Successfully exploiting the Indonesian market will be a good passport for Vietnamese businesses to penetrate the global Halal industry.

Vietnamese enterprises should choose superior products with Halal certificates issued by Indonesia, should not compete on price, seek investment opportunities according to local financial incentives, actively participate in prestigious international fairs... to conquer the market of the world's largest Muslim country.

Vietnamese Ambassador to Indonesia Ta Van Thong speaks at the Vietnam-Indonesia business connection session within the framework of the Indonesia Trade Exhibition, October 2024. (Source: Vietnamese Embassy in Indonesia)

Those are the suggestions of Vietnamese Ambassador to Indonesia Ta Van Thong for Vietnamese enterprises wishing to do business in the largest economic market in Southeast Asia in an interview with The Gioi va Viet Nam Newspaper about the potential and opportunities for cooperation in developing the Halal industry between the two countries as well as the advantages and challenges ahead.

With 87% of Indonesia's population of more than 280 million people following Islam, the country's Halal market has great potential for many countries, especially for an economy with high openness and strong exports like Vietnam. Could you please tell us about the advantages, potentials, and opportunities for cooperation between Vietnam and Indonesia in developing the Halal industry?

Globally, consumers spent $1.17 trillion on Halal food in 2019, making it the second-largest sector after Halal finance. The Halal food and beverage (F&B) industry is expected to reach nearly $4 trillion by 2028.

On the other hand, the Muslim community is growing rapidly and studies predict that the number of Muslims will be equal to that of Christians (30% and 31% of the world population respectively) by 2050 and is expected to become the world's largest religion by around 2075. Therefore, the potential for the Halal industry is enormous. Tapping into the Indonesian market will be a good passport to penetrate global Halal markets.

Indonesia is currently the country with the largest Muslim community in the world with 231 million people, a member of G20, the largest economy in Southeast Asia and has the ambition to become a top 5 economy in the world. The Islamic economy is not only limited to food and beverages but also all consumer products and services such as finance, tourism, pharmaceuticals, even clothing, cosmetics, fashion ... in accordance with Islamic Halal regulations.

Indonesia's Islamic economy is currently the fourth largest in the world, after Malaysia, Saudi Arabia and the United Arab Emirates (UAE). Indonesian people's consumption of goods and products is very large (domestic consumption accounts for about 65% of GDP), corresponding to the consumption of Halal products.

Indonesia's Halal products market reached US$220 billion in 2018 and is expected to grow to US$330.5 billion by 2025. In 2022, food and beverage imports accounted for about 6.5% of the country's total imports.

Indonesia's imported food and beverages focus on dairy products, reaching a turnover of 1.2 billion USD, sugary drinks 120 million USD, confectionery 75 million USD, cereals 541 million USD, processed vegetables and fruits 222 million USD...

In addition, the e-commerce system in Indonesia is also developing strongly, bringing convenience to people's shopping and spending. The country's digital economy is currently leading Southeast Asia, worth about 70 billion USD and is expected to reach 133 billion USD by 2030.

The Indonesian Halal market is currently growing rapidly, creating favorable conditions for businesses to participate.

First, the Government increased investment in infrastructure, while applying the Halal philosophy in many industries including food, pharmaceuticals, cosmetics and tourism.

Second, Indonesia is making efforts to upgrade and build the country's Halal brand into an internationally influential brand, through signing bilateral agreements with Muslim-majority countries to expand the market.

Third, Indonesia has established a synchronous apparatus and institutions through the promulgation of laws, regulations, and the development of a process for granting Halal certification under unified management by the Government (previously, certification was granted by religious councils).

Vietnam has strengths in rich and high-quality agricultural products and food that have conquered many high-standard markets in the world, and culinary culture is increasingly becoming a national brand. Vietnam's tourism resources are also abundant, with many world-famous destinations, which is an opportunity for cooperation in developing Islamic tourism.

There are now a number of Vietnamese products that have been certified Halal and circulated in the Indonesian market, such as dried foods (pho, vermicelli, instant noodles), frozen foods (spring rolls, wontons, ha wontons), canned foods (meat, fruit, coffee). In addition, products such as milk, honey, instant coffee, passion fruit juice, etc. are also highly competitive.

Vietnamese Ambassador to Indonesia Ta Van Thong. (Source: Vietnamese Embassy in Indonesia)

Besides the advantages, what are the challenges for Vietnamese enterprises wanting to conquer the market of this largest country in Southeast Asia, Ambassador?

Although the potential is huge and opportunities are numerous, there are still some difficulties that businesses need to overcome in order to conquer the Indonesian market.

Firstly , the Indonesian market is highly protected through tariff and non-tariff barriers to protect the interests of domestic small, medium and micro enterprises, which account for the majority of the economy. Therefore, the cost of entering the market is relatively high due to uneven development of logistics infrastructure, complicated customs procedures, and many technical barriers such as National Standards (SNI), localization rates (TKDN), etc.

On the other hand, Indonesia is trying to be self-sufficient in food and reduce imports of agricultural, forestry and fishery products, so Vietnamese goods have to compete with goods from other ASEAN countries and the protectionist policy is intended to replace imports.

Second, the Government has recently issued a regulation requiring most products and services in Indonesia to have a Halal certification issued by the Halal Product Assurance Agency (BPJPH). The implementation roadmap is from October 2024 to October 2034 for each type of product, initially applying to food and beverage products in 2026, then applying to textiles, cosmetics and many types of services.

The certification procedure is very complicated, costly and has subjective factors such as requiring a field survey of the production facility, therefore, Vietnamese products with Halal certification currently need to be registered and distributed by Indonesian importers.

Third, Vietnam has to compete with countries that have closer economic relations with Indonesia such as Malaysia and Singapore. These two countries have the advantage of being countries with long-standing experience in the Halal industry and modern infrastructure and synchronous institutions.

Indonesia has signed memorandums of understanding with Malaysia (June 2023) and Singapore (August 2024) to promote technical cooperation in Halal assessment procedures, Halal accreditation, technical standards and regulations for Halal certification, mutual recognition of Halal certificates and Halal labels on products to facilitate trade in Halal products.

Fourth, Vietnamese enterprises have not had much information or interest in the Halal economy, while focusing their attention on traditional products and large markets such as the US, EU, and Japan, although they may face more stringent standards.

Vietnamese enterprises have not yet fully realized that it is necessary to focus on expanding and diversifying markets, allocating resources to exploit markets on the basis of multilateral trade agreements that have been established within the framework of ASEAN, AANZFTA, RCEP...

Faced with such difficulties, as someone who is closely familiar with the area, what advice does the Ambassador have for Vietnamese businesses when approaching the Indonesian Halal market?

As mentioned above, the Indonesian market has great potential and is also one of the important opening points for Vietnamese enterprises to participate in the global Halal market although there are still certain obstacles. Therefore, to conquer this market, enterprises need to have understanding and long-term development strategy.

In the current context, businesses need to draw practical lessons on expanding, diversifying and maintaining markets, and guard against systemic risks such as the Covid-19 pandemic, high inflation leading to reduced purchasing power in the US and EU markets, financial and economic crises, political and military conflicts, etc. to better prepare for exploiting regional markets and, further, markets in Muslim countries around the world.

Enterprises should start focusing on building a system to produce Halal-compliant products in addition to traditional products. Production in accordance with Halal standards can bring many benefits to enterprises in the long term because it can both exploit the traditional market and approach the market of nearly 2 billion people in basic areas such as food and beverage, consumer fashion, tourism, etc. On the other hand, service enterprises can target Islamic financial services because this is the largest segment in the Islamic economy today.

Exporting enterprises should proactively learn and apply for Indonesian Halal certification because the Government of this country is currently promoting the roadmap to apply Halal standards to most goods and services. Vietnamese enterprises should prioritize choosing competitive products that have achieved Indonesian Halal certification, and note that imported goods into Indonesia are often divided into many groups including: free import goods, groups that must be registered when imported... to have specific and effective plans.

Currently, modern distribution (MT) channels account for 50% of the distribution system in major cities in Indonesia, so a good choice in the beginning is to link up with a distributor in this country (who is familiar with the procedures and has an import license) to access a widespread supermarket system in the largest national market in Southeast Asia.

Vietnamese products that want to penetrate the Indonesian market should not compete on price because it will certainly not be sustainable. Even if the price is higher, Indonesian consumers are still willing to accept Vietnamese products if they have special characteristics, have their own identity, good features and bring higher value to users than similar products.

Businesses can also look for investment opportunities as the Indonesian Government is providing financial incentives such as exemptions and refunds of export duties, import of raw materials and machinery, support for research and vocational training, and promotion of Halal manufacturers in special economic zones, free trade zones and industrial parks to encourage investment and promote the export of Halal products.

In addition, I think that Vietnamese enterprises should be more active in participating in prestigious large-scale international fairs held annually in Indonesia to approach new markets, import partners, customers, and distributors.

Normally, major international fairs in Indonesia attract 40,000 to 50,000 visitors with the participation of many domestic and international enterprises from 40 countries in and outside the region. Through these events, the image and brand of quality Vietnamese products will be introduced and effectively promoted to partners and in fact, many contracts and purchase agreements between Vietnamese enterprises and Indonesian partners and importers have been signed at the fairs.

Ambassador Ta Van Thong participated in the ribbon cutting ceremony to open the International Halal Industry Exhibition Indonesia 2024. (Source: Vietnamese Embassy in Indonesia)

What is the Embassy's orientation in promoting cooperation in the Halal industry between the two countries?

The Vietnamese Government has developed a Master Plan on promoting Vietnam's Halal industry, which clearly identifies potential areas and key implementation areas under the direction of the Prime Minister.

One of the focuses is to promote international cooperation to develop Vietnam's Halal industry, including promoting the signing of bilateral and multilateral agreements on mutual recognition of Halal certificates/Halal certification bodies or supporting the construction of international standard Halal certification centers. This will be an important key to opening up market access opportunities.

The Embassy will continue to promote the signing of cooperation agreements for Indonesia to recognize Halal certification organizations in Vietnam; at the same time, support Vietnamese enterprises to connect with Indonesian partners to obtain Indonesian Halal certification. Indonesia can also support Vietnam in training human resources, investing in production facilities, transferring Halal product manufacturing technology, creating conditions for Vietnamese enterprises that meet Halal standards to exploit the local market as well as expand the market.

On the other hand, the Embassy and the Trade Office continue to actively inform about Indonesia's trade policies, culture, consumer practices, business, etc. to support and connect Vietnamese enterprises to access and participate in this market, focusing on promoting cooperation on Halal products and services to facilitate the trade of Vietnamese Halal products and services in Indonesia and in the long term reach regional and world markets.

In addition, the Agency also needs to pay more attention to introducing Vietnamese Halal-compliant foods and cuisine at international seminars, conferences and forums to build the Vietnamese Halal brand with international partners as well as raise awareness and interest of Vietnamese businesses in the Islamic economy.

For their part, Vietnamese businesses also need to be more proactive and positive in creating products that meet Halal standards. One of the potential areas is Muslim-friendly tourism as the number of Indonesian tourists to Vietnam has increased sharply in recent years.

50% of Muslim tourists surveyed responded that Muslim-friendly experiences in tourism activities were considered the main factor that would make them return; 66% highlighted Halal food as the most important issue when choosing a destination.

Meanwhile, Vietnam has beautiful natural landscapes, rich cultural heritage and diverse cuisine. If we develop more specific services for Muslim tourists such as Halal restaurants, Muslim-friendly hotels, resorts with separate spaces for Muslim families, prayer places near famous tourist areas..., we will attract a large number of tourists from Indonesia, Malaysia and Middle Eastern countries.

Thank you Ambassador!

Source: https://baoquocte.vn/dai-su-ta-van-thong-khai-thac-thanh-cong-thi-truong-indonesia-se-la-giay-thong-hanh-tot-de-doanh-nghiep-viet-tham-nhap-nganh-halal-toan-cau-297670.html