Industry News

Indonesia is the heart of the global halal economy, with its 229 million Muslims representing the world's largest Muslim population. In 2023, Indonesia's halal market was valued at approximately US$279 billion, demonstrating the country's significant role in the global halal industry. The market is projected to grow at a compound annual growth rate of 14.2%, reaching approximately US$807 billion by 2030. As the largest consumer market for halal products, Indonesia offers a wealth of opportunities in areas such as food and beverages, modest fashion, and halal tourism.

Backed by strong government policies, an expanding middle class and a thriving digital economy, the country is a top destination for local and international investors seeking to capitalize on its vibrant halal ecosystem.

Food and beverages: Indonesia's largest halal industry

Booming domestic market

The food and beverage sector dominates Indonesia's halal industry, driven by high domestic demand and regulatory requirements ensuring that all consumables meet halal certification standards. In 2022, Muslim consumers in Indonesia spent approximately $149 billion on halal food and beverages. Forecasts indicate that this figure will grow significantly, with the market projected to reach $258.02 billion by 2030, with a compound annual growth rate of 6.78% from 2023 to 2030. This growth is driven by the expansion of the middle class and increasing consumer awareness of the importance of halal compliance.

Halal food exports from Indonesia

Indonesia's halal food exports are a vital component of its economy, demonstrating the country's potential as a global supplier. Halal food exports are projected to be worth $42.33 billion in 2023, with processed foods, beverages, and condiments contributing significantly. In 2022, approximately $13 billion worth of these exports went to OIC countries. Key product categories include:

• Processed foods:Halal-certified snacks, canned goods and ready meals.

• drinks:Non-alcoholic beverages, such as juice and soft drinks.

• Condiments and Sauces:A wide variety of halal-compliant sauces and spices.

Adapting to Halal Standards: Lessons from Foreign Fast Food Chains

Global fast food giants like McDonald's and KFC have successfully adapted to Indonesia's stringent halal certification requirements, offering valuable lessons for other foreign investors. These companies maintain stringent compliance, ensuring their supply chains, preparation processes, and final products meet halal standards. Their success highlights the ability of international brands to adapt to Indonesia's regulatory environment and the strong consumer preference for certified halal food.

Changing lifestyles and evolving consumer preferences

Indonesia's expanding middle class and improving economy are driving significant changes in consumer behavior. Rising disposable incomes are making higher-quality, halal-certified products more accessible. One notable shift is the growing demand for beef, which is becoming more affordable and accessible to a wider audience. Indonesia is Australia's largest cattle export market, importing approximately 359,305 head of cattle in 2023, a 6% increase from the previous year. The country is also a significant market for Australian boxed beef, with imports reaching 11,026 tonnes in October 2024 alone.

This trend reflects a broader shift in Indonesian eating habits, with consumers seeking protein-rich and high-quality food options. Beyond beef, demand is also growing for other halal-certified products, including processed snacks, functional beverages, and ready-to-eat meals. These shifts are being driven by Indonesia's burgeoning middle class, which increasingly prioritizes convenience, quality, and adherence to religious guidelines.

As Indonesia continues to urbanize and modernize, these changing preferences present lucrative opportunities for businesses. By aligning their products with the demands of a more discerning and affluent consumer base, both local and international companies can tap into Indonesia’s vibrant and rapidly growing halal market.

Modest fashion: a cultural and economic phenomenon

Indonesia's halal fashion industry is booming, becoming a major player on the global stage. Ranked third globally in the Muslim fashion industry, Indonesia's Muslim fashion market is expected to be worth approximately US$20 billion by 2023, and is projected to grow to US$22 billion by the end of 2024. This strong growth highlights the country's key role in shaping trends in the modest fashion industry.

Key drivers and trends

The industry is driven by a number of factors, includingDigital transformation, Government support and innovative design:

1. Digital Transformation:
   Indonesia's halal fashion industry is increasingly leveraging digital platforms to reach a wider audience. By 2023, the country's e-commerce gross merchandise value (GMV) is projected to reach US$53.8 billion, making it a dominant force in Southeast Asia's online economy. Local Muslim fashion brands use platforms such as Tokopedia, Shopee, and Instagram to market and sell their products, enabling them to more effectively reach domestic and international customers.

2. Government support:
   The Indonesian government has been actively promoting the halal fashion industry through initiatives such as Jakarta Muslim Fashion Week, showcasing local talent to a global audience. The government’s approval of laws ensuring halal product certification has further boosted confidence in the industry.

3. Innovative design:
   Local Muslim fashion brands such as Elzatta and Rabbani have gained international recognition for their innovative designs. These brands skillfully blend traditional cultural elements with modern aesthetics to create unique styles that appeal to both domestic and international markets.

4. Sustainable Development and Ethical Practices:
   Sustainability is an emerging trend in Indonesia’s halal fashion industry. Designers are adopting eco-friendly materials and ethical production practices to meet global demand for more environmentally conscious fashion.

5. Cultural Heritage:
   Indonesian designers are incorporating the country’s rich cultural heritage into their creations, drawing on traditional fabrics like batik and songk. This fusion of tradition and modernity resonates with diverse audiences, enhancing the global appeal of Indonesia’s understated fashion.

Indonesia's global influence

As the world increasingly embraces modest fashion, Indonesia's halal fashion industry stands out for its innovation and authenticity. Events such as Jakarta Muslim Fashion Week provide a platform for Indonesian designers to collaborate with the international market, strengthening the country's position in the global modest fashion economy. With growing government support, a booming digital economy, and a commitment to sustainable development, Indonesia is poised to further solidify its position as a leader in the halal fashion industry.

The role of Indonesia’s digital economy

Indonesia's thriving digital economy has played a key role in supporting the modest fashion industry. According to the Google e-Conomy SEA Report 2024, Indonesia's e-commerce gross merchandise value reached US$65 billion in 2024. That same year, the country's digital economy had a total GMV of US$90 billion and is projected to grow to US$20-360 billion by 2030. This robust online ecosystem has enabled local designers to enter the global market, making Indonesia a leader in modest fashion e-commerce.

Halal tourism: Indonesia's rising star in tourism

Indonesia's halal tourism industry is rapidly expanding, catering to both domestic and international Muslim tourists. The country is also a major contributor to global religious tourism, with 209,782 Indonesians expected to perform the Hajj in 2023. Saudi Arabia has approved 221,000 Indonesian pilgrims for the 2023 Hajj and expects a similar number in 2025.

Domestically, Indonesia ranked first out of 140 countries in the GMTI 2023 report, solidifying its position as the world's leading halal tourism destination. Regions such as West Nusa Tenggara and Aceh are being developed as halal-friendly hotspots, offering certified accommodation, prayer facilities, and culturally inclusive experiences.

The global Muslim tourism market is worth over US$200 billion and is expected to grow to 2.2 billion Muslims by 2030. Indonesia is working to strengthen its Muslim-friendly tourism infrastructure and services to enable it to capture a significant share of this growing market.

Indonesia's evolving halal certification framework

Indonesia has established a comprehensive regulatory framework to ensure the integrity of its halal industry. Central to this effort is the Halal Product Assurance Law (Law No. 33/2014), which mandates that all consumable products entering, circulating, and traded in Indonesia must be halal certified. This law underscores the country's commitment to maintaining high standards of halal compliance, making it a trusted global player in the halal economy.

The Halal Product Assurance Organization (BPJPH) oversees the certification process in collaboration with the Indonesian Ulema Council (MUI) and the Halal Inspection Agency (LPH). In October 2024, the government introduced Government Regulation No. 42 of 2024 (GR 42/2024), which brought significant updates, including:

• Extending the Halal certification deadline for small and medium-sized enterprises toOctober 17, 2026。

• Unless the production process changes, the halal certificate granted is valid forever.

• Simplify the process of applying for foreign products through an importer or representative.

Failure to comply can result in sanctions such as fines or product withdrawals, highlighting the importance of adhering to these rules. Indonesia’s evolving regulatory framework demonstrates its commitment to creating a trusted halal ecosystem that supports consumers and businesses.