JAKARTA (07/24/2026)

The global halal economy is no longer a niche market. Valued at roughly USD 2.6 trillion in 2024 and projected to reach USD 3.56 trillion by 2029, it now touches sectors far beyond food from modest fashion and pharmaceuticals to media, cosmetics, and finance. For any country with a large Muslim population, this growth would seem like an obvious advantage. Yet Indonesia, home to the world’s largest Muslim population, has just dropped one place to fourth in the Global Islamic Economy Indicator (GIEI) 2025/2026 a signal that population size alone does not translate into global market leadership.

This shift raises a question relevant well beyond Indonesia’s borders: what actually determines success in the halal economy, and what can other markets Muslim, majority or not, learn from it?

A Market Built More on Consumption Than Production

According to discussions held at a public forum on the future of Indonesia’s halal economy, hosted by Paramadina University and the Center for Sharia Economic Development (CSED) INDEF in Jakarta on 22 July 2026, the core issue is structural rather than cultural. Indonesia continues to perform strongly in specific segments — ranking first globally in modest fashion, third in media and recreation, and moving up to fourth in pharmaceuticals and cosmetics. However, these pockets of strength have not been matched by a broader industrial ecosystem.

The country’s Islamic finance market share remains at around 7 percent, a relatively modest figure given the size of its population and economy. More notably, Indonesia’s governance ranking within the GIEI framework sits at 16th worldwide, well behind its consumer-market standing. In practice, this means regulatory coordination, institutional capacity, and cross-sector alignment have not kept pace with demand.

The forum’s participants pointed to a specific structural gap: Indonesia has largely developed as a consumer of halal goods rather than a producer of them. Halal certification, product traceability, and manufacturing capacity. The infrastructure that allows a country to export halal goods rather than simply import or consume them  remain underdeveloped relative to markets such as the United Arab Emirates and Malaysia, both of which have invested more systematically in halal-specific financial products, certification systems, and trade infrastructure.

From Consumer to Producer: The Core Shift Needed

Several speakers at the forum framed this as the central challenge for Indonesia’s halal economy going forward: shifting from a demand-side market to a supply-side one. Rather than measuring success by how much halal product Indonesians consume, the argument goes, growth should be measured by how much Indonesia manufactures, certifies, and exports.

This reframing has practical implications. It suggests a need for:

• Stronger production infrastructure, including dedicated special economic zones for halal manufacturing, to increase output capacity rather than relying on imported goods.
• Better traceability systems, such as blockchain-based certification, to give international buyers confidence in the authenticity and supply chain of Indonesian halal products.
• Broader financial innovation, since Islamic finance products in Indonesia currently show less variety than in more established markets.
• Cross-sector coordination between research institutions, universities, industry, and government — since innovation in halal products (much like innovation in any consumer sector) depends on collaboration, not isolated efforts within a single ministry or industry group.

Notably, the discussion also emphasized that the halal economy is not an exclusively religious or Muslim-only market. Halal certification standards covering ingredients, hygiene, traceability, and ethical sourcing are increasingly appeal to non-Muslim consumers as a broader marker of quality and transparency. This positions the sector as one that non-Muslim businesses and investors can engage with on commercial, rather than purely religious, grounds.

What Academic Research Says About These Gaps

These forum observations are consistent with a broader body of academic research on halal trade and governance.

Studies on certification and trade show that compliance with halal standards directly shapes the export performance of Indonesian small and medium enterprises primarily through faster processing, lower costs, and stronger buyer confidence once digital traceability is in place. At the same time, some of this research flags a paradox: Indonesia’s own domestic certification requirements could themselves be read as a trade barrier under international trade rules if they are not harmonized with global standards, which risks undercutting the very export ambitions the policy is meant to support.

The lack of harmonized, internationally recognized halal standards is a recurring theme in the literature more broadly. Research reviewing certification systems across countries points to overlapping and inconsistent certification bodies as a persistent obstacle to supply chain efficiency and cross-border trade confidence. The gap that affects countries relying on multiple domestic authorities rather than a single, internationally interoperable system.

On governance, longer-running research on Indonesia’s halal institutions has documented fragmentation across multiple regulatory bodies for certification, standard-setting, and enforcement an issue more recent studies suggest has still not been fully resolved. Frequent regulatory changes and overlapping institutional authority, in particular, tend to create uncertainty for business actors, with smaller enterprises struggling most to keep pace with evolving compliance requirements.

Consumer research also complicates the assumption that halal demand is purely religious in nature. Studies on halal purchase intention among non-Muslim consumers have found that halal awareness and certification visibility meaningfully shape buying decisions even outside Muslim populations suggesting halal labeling functions, in part, as a broader signal of quality and safety, and that halal industry growth is not contingent on religious demographics alone.

On the production side, research on Indonesia’s halal industrial zones found that digital transformation including IoT-based monitoring and blockchain traceability remains uneven, held back by infrastructure gaps and limited digital literacy among smaller producers, with public–private partnerships and dedicated technology incubators proposed as ways to close that gap.

Taken together, this research points to a consistent conclusion: Indonesia’s halal economy challenge is less about market size or religious demographics, and more about regulatory harmonization, institutional coordination, and production-side infrastructure with the same variables that determine competitiveness in most other export-oriented industries.

A Regional and Global Pattern Worth Watching

Indonesia’s case illustrates a pattern relevant to any market attempting to convert demographic scale into economic influence: population size creates demand, but demand alone does not create industry leadership. Governance, financial infrastructure, and production capacity are the variables that determine whether a large consumer base becomes a competitive export economy or remains a market that others supply into.

For international observers, particularly those in trade, finance, and manufacturing sectors, this offers a useful case study in how emerging markets approach sector-specific industrial policy and where the gaps between potential and execution tend to appear.

Written by: Alhayya Maritza

REFERENCES

Ahmad, S., Fadhilah, N., & Sulaiman, S. (2021). Halal certification and global trade: Barriers and opportunities. Referenced in: Halal Certification by Globalization: Packaging Variance, Enhancing Efficiency and Lowering Compliance Barriers. International Journal of Research and Innovation in Social Science, 9(1).

Dinar Standard & Salaam Gateway. (2025). State of the Global Islamic Economy Report 2025/2026. Dubai: DinarStandard.

Nasution, et al. (2024). Risk Assessment of Trade Barriers: The Implications of Indonesia’s Halal Certification Law on International Commerce. International Journal of Islamic Economics, 6(2), 132–145.

Rusydiana, A. S., & Firmansyah, I. (2019). Halal Governance in Indonesia: Theory, Current Practices, and Related Issues. Journal of Islamic Monetary Economics and Finance, 5(1), 89–116.

Digital Transformation in Indonesian Halal Industrial Zones. (2025). Journal of Islamic Economics and Finance Studies (JIEFeS).

SPS/TBT Halal Certification and SME Export Performance: Implications for Global Market Access. (2026). International Journal of Economics and Management Research.

Institutional Collaboration and Halal Industry Governance in Indonesia. (2025). Journal of Social Philanthropy and Halal Research, 2(2), 1–11.