Malaysia Has High Hopes for Joint Halal Certification with Indonesia

To strengthen Halal trade relations between the two countries, Malaysia has high hopes that its plan for joint Halal certification with Indonesia—the country with the largest Muslim population in the world—will be implemented.

Currently, Indonesia only directly accepts industrial goods that have a Malaysian Halal certificate, such as palm oil.

However, before Malaysia's end products can enter the Indonesian market, they must undergo various tests to obtain another Halal certificate from the Indonesian Council of Ulama (MUI) and a Halal mark from Indonesia's Food and Drug Administration (BPOM).

To solve this problem, Malaysian and Indonesian authorities are evaluating their Halal certifications to avoid inefficiencies in import and export operations in the long run.

'We have been working closely together because we want to sell more products to Indonesia, and of course we also welcome Indonesian products to Malaysia,' Malaysia's Minister of International Trade and Industry Mustapa Mohamed told reporters on the sidelines of the 2017 Malaysia International Halal Showcase (MIHAS) in Kuala Lumpur on Wednesday.

'There are still outstanding issues. The Indonesian authorities recognize our Halal certificate, but our people have to go through some additional tests.'

Muti Arintawati, Deputy Director of Indonesia's MUI LPPOM, said her side has already planned to simplify Halal certification for Malaysian end products imported into Indonesia.

'We may not need to conduct audits at production sites. Instead, we could just audit the documents of these products. Nonetheless, this plan has not yet passed official approval,' Muti said in a phone interview with the Jakarta Post on Friday.

Last August, Malaysian Prime Minister Najib Razak said he was committed to promoting trade between the two neighboring countries, bringing the trade volume to US$30 billion in the near future.

According to data from Indonesia's Trade Ministry, total trade between Malaysia and Indonesia fell from US$24 billion in 2013 to US$14.31 billion in 2016 amid the global economic crisis.

'Indonesia is very large and, of course, a big market. The issue is that there are some technical problems in terms of Halal certification,' Abu Bakar Koyakutty, Senior Director of the Market Access and International Cooperation Division at the Malaysia External Trade Development Corporation, said in an interview with the Jakarta Post on Tuesday.

'There are different standards for the definition of Halal. If we can solve this problem, we will see huge potential for future market development.'

According to a study published by Salaam Gateway in 2016—a business intelligence platform that is the joint effort of the Dubai Islamic Economy Development Centre and the intelligent research agency Reuters—one problem it faces is that global Halal regulation does not have a unified standard.

For example, it states that the standards of Malaysia's Department of Standards implemented in Malaysia differ significantly from the quantified standards of the UAE authority implemented in the UAE.

'To meet the needs of different markets, multiple certifications need to be obtained, and this cost increases the complexity of trade, potentially preventing the import of products and resulting in a failure to meet Muslim consumers' demand for halal food,' the report said.

The report also noted that the slow and limited Halal audit procedures make third-party certification viable.

Compounding this problem, Halal certification bodies have not yet signed specific mutual recognition agreements for Halal certificates, nor is there a forum or framework to ensure peer review.

Halal audit operations are currently independent of one another, and generally there is limited clarity on the jurisdiction of auditors.

Meanwhile, Reuters and a research consulting firm, in the 2016/2017 State of the Global Islamic Economy report, estimated the size of the Islamic economy at US$3 trillion.

In 2015, Muslim spending on food and beverages reached US$1.1 trillion, with US$415 billion in budgeted revenue coming from Halal-certified food and beverage products.