Indonesia delays launch of new halal certification body

Photo: JAKARTA, INDONESIA - 12 SEPTEMBER 2016: Indonesian Muslims prepare meat at a mosque during Eid Al-Adha, the feast of sacrifice in Jakarta, Indonesia on 12 September, 2016. / Hokmesso / Shutterstock, Inc.

JAKARTA - Indonesia’s Religious Affairs Ministry's new halal certification body, the Halal Products Certification Agency (Badan Penyelenggara Jaminan Produk, BPJPH), will not start operations before October, due to delays in finalizing the government decree (Peraturan Pemerintah, PP), Siti Aminah, the Ministry’s head of Halal Products Sub-directorate told Salaam Gateway.

The Ministry told Salaam Gateway in November last year that the new agency will start functioning in early 2017. The government decree was expected to be finalized in December, after the ministerial decree for the establishment of BPJPH was signed in October.

According to Siti Aminah, the draft government decree still needs to be aligned with technical teams from the Ministry of Health, Ministry of Trade and Ministry of Industry as well as the Indonesia Ulama Council’s Food and Drug Analysis Agency (LPPOM MUI).

LPPOM MUI has been the only national-level halal certifier and auditor and has been operating since 1998.

“We hope this process will take no longer than two to four weeks. Currently, we are still discussing several issues including tariffs, standardization of halal audit agencies as well as mandatory halal labeling by the end of 2019,” she said.

Currently, the halal product registration fee starts from 400,000 Indonesian rupiah ($30) and goes up to 4 million Indonesian rupiah ($300) per item. Each halal certificate is valid for two years, with a six-month notice period for extension.

Without revealing the proposed new fee, Siti Aminah said the draft government decree states that the new halal certificates will be valid for four years and extensions can be possible with a lower fee, if all ingredients and processes used remain the same.

AUDIT AGENCIES

The draft government decree also says that halal audit agencies (Lembaga Pemeriksa Halal, LPH) must be linked to a legal entity that is an Islamic organization, with a registered office address and at least three Muslim auditors as employees.

The Religious Affairs Ministry will work with the LPPOM MUI until other halal audit agencies are established.

“Standards for halal audit agencies have become tighter. They must have a recommendation from the state to confirm they are an official body and also be acknowledged by Indonesian embassies abroad (for Indonesian halal exports). This oversight will better assure other countries of Indonesia’s halal certification,” said Siti Aminah.

2019 MANDATORY LABELING DEADLINE

Businesses and the Ministry of Industry have been asking for a transition period of one year after the mandatory halal labeling deadline of 2019, saying that companies still need to distribute their old stock that may not be labeled halal.

The draft government decree states that companies that distribute unlabeled halal products will have to pay a hefty fine of 2 trillion Indonesian rupiah and face imprisonment.

BPJPH STRUCTURE

The Religious Affairs Ministry will open recruitment for the new halal certification body next month. It is currently finalizing job roles, responsibilities and work plans. The head of the new agency will be a general director.

The ministry is waiting on its budget allocation from the Indonesian Ministry of National Development Planning (BAPPENAS) for the Halal Products Certification Agency (BPJPH).

SME FEE SUBSIDIES

LPPOM MUI director Lukmanul Hakim says the proposed SME fee subsidy for halal certification could be a strain on the state budget.

The draft government decree states that SME halal product registration fees can be subsidized from both the state budget and big companies.

Hakim estimated an additional 60 trillion Indonesian rupiah ($4.5 billion) burden on the state budget to subsidize SME fees for halal certification, based on an estimate of 30 million SMEs paying an average registration fee of 2 million Indonesian rupiah ($150).  

“For food and beverage SMEs only, there is an estimated 2.5 million enterprises, such a big number,” he said.

Only 5 percent of all companies in Indonesia are categorized as big companies that contribute around 30 billion Indonesian rupiah as fee income to the certifier. However, this is still insufficient to cover subsidies given out to the SMEs. “I think we need to link Shariah-based funds such as zakat, as well as sukuk to solve this problem,” said Hakim.

In November, Salaam Gateway reported that to make certification affordable, the Ministry of Religious Affairs is preparing funding options from three specific channels: the state budget, big companies in the halal sector to subsidise SMEs application and social finance, such as zakat and sadaqat.

MUI TRANSPARENCY

MUI has been accused of receiving around 240 trillion Indonesian rupiah from registration fees, based on an estimated average fee of 12 million Indonesian rupiah for 40 million companies.

Hakim refutes these allegations and says there is no basis for criticisms about MUI’s lack of transparency, including how much it charges certifiers to access the Indonesian markets.

According to Hakim, MUI has only issued 13,000 halal certificates to 2 million companies from 1998 to 2014 and has collected 53 billion Indonesian rupiah, assuming 4 million Indonesian rupiah as the highest fee for a two- year halal certificate.

Hakim also stressed that transparency has been increased since 2009 when LPPOM MUI started using an online registration system. According to him, an internal firewall system ensures auditors can only access company data after the completion of the audit process. “Our enterprise audit Key Performance Indicator since then improved from 70 days to 58 days,” he said.

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