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Halal Market as An Emerging Sector: How Promising is the Market in Indonesia?

Indonesia is currently the largest Muslim country in the world with a Muslim population reaching 241.7 million people, or 87 percent of the country’s total population in 2022. Considering the large Muslim population in Indonesia, the demand for halal products and services will automatically take a huge part in boosting the national economy.

Bank Indonesia estimates that priority sectors in the Halal Value Chain (HVC) will grow by 4.5 – 5.3 percent in 2023, and be able to support 25 percent of the national economy. HVC consists of several sectors i.e., agriculture, food and beverages, Muslim fashion, and halal tourism. 

Indonesia is one of the leading countries in the global halal market by contributing to the increasing demand for halal products and services every year, in which the demand for halal products and services in Indonesia is projected to grow by 14.96 percent in 2025 or around 281.6 billion USD. With this steady growth, Indonesia has the opportunity to become the largest halal consumer market in the world, contributing to 11.34 percent of the total halal spending globally. The 2022 State of Global Islamic Economy (SGIE) report also shows that Indonesia’s sharia economic indicators continue to increase so that currently Indonesia is able to occupy the fourth position in the world. 

Halal Market

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Halal Consumption and Industry in Indonesia

In 2020, Indonesia’s total consumption of halal products reached USD 184 billion. Meanwhile, the total exports of halal products were USD 8 billion, and the import value was higher, which was USD 10 billion. Particularly in the halal food sector, Indonesia is the second largest consumer, and the fourth largest consumer for halal cosmetics in the world. 

As a serious step in supporting the Sharia economy and the national halal industry, the government is focusing on national strategies and programs aimed at encouraging the growth of the halal sector. Apart from the great opportunity as the world’s largest market for halal products and services, the Indonesian Government is also targeting to become one of the largest halal producers in the world. 

The estimated global consumption of the Muslim population is projected to reach USD 2.4 trillion in 2024, and this is what the Indonesian government is aiming i.e., to take part in the global halal market share through the development of the halal industry in Indonesia. 

Certification Obligation for Halal Products and Services 

In accordance with Government Regulation Number 39 of 2021, halal products and services are required to possess halal certificates gradually in several phases with different due dates. The first phase started on 17 October 2019 and will be due on 17 October 2024. 

The first phase of halal certification obligation is for:

  • Food and beverage products;
  • Raw materials, food additives, and auxiliary materials for food and beverage products; and 
  • Slaughterhouse products and services. 

In the next phases, which will be due in 2026, 2029, and 2034, several other products will also be required to obtain halal certificates i.e., medicines, cosmetics, goods used for the use of medical devices, and other products of which the sources of raw materials are not yet halal and/or the production method is not yet halal. 

Therefore, all business actors who produce or market these products are to immediately carry out halal certification for their products before the deadline of the phases determined by the Government. 

Strengthening the Halal Industry in Indonesia

With the huge market opportunities for halal products and services in Indonesia and the world, the Indonesian Government is encouraging the halal industry to be able to meet consumer demand in Indonesia and to also aim for the export market as stated in Presidential Regulation Number 74 of 2022 concerning National Industrial Policy for 2020-2024.

The Indonesian government has established the Indonesia Islamic Economic Masterplan (MEKSI) 2019-2024 in the National Medium-Term Development Plan (RPJMN) and established the National Committee for Islamic Economy & Finance (KNEKS) through Presidential Regulation Number 28 of 2020 to accelerate, expand, and advance the development of sharia economy and finance. 

There are six sectors in the focus of halal development being carried out by the government, as follows:

  • Halal Foods
  • Sharia Finance
  • Halal Tourism
  • Muslim Fashion
  • Halal Media and Recreation
  • Halal Cosmetics and Pharmacy 

Several government policies in terms of strengthening the halal industry in Indonesia are carried out through compiling halal industry policies, strengthening halal industry infrastructure, implementing the Halal Product Assurance System (JPH)/halal management system, providing fiscal and non-fiscal incentives to the halal industry, participating in international cooperation for the access to halal raw materials, and so forth. 

Halal Market

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What are the Benefits of Halal Certification for Business Actors?

The government’s plan to empower the halal industry and promote halal certification, as well as the opportunities for the large halal market at the national and global levels, can be one of many considerations for business actors to carry out halal certification for their products and services.

Besides, there are direct benefits business actors can get if they comply with halal certification for their products and services, as follows:

  1. Providing a sense of security and increasing trust of the consumers
    Most Muslim consumers will pay attention to the presence or absence of a halal label on every product and service they will purchase. With a halal certification, consumers will feel more confident and have a sense of trust in your products and services. The sense of trust certainly arises from the guarantee that certain standards have been met by the business actors.
  2. Gaining competitive advantage for the products or services
    In business competition, every business actor definitely needs a value that differentiates their products or services from those of other competitors. The halalness of the products or services can be one of the Unique Selling Points offered by business actors because not every business actor has the ability to comply with halal standards.
  3. Expanding your products/services marketing reach
    Carrying out halal certification enables you to tap into the global market. One of the many requirements to export your products is the quality assurance, which includes product halalness, particularly if your main export destinations and target markets are Muslim countries where halal certification is mandatory.

Considering the promising market for halal products and services in Indonesia and the world, you can learn more about the importance of fulfilling the halal certification obligation from ET Consultant Business Talk, which will be held on August 2nd at Fraser Place Setiabudi, South Jakarta. Ibu Siti Aminah, the Head of Halal Certification Agency, Ibu Anisah Ali, Trade Commissioner of MATRADE Jakarta, Bapak Trisna Permadi, our Senior Consultant, and Ibu Deasy Widiantie, our Director will share about their knowledge and perspectives around the halal certification and the benefits for the business continuity of business actors in Indonesia. 

Make sure you register to reserve your seat now through this link: https://bit.ly/ETCHalal

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ET Consultant is a Business Consultant and Legal Consultant Expert that provides support for local and multinational clients to start and manage their business operations in Indonesia. ET Consultant specializes in Business Incorporation, Licensing & Legal, Accounting & Taxes, Immigration, and Advisory Services.

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