Inforial (The Jakarta Post)
Fri, March 18, 2022
A business forum on the halal industry has revealed how Indonesia, the most populous Muslim majority country in the world, is well poised to become a major global player in halal products and services, despite challenges that lie ahead.
The “Halal Markets: Home for Halal Business” forum was held on March 14 in hybrid style which is one of the series of events of Bank Indonesia’s Special Week as part of Indonesia’s G20 Presidency 2022 in Indonesia Pavilion, World Expo 2020 Dubai from 11th to 17th March 2022.
In his keynote speech, Juda said the halal industry proved to be resilient during the COVID-19 pandemic in line with the increased resumption of business activities across the nation.
“Sharia businesses have been growing positively during the recovery phase. Last year, growth in the halal sector, such as halal foods and Muslim fashion, as well as Muslim-friendly tourism, reached around 2.11 percent,” he said.
Domestic spending on halal products and services stood at around US$184 billion in 2020 and was expected to grow 14.96 percent to around $282 billion by 2025, Juda added.
Moderated by Sapta Nirwandar, chairman of the Indonesia Halal Lifestyle Center, the webinar session featured Bank Indonesia (BI) Deputy Governor Juda Agung as the keynote speaker of a panel discussion with BI Sharia Economic and Finance Department Head Arief Hartawan, DinarStandard CEO and Managing Director Rafi-uddin Shikoh, PT Lulu Group Retail’s Corporate Affairs Director Luthfi Husin and Indonesian Fashion Chamber (IFC) Chairman Ali Kharisma.
While the discussion assured the improving domestic ecosystem of the halal industry, it also highlighted how Indonesia could shift from being a consumer of halal products, which has dominated the domestic industry, to becoming a producer of halal goods to meet global demands in response to the recently released Indonesia Halal Market Report 2020/2021.
Juda also placed the development of Indonesia’s halal industry in the context of the global halal economy. “Indonesia’s ranking in the development of the Islamic economy and finance ecosystem has risen significantly compared to 2018. This confirms that Indonesia has accelerated dramatically in developing its sharia economy, especially the halal industry in terms of the modest fashion sector,” he said.
The halal market business forum is expected to provide information and data that the global community and UAE investors, as well as entrepreneurs, can leverage to exploit Indonesia’s halal industry and market potentials for mutual benefits.
Referring to the progress made in Indonesia’s halal industry, DinarStandard’s Shikoh asked how current opportunities could be converted into greater benefits for the people of Indonesia and other countries across the world.
Indonesia’s halal economy exports reached an estimated $8 billion in 2020, while its halal imports reached $10 billion. “So, you can see there is a deficit when it comes to halal trade for Indonesia,” he said.
“We also estimate $5 billion in investment activities in the halal economy in 2020,” said Shikoh. Food was the biggest consumer market and reached $135 billion, he added, despite the COVID-19 pandemic.
The halal market report also mapped the current players in Indonesia’s halal value chain, from manufacturers and distributors to retailers, as well as SMEs.
“The players in the ecosystem that enable services include logistics, [manufacturers], agencies, Islamic financial institutions, government agencies, regulators, industry associations and, if I may add, educational institutions that also play a big part in the ecosystem,” he said.
To grow the export market of its halal products, he said, Indonesia could expand to member states of the Organisation of Islamic Cooperation (OIC), such as the UAE, Saudi Arabia and Turkey, as well as non-OIC countries.
The UAE, one of Indonesia’s key trade partners, currently imports an estimated $375 million of halal products from Indonesia.
According to Shikoh, apparel and cosmetics are the two major halal products that the UAE import from Indonesia. “But we also import other products from Indonesia, and the opportunity can be further developed,” he said.
Meanwhile, BI’s Arief said Indonesia’s sharia businesses were gaining global momentum, especially in the last three years, with the halal market report stating that the development of Indonesia’s sharia economy and finance ecosystem was accelerating.
“I think it is the right time to invest in Indonesia’s [sharia] products and services so we become a […] producer country, not a consumer, since Indonesia has abundant resources and talented people, a conducive environment for developing sharia economy and finance, as well as strong support from the government and relevant authorities,” he said.
According to Arief, developing the country’s halal industry was one of the government’s strategic initiatives to increase the effectiveness and efficiency of the halal ecosystem, including strengthening the halal value chain in the end-to-end process from the upstream to the downstream. It also involved developing halal industrial areas, such as the modern halal valley industrial park in Sidoardjo, in East Java, and the halal hub in Bintan, the Riau Islands.
Lulu Group’s Luthfi said that linking businesses was very beneficial for everyone in the halal industry, including the retail group.
According to him, Lulu serves as a bridge enabling Indonesian halal products to be sold not just domestically or in the Middle East, but also in other countries across the world.
“We, as a food producer, should be aware of what the situation is like globally. Competing globally in halal products is not just a matter of having good quality products, but there are many other sectors that benefit your competitiveness in the world, such as logistics, supply, the location of product supplies. All producers in Indonesia need to know what other countries are doing and how their products compare to the products that are produced [in Indonesia],” he said.
Modest fashion businesses also faced challenges in going global, particularly because of the huge domestic market.
According to the IFC’s Ali, Indonesian clothing companies were seeing constant growth in domestic demand. “Our domestic fashion market remains highly promising, which pushes [businesses] to focus more on domestic market,” he said.
“But we are ready to collaborate with fashion players from other countries in order to go global,” he added.
In his concluding remarks, Candra Negara, the Indonesian Consul General in Dubai-UAE, highlighted that the city had become a global strategic hub for businesspeople from different nations, underlining that this was something Indonesia should take advantage of.
During Indonesia’s G20 Presidency, he added, “We can explore all spectrums of the halal market as well as the open market with businesspeople from the UAE and Muslim countries with halal products.”
Candra also highlighted that the relationship between Indonesia and the UEA was now at its peak, with the two countries gearing up to sign a Comprehensive Economic Partnership Agreement (CEPA) by the end of March.
“I am confident that the halal market will grow from today onwards into the future,” he said.