Indonesia About to Introduce Draconian Islamic Certification Law

In December 2014, as one of its last actions before its term ended, Indonesia’s House of Representatives pushed through a law requiring halal labeling, or Islamic certification of food products and pharmaceuticals that had been hanging fire for eight years, primarily because of a flock of contentious provisions that critics say will damage the interests of importers of foreign products and raise questions about fairness at the World Trade Organization.

Although Indonesia is nominally Muslim, with 87 percent of its 250 million people following the faith, it has been a largely tolerant society, with many drinking beer, eating pork and following other non-Muslim customs. However, as stricter rules have made their way out of the Middle East, Indonesia has increasingly been falling into line. The halal law, demanded by the Ulema Council, the country’s top religious body, is an example.

At the time of passage, much of the country’s business community, both domestic and foreign, warned that the law would put in place “one of the most extensive and draconian halal regimes of any country,” according to a note from the European Union, “throwing up unnecessary and costly barriers to the import of food and other products.” Today, a year and a half after passage, the regulations are close to being implemented to govern the process. And sure enough, according to members of the western business community, they are indeed throwing up unnecessary and costly barriers.

The law stipulates jail time of up to five years and a maximum penalty of Rp 2 billion (US$150,000) for companies that violate the law.

The law particularly hits foreign pharmaceuticals, primarily because the complex supply chain makes it extremely difficult to verify that the products are indeed halal. According to Islamic law, products must be taken from animals that are alive immediately before evisceration, that Muslims perform the slaughter, all flowing blood be drained completely from the carcass and any modern methods must be considered in line with Islamic principles.

Pharmaceuticals are hardly alone, however. The regulations are to apply to goods that can be “worn, used, utilized, imported and circulated in Indonesia’s territory.”

It also appears the law will inevitably create a giant new bureaucracy. The law mandates the establishment of a new agency, the Halal Product Guarantee Agency, to be supervised by the Ministry of Religious Affairs. The agency will be responsible for issuing halal certificates to producers. Companies must employ at least three inspectors, operate their own laboratories or use other certified parties that have laboratories to support the halal check for products.

Although the agency will issue the certificates, the verification process will be handed over to a third party called the Halal Inspection Institution, which is to make field checks on the processing of raw materials inside or outside of the manufacturing facilities. Yet another agency is to be set up to audit the halal certification process.

In Indonesia, the growth of a new agency to govern the import of anything is a license for bureaucrats and their political allies to make illicit money, with religious considerations no barrier to wrongdoing. There is no better example than “Beefgate,” which blew up in 2013 when anti-corruption watchdogs raided a Jakarta hotel room and found an aide to the leader of the Islam-based Prosperous Justice Party, along with a naked coed and a suitcase containing Rp1 billion, presumably to evade quotas for the import of Australian beef.

And, while the law doesn’t appear in theory to contravene Indonesia’s World Trade Organization obligations since the law applies equally to domestic and imported goods, in fact its impact is expected to be far more negative for imported products. The obligation for halal-based storage and distribution, potentially even including shipping containers, is expected to add substantially to costs. Halal checking is to include manufacturing, packaging, distribution, sales and serving to make sure that halal products are not mixed with non-halal products during production and distribution. Non-halal products must be labeled “non-halal.”

The local business community isn’t much better off, with the Indonesian Food and Beverage Association expressing concern that the law could place unnecessary burdens on small and medium sized enterprises as well. The current cost of a halal certificate from the Ulema is roughly Rp2 million (US$150).

The Ulema isn’t backing away from any of the law’s provisions, no matter the cost, saying it would give comfort to the Muslim community. Last week, at a meeting of parties over modifying the regulations, the Religious Affairs Department refused all suggestions, quoting the Quran to back the unchanged package.

“We see this as very positive. For Muslims, we can be assured that when we consume certain food and beverage products, they are truly halal,” Hasanuddin AF, chairman of the MUI Fatwa Commission, told the Jakarta Globe when it was passed. “All this time, halal labeling was not an obligation, it remained voluntary for producers of food and beverages, drugs or cosmetics to show their good intentions to their [Muslim] consumers. Now the law gives us protection.”