Indonesian businesses prepare for the worst as they face up to universal halal law
The final law passed by the last government, it is also proving to be a headache for incumbent Joko Widodo.
It is poised to cover a wide range of consumer goods from food and beverages to textiles, which must all be certified as halal by the time the act is introduced in 2019. Currently, halal certification is voluntary and at the discretion of a manufacturer.
The new regulation’s broad focus raises concerns for small- and medium-sized retailers carrying quantities of long-life uncertified stock that they will be forced to dispose of when it comes into effect.
Food manufacturers will also be made to shell out to redesign and print new labels to reflect their products’ halal status. A colossal gridlock is expected as they rush to get certified.
The Halal Product Certification Agency (BPJPH), a new government body created to replace the widely criticised Indonesian Ulema Council (MUI), a clerical organisation, which has hitherto issued halal certification, faces understaffing and a steep learning curve.
While MUI has only been able to process some 6,000 certification requests per year, its replacement is staring at around the 1.5 million companies that will each require assessment over the next year.
"We don't need 45 people. We need more than 1,000,” a resigned Dr Sukoso, BPJPH’s director, told Business Times.
It is estimated that each certificate will initially take 50 days to process, at a price of up to IDR5m (US$370). The Indonesian Food and Beverage Association (GAPMMI) has calculated that the overall cost to businesses to register their products could reach up to US$3.25bn.
"In general this halal act will disrupt business in Indonesia,” said Adhi Lukman, GAPMMI’s chairman. “We would have to throw everything away.
"If even the MUI, an organisation with vast experience [in issuing the halal labels], can only process around 6,000 applications a year, what about a new institution?" he added.
Many businesses hope that President Widodo, who inherited the new halal law from his predecessor Susilo Bambang Yudhoyono, will delay its implementation until after the 2019 general election.
While the policy is popular with conservative Muslims, moderate lawmakers like Indonesia’s president are concerned about its potential impact to businesses. If re-elected, Jokowi is likely to put it on permanent hiatus, but his success is no certainty.
In the meantime, Dr Sukoso and his lean BPJPH team must plan for the transition from their new office in the suburbs of Jakarta.
And businesses, which are already forced to wade through Indonesia’s byzantine trade regulations, must get ready and plan for the worst.