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The Indonesian government issued Law No. 33 of 2014 concerning Halal Product Assurance (the “Halal Law”) in 2014. This was seen as an important piece of legislation, considering that Indonesia is home to the world’s largest Muslim population and halal refers to what is permissible under Islamic law. The Halal Law regulates the institution that issues halal certificates, the types of products that must be halal certified, and the procedures for business players seeking to obtain halal certification. However, the Halal Law has never been fully implemented, but the government is now targeting full compliance with halal certification requirements in 2019 as required under the law.
The halal certification requirement basically applies to all products that people consume and/or use. Pursuant to the Halal Law, products that must be halal certified include goods and/or services related to foods, beverages, medicines, cosmetics, chemical products, biologic products and genetically modified products, as well as goods used or utilized by people. Animal slaughterhouses must also be halal certified.
Before the enactment of the Halal Law, the Indonesian Ulema Council (Majelis Ulama Indonesia or “MUI”) was authorized to issue halal certificates, which it did through a special office of the MUI. With the Halal Law, the Indonesian government has given this authority to a new institution under the Ministry of Religious Affairs called the Halal Products Guarantee Implementation Body (Badan Penyelenggara Jaminan Produk Halal or “BPJPH”). The BPJPH is authorized to supervise halal assessments of products. The assessments themselves will be carried out by Halal Assessment Institutions that can be established by either the government or the private sector. The BPJPH will then provide the assessment result to the MUI for halal stipulation, after which the BPJPH will issue the halal certificate.
The Halal Law obliges all products distributed and traded within Indonesia to be halal certified by October 2019, four years after the enactment of the law. There is no sanction in the Halal Law for products that fail to obtain a halal certificate. However, the Halal Law is unclear on the implications for products that do not contain non-halal materials/ingredients but are not halal certified pursuant to the law. It is possible such products will not be able to be declared as halal or may be deemed as non-halal, with either scenario having potential business consequences.
With just over a year until the complete implementation of the Halal Law, there remain a number of outstanding questions. Although the BPJPH was established in October 2017, no implementing regulations for the Halal Law have been issued as of this writing, which has caused doubt about how the body will manage to assess products and issue halal certificates. The Halal Law stipulates that implementing regulations will be issued for a number of matters including the division of work and responsibilities among the BPJPH, MUI and Halal Assessment Institutions; the assessment of products; halal certification fees; BPJPH cooperation with foreign halal assessment institutions; and products for which halal certification may be delayed beyond the October 2019 deadline in the Halal Law.
The BPJPH has said that without the implementing regulations for the Halal Law, it will not be able to certify products because there are no guidelines. Clearly, something will have to give before 2019 or business players in Indonesia will face a situation where they are required to obtain halal certificates for their products but there is no body able to issue the certificates.
There is also concern among manufacturers of pharmaceutical products that the Halal Law will be applied not only for their finished products but also the raw materials, processed materials, additives and auxiliary materials of such finished products. Most raw materials for pharmaceutical products manufactured in Indonesia are imported from abroad and business players in the pharmaceutical industry face the prospect of having to have the raw materials halal certified before importing them.
The International Pharmaceutical Manufacturer Group, an industry association, has been discussing the possibility of including pharmaceutical products in the list of products that can be halal certified after the October 2019 deadline. There have been reports that the government has agreed that pharmaceutical products, biological products and medical devices whose raw materials and/or manufacturing processes are not yet halal may be marketed by providing information on the origin of the raw materials, until halal materials and/or halal manufacturing processes for the products are found. It is unclear, however, whether these products have to be expressly declared as non-halal or if the manufacturers can remain silent on this issue. The implementing regulation of the Halal Law is expected to answer this question.
The implementation of a new law in Indonesia is frequently hampered by the absence of implementing regulations to provide the necessary details and guidelines. Now, if it is to make the 2019 deadline for implementation, the government has just over 12 months to issue the necessary regulations to address the ambiguities of the Halal Law and ensure a smooth transition in halal certification authority from the MUI to the BPJPH.
SSEK - 8th May 2018
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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