Photo: Joko Widodo campaigning for a 2nd term in Banjarmasin, Indonesia on March 27, 2019. Iman Satria / Shutterstock.com

Islamic Finance Halal Industry

Onward Indonesia: Leaders want new ministers to better facilitate implementation of national halal, Islamic finance strategy


JAKARTA – Indonesia’s Islamic economy leaders expect the newly-sworn in ministers of President Joko Widodo’s second-term government to accelerate growth of the industry in the next five years.

Several ministers are expected to take active steps, including the new Minister of Religious Affairs Fachrul Razi, returning Minister of Finance Sri Mulyani Indrawati, new Minister of Education and Culture Nadiem Makarim, new Minister of Industry Agus Gumiwang Kartasasmita and the new Minister of Tourism and Creative Economy Wishnutama.

The head of the government’s new halal authority BPJPH and the director of the National Islamic Finance Committee (KNKS) told Salaam Gateway they expect President Jokowi’s second-term government to better facilitate the implementation and coordination of plans for the development of the Islamic economy.

SUPPORT TO IMPROVE HALAL ECOSYSTEM

Mandatory halal certification under the government’s new authority BPJPH started on October 17, six days before the second-term cabinet ministers were sworn in.

This is a challenging time for BPJPH as it takes on the substantial task of managing mandatory certification, starting with food and beverages.

The agency’s head, Prof Sukoso, told Salaam Gateway on October 9 that although BPJPH wasn’t 100% ready, it would start accepting applications on October 17 as per the halal products guarantee law.

After the new cabinet was announced, Prof Sukosotold Salaam Gateway if the new religious affairs minister can support and properly enforce the halal products guarantee law Indonesia would need to rely less on halal imports. It is currently ranked outside the 10 biggest halal F&B producers in the world, he said.

"If our new minister cannot support us to implement halal certification well, I am afraid that Indonesia will be inundated with foreign products that will flood the domestic market, and in the end we become bystanders,” said the BPJPH head.

“We need to focus on the real economy, the people economy—who are behind the micro and small enterprises actively involved in building our economy—and not only the 2% of companies that are medium-sized and big,” said Prof Sukoso.

The big concern at the moment is that the final list of fees for halal certification has still not been released by the ministry of finance (BPJPH is a public services agency supervised by the ministry) and the government has still not worked out subsidies for MSMEs to help them bear the additional costs.  

Salaam Gateway was informed an indicative amount although nothing official has been announced; SMEs could pay from 1 million rupiah ($71) to 1.5 million rupiah per application per product group and bigger companies could pay three times more. 

"We need to be better facilitated in terms of halal infrastructure by the Ministry of Religious Affairs as well as other related ministries so that the halal product guarantee law can be enforced well,” stressed Prof Sukoso.

BPJPH works with other ministries, for example the Ministry of Industry to promote halal industrial estates, and requires its parent ministry to step up its facilitation and coordination of related matters.  

“Otherwise,” said Prof Sukoso.

“This big halal market potential in Indonesia will remain just that – potential, and cannot become reality.

“If we put this in the global context, other countries like Japan may be better prepared in the halal F&B market, for example they are preparing the infrastructure for the Tokyo 2020 Olympics because they are really aware there will be many Muslim travellers."

ISLAMIC FINANCE: ‘WORK FAST, WORK HARD’

The start of mandatory halal certification is a potential windfall for the government, who told local media in February it expects to raise 22.5 trillion rupiah ($1.6 billion) in revenue annually from halal certification. 

This feeds directly into the Shariah-compliant financial sector as BPJPH will use four Islamic banks to manage its funds and finances, and go some way to pushing up the market share of Islamic finance.  

Islamic banks hold around 6% of banking sector assets and the aim is 15% market share in the next five years. To get there, Indonesia has taken an Islamic economy-wide approach, understanding the links, as well as how each sector impacts the whole.

The National Islamic Finance Committee (KNKS) is currently working on a new implementation plan for Indonesia’s Shariah Economy (2020-2024) that will be delivered to the new cabinet, especially related ministries, to give them a strategic working plan, said KNKS director Afdhal Aliasar.

He told Salaam Gateway he expects the new cabinet to support the growth and development of the country’s Islamic finance and economy.

"This implementation plan will focus on strengthening the halal value chain, Islamic finance and social religious affairs fund management, the halal industry's SME players, digital economy as well as strengthening our HR quality,” said Afdhal, echoing President Jokowi’s emphasis for his next five-year term to focus on developing the nation’s human capital.

KNKS director of education and research told Salaam Gateway on October 22 the returning finance minister Sri Mulyani Indrawati, as chairperson of the Indonesian Association of Islamic Economists (IAEI), would be expected to place more attention and introduce more initiatives related to the development of the Islamic economy.

Still, the emphasis for the next five years will be on an efficient implementation of what’s already been planned and strategised.

“I hope this implementation plan can also help the new cabinet to not take so much time to carry out positive initiatives related to the development of the Islamic economy in Indonesia,” said Afdhal.

On the steps of the state palace announcing the new cabinet on October 23, President Jokowi said the government must firstly refrain from corrupt practices, and to “work fast, work hard and be productive”.

The heads of BPJPH and KNKS will be hoping that, for the sake of the efficient development of the halal and Islamic finance industry, Indonesia’s cabinet ministers take heed of the president’s rhetoric: “Be careful, I will make sure to dismiss [ministers] who are not serious and determined in doing their work.”

(Reporting by Yosi Winosa, Editing by Emmy Abdul Alim [email protected])

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