Indonesia must look to neighbours for halal export inspiration

The LPPOM MUI building in Bogor, West JavaThe LPPOM MUI building in Bogor, West Java. Photo courtesy LPPOM MUI.

By: Ardi Wirdana

Indonesia’s halal industry is looking to follow the footsteps of neighbours Malaysia and Thailand to become one of the world’s major halal product suppliers, as it looks to seize the vast opportunity brought about by the ever increasing global halal market.

“As we know, the global halal trade is growing fast, especially halal product exports from the Asean region to middle east and OIC (Organisation of Islamic Cooperation) countries, as the biggest consumers of halal products,” Mohamad Bawazeer, chairman of the Middle East and Organization of Islamic Conference (OIC) at the Indonesian Chamber of Commerce and Industry, told Asean Today.

“And of course this will cause a trade competition between the Asean countries in taking advantage of this opportunity,” he added.

This opportunity, is no small matter. It is estimated that Muslims account for 27 per cent of the world population, or 1.7 billion people, and is expected to surge to 2.8 billion in 2050. The current halal product supply is only enough to meet more or less 20 percent of the world halal demand.

Furthermore, the whole of the Muslim population currently consumes an estimated US$265 billion worth of halal foods a year. What is interesting is that the spending power of Muslims is increasing. According to the State of the Global Islamic Economy 2014-2015 report by Thomson Reuters, the global expenditure of Muslim consumers on food and lifestyle grew 9.5 percent from the previous year’s estimate to US$2 trillion in 2013 and is expected to reach US$3.7 trillion by 2019.

Simply put, this is a growing yet gravely undersupplied market, making it a mouth-watering prospect for many the world’s halal producers.

Asean countries, both the Muslim and non-Muslim majorities, have jumped into the bandwagon. While Malaysia and Thailand continue to establish themselves as two of the world’s main halal kitchens, other countries in the region have also started to pull up their sleeves.

Singapore has been building its halal brand through product development and establishing a globally recognised halal certification. The Philippines has introduced various new bills to encourage the manufacture and trade of domestically produced halal products.

Indonesia, however, despite being the world’s most populous Muslim nation with an abundance of certified halal businesses and products, have yet to make any major moves in the pursuit of the global halal market.

Slowly Thinking Globally

The key parties in Indonesia’s halal industry, which have for so long concentrated on the domestic market, now seem to be showing signs that it is starting to open itself up and set its sights on serving international demands.

Last week the country’s halal certifier LPPOM MUI, for example, held a national coordination meeting themed “Integrated Halal Certification Service with International Standard”. In the meeting, the halal body explored a number of important issues, including preparing an improved halal certification system and service needed for the Asean Economic Community (AEC).

Before that, the Industry Ministry, working together with the Indonesian Chamber of Commerce and the Indonesian Ulema Council (MUI), announced that it planned to develop halal industrial zones in Indonesia to boost the halal industry and push halal producers to export is products abroad.

Mohamad Bawazeer of the Chamber of Commerce told Asean Today that the industry ministry is currently preparing the regulations for the halal zone and also getting a pilot project ready which will be located in the Java island.

Industry Ministry director general for industrial-estate development Imam Haryono said that the building of halal industrial zones was an ”urgent” necessity given the growing demand for halal products, and the fact that other countries, especially Thailand and Malaysia, has already beaten Indonesia to it.

Thailand and Malaysia Setting the Bar

As far as Southeast Asia is concerned, Malaysia and Thailand are the leaders when it comes to halal exports, and it is not something that happened overnight.

As a non-Muslim country, Thailand initially found it difficult to have its halal food exports accepted by consumers in the Muslim market. In an effort to win the trust of Muslim consumers, the country invited foreign halal bodies to assist producers meet halal requirements and earn the halal certification. By 1982, the country’s Islamic authority the Central Islamic Council of Thailand began issuing halal certificates.

Driven by the growth of the world Muslim population, the Thailand halal industry continued to prosper. In 2014, Thailand’s halal-food exports were valued at US $6 billion, ranked in the world’s top 10. In the past five years, the country’s halal-food exports have grown by 8 per cent annually.

The Industry Ministry has budgeted Bt180 million (US$ 5 million) to promote exports of halal products. The ministry will also expedite development plans for halal products of small and medium-sized enterprises and Otop (One Tambon, One Product) to propel Thailand towards being among the top five halal exporters by 2020.

Malaysia, meanwhile, is regarded as a role model for the development of world halal food industries. The Codex Alimentarius Commission, a body under the United Nations responsible for regulations of food preparation globally, has cited Malaysia as the best example in the world in halal food certification.

Malaysia owes much of its halal industry success to a special halal body called the Halal Industry Development Corporation (HDC) which was set up by the government in 2006. The HDC is responsible for the overall development of the halal industry in Malaysia which includes the development of halal standards, audit and certification for halal products and services. Apart from food, halal products also include pharmaceuticals, cosmetics, finance, logistics and tourism.

Halal Industry Development Corporation (HDC) chief executive officer Datuk Seri Jamil Bidin said halal exports stood at RM38bil (US$ 9 billion) in 2014 from RM32bil the previous year

Government Support Vital

The fact that Indonesia is still lagging behind Malaysia and Thailand in halal product exports could be down to various factors like trade and diplomatic relations, says deputy director of LPPOM MUI Osmena Gunawan.

However, she observed that one of the most notable thing about the Malaysian halal industry – and something that Indonesia badly lacks – is aggressive PR and promotion strategy.

“We have to admit that Malaysia is stronger in terms of PR. Indonesia is still weak, because MUI is working alone,” Osmena told Asean Today recently. “Promotion is key. Even in companies promotion takes up 30 percent of all costs if they want their products to be seen by people.”

She added that both Malaysia and Thailand have both greatly benefited from full government support on the development of the halal industry. This, she said, is something that Indonesia has not enjoyed.

“The difference is miles apart because we know Malaysia is supported fully by the government so is Thailand. They have the support of the Kingdom even though they’re not a Muslim majority,” she said.

Osmena explained that unlike Malaysia which has the HDC which is in charge of all matters related to halal product development from start to finish, Indonesia only has LPPOM merely as a halal certifier. The important process that needs to be undergone before and after certification has not been addressed by the government.

She added that her agency has been trying to assist businesses in things other than certification, but has found it difficult and ineffective.

“Our job is only to handle certification only, and we’ve done that. Pre and post-certification is not the job of the LPPOM MUI, but we have been doing it because that has not been done by the government. LPPOM has been trying to do that because the people need it,” she said.