Halal Industry Can Drive Indonesia to Developed Nation Status

Vice President Gibran Rakabuming Raka has identified the halal industry as a cornerstone of Indonesia’s ambition to achieve developed nation status. He emphasized the need to foster independence in critical halal sectors, including Islamic finance, food and beverage, Muslim fashion, and Islamic media content, to drive economic growth and global competitiveness.

Prof. Dr. Imron Mawardi, SP, a leading economist from Universitas Airlangga’s Faculty of Economics and Business (FEB), reinforced this vision, highlighting Indonesia’s unique position as the world’s largest Muslim-majority nation. “With a population of 230 million Muslims, Indonesia possesses a robust domestic market and significant export potential to nearly two billion Muslims worldwide, creating immense opportunities for both consumption and production,” he stated.

Structural Challenges in the Halal Sector

Despite its potential, Prof. Mawardi noted that Indonesia faces significant structural barriers to becoming a global leader in halal goods production. A high-cost economic structure, characterized by elevated interest rates and financing margins compared to competitors like Thailand and Vietnam, hinders efficiency. These financial constraints make it challenging for businesses to scale operations and compete internationally.

Moreover, Indonesia’s halal industry is predominantly composed of micro, small, and medium-sized enterprises (MSMEs), which often lack the resources to operate efficiently. Challenges such as limited human resource productivity, underdeveloped distribution networks, and logistical bottlenecks further drive up production costs, limiting the sector’s growth potential. Addressing these inefficiencies is critical to unlocking the industry’s full potential.

Significant Economic Contributions

Although not yet formally categorized as a unified sector, halal-related industries—including food, fashion, pharmaceuticals, tourism, and Islamic finance—play a substantial role in Indonesia’s Gross Domestic Product (GDP). “Over 60 percent of our national GDP is derived from industries within the halal ecosystem, underscoring their economic significance,” Prof. Mawardi explained.

To capitalize on this, he proposed the establishment of dedicated halal industrial hubs. These hubs would support MSMEs by providing access to modern infrastructure, streamlined logistics, and training programs to enhance productivity. Such initiatives would enable small businesses to produce high-quality goods consistently, positioning them for success in both domestic and international markets.

Strategies to Strengthen the Halal Industry

To elevate Indonesia’s ranking in the Global Islamic Economy Index, Prof. Mawardi recommended prioritizing six key sectors: Islamic finance, halal food, Muslim fashion, pharmaceuticals and cosmetics, and Islamic media and entertainment. Each sector offers unique opportunities for growth and innovation, aligning with global demand for halal products and services.

“Innovation must extend beyond products to encompass entire systems. From financing to distribution, every process must adhere to halal and thayyib principles, ensuring ethical and high-quality standards,” he emphasized. This holistic approach would enhance the industry’s credibility and appeal to discerning consumers worldwide.

Prof. Mawardi also stressed the importance of international cooperation, particularly in mutual halal certification recognition. He described this as a strategic non-tariff measure to boost the competitiveness of Indonesian products. “Halal certification can act as a protective barrier against foreign goods while establishing Indonesia as a global leader in halal production,” he noted. By harmonizing certification standards with other Muslim-majority countries, Indonesia could facilitate smoother trade and expand its market reach.

Opportunities for Growth and Global Leadership

Indonesia’s halal industry is uniquely positioned to drive economic transformation. The country’s vast domestic market provides a strong foundation for growth, while its cultural alignment with halal principles enhances its credibility as a global supplier. By addressing structural challenges and investing in innovation, Indonesia can tap into the growing global demand for halal products, projected to reach trillions of dollars in the coming years.

The establishment of halal industrial hubs, coupled with government support for MSMEs, could streamline production processes and reduce costs. Additionally, fostering partnerships with international markets and promoting halal certification as a mark of quality could position Indonesia as a hub for halal goods and services, attracting investment and boosting exports.

Prof. Mawardi concluded by urging policymakers to act swiftly. “The halal industry is not just an economic opportunity; it’s a strategic pathway to elevate Indonesia’s global standing. By leveraging our demographic advantage and committing to innovation, we can lead the global halal market,” he said.