reg 31, 2019), which was issued in May, and sets out the scope and requirements for the types of products subject to be Halal certified.

Reg 31, 2019 states that the BPJPH will cooperate with state-owned and private Halal inspection agencies (LPH) to conduct examinations of food and product samples with the results then being presented to the Food and Drug Research Institute of the Indonesian Ulema Council (MUI), who will issue a ruling on whether the sample is deemed Halal. Once approved, the BPJPH can issue the Halal certificate. The key provisions in Reg 31,2019 include:

How to get Halal-certified

Businesses that need Halal certification need to do the following:

  1. Businesses that have yet to get their products or services Halal-certified must register their company and products at the Ministry of Religious Affairs in Jakarta (the current BPJPH office is still not ready to receive applicants and their online portal is not yet developed);

  2. Once applicants are registered, the BPJPH will issue a special registration number, which must be placed on all packaging or on the product itself;

  3. The applicant will then choose an LPH agency from a list provided by the BPJPH;

  4. Pay the fees (these vary depending on the size of the business);

  5. The LPH agency will conduct the relevant tests on the applicants’ products or services, which includes ingredients contained in food samples; and

  6. The results of the testing from the LPH will be presented to the MUI, who will issue a verdict on whether the product or service is classified as Halal.

Fees

Businesses will have to wait for implementing regulations from the Ministry of Finance regarding the payment of fees, which the BPJPH says will be dependent on the applicants’ type of products or services, and the type of business. However, the following terms have been defined:

Requirements to apply for foreign Halal certificates

For foreign companies looking to export products that require Halal certification into Indonesia, they first must be Halal-certified by an agency from their own country, and that agency must already be registered with the BPJPH. The full list of international partners is forthcoming; however, the following terms have been defined:

Requirements for foreign Halal registering agencies

FHAs are any Islamic body that is recognized by their country of origin as the agency that can issue Halal certification.
The BPJPH aims to establish cooperation with FHAs so as to ease the process for foreign companies looking to export their products or services into Indonesia.
As stipulated in Reg 31, 2019, FHAs will first need to register with the BPJPH and provide the following evidence:

Halal Law needs more implementation rules

Given Indonesia’s standing as the country with the largest Muslim population in the world, the introduction of the Halal Law in 2014 was welcomed by many local consumers.

According to the Global Islamic Economy Report 2018/2019, Indonesian Muslims spent US$218 billion across various Islamic economic sectors such as travel, finance, pharmaceuticals and cosmetics, and fashion, making the country a potential to become a global Halal market hub.

From this, more than US$170 billion was spent on Halal food, with many multinational FMCG and F&B companies such as Nestle, Kraft Heinze Unilever, KFC, and McDonald’s already benefiting from having the first-mover advantage – they have all developed substantial Halal propositions in the country. 

The government will need to speed up its implementation regulations – they have stated there could be as much as 20 in total – as there continues to be a significant degree of uncertainty among business owners.

The Halal Law, for example, states that business owners must demonstrate the original source of their raw materials and that these must also be Halal-certified sources. This poses problems as the food production chain is highly diversified, with many ingredients being sourced from all over the world.

The BPJPH, with only one functioning office in Jakarta, and currently no online platform, is also ill-equipped to manage a large number of applicants.

Additionally, the cost of registration and testing will add to the overall production costs of SMEs, in particular, those in the F&B industry, who are crucial to the economy in terms of employment.

This article was first published by ASEAN Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in ChinaHong KongVietnam, Singapore, India, and Russia. Readers may write info@dezshira.com for more support.


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