[KH Explains] Indonesia's halal certification: Double-edged sword for Korean food industry?

Indonesia’s new regulation mandating Halal certification for all imported food products is expected to widen the export gap between large conglomerates and small businesses in Korea due to the high costs and time need to meet the requirements.

After a five-year grace period, the Indonesian government has officially ordered businesses in most industries to be halal compliant and halal certified, starting Thursday.

While products lacking halal certification can still be exported, they must be labeled "non-halal" and comply with regulations set by Indonesia's Food and Drug Authority. Halal refers to items permissible under Islamic dietary laws. Generally prohibited meats include those from pigs, dogs and any animals not slaughtered according to Islamic practices.

Early movers in Islamic market

As the fourth most populous country and the largest economy in Southeast Asia, Indonesia presents significant opportunities for food companies worldwide.

Large firms recognized the potential of Islamic markets over a decade ago, preparing halal-certified brands and production lines early on.

"Major food companies aiming for global expansion began obtaining halal certification for select brands suited to the Islamic market as part of their export strategy in the early 2010s," an industry insider said on condition of anonymity.

"Costs are one factor. But obtaining certification for each product typically takes about a year. These companies were willing to invest time for long-term gains in the Islamic food sector, and this has begun to pay off."

Nongshim has secured halal certification for about 40 products across 10 brands, including flagship product Shin Ramyun, targeting over 40 countries, including Indonesia, Malaysia, Saudi Arabia, the UAE and Kazakhstan.

Daesang has certified 50 products, including popular kimchi and other items like soybean oil, under its Indonesia-exclusive brand, Mamasuka. CJ CheilJedang has expanded its halal-certified offerings to over 100 products, including seaweed, kimchi and sugar.

In 2017, Samyang Foods faced a major setback when some ramyeon products exported to Indonesia tested positive for pig DNA, resulting in a suspension of import approvals. However, they successfully obtained halal certification for their Buldak series from Indonesia's Ulama Council (MUI) later that year, becoming the first in the Korean ramyeon industry to do so. SPC is also completing a halal food factory in Johor Bahru, Malaysia, to cater to future markets in 12 countries across the Middle East and Africa.

Challenges for small market players

For small and medium-sized food companies, costs associated with obtaining halal certification are a primary concern.

According to the Korea Trade-Investment Promotion Agency, the certification process in Indonesia begins at around 18.3 million rupiah ($1,200), with additional costs for inspections related to food additives, supplies and packaging.

Moreover, even after investing in halal certification, companies face the challenge that this certification is not universally recognized. Halal standards vary widely by region and certifying bodies, complicating the export process.

"A halal product certified by the Korea Muslim Federation may be accepted in Malaysia, but in Indonesia, MUI certification involves a much more rigorous review process," an industry source explained. "MUI certification examines not only the finished product but also the raw ingredients from the start, which can prolong the certification process for even well-known brands. Moreover, MUI certification is valid for only five years, necessitating a new application afterward."

The burden of facility maintenance is another considerable issue. Although there’s no rule against producing halal and non-halal foods on the same line, managing both simultaneously is impractical. Maintaining a dedicated halal production line in the factory requires significant resources, making competition tough for smaller companies.

Last year, the KMF and MUI signed an agreement to streamline the certification process, but many additional documents and requirements still complicate the landscape.

Korea’s position in halal certified products

The rising popularity of Korean cuisine among millennials and Generation Z in Indonesia is definitely seen as a promising market for domestic food companies.

According to the Korea International Culture Exchange Foundation’s 2022 survey, the growing appreciation for Korean cultural content correlates with increased awareness of Korean food.

Particular reason for K-food’s appeal in Indonesia is its use of strong seasonings like gochujang (red pepper paste), which align with local tastes of having preference for bold flavors and frequent use of sauces in their cuisine.

Therefore, Korean food conglomerates have largely prepared for the halal certification, positioning themselves favorably for exports.

Last year, 3,243 Korean products received halal certification from Indonesia’s halal product assurance agency BPJPH, ranking fifth globally, behind China, Singapore, Malaysia and India.

"In anticipation of mandatory halal certification in Indonesia, we have been working with the private sector to establish mutual recognition agreements between halal certifying bodies and to support exporters in obtaining certification," said Yang Ju-pil, director of food industry policy at the Agriculture Ministry. "We will address any export challenges to ensure a smooth process."