The government's decision to require all micro, small, and medium enterprises to obtain halal (permissible) labels shows that the country's policymakers still fail to understand public goods governance. In a country where 87.14 percent of the population is Muslim, it is non-halal goods, especially food and beverages, that should be regulated.
Labels on goods serve as markers to regulate their consumption. For Muslim consumers, such labels also serve as a warning not to eat or drink certain products. Since non-halal products are fewer in number and therefore easier to regulate, haram (forbidden) certification would not impose a new burden on the majority of small business owners, who already struggle with various obstacles, from capital and sales to attracting customers.
In economics, certification is often classified as a non-tariff barrier. Tariffs – from production and distribution to the retail prices paid by consumers – always impede the flow of goods from producers to consumers. Although governed by the laws of supply and demand, the tension between producers' desire for profit and consumers' needs is not always balanced.
When these tariff barriers are compounded by non-tariff barriers, such as mandatory halal labeling for consumer goods, producers, traders, and buyers all suffer. For small producers, halal labeling means additional time and costs. Obtaining a halal label can cost business owners hundreds of thousands to millions of rupiah. Additional costs mean higher prices. A non-tariff barrier turns into a tariff barrier.
High-cost economies invariably invite abuse. Investigations by this magazine have repeatedly uncovered corruption surrounding halal labels. Business owners are driven to bribe officials to obtain certification, while officials are tempted by their authority to regulate consumer goods. When this happens, the goal of protecting consumers through halal labeling becomes nothing more than a pretext for profiteering.
The process is also complicated. Implementation of mandatory halal labeling has already been postponed by two years. The requirement was initially scheduled to take effect on October 18, 2024, under Government Regulation No. 42/2024, which implements Law No. 33/2014 on Halal Product Assurance, reinforced by Law No. 6/2023 on Job Creation. The complexity of implementation has delayed enforcement until October 18, 2026.
Every business owner must apply for a halal label through the Online Single Submission system. The certificate is a prerequisite for obtaining a Business Identification Number (NIB), which is required to operate legally. Business owners struggle even to obtain an NIB. Many small entrepreneurs have difficulty determining the appropriate Indonesian Standard Classification of Business Fields for their products. Moreover, the government is not prepared to provide the necessary services.
According to data from the Sharia Economic Development Center at the Institute for Development of Economics and Finance, only 3 million of the country's 28 million small and medium enterprises have halal certificates. With 1,900 halal auditors and 117,000 facilitators, the Halal Product Assurance Agency will be unable to verify all businesses that have yet to obtain halal labels. This does not even account for disparities in verifiers' competence and frequent outages on the Sihalal digital platform.
Rather than obsess over mandatory halal labeling, the government would do far better to establish food safety standards for consumer goods production. For business owners, production standards would serve as guidelines for planning and manufacturing products. Consumers, meanwhile, could feel confident that the goods they consume are safe for their health.
– Read the complete story in Tempo English Magazine
Source: https://en.tempo.co/read/2121568/another-case-for-haram-certificatio