Study of Halal Certification on Food and Beverages on Small and Medium Enterprises (SMEs) in Indonesia (Quality Assurance Case)

In this modern era, there are many food and beverage products manufactured and sold in Indonesia. Not all food and beverage products sold in the Indonesian region is Halal for consumption, because its material and manufacturing process have violated the laws of Islam, for example, food made from pork, beverages contain alcohol, goods made in a way that is unusual in Islam, etc. Whereas the people of Indonesia, the majority are Muslim, has an obligation to eat Halal food and beverage products. To protect Muslim consumers from fraud of food and beverage products in Indonesia, the government drafted RUU Halal Product Assurance which is addressed to the food and beverage industry in Indonesia. All food and beverage products including medicines should be inspected specifically to test its Halal status. The inspection process is carried out by specialized staff of the Indonesian Ulama Council (MUI) which includes auditing, labeling, and certification of Halal products. The products will be inspected based on the type of product, so that if an industry has five types of products, the inspection was also carried out on every production process of these five type products. The industry should bear the cost of auditors accommodation during the certification process as well as pay a fee for the published Halal certificate. Cost levy any product halal certificate is determined from the complexity of processes and the industry scale, which ranges from 1 to 5 million rupiah per certificate for large enterprises and 0 to 2.5 million rupiah per certificate for small and medium enterprises (SMEs). Although industry will gain the trust of Muslim consumers after the product is certified, the high cost will also be a burden for the production process of food and beverage industry in Indonesia, especially for small and medium enterprises (SMEs) groups. With such additional burden of production, the industry also has to raise the price of the products they sell to prevent loss. However, the obligation of food and beverage products Halal certification in Indonesia is still not necessary due to the majority of Indonesian food and beverage manufacturers are Muslims who know how to make Halal goods.The actual purpose of Halal certification is good for both manufacturer of the products and its consumers. But due to its high operational cost, the Halal certification is currently done only by several large scale food and beverage enterprises in order to ensure its product Halal status and increase their products competitiveness in Indonesia market. As reported by Kompas.com (2014), the small and medium food and beverage enterprises couldnt afford the cost of Halal certification process and sold their products to the market without any Halal certificate. This is because SMEs produce food and beverages only in an amount which is not so great and only have a small market access, so that they are recognized by their market better. By doing so, they also dont need Halal product assurance to convince their consumers. If food and beverage industry conduct Halal certification for their products, then they need to pay at least 4 to 8 million rupiah for the certificate/Halal legalization including accommodation of auditors and also Rp 10 for each label printed on a product plus PPN retribution. The total cost of this Halal certification and labelling process will be a great burden even for the large scale enterprises. This will lead the manufacturers to charge these costs to the consumers through higher product prices. If the price of the products is higher, then the consumers purchasing power of their products will also decrease and in the long term may result in an adverse effect to Indonesian economic condition.Name : Surya Hadi WijayaStudent ID : 2513100098Submission Date : March 23rd, 2015

Halal certification is a pretty good way to protect consumers against fraud of food and beverage products in Indonesia, which is often occurred in the Indonesian market, such as the case of Ajinomoto in 2000, meatballs mixed with pork, alcoholic soft drinks, and more. But in fact, the current use of halal label is misused by some of the food and beverage industry to deceive consumers. This will reduce the effectiveness of Halal certificates and labels usage as food and beverage products quality assurance in Indonesia. Therefore, Halal product quality assurance agencies should also need to keep an eye on the circulation of food products and beverages in the market regularly and take action against counterfeit Halal labels and certificate to prevent fraud of quality products and support industries that have been registered as the holder of the original Halal certificate and label. In this condition, there will be regular costs that need to be issued by the quality assurance agency to perform monitoring on Halal products in market regularly, the more enterprise products registered as Halal certified, the more personnel needed to supervise the use of Halal label in the market. This, of course, also will be a burden for the Halal quality assurance agencies and reduce the focus of product monitoring.According to the arguments above, we can infer that Halal certification is a good way to ensure the Halal quality of products, prevent food and beverage fraud, and also increase the industry product competitiveness. But there are some issues that inhibit the usage of Halal certificates and label as the quality assurance of Halal products in Indonesia, such as the high cost of certification activity, the lack of monitoring by the Halal quality assurance agency, as well as misuse of the 'Halal' certificate and the labels. The obligations of Halal food and beverage products certification in Indonesia is still not necessary for small and medium enterprises (SMEs) considering they only made products for a small market and have usually been recognized by consumers. If the 'Halal' certification obligations is also applied to small and medium enterprises, it will increase production costs they incur in their production system, and then they will increase their products price but still couldnt compete with another products in the same market, which will probably lead to bankruptcy of their business.

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