Wednesday, February 27, 2008

Halal labeling not necessary

Acutely inadequate institutional capacity and a mostly corrupt bureaucratic system are our greatest concerns whenever a regulatory process requires nationwide enforcement on a very massive scale. These are the major shortcomings that would make mandatory halal labeling for food, drugs and cosmetics technically, economically and legally unfeasible.

The Indonesian Ulemas Council (MUI) has a legitimate point in demanding that Muslims, who make up the majority of the population, need protection and assurances from the government that what they consume is halal, or permitted under Islamic law.

However, making halal labeling legally mandatory is surely not the most effective way of achieving that objective. Meeting the MUI demand that the draft law on halal food, drugs and cosmetics the government is now finalizing make halal labeling compulsory could cause chaos in the market.

Currently, halal certification is voluntary for producers and is administered by the MUI. Hence, it is allowable for producers or importers not to file requests for such labels.

The halal label issue is different from the bills on Islamic finance -- sharia banking and sukuk (bonds) -- which are currently in deliberation at the House of Representatives.

These bills will not make sharia banking and other sharia-compliant financial products mandatory in the country. They are designed only to protect consumers or people who prefer financial products or derivatives that conform to Islamic laws, and to attract investment from the Middle East.

An increasing number of wealthy Muslims, including those in Indonesia, have been seeking sharia-compliant financial products and it is the duty of the government to ensure these products, similar to those marketed within conventional banking and financial services, are safe.

But making halal labeling compulsory is a completely different issue.

First, the MUI simply does not have the human resources and laboratory equipment to enforce such a legal requirement across the country, and upon all producers of foods, drugs and cosmetics. It would also be impossible for the MUI to ensure that once food, drug or cosmetic products are certified halal they will continue to fulfill halal requirements.

It would be an uphill task itself to determine which products and which categories of producers or importers/distributors should obtain halal labels. How about prescription and over-the-counter drugs, or foods made by cottage industries.

The additional economic costs producers and importers would have to bear in fulfilling a mandatory halal labeling requirement would be enormous.

We should not forget that producers and importers of foods, drugs and cosmetics are already required by law to register their goods at the Health Ministry's food and drug administration agency, a process that involves elaborate documentation and testing.

Requiring these producers/importers to undergo a similar regulatory process with the MUI to obtain a halal certificate would increase production costs at the expense of consumers. Mandatory halal labeling would certainly kill micro, small and medium businesses due to the costs involved.

Even now the Health Ministry's food and drug administration agency is unable properly to register and certify all food, drug and cosmetic products to protect consumers, a result of technical and economic shortcomings and an acute lack of resources.

Instead of legislating halal labeling, the government should give top priority to further empowering the food and drug administration agency, because the work it does protects the basic needs and interests of all groups: monitoring and ensuring the health and hygiene standards of products sold in the market and making certain producers are fully transparent with regard to the ingredients used in their products.

Such transparency will enable consumers -- Muslims in particular -- to ascertain which foods are halal and which products are healthy.

Another reason to scrap the halal labeling policy is that the certification process is vulnerable to corruption, especially because the certification work will have to be done across the country and require credible auditors to assess whether the preparation of and the ingredients used for foods, drugs and cosmetics meet Islamic laws.

There is no guarantee the MUI, however impeccable its integrity may be, would be able to make halal certification, if made mandatory, efficient, expedient and clean of corruption.

We therefore cannot help but get the impression that the MUI demand to make halal labeling mandatory, and to authorize it as the sole institution responsible for enforcing the law, smacks of an attempt at rent-seeking.

The government and House members who support the MUI stance should take into consideration all the technical, economic, legal and institutional barriers to such a regulation, otherwise they may end up swallowing something they cannot digest.

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