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Indonesia Halal Economy and Strategy Roadmap 2018/19A PREVIEW
Comprehensive Roadmap by IHLC inPartnership with DinarStandard
Purpose
Inspire and empower stakeholders across Indonesia – business leaders, entrepreneurs, government officials, investors and industry
bodies to evaluate an actionable market strategy that addresses the Global Halal
Economy opportunity
Indonesia Halal Economy andStrategy Roadmap 2018/19
A PREVIEW
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
Defining Halal Economy
“Halal Economy comprises sectorswhose core products and services arestructurally affected by Islamic law"
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
Why care? In a $2.1 trillion global Halal economy, Indonesiarepresents ~10% of 2017 spend, but only 3.8% of related exports
Halal Economy domestic opportunity$214 billion;
10% of globalHalal Economy Exports
opportunity
3.8% of global
Indonesia’s current and projected GDP evolution, targeting $4 trillion in GDP by 2025, and $15 trillion in GDP by 2040-45.
Why care? A strong strategic alignment to Indonesia’slong-term growth plans
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
Significant Impact: Economic and Leadership
Economic:• Exports - additional Halal exports between a $5.1
billion - $11 billion annually. (Current $7.6 bill in exports)
• Jobs - additional 170,000-333,000 jobs• Import substitution of $500 million plus increased FDI
Leadership:• Global champions• Islamic finance penetration• Talent pool hub• Global halal compliance leader
Halal Economy Roadmap: Strategic Framework
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
Note: Reflects exports to the OIC across Food & Beverage, Women’s clothing, Cosmetics, Pharmaceutical products and Media & RecreationSource: ITC Trademap
Indonesia is the largest OIC-based exporter in Halal Economy Products to the broader OIC, but only 3.3% of Halal exports global share ($7.6 billion)
Halal Economy: International OpportunityOIC export annual incremental, qualified* opportunity $17.8 bill
The top categories include Mixed Medicaments with the largest importers, Belgium and the United States, followed by Vaccines.
The largest food and beverage category was Animal or vegetable fats and oils with the largest importers of this category being India and the Netherlands.
Non-OIC countries across each of 26 categories imported$14.7 billion of Halal Economy products
Halal Economy: International OpportunityNon- OIC export annual incremental, qualified* opportunity $14.7 bill
Halal Economy: International Opportunity Market ProfileSector Top product
categories and values
Top OIC import
markets
Top non-OIC import markets
with robust Muslim
populations
Food
and
beverag
e
Meat and edible meat
offal:
$4 billion
1. Saud
i
Arab
ia
2. United
Arab
Emirates
3. Egypt
1. Germany
2. The Netherlands
3. The United States
Fashion Women’s or girls’
suits, dresses, skirts
etc.:
$567 million
1. United
Arab
Emirates
2. Saud
i
Arab
ia
3. Iraq
1. Germany
2. The United States
3. France
Pharmaceuticals Medicaments:
$5.2 billion
1. Saud
i
Arab
ia
2. Turkey
3. Egypt
1. Belgium
2. The United States
3. Switzerland
Cosmetics Beauty or make-up
products:
$1.1 billion
1. United
Arab
Emirates
2. Saud
1. Singapore
2. Russia
3. Germany
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
• Indonesia’s Halal consumer spending $214 billion in 2017
• …growing at a projected6.0% CAGR to reach$330.5 billion by 2025
Domestics Opportunity through Import Substitution & FDI
Indonesia Domestic Halal Economy Drivers
Religion is “very important” to Indonesia’s Muslims and trickles down to their consumption patterns.
93% of 1,880 Muslims surveyed in Indonesia in 2012 considered religion very important in their lives, in line with Malaysia, and ahead of respondents in the MENA region.
Pew Research, Photo: Nikkei Asian Review
Thriving Domestic Halal Economy Production Base
Indonesia has a strong domestic Halal economy asevidenced by low imports relative to domestic spend
Sector Indonesia imports$ billions, 2017
Share of domestic total
consumption, 2017
OIC benchmark, 2016
Food and beverage 16.9 7% 13%
Clothing and apparel 0.1 0% 14%
Pharma 1.0 12% 6%
Cosmetics 1.1 23% 50%
Media 0.6 5% 29%
Total 19.7 7% 14%
• Indonesia’s FDI in Food and Beverage totaled$8.8 billion in the five years to 2017, across 5,500 projects
• Adding domestic investment, total investment in Food and Beverage was $3.5 billion in 2018, moderately up from $3.1 billion in 2018
Domestic growth is expected to boost FDI
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
Strengthening Governments Halal Compliance Leadership
Government
Effective global engagementon HalalStandards
Government
Effective global engagement onHalal Accreditation
Preview Outline
• Defining ‘Halal Economy’
• Why Indonesia Should Care?
• Summary Impact & Strategic Framework
• Strategic Opportunity: International
• Strategic Opportunity: Domestic
• Strategic Enabler: Government
• Strategic Enabler: Production
• Strategic Enabler: Islamic Finance/ Investments
Indonesia’s Islamic Finance industry falls below leading OIC benchmarks, which inturn limits the required and varied capital needs for Halal Economy growth.
Participation banking penetration rates by country:
Convergence Opportunity with Islamic Finance
“Real” Halal Economy Financing Needs:• Financing needs p[er industry
survey: Working Capital (listed by 21.7% of respondents), trade finance (18.9% of respondents), and expansion capital (17.3% of respondents).
• SME financing
FintechOpportunities:
• Blossom Finance, Alami, Ethis Ventures in Indonesia and addressing SME financing needs
Convergence Opportunity with Islamic Finance
Private Equity Opportunity:• $667 million in disclosed
investments across allsectors of the HalalEconomy, between 2015/18globally---very limited fromIndonesia.
• Opportunity for private equity ,VCecosystem to establish adedicated fund. Could besupported by Indonesia’sSovereign Wealth Fund, as well asPension Funds, Awqaf Institutions
Indonesia HalalEconomy andStrategy Roadmap
TO BE LAUNCHEDNOV/DEC 2018
Thank you!