Jakarta. Indonesia’s planned enforcement of mandatory halal certification on Oct. 18, 2026, has drawn calls for a fundamental policy review, with economists warning that compliance costs could burden micro, small and medium enterprises (MSMEs) and urging the government to tailor enforcement to product risks.

Nailul Huda, executive director of the Center of Economic and Law Studies (CELIOS), said the Halal Product Assurance Law requires certification across broad product categories, potentially imposing unnecessary costs and administrative burdens on small businesses with limited capital and resources.

“Not all MSMEs need to have their products certified halal. Given that the majority of Indonesia’s population is Muslim, I think it is easy to find halal food in Indonesia. Instead, non-halal food should be the one required to carry a label,” Nailul said on Monday.

He argued that costly and complicated certification procedures could hinder small businesses, particularly those selling simple products that do not carry the same halal risks as processed goods with complex supply chains.

“The root of this problem is the Halal Product Assurance Law, which states that all goods in Indonesia must be halal-certified. This creates additional costs for producers. MSMEs cannot afford these costs, making the requirement burdensome,” he said.

Nailul said postponing the requirement could be appropriate, but urged the government to go further by reviewing the regulatory framework. One option would be to replace universal mandatory certification with mandatory labeling for non-halal products and classify goods according to their characteristics and certification needs.

Under his proposed approach, products could carry halal assurances issued by authorized institutions, rely on business declarations where permitted, or disclose specific ingredients that consumers should be aware of. Formal certification would remain necessary for large companies and products involving more complex production processes or supply chains.

Read More: Indonesia’s Halal Industry Contributes $61.6 Billion to Manufacturing

Yusuf Rendi Manilet of the Center of Reform on Economics (CORE) Indonesia said the government should focus on improving implementation rather than abandoning the policy's underlying objective.

“MSMEs' concerns are justified. However, the problem lies not in the objective of mandatory halal certification, but in the implementation design and how the rules are enforced,” Yusuf said.

Halal status is a credence attribute, meaning consumers cannot easily verify it independently, even after consuming a product. This creates information asymmetry between producers and consumers, making government oversight necessary to ensure product information is accurate and accountable, he said.

Yusuf argued that halal requirements should primarily serve as a transparency mechanism rather than simply an obligation to possess a certificate. Products containing non-halal ingredients should remain available for sale as long as they comply with applicable regulations and clearly disclose their contents.

Indonesia already has a legal framework for halal assurance through the Halal Product Assurance Law, the Job Creation Law and Government Regulation No. 42/2024. Reforms should therefore focus on implementation, proportionate compliance costs and consistent oversight, he said.

Yusuf proposed a selective, risk-based enforcement system that prioritizes slaughterhouses, slaughtering services, raw material suppliers and products with a higher risk of non-compliance with halal requirements.

Meat and meat derivatives, gelatin, enzymes, flavorings, animal-derived ingredients and processed imported materials warrant stricter scrutiny because their production processes and raw material origins can pose greater risks.

By contrast, simple plant-based products made with certified raw materials could be subject to lighter oversight, provided they meet the applicable requirements.

Compliance Costs and Oversight Capacity
Yusuf said the burden on MSMEs extends beyond certification fees. Businesses must also spend time and resources obtaining a Business Identification Number (NIB), documenting raw materials, preparing administrative records, adjusting suppliers and, in some cases, separating production equipment.

These requirements weigh disproportionately on microenterprises because some compliance costs are fixed. Administrative expenses that are relatively small for large companies can consume a much larger share of a microbusiness's revenue.

The government's enforcement capacity is another concern. Yusuf said that in 2024, meeting the certification target was estimated to require the issuance of around 102,000 certificates per day, while the average issuance capacity at the time stood at approximately 2,678 certificates per day.

The gap highlights the need to align regulatory targets with the institutional capacity to process applications and oversee compliance, he said.

Yusuf also called for administrative sanctions to be imposed gradually. Low-risk microenterprises that have registered and participated in assistance programs, for example, could receive a temporary suspension of sanctions under a clearly defined legal framework.

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