Indonesia Drives Halal Value Chain Growth Across D-8 Economies

Indonesia, the world’s largest Muslim-majority country, is spearheading a call for the creation of a unified halal value chain among its fellow members of the Developing-8 (D-8) economic bloc. This initiative aims to bolster intra-group trade, enhance economic growth, and strengthen the halal economy within the D-8 nations. With halal products and services witnessing exponential growth globally, Indonesia’s proposal could redefine trade dynamics for these influential economies. The initiative has the potential to position the D-8 countries as key players in the growing global halal market, which is projected to be worth $4.96 trillion by 2030.

What is the D-8 Economic Bloc?

The D-8, or Developing-8, is a group of eight countries with significant Muslim populations. Originally founded in 1997, the D-8 includes Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan, and Turkiye. During the most recent summit held in Cairo, Azerbaijan was officially inducted as the ninth member of the group. Collectively, these nations represent a substantial portion of the world’s Muslim population and are key players in the global halal economy.

The primary objective of the D-8 is to promote economic cooperation, trade, and development among its members. These countries share a collective vision of increasing their share of global trade, which aligns perfectly with the growing demand for halal products worldwide.

President Prabowo Subianto of Indonesia has taken a leadership role in advocating for the establishment of a halal value chain among D-8 members. During his address at the D-8 summit, he emphasized the importance of creating a “strengthened D-8 halal economic network” that would ensure a steady flow of goods and services permissible under Islamic law.

“We must create a halal value chain through a strengthened D-8 halal economic network,” Prabowo urged, emphasizing the need for closer economic integration, streamlined trade procedures, and the effective implementation of preferential trade agreements.

Economic Potential of the Halal Value Chain

According to forecasts by PricewaterhouseCoopers (PwC), the D-8 economies are projected to rank among the world’s 25 largest economies by 2050. As of 2023, the combined Gross Domestic Product (GDP) of the D-8 nations was estimated to be $4.8 trillion, making it the third-largest economic bloc in the world. Establishing a halal value chain within this group could unlock untapped potential, particularly in the production and export of halal-certified products.

The demand for halal products is increasing worldwide, driven by both Muslim and non-Muslim consumers seeking healthier, ethical, and traceable food options. The establishment of a halal value chain will allow D-8 countries to tap into this growing demand, potentially increasing their market share in regions such as the Middle East, Europe, and Southeast Asia.

The halal economy is rapidly growing, fueled by increased consumer demand for halal products and services. From halal-certified food and beverages to cosmetics, fashion, and pharmaceuticals, the market’s expansion is being driven by the preferences of over 1.9 billion Muslims worldwide.

Indonesia, with its 229.6 million Muslim population (as of 2020), serves as the world’s largest domestic halal market. According to the Indonesia Halal Markets Report 2021/2022, the country’s domestic spending on halal economy products and services reached $184 billion in 2020 and is forecasted to grow to $281.6 billion by 2025. By championing the halal value chain, Indonesia aims to further capitalize on its position as a major player in the global halal market.

The Role of Trade Agreements in the Halal Value Chain

One of the main objectives of Indonesia’s proposal is to strengthen the existing preferential trade agreement (PTA) among D-8 nations. While a PTA is already in place, critics have noted that the tariff reductions have not been substantial enough to drive significant trade growth. Indonesia’s call to streamline customs procedures and harmonize certification standards aims to remove barriers that hinder the smooth flow of halal-certified products across borders.

Indonesia’s emphasis on improving bilateral trade with Egypt, as well as with other D-8 members like Malaysia, Pakistan, and Bangladesh, underscores the broader ambition to create a fully integrated halal value chain. With the rise in demand for halal products, simplifying trade and certification processes will benefit both producers and consumers.

Indonesia’s role in the halal value chain extends beyond advocacy. It’s also a leading supplier of halal products to member countries of the Organization of Islamic Cooperation (OIC). In 2020, Indonesia’s halal exports to OIC countries reached $8.6 billion, with key products including food items, pharmaceuticals, and cosmetics. Major importers of Indonesian halal products include Malaysia, Pakistan, Egypt, and Bangladesh—all of which are also D-8 members.

Opportunities for the D-8 in the Halal Economy

The D-8’s collective participation in a halal value chain presents significant economic opportunities. By fostering economic cooperation and reducing trade barriers, D-8 members can:

• Increase exports of halal-certified products: Streamlined trade and certification processes will facilitate faster movement of goods.

• Enhance market competitiveness: By positioning themselves as key players in the halal value chain, D-8 nations can attract global investors and halal product importers.

• Boost employment and local production: Increased demand for halal products will create jobs in sectors like food production, logistics, and quality assurance.

• Foster innovation and halal certification standards: Unified halal certification procedures will encourage more companies to enter the halal market.

While the potential benefits of a unified halal value chain are substantial, the initiative is not without challenges. Key obstacles include:

1. Diverging certification standards: Each D-8 member currently has its own certification processes, leading to inconsistencies.

2. Regulatory barriers: Different import/export regulations and customs procedures can delay the movement of halal goods.

3. Limited trade data transparency: A lack of standardized data sharing among D-8 countries hampers trade efficiency.

4. Logistics and supply chain issues: Shipping delays and insufficient cold storage facilities can compromise the quality of halal products.

How the D-8 Can Overcome These Challenges

To successfully implement a halal value chain, D-8 countries must:

• Standardize halal certification: A single set of halal certification criteria for all D-8 members will facilitate cross-border trade.

• Simplify customs processes: Reducing customs delays will speed up the movement of perishable halal products.

• Strengthen digital trade platforms: Using e-commerce and blockchain for supply chain tracking will enhance transparency.

• Invest in halal research and development: Encouraging innovation in halal-certified products will ensure a steady supply of high-quality goods.

Indonesia’s leadership in establishing a halal value chain is a testament to its commitment to economic growth and trade integration. By uniting the D-8 countries under a shared goal, Indonesia is paving the way for a future where halal-certified products flow more freely between member nations. With growing demand for halal goods and services, the establishment of a cohesive halal value chain can position the D-8 as a major player in the global halal economy.

Indonesia’s push for a halal value chain among D-8 economies is a bold vision with enormous economic potential. If successful, the initiative will boost trade, drive economic growth, and position the D-8 as a leader in the global halal economy. As consumer demand for halal products continues to rise, the creation of a unified halal value chain will offer long-term benefits for producers, consumers, and governments alike. With Indonesia at the helm, the D-8’s journey toward halal market dominance is well underway.