AND SUCCESSFUL IMPLEMENTATION OF POLICY PROGRAMMES
Ach. Fadhor Rosid Efendi,a Zainurib
Master of Economics study program, Faculty of Economics and Business, Jember University, Indonesia
e-mail: [email protected] (corresponding author);
Abstract
This research aims to analyze the KNEKS institutional policy and program plans for implementing the policy. This research uses a qualitative method, with a descriptive approach. Based on Duncun's theory, namely the Policy Analysis Approach, this approach involves collecting, understanding, and assessing data to understand the policy-making process, policy objectives, and the impact and effectiveness of policy implementation. The results showed that the establishment of the National Committee for Islamic Economics and Finance (KNEKS) is expected to accelerate, expand, and advance the development of Islamic economics and finance to strengthen national economic resilience. The successful implementation of the KNEKS task depends on the synergy between all sharia economic stakeholders, including Ministries and Institutions, in overseeing the KNEKS work plan program.
Keywords: KNEKS Institution, Policy and Implementation
I. INTRODUCTION
Indonesia, as a country with the largest Muslim population in the world, has significant potential in the Sharia economic industry. However, the development of the Islamic economy in Indonesia is still significantly delayed compared to the achievements of other countries such as Malaysia. Therefore, it is necessary to make strategic efforts to increase the growth and sustainability efforts of the Islamic economic market in Indonesia. In this decade, the Islamic economy in Malaysia is in a favorable state. This is due to the various efforts that the country has made in encouraging and advancing the Islamic economic sector. These efforts include establishing Islamic financial institutions, developing Islamic financial products, and increasing public awareness of the Islamic economy.
A comparison of the progress of the Islamic economy between Indonesia and Malaysia can be explained as follows: Although Indonesia has the largest Muslim population in the world, the penetration rate of the Islamic economy in the country still requires improvement. Efforts have been made by establishing Islamic financial institutions, developing Islamic financial products, and launching Islamic stock indices.
Nonetheless, there is still potential for further development in Indonesia's Islamic economic sector. On the other hand, Islamic finance penetration in Malaysia has reached a more sophisticated level. The country has strong and growing Islamic financial institutions with a wide range of Islamic financial products and supports Islamic financial institutions globally.
Malaysia also has an adequate legislative framework to support the development of the world's Islamic economy, currently, Malaysia is a reference for Muslim countries in the world in the development of world
The progress of Islamic economics in Indonesia itself has experienced significant development, although the growth has been relatively slow when compared to the initial period of its emergence in the 1990s. This development may hurt the financial sector, which may experience a slowdown if it does not receive adequate support from the real sector. To cope with the development of Islamic economics, serious efforts are required from all relevant parties. Some of the measures for the development of the Islamic economy involve building theories and policies, strengthening the legal umbrella, socialization, and promotion of the Islamic economy. In 2020, the penetration of Islamic economics and finance in Indonesia only reached 6.51%, while in Malaysia it has reached 29%. In addition, in terms of asset growth, Malaysian banks generally show better performance than Indonesian banks. Malaysia's Islamic banking assets reached RM 350.8 billion (USD 166 billion), with a market share of 21% (BNM report, 2014). On the other hand, Indonesia has total assets of IDR 104 trillion (USD 10.4 billion), but its market share is still below 3.3% (BI report, 2011).
Iran Turki Indonesia UEA Singapura Malaysia
0 50 100 150 200 250
Country index score of the world halal industry for the 2021/2022
Data source: Databoks
One indication of the progress of Sharia economic development in Indonesia includes the increasing number of Sharia financial institutions, such as Sharia banks, Sharia financing institutions, and Sharia insurance companies. These institutions offer financial products and services that comply with sharia principles. Meanwhile, the Islamic capital market in Indonesia has also experienced significant growth. There has been an increase in the number of companies listed as Sharia-compliant on the Indonesia Stock Exchange, and there have been developments in Sharia investment instruments, such as sukuk and Sharia stock indices.
Increasing public understanding of the Sharia economy is one of the initiatives included in the National Committee for Sharia Economy and Finance (KNEKS) program to promote the Sharia economy. KNEKS acts as a key driver in the development of Islamic economics and finance, both
nationally and internationally. The main task of KNEKS is to drive the development of the Sharia economy and finance in supporting national economic resilience. KNEKS has organised various activities and formed working groups to accelerate the increase in sharia economic literacy. The existence of Sharia Economic and Financial Service Offices (KDEKS) in various provinces in Indonesia is also expected to help in increasing the literacy and progress of the Sharia economic market in Indonesia.
Under the leadership of President Joko Widodo, the government initiated the establishment of an institution called the National Committee for Sharia Economics and Finance (KNEKS), which was officially launched on 2 August 2016. This initiative aims to strengthen national development, particularly in the development of the Islamic finance sector. In line with the growth of Sharia finance, the government then expanded the role of KNKS into KNEKS through presidential regulation No. 91, which was further strengthened by Presidential regulation No. 28 of 2020. KNEKS has broader duties and functions, not only in the Sharia financial sector but also in the Sharia economy as a whole. The scope of KNEKS' tasks in the Sharia economy and finance includes four aspects, namely the development of the halal product industry, the development of the Sharia financial sector, the development of Sharia social funds, and the development and expansion of Sharia business activities. With the establishment of this new organizational structure, it is hoped that the KNEKS institution can successfully carry out the mandate that has been given to its management. The goal is for the development of Sharia economy and finance to progress at par with other Muslim countries. The hope is that Indonesia can become a leader in the development of Sharia economics and finance at the global level.
This institution is part of the supporting structure in the Islamic economic environment, acting as a driving force to accelerate the growth of Indonesia's Islamic Economics and Finance. The aim is to be the main driver in building and coordinating cooperation between various related parties, to accelerate the development of Islamic economics both at the national and international levels. This is in line with Indonesia's vision as the world's halal center by 2024. The existence of Islamic economic and financial institutions is expected to make a significant contribution to accelerating the recovery and strengthening of the national economy, in line with the national vision outlined in MEKSI.
II. RESEARCH METHODS
This research is a qualitative study using an approach that is commonly used in an analysing policy, policy direction, and policy implementation is a policy analysis approach. This approach involves collecting, understanding, and assessing data to understand the policy- making process, policy objectives, and the impact and effectiveness of policy implementation.
In the view of Duncan Macrae (1976), policy analysis is defined as a
discipline that applies rational argumentation by utilizing facts to explain, evaluate, and generate ideas, all aimed at solving problems in the public sphere. Policy analysis is not just an evaluation of data and information but involves exploring all aspects related to policymaking. This includes problem analysis, information gathering, evaluation, determination of policy options, and presentation of these options to decision-makers. The formulation of policy options that emerge from policy analysis does not automatically or directly become a policy. To make it a policy, it needs the support of authority and alternative factors. Thus, the process that produces policy options is rational.
Policy is a decision that contains principles to guide planned and consistent actions in achieving certain goals. The definition of policy issues depends on the participation of policy stakeholders, as they play a role in influencing and being influenced by government decisions. The policy environment is the specific context in which events related to policy issues occur, influencing and being influenced by policymakers and public policies. Therefore, the policy system is a dialectical process in which the objective and subjective dimensions of policy-making cannot be separated from its practice.
In policy analysis, the approach used by researchers in this study uses descriptive and normative approaches. The descriptive approach aims to present information objectively to decision-makers, with the aim that they understand the problems being discussed regarding policy issues. On the other hand, the normative approach aims to assist decision- makers by providing ideas and thoughts that can guide them in finalizing a policy.
III.DISCUSSION
Among policy analysis scholars, Dunn is perhaps one of the most recognized in Indonesia. William N. Dunn is a professor of policy analysis at the University of Pittsburgh, USA, and his expertise in this field has been widely recognized. As such, his books have become invaluable references in the teaching of policy analysis in universities around the world. Some of his works have been translated by lecturers at Gadjah Mada University and are very popular among students.
Dunn's version of policy analysis is defined as an intellectual and practical activity that aims to create, critically appraise, and communicate knowledge in the process of policy analysis. Dunn views policy analysis as an applied social science that uses diverse research methods and argumentation to produce information relevant to analyzing social problems that may arise from the implementation of a policy. Policy analysis is a type of study that produces information that can be the basis for policymakers’ considerations in assessing policy implementation to produce improvement alternatives. Policy analysis activities can be formal and careful, involving in-depth research into issues or problems related to the evaluation of a program that has been implemented.
In Dunn's analytical approach, five procedural steps must be followed in carrying out a policy analysis process, including:
a. Definition: generating information about the conditions that give rise to a policy problem...
b. Prediction: provides information about the future consequences of implementing policy alternatives, including if you do something.
c. Prescription: provides information about the value of future policy consequences.
d. Description: produces information about the current and past consequences of implementing policy alternatives.
e. Evaluation: the usefulness of policy alternatives in solving problems.
The stages in the policy-making process according to Dunn are as follows:
a. Agenda Setting phase where elected and appointed officials place policy issues on the public agenda.
b. The policy formulation phase (policy Formulation) where officials formulate alternative policies to address the problem.
c. Policy Adoption where policy alternatives are selected and adopted with the support of the majority and/or institutional consensus.
d. Policy Implementation where policies that have been adopted are implemented by administrative units by mobilizing their resources, especially financial and human resources.
e. Policy Assessment where audit and accounting units assess whether policy makers and policy implementers have fulfilled the requirements of policy making and policy implementation that have been determined.
III.A.1. KNEKS Policy
1) Development of Halal Product Industry
As a country with the largest Muslim population in the world, Indonesia has tremendous potential to become the center of the global Islamic economy. Islamic economy, especially in the halal industry, is a very promising alternative as a driver of global economic growth. Every year, the Muslim world's demand for the Islamic economy and halal industry continues to increase. Based on data from The State of Global Islamic Economy Report 2019/2020, it is estimated that Muslim consumer spending on halal food and beverages could reach USD 3.2 trillion by 2024. In addition, with the growth of the Muslim population estimated to reach 2.2 billion people by 2030, this demand is expected to continue to increase.
In 2018, the consumption value of halal products in Indonesia, especially in the halal food sector, reached USD 173 billion, making Indonesia the world's largest consumer in this category. The same is true in other key sectors, such as Muslim-friendly travel, halal fashion, halal pharmaceuticals, and halal cosmetics. Indonesia spends USD 11 billion on Muslim-friendly travel, ranking 5th in the
world. In the conforming fashion sector, Indonesia is the third largest consumer in the world with a total expenditure of USD 21 billion. Meanwhile, in the halal pharmaceutical and halal cosmetics sectors, Indonesia's consumption is ranked 4th and 2nd respectively, with a total expenditure of USD 5 billion and USD 4 billion.
Indonesia is indeed an Islamic economic market with an abundant number of Muslim consumers, but until now it has not become the largest exporter of halal food products in the world. This opportunity can improve the performance of the domestic industry, especially in sectors such as tourism, Muslim fashion, pharmaceuticals, cosmetics, and recreational media. Therefore, Indonesia's role in the global halal industry needs to continue to be optimized, by utilizing domestic potential and through cooperation and synergy between stakeholders to achieve the goal of becoming the center of the global Islamic economy.
Amid the current pandemic situation, the halal industry has also felt a significant impact. The hospitality industry has experienced a decrease in turnover of between 25% and 50%, including in the Muslim-friendly tourism sector. Similarly, the Muslim fashion industry experienced a decline in sales of up to 30%.
Meanwhile, Sharia mobile banking transactions increased by 86%, and e-commerce transactions increased by 400%, especially in the price of basic commodities on e-commerce platforms which increased by around 18.82%. Facing this pandemic, business players have optimized and changed business direction to adjust to changes in people's consumption patterns, especially the Muslim community, which tends to shift to consumption of primary and health needs.
In line with the government's initiative to encourage the growth of the domestic industrial sector, the specific development of the halal product industry has been described in the 2019-2024 National Medium-Term Development Plan (RPJMN) and the Indonesian Sharia Economic Masterplan (MEKSI). To make the halal industry one of the main pillars of the national economy and Indonesia the center of the global halal industry, the main focus for the development of the Indonesian Halal Product Industry during the period 2020-2024 is as follows:
a. development of halal industry infrastructure and clusters as a vital supporting factor for the national economy.
b. Development of halal standards and a comprehensive halal assurance system (HAS) to support the development of the halal industry at the national level.
c. Increasing the role of the halal industry in increasing the contribution of leading sectors to the national trade balance.
With the great potential possessed by Indonesia, the development of halal industrial infrastructure and clusters is an essential need as a driver for the halal product industry to optimize
its role as a major contributor to the national economy. The development of the physical infrastructure of the halal industry is directed at strengthening the halal value chain, both on a domestic and global scale. As part of the halal value chain development strategy, it is also necessary to develop halal standards and a holistic Halal Assurance System (HAS) as non-physical infrastructure, especially to support the acceleration of the halal product industry at the national level, especially in key sectors of the halal industry. With a focus on developing halal industry infrastructure, both physical and non-physical, it is expected to achieve an increase in the contribution of the halal industry to the national trade balance in key sectors.
2) Development of the Islamic Finance Industry
The field of Islamic finance is an integral part of the national economy involving a diverse range of institutions that provide financial services based on Islamic principles to businesses and the general public. Islamic finance places special emphasis on the importance of ethics and the empowerment of the real economy to provide the maximum benefit to society. Generally, the Islamic finance sector includes the subsectors of banking, capital markets, and non-bank financial industries. In the last decade, the Islamic financial sector has undergone transformation and adaptation in line with the development of the global financial industry, emphasizing the use of information technology and digitalization processes. Not only that, but at the global level, the Islamic finance industry is also known as a pioneer in supporting projects that pay attention to ethical values, social impact, and environmental sustainability.
These conditions give the Islamic finance sector a comparative advantage due to its compatibility with ongoing global economic and business trends.
Based on OJK data as of March 2020, the market share of Indonesia's Islamic financial sector reached 8.98% (excluding Islamic stock capitalization), with total assets reaching Rp1,497.44 trillion. The Islamic capital market showed the highest market share of 16.33%, followed by Islamic banking with 5.99%, and Islamic IKNB with a market share of 4.34%. The growth of the Islamic financial sector has been significant, with total aggregate assets reaching Rp382.02 trillion in 2012 and almost quadrupling over the past eight years. With a seven-year historical growth rate of between 18.19% and 21.21%, it is estimated that total Islamic financial assets (without Islamic stock capitalization) will reach IDR3,385.58 trillion to IDR3,840.48 trillion by the end of 2024, without considering the impact of Covid-19. Meanwhile, Islamic stock capitalization became dominant in the total assets of the Islamic finance industry, fluctuating between IDR2,400 trillion to IDR3,700 trillion during the
period 2012-2020. With the development of the Islamic economy as a national aspiration, it is expected that the growth of Islamic stock capitalization will be even better in the future.
As a regulator, the government plays a strategic role in setting the direction of the development of the Islamic economic and financial industry for the next five or ten years and has great goodwill to encourage the growth of new economic sources amid the momentum of the growth of the global halal industry. Based on the Indonesia Sharia Economic Development Implementation Plan, there are two main focuses for the development of the Islamic finance industry during the period 2020-2024. First, focus on strengthening the capacity, governance, and infrastructure of the Islamic finance industry. Second, strengthening capital and funding in the Islamic economic and financial industry.
First, Strengthening the capacity, governance, and infrastructure of the Islamic financial industry is intended to respond to criticism and expectations from parties who demand reliable Islamic financial services, at least comparable to conventional financial institutions.
Some of the challenges faced, such as suboptimal governance, limited IT infrastructure, low penetration and economies of scale, as well as the lack of competitiveness of the Islamic finance industry, are the main factors why there are no large-scale Islamic financial institutions. In addition, regulations related to Islamic finance that have not been well integrated and the absence of incentive schemes that create a level-playing field in the banking industry, capital market, and Sharia IKNB, are also some of the main aspects that need attention. In outline, the steps in this development focus will be implemented through the preparation of recommendations to encourage product innovation, deepen the market, and develop the infrastructure of the Islamic financial system.
Second, the focus on developing capital and funding strengthening aims to make the Islamic economic and financial sector an integral part of the development plan listed in RPJMN IV for 2020-2024. This plan aims to strengthen economic resilience to achieve quality growth. Strengthening capital and funding for the halal industry, including corporations and MSMEs, the infrastructure sector, and Islamic finance is expected to spur better, sustainable economic growth, and contribute to improving people's welfare fairly and equitably. Then, these two strategic development focuses in the field of Islamic finance are translated into eight work programs that are prioritized during the 2020-2024 period. This is done to accelerate, expand, and advance the Islamic economic and financial industry in Indonesia.
3) Development of Islamic Social Funds
Poverty is a challenge faced by all countries in the world, and the situation can worsen when natural disasters, economic crises, or
political crises occur. In 2020, the health crisis caused by the COVID- 19 pandemic proved this by increasing the number of poor people to 26.42 million as of March 2020. This figure shows an increase of 1.63 million people compared to the September 2019 period. Some parties even anticipate a worst-case scenario, where the impact of COVID-19 could lead to an increase in the number of poor people to 33.24 million people, equivalent to 12.37% of Indonesia's total population (SMERU Research Institute, 2019).
There is a continuous effort to find the most effective solution to reduce and solve the problem of poverty. Poverty eradication has become one of the aspects to be achieved in the Sustainable Development Goals (SDGs) launched by the United Nations (UN).
The government itself has allocated a special budget to deal with poverty, although various alternatives are needed to make these efforts more effective. One system that has great potential for poverty reduction is the Islamic economic system, especially through the Islamic social fund sector which includes zakat, infaq, sadaqah, waqf, and Islamic microfinance. Some international economists, such as Dr Mohammed Obaidullah and Prof Habib Ahmed, have proven that the Islamic economic and financial system is in line with the values to be achieved in the SDGs agenda (Mohieldin and Aboulmagd, 2015).
One of the responsibilities of KNEKS is to strengthen and develop Islamic Social Funds to overcome various social problems, including poverty. Poverty can be identified through the limited access of low- income and poor communities to Islamic microfinance services, such as zakat, infaq, sadaqah, and waqf (ZISWAF). To play an effective role in poverty alleviation, Islamic social finance needs to be accompanied by an increase in the inclusiveness of Islamic finance to overcome service access constraints. In practice, there are still various obstacles and challenges faced by the Islamic social finance sector in Indonesia, so solid integration and collaboration of the various parties involved is essential in achieving the goal of poverty reduction in Indonesia.
In implementing the National Programme for the Development of Islamic Social Funds, there are three main focuses that KNEKS aims to achieve in the next five years. These focus areas involve realizing the management of Islamic social funds, including zakat, infaq, sadaqah, and waqf, to have a transformative impact. In addition, KNEKS is also committed to realizing sustainable Islamic Microfinance Institutions, to improve the welfare of low-income communities. Increasing Islamic financial inclusion is also a focus, and this is realized through optimizing the pesantren network.
The first focus, realizing transformative ZISWAF fund management, is an effort to improve the quality of zakat, infaq,
sadaqah, and waqf governance in Indonesia. This action is important because the four ZISWAF instruments are considered key elements in the Islamic social finance sector. Islamic history shows that zakat and waqf, in particular, have been the main fiscal instruments that have been successfully used to support the country's economy, especially in alleviating poverty and improving people's welfare.
Although national statistics show an increase in the realization of ZISWAF fund collection every year, however, when compared to its potential, the realization of zakat and waqf, both in terms of collection and utilization, is still relatively low.
The next focus is to realize sustainable Islamic Microfinance Institutions, which is a big step towards making the Islamic financial sector truly make a significant contribution to improving the quality of life of the community. The presence of strong and sustainable Islamic Microfinance Institutions is expected to increase the role of the Islamic financial sector in providing inclusive financial services, especially for the poor and low-income communities. In addition, this is also part of the effort to realize the main objectives of the Islamic financial sector, which are to empower, uphold justice, and improve the welfare of humanity.
The third focus is to create an extensive and resilient network of Islamic financial services based on Islamic boarding schools that can reach the community evenly, especially in the lower middle-class economy and in various remote areas. Through this network, it is expected that the general public can easily, economically, and comfortably access various Islamic financial services that are beneficial for improving welfare. Thousands of Islamic boarding schools spread across Indonesia will have a significant positive impact on increasing Islamic financial inclusion in the country.
4) Development and Expansion of Sharia Business Activities
The involvement of small and medium enterprises (SMEs) has a major impact on Indonesia's economic growth, which is reflected through the creation of jobs and increased production as an integral part of the national economic resilience network. In 2019, the contribution of SMEs to the growth of Indonesia's Gross Domestic Product (GDP) increased by 5.02%. In further detail, SMEs contribute 60% to national GDP and create 97% of jobs. However, the contribution of SMEs to Indonesian exports is still limited to 14.37% (Kemenkop SMEs, 2018). This shows that increasing the scale of SME businesses has a significant positive impact on Indonesia's economic growth, and strategic steps are needed to develop and expand SME business activities in the future. Therefore, other strategic plans are also needed to increase the scale of medium and large businesses.
In the new business era, business strategies are needed that can support the economic resilience of businesses in a sustainable
manner. The impact of the COVID-19 pandemic was felt by the majority of micro, small, and medium businesses in Indonesia, reaching 72.6%. These entrepreneurs experienced a significant decline in sales, and some were even forced to close their businesses. The main obstacles faced by most business actors involve access to capital and obtaining raw materials. According to the Head of the MSME Development and Consumer Protection Department of Bank Indonesia, the agricultural MSME sector was hit by 41.5%, 95.4% of export-oriented small businesses felt the impact, and MSMEs in the craft sector and supporting the tourism industry reached 89.9%. The average decline in MSME turnover reached more than 50%. Bank Indonesia previously noted that in 2018, real gross domestic product produced by the MSME sector reached IDR 694 trillion or grew by 7.3% compared to the previous year. Currently, a total of 64.2 million MSME business units are capable of absorbing 116.98 million workers. According to the Coordinating Ministry for the Economy, around 301,115 Micro, Small, and Medium Enterprises (MSMEs) have switched to digital platforms during the coronavirus pandemic to maintain business continuity.
The government is making efforts to save Micro, Small, and Medium Enterprises (MSMEs) through the National Economic Recovery (PEN) program. One of the government's main focuses is to provide support to the MSME sector with a financing allocation of IDR 123.4 trillion. Along with this, the Coordinating Ministry for the Economy stated that there was a significant increase in the use of digital technology, reaching around 15-20% during the pandemic.
This increase includes the use of e-learning, e-commerce, increasing digital literacy, demand for delivery, and the need for medical equipment. Several business sectors experienced a marked increase, such as e-grocery which experienced a 400% surge in business in line with the large-scale social restriction (PSBB) policy which encouraged people to stay at home. Beauty product transactions increased by 80%, while fashion products increased by 40%.
Therefore, the use of digital platforms provides great growth opportunities for business continuity, including MSMEs.
Seeing these opportunities, the government has a target to increase the value of the digital economy to US$ 35 billion in 2020 and US$
101 billion in 2025. By 2025, it is hoped that marketplaces will use a balanced business model between C2C and B2C. Thus, it is hoped that more and more business people will switch to online business when new normal conditions occur. In the Sharia business and entrepreneurship sector, the government needs to design a mature plan to foster, incubate, accelerate, and digitize Sharia businesses so
that they can survive and continue to develop amid the COVID-19 pandemic era.
With the abundance of Halal Industrial MSMEs in Indonesia, power will increase Competition is the main focus in developing sharia business and enterprises in this country. Halal Industry MSMEs that have adequate capacity and quality according to international standards are expected to be able to gain recognition in the context of the global halal value chain. The development of Halal Industrial MSMEs includes support through partnerships, regulations that support ease of doing business, and the provision of financing facilities for production and exports.
To increase the contribution of sharia businesses in the Indonesian economy and make Indonesia the center of the global halal industry, the main focus is the development and expansion of business activities sharia for the 2020-2024 period are as follows:
a. Increasing the competitiveness of Halal Industry MSMEs and their integration in the global halal industry supply chain.
b. Digitalization of the Sharia economy.
c. Formation of new business actors and strengthening sharia businesses
Apart from that, in the current era where technology has become an inseparable part of everyday life, the development of the digital economy is a crucial aspect in advancing Sharia business and enterprise in Indonesia. The use of technology to digitize Sharia business and business data in Indonesia helps the Sharia Business sectors to compete competitively on the Indonesian economic map.
Through the digitalization of the Sharia economy, it is hoped that it can stimulate business growth and increase the economic resilience of the people.
5) Sharia Economic Ecosystem infrastructure development
As an important condition for realizing Indonesia as the center of the world's Sharia economy and halal industry, the development of good, integrative, and efficient Sharia ecosystem supporting infrastructure is very essential. This infrastructure is a system that can connect various aspects of the Sharia economy and halal industry, especially in integrating all core and supporting components from upstream to downstream. This supporting infrastructure development program involves four main pillars, namely Sharia Economic Literacy and Inclusion Development, Sharia Economic Regulations, Sharia Economic Human Resources (HR), and Sharia Economic Research and Innovation (R&D).
The level of economic literacy and Sharia finance in Indonesia is low due to limited literacy activities carried out by the government and the private sector, so it does not cover various levels of society.
OJK Sharia financial literacy index data (2019) shows insignificant growth in the last 3 years, only 0.8%. According to the BI Sharia
Economic and Financial Literacy Index (2020), this figure is still low, namely 16.3% in 2019. The Sharia economic and financial literacy program implemented by the government and the private sector does not yet have a strong synergy. Unlike other countries, Indonesia does not yet have a comprehensive literacy program with a more focused focus at the national and international levels. Limited access to information and content packaging that is too formal is also a factor in the public's low interest in understanding and studying Sharia economics and finance. This obstacle is not supported by an adequate supporting ecosystem, as well as services and products that can attract public interest in using Sharia economic and financial services and services.
The challenges faced in the development of sharia economics and finance involve the complexity of the sector's legal issues, which include; disharmony and overlapping regulations, as well as legal gaps and voids. To accelerate the development of Sharia economics and finance, a strong, harmonious, comprehensive, and sustainable legal ecosystem is needed. It is hoped that a conducive legal ecosystem can be dynamic in encouraging the acceleration of Sharia economic and financial development, with action plans that can be implemented across institutions through legal regulation harmonization forums. This forum can be realized in the form of a working group that discusses and formulates legislative regulatory initiatives that are comprehensive, efficient, sustainable, dynamic, and responsive to current developments. In this way, it is hoped that the harmonization process can accelerate, expand, and enlarge the development of sharia economics and finance in Indonesia.
Optimizing the momentum for strengthening regulations, which is initiated by the government and the DPR as executive and legislative, needs to be carried out while being supported by in-depth and comprehensive legal studies. Some of this momentum includes the Omnibus Law program for the Development and Strengthening of the Financial Services Sector, which has become a government priority and is included in the 2020-2024 Prolegnas; as well as the Sharia Economic Law Draft (RUU) program, which has also been included in the 2020-2024 Prolegnas. To utilize the Omnibus Law for the Development and Strengthening of the Financial Services Sector, strategies related to Sharia Financial Services can be included. Meanwhile, for the Sharia Economic Bill program, this momentum can be taken by continuing the Academic Draft of the Sharia Economic Bill which was prepared in 2019, through advocacy, discussion, and coordination with a team of experts, market players, policymakers, and the general public. The regulatory harmonization process, recommendations of the Sharia
Financial Services Sector Omnibus, and the Sharia Economic Bill are strengthened by in-depth and comprehensive legal studies.
The main targets in developing Sharia ecosystem infrastructure to increase Sharia economic and financial capacity are as follows.
a. Sharia economic brand
The main aim in developing a Sharia economic brand is to integrate all initiatives, activities, and campaigns carried out by the government and the private sector so that they can be carried out in synergy, increase public awareness, and encourage the use of Sharia economic and financial services in a holistic manner.
b. Increasing Sharia economic and financial literacy
The main aim of implementing the Sharia economic and financial literacy program is to increase literacy participation at all levels of society, including the lowest levels. This program also aims to provide information that is easily accessible and understood by the public. Ultimately, the goal of sharia economic and financial literacy is to increase the sharia economic and financial literacy index.
c. Harmonization and strengthening of Sharia economic and financial regulations
The main objective of the Harmonization and Strengthening of Sharia Economic Regulations is to build a comprehensive, strong, and harmonious legal ecosystem to support the development of Sharia economics and finance in Indonesia. It is hoped that the existence of this conducive and dynamic legal ecosystem will encourage and accelerate the development of the sharia economic and financial sector in Indonesia.
d. Superior human resources in the Sharia economic and financial sector
The main objective of developing Human Resources (HR) in the sharia economic and financial sector is to create individuals who are qualified and have global competitiveness.
This program also aims to increase the Human Development Index (HDI), and Human Resources Index (HCI), as well as increasing the absorption of Indonesian workers who have competence in the sharia economic and financial sectors, both at the national and international levels.
e. Halal science research and Sharia economic innovation
The main objective of the halal science research and halal product innovation program is to ensure that research centers in Indonesia can produce halal research findings, including the development of non-halal substitute materials, efficient halal testing technology (rapid halal assessment tools), and other halal product innovations. The substitute materials used must
be halal (non-critical) and can replace non-halal critical materials which are commonly used in all production chains in Indonesia. These substitute materials will be obtained domestically (locally) so that they can help reduce the trade balance deficit.
The main objective of Sharia economic research is to increase the quality and amount of academic and applied research in the field of Sharia economics, which incorporates the main principles of Sharia and provides a direct impact on national development and the development of the Sharia economic sector. This research is directed at producing strategic policies, business models, and innovative products with added value and significant impact. The sectors include Sharia economics, Sharia finance, Sharia social finance, halal industry, and management, as well as Sharia businesses.
III.A.2. Implementation Development of policy programs 1) Development of Halal Product Industry
By referring to the main priority of developing the halal product industry to strengthen the role of the halal industry as a pillar of the national economy and positioning Indonesia as the center of the global halal industry, a national program for the development of the halal product industry was designed as follows.
a. Development of industrial zones and halal industrial areas (KIH)
A total of 103 industrial areas have been operating in Indonesia, with the largest distribution being on Java Island (58 areas), followed by Sumatra Island (33 areas), Kalimantan Island (8 areas), and Sulawesi (4 regions). Of this number, to date, seven industrial area managers have shown interest in developing halal zones in their areas, including Modern Cikande (Banten), Safe N Lock (Sidoarjo, East Java), Bintan Inti & Batamindo (Riau Islands), JIEP (Pulo Gadung, DKI Jakarta), Surya Borneo Industri (West Kalimantan), and KIMA (South Sulawesi). It is possible that there is interest from other industrial area managers to establish Halal industrial areas in their respective areas. Nevertheless, achieving the target of at least 5 Halal Industrial Zones operating in Indonesia by 2024 is a very good achievement to pursue.
b. Halal certification of export products and halal traceability Currently, halal tracking is still done manually without taking full advantage of technology, causing significant use of time and energy. The halal tracking process is the core of halal certification, where each product to be certified must be identified as halal for its ingredients one by one. The
development of a halal tracking system can increase the credibility of halal products from Indonesia, giving domestic and foreign consumers confidence in Indonesian products. A digitalized halal tracking system will help consumers check the halalness of products more easily, eliminating doubts in their minds. In addition, producers, business actors, and halal product certification bodies will gain significant benefits from an automated halal tracking system, because ingredient data is reliable, ensuring tracking of supplies and raw materials takes place efficiently and effectively.
c. Development of Halal Hub Ports (sea and air)
Implementation of the establishment of Halal Hub Ports in an integrated manner with the halal supply chain requires special attention to encourage all stakeholders to realize the results of this program. One of the obstacles in realizing a Halal Hub Port is the lack of positive response from business actors, including logistics, because market needs and demand are still relatively small. To overcome this, it is hoped that regulations covering the establishment of Halal Hub Ports, including governance, incentives, and other supporting infrastructure, can be issued by the relevant Ministries/Institutions. This step is expected to encourage other ports to build Halal Hub Ports as an integral part of the Halal supply chain. The integration of Halal Hub Port with other supporting facilities is expected to increase the efficiency and effectiveness of logistics processes, with a positive impact on the overall economic scale.
d. Establishment of a national LPH (Halal Inspection Agency), Development of Muslim-friendly Tourism, Development of the Sharia health industry, Modernization of Halal slaughterhouses (RPH), and a program to develop MSE preparation towards halal certification
2) Development of the Islamic Finance Industry
Based on the emphasis on the main development of the Sharia financial industry and the level of importance of various interventions, there are eight national programs for the development of the Sharia financial industry. These eight programs are strategic steps to implement initiatives from the two main focuses previously explained.
a. National Halal Fund
National Halal Fund (NHF) is a financing and assistance initiative for micro, small, and medium enterprises (MSMEs) and large industries, to support the development of the halal value chain in Indonesia. Through NHF, it is hoped that halal industry players can improve their quality, capacity, productivity, and export capabilities, as well as produce halal products as an
alternative to imports. The main focus of this program is to determine the organizer of the National Halal Fund (NHF) who is responsible for providing financing, consultation and assistance to halal industry players while identifying various funding sources by applicable regulations. In the initial stage, the NHF organizers will be drawn from existing institutions and have a mandate that is by the NHF's functions. However, regular evaluations (3-5 years) are needed regarding the scope, organizational structure, and funding of NHF to adapt to the rapid development of the halal industry.
b. Employment social security sharia services
Employment Social Security (Jamsostek) is a form of protection for workers that involves providing monetary compensation as partial compensation for lost or reduced income, as well as services related to events or conditions experienced by workers such as work accidents, illness, pregnancy, childbirth, old age, and death (Article 1 number 1 of Law (UU) No. 3 of 1992). In the implementation of BP Jamsostek, many principles are in line with Sharia principles, including the principle of ta'awun or 'cooperation'. Fund management has also taken this principle into account by separating BP Jamsostek funds from membership funds, which have been separated based on each program.
c. Islamic investment bank
Sharia Investment Bank or Islamic Investment Bank (IIB) is needed as a step to strengthen the Sharia financial ecosystem which is currently not operating optimally. This is mainly related to the need for large-scale and long-term financing support by Sharia principles. This condition is reflected in several indicators.
First, there is limited financial and institutional capacity of existing Sharia financial institutions to prepare and fund large- scale corporate projects and infrastructure financing in Indonesia. Second, the share of the Sharia capital market only reached 16.33% of the total capital market in Q1 2020, even though there is quite a large potential for Sharia-based funds.
Third, the contribution of corporate Sukuk to the state Sukuk market only reaches 18%, and most of it is controlled by private companies. Meanwhile, corporate Sukuk from state-owned companies is still limited. These last two indicators are caused by the absence of Sharia financial institutions which specifically function as intermediaries between investors and corporations whose business activities are by Sharia principles, including state-owned companies.
3) Development of Islamic Social Funds
Based on the emphasis on the main aspects of developing sharia social funds to address poverty problems, there are a series of main work programs as follows:
a. transformation of the management of national infaq, zakat, and alms
The transformation program for the management of zakat, infaq, and national alms is designed to support accelerated growth in the management of ZIS funds to overcome the problem of poverty and improve community welfare. This program also aims to gradually increase ZIS fund collection, expand the scope of the formal ZIS ecosystem throughout Indonesia, and ensure the usefulness and reliability of national ZIS management data.
Through the implementation of the national zakat management transformation program which involves all stakeholders, it is hoped that it can provide significant benefits to the Indonesian economy, especially in efforts to reduce poverty and improve the welfare of Indonesian society as a whole.
b. Sharia and sustainable microfinance institutions
To achieve sustainable Sharia Microfinance (IKMS), KNEKS designs work programs that involve all related parties, both members and non-members of KNEKS. Programs originating from efforts to achieve sustainable IKMS include Standardization and Data Integration of Sharia Microfinance Institutions, Strengthening Social Functions in Sharia Microfinance Institutions, Implementation of BMT 4.0, Implementation of Sharia Microfinance Supervision System Policy, Implementation of the IKMS Deposit Guarantee System, as well as integration of IKMS, mosques and Islamic boarding schools. With a work program that focuses on the sustainability of IKMS and involves all IKMS stakeholders, it is hoped that sustainable growth and development in IKMS will be achieved, which in turn will make a positive contribution to the Indonesian economy and improve the welfare of its people.
d. Expanding and strengthening the Islamic financial service network based on Islamic boarding schools
This program aims to increase Islamic financial inclusion in Indonesia by expanding and strengthening the Islamic financial service network involving Islamic boarding schools. The realization of this goal will be carried out through several derivative programs. The main derivative program involves increasing the presence of Sharia Financial Services Units (ULKS) in Islamic boarding schools, both in the form of Islamic financial institutions owned by Islamic boarding schools such as Baitul Maal wat Tamwil (BMT) and Micro Waqf Bank (BWM), as well as service units in the form of partnerships or agencies with formal Sharia Financial Institutions (LKS). Through this ULKS,
Islamic boarding schools will play an active role in providing various sharia financial services to the community in and around the Islamic boarding school.
4) Development and Expansion of Sharia Business Activities
The focus of the national Sharia business development and expansion program is on developing a micro, small, and medium entrepreneurial business ecosystem oriented towards halal products in Indonesia. The programs that have been prepared have the aim of increasing awareness of halal products and encouraging the implementation of Sharia business through the use of digital technology and Sharia economic data, which involves the following steps:
a) National halal MSEs business development and scale-up program Micro, Small, and Medium Enterprises (MSMEs) play a significant role in national economic resilience. This statement is reinforced by data from the Central Statistics Agency (BPS) which notes that in 2018, the contribution of MSMEs to the Gross Domestic Product (GDP) reached 61.07%, with micro businesses contributing 37.77%. In the same year, MSMEs also played a role in labor absorption with a percentage reaching 97%. However, BPS data in 2016 shows that MSMEs that have halal certificates are less than 1% of the total MSMEs in Indonesia. In the same period, only 6.3% of the total national MSMEs were successfully involved in the trade chain in the Southeast Asia region. Through the development program and increasing the business scale of National Halal MSMEs, it is hoped that we can maintain consistent business continuity and the products produced by MSMEs. Apart from that, this program is expected to be able to improve product quality and expand the business scale of MSMEs.
b) Sharia business IPOs per year and issuance of Sharia business sukuk (corporate sukuk)
Initiatives such as the Initial Public Offering (IPO) Program for Sharia Businesses and Sukuk Offerings for Sharia Businesses are carried out to strengthen the Micro, Small, and Medium Enterprises (MSME) sector ) as well as large industries in the Halal Industry sector. This step aims to increase business continuity capacity by strengthening access to financing and funding, providing opportunities for business actors to obtain long-term funds. MSMEs have a crucial role in driving the national economy, as proven by 97% of job creation coming from this sector. This significant contribution helps reduce the national unemployment rate. Despite this, MSMEs in Indonesia still have low involvement in the global value chain, only 6.3% of the total MSMEs are involved in the Southeast Asian trade chain.
The competitiveness of MSMEs in the country also still shows a low level, reflected in their contribution to export value which only reached 14.38% in 2018
c) Incubation of halal product exporters and partnerships with large businesses
In this framework, MSMEs that focus on exports will receive support in the form of coaching and related facilities to improve their business operational capabilities. This support involves aspects of financial management, operations, marketing, and the implementation of technology-based innovation. So that this program can provide optimal results, export-oriented MSMEs will be given access to large business partners and the opportunity to take part in best practice-based coaching programs related to business expansion and exports. The positive impact of this program is increasing the participation of Halal Industry MSMEs in international trade, reflected in increasing their contribution to exports and the national trade balance. It is hoped that this effort will strengthen Indonesia's position as a major player in the halal industry on the international stage.
5) Sharia Economic Ecosystem infrastructure development
Referring to the emphasis on developing supporting infrastructure for the Sharia economic ecosystem to increase Sharia economic and financial capacity, the next national program is Sharia Ecosystem Infrastructure Development.
a. Sharia economics brand
It is hoped that the Sharia Economics brand can shape people's views to provide added value and increase awareness regarding Sharia economics and finance. It is hoped that concepts related to sharia economics will become easier for the public to remember, which in turn will increase their interest in using sharia economic and financial products.
b. Increasing Sharia financial literacy and economics
This program aims to increase the overall literacy index in Indonesia. With this increase in literacy levels, it is hoped that there will be an increase in the number of users of sharia economic and financial products and services, which in turn can strengthen national economic resilience. Efforts to increase literacy can involve, be implemented, or managed by all Ministries/Institutions that are part of the National Committee for Sharia Economics and Finance (KNEKS), as well as involving all relevant stakeholders in the government, private sector, ulama, experts and academics in the field Islamic economics and finance.
c. Harmonization and strengthening of regulations
Strengthening and harmonization of regulations is also carried out through a recommendation preparation program that takes
advantage of the momentum for strengthening regulations at the national level. These steps include preparing recommendations for the Sharia financial sector as part of the Omnibus Strengthening and Development of the Financial Sector;
submission of academic papers, discussions, meetings, and coordination with experts, market players, and relevant stakeholders as input contributions for the Sharia Economic Law Draft (RUU). In addition, it involves an in-depth and comprehensive Sharia economic and financial law study program as a basis for strategic recommendations in the field of Sharia economic and financial law.
IV. CONCLUDING REMARKS
The progress of Sharia economics and finance in Indonesia is currently developing rapidly, but has still not reached its maximum potential, so hard and serious efforts are needed from various related parties to make Sharia economics a new driving force in the national economy. It is hoped that this can support efforts to equalize development, improve community welfare, and contribute to overcoming the problem of poverty. The formation of the National Sharia Economic and Financial Committee (KNEKS) is expected to accelerate, expand, and advance the development of Sharia economics and finance to strengthen national economic resilience. The successful implementation of KNEKS' tasks depends on the synergy between all Sharia economic stakeholders, including Ministries and Institutions, in overseeing the KNEKS work plan program described above.
The National Sharia Economic and Financial Committee (KNEKS) seeks to supervise all core and supporting elements in the Sharia ecosystem, with the aim that all parties and stakeholders can work together synergistically in supporting the development of Sharia economics and finance from start to finish. KNEKS' priorities include development programs for the halal industrial sector and sharia business, to make the halal industry the center of the global halal industry and encourage the growth of sharia business, especially in the MSME sector, as one of the pillars of the national economy. For the Sharia financial industry sector in Indonesia, KNEKS targets strengthening the capacity, governance, and infrastructure of the Sharia financial industry, including strengthening capital and funding for the Sharia economic and financial industry.
The important role of the Sharia social finance sector in Indonesia is also emphasized, with a focus on improving community welfare through transformational management of Sharia social funds (zakat, infaq, alms, waqf), sustainable development of Sharia microfinance institutions, and optimizing Islamic boarding school networks to increase inclusion Islamic finance. As a prerequisite for achieving Indonesia's status as the world's
Sharia economic center, especially in the halal industry, business, and Sharia business sectors, KNEKS recognizes that the availability of good, integrated, and efficient Sharia Ecosystem Infrastructure is very important to develop. The focus of developing the Sharia ecosystem includes developing Sharia economic literacy and inclusion, strengthening Sharia economic regulations, creating competent and superior Sharia economic human resources (HR), as well as increasing research and developing Sharia economic innovation.
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William N. Dunn. 1999. Pengantar Analisis Kebijakan Publik. Yogyakarta:
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Journal:
Kusjuniati. Startegi dan peran penting komite nasional ekonomi dan keuangan syariah (KNEKS) dalam mendukung ketahanan ekonomi nasional. Jurnal ilmu pendidikan dan ekonomi. Vol 5, No 1 (2020). Hal 112-123.
Rokim. Analisis kebijakan versi Dunn & implementasinya dalam pendidikan islam. Jurnal Studi Islam. Vol 14, No 2 (2019).
Premis:
Master plan industri halal Indonesia 2023-2029
Rencana Kerja Komite Nasional ekonomi dan Keuangan Syariah 2020- 2024
