Minister of National Development Planning/Head of Bappenas Bambang Brodjonegoro (left) with President of United in Diversity Foundation (UID) Mari Elka Pangestu (center) and Director of Sustainable Development Solutions Network and Special Advisor to United Nations Secretary General Jeffrey Sachs (right) show the cooperation sheet to the media during the Tri Hita Karana forum which is held on the sidelines of the 2018 IMF-WBG Annual Meetings in Nusa Dua, Bali, Thursday (11/10) - Photo by the Committee

Nusa Dua (TheInsiderStories) – To boost Indonesia’s sharia economy, Financial Service Authority (FSA) will gives a lot of incentives to Sukuk instrument, said one government official. Every Sukuk issuance will secure levy deduction, said the deputy chairman of FSA Nurhaida on Thursday (11/10).

“We keep encouraging to multiply the existing instruments. Things to make Islamic finance attractive, must be increased” said Nurhaida, during the IMF-WB meeting in Nusa Dua, Bali.

Previously, Ministry of National Development Planning together with the National Committee on Sharia Finance is preparing a sharia economy roadmap, which could overcome the persistent current account deficit (CAD).

The minister Bambang Brodjonegoro on July 25 said the sharia economy especially halal goods and halal tourism could be an effective recipe to overcome Indonesia’s CAD. Since 2011, Indonesia suffers current account deficit due to the commodities demand slowdown and commodities price fell.

The CAD was US$5.5 billion or 2.15 percent of gross domestic product (GDP) in the first quarter this year, triggered by the deficit in the balance of primary income and services that reached $7.9 billion and $1.4billion, respectively. As a result, the country’s balance of payment deficit recorded $3.9 billion.

Bank Indonesia earlier said the CAD is seen around 2.5 percent to 3 percent of GDP in the second quarter of this year, possibly putting more pressure on the Rupiah. Indonesia always records a current account deficit in the past six years.

The government is putting efforts to fix the CAD, of which by boosting the goods and services exports. Indonesia recorded $11.84 billion in trade balance surpluses in 2017, pushed by export that grew 16.22 percent (year on year), while import grew 15.66 percent (year on year). The decent record of export in 2017 pushed by the higher demand for manufactured goods and commodities especially crude palm oil, coal, and rubber.

Brodjonegoro added the government should increase export by seeing consumer goods opportunity to overcome the persistent CAD. One of them is halal goods and services. Indonesia’s halal goods export contributed 21 percent of the total export.

Although the record is not impressive, the halal product’s growth in Indonesia increased 19 percent since 2016. In the future, the role of halal products must be covered by the laws in the export destination countries as well as the export potential to Islamic member countries such as Egypt and the United Arab Emirates.

According to the Halal Industry Development Corporation in 2016, the halal goods and services reached US$2.3 trillion including foods, ingredients and addictive substances, cosmetics, animal foods, medicines, vaccines, sharia finance, pharmacy, and logistic.

The sharia economy has big opportunities in line with the world Moslem population growth that reached 27.5 percent of the world population in 2030. The sharia economy is progressing not only in the Moslem countries but also in other countries such as China and India.

Indonesia also has big opportunity to develop sharia economy and boost halal products export as the country has a strategic position for the halal superhighway link in the global halal supply chain. “Strategies in the trade sector and efforts to diversify products need to be focused on a number of markets for potential goals of halal products,” Brodjonegoro said.

Furthermore, Indonesia also has a big opportunity in the halal tourism that currently being popular in the global tourism. The current global halal tourism data shows that Indonesia ranks fourth as the country with the largest Moslem tourists, with expenditure reaching US$9.7billion with a total of 200 million domestic tourists.

Moslem travellers have the biggest spending in the tourism worth US$120 billion in 2015, the time the halal tourism grew 6.3 percent. Indonesia’s tourism grew 10.3 percent in 2015. In 2016, the Moslem tourism in the world grew to US$169 billion and projects to reach US$283billion in 2022.

“As the largest archipelago with more than 17,000 islands, 300 tribes, 746 languages and dialects and more than 800,000 mosques, Indonesia has great potential to continue to contribute to increase state revenues through Moslem-friendly tourism,” Brodjonegoro added.

Indonesia takes place in the top five world halal tourism destination category with foreign exchange revenue reaching US$13 billion which contribute to US$57.9 billion of gross domestic product (GDP). In this case, there has been an increase in the Middle Eastern tourist arrivals of 32 percent in 2016.

The tourism sector is projected to be the most contributor to the foreign exchange by 2020. This increase is a positive result of halal tourism acceleration in several Indonesian tourist destinations, such as Lombok, Padang, Aceh, Bangka Belitung, Jakarta, to Maluku Utara.

Recently, Indonesia sharia economic is not as big as the conventional, with 8 percent shares only. Total of Indonesia sharia economic market is only $83 billion. A tiny percentage compared to global sharia financial industry asset of $2.2 trillion, which is mostly from Sukuk.

Effort to escalate Sukuk, in the end, aims to create funding for infrastructure projects, as President Joko Widodo’s focus is infrastructure.

“If from the $2.2 trillion becomes part of our infrastructure funding, it will be very huge,” said Nurhaida.

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