Indonesia’s Halal Economy Set for Boost Under New Government

A Smooth Transition

The handover from the current administration of President Joko Widodo to Subianto’s team has been remarkably smooth. According to Sutan Emir Hidayat, Sharia ecosystem infrastructure director at the National Sharia Economy and Finance Committee (KNEKS), the incoming government has strongly committed to continuing the current Sharia economic and finance agenda. Hidayat emphasized the clear intent to strengthen KNEKS, possibly transforming it into an independent entity to serve the nation’s Islamic economy better needs.

KNEKS operates under the Ministry of Finance and includes 16 members from various ministries and institutions. Its regional offices span almost all provinces, with exceptions in non-Muslim majority areas such as Papua, Bali, Nusa Tenggara Timur, and Maluku.

Strategic Plans and New Initiatives

The Sharia economy and finance agenda is deeply embedded in Indonesia’s National Long-Term Development Plan (RPJPN) 2025-2045 and its five-year medium-term development plan (RJPMN) 2025-2029. The new Sharia economy masterplan (MEKSI), set to refine and build upon its predecessor (MEKSI 2019-2024), outlines 13 priority programs aimed at transforming Indonesia into a hub for the global Halal economy.

These programs include enhancing the quality of Halal tourism, developing Islamic financial institutions, and optimizing the use of social funds such as zakat and waqf. Vice-president-elect Gibran Rakabuming Raka has expressed a strong commitment to these initiatives, promising policies that will train and upskill professionals in the Islamic banking sector and improve the overall Halal industry in Indonesia.

Challenges and Delays

Despite the progress, the transition has not been without its challenges. One significant hurdle has been the delay in mandatory Halal certifications for products, now postponed until 2026 for micro and small enterprises. Originally set for October 2024, the postponement was announced to allow more time for the estimated 4.4 million MSME products still needing certification, against the initial target of 10 million.

Hidayat acknowledges the delays but insists that the extension is in the best interest of MSMEs. The Halal Product Assurance Agency (BPJPH) and KNEKS require substantial resources to educate and certify businesses across Indonesia’s vast geography.

Industry Reactions

Muti Arintawati, director of LPPOM, the Halal certification body, notes that many stakeholders have welcomed the extension. However, she cautions against complacency, stressing the need for intermediate programs and strict targets to ensure businesses do not delay their certification efforts. She highlights the importance of addressing upstream issues, such as the availability of Halal materials and services, to ensure a smooth certification process for downstream businesses.

Ensuring a robust supply chain for Halal products, especially in critical areas like meat and spices, is essential. The availability of Halal-certified materials will ease the production of end products, creating a domino effect that could resolve many of the existing challenges in the Halal certification process.

As Indonesia transitions to new leadership, the focus on the Halal economy remains strong. The upcoming administration’s plans to enhance the Halal sector could position Indonesia as a global leader in the Islamic economy. By addressing current challenges and leveraging strategic initiatives, Indonesia is set to strengthen its Halal economy, benefiting both local and international markets.

The upcoming changes promise to bring about significant advancements in the Halal sector, supporting Indonesia’s vision of becoming a center for the global Halal economy by 2045. With continued commitment and strategic planning, the future of Indonesia’s Halal economy looks promising.

This transition period offers a unique opportunity for Indonesia to solidify its position in the global Islamic economy, harnessing the potential of its Halal sector to drive economic growth and development.