Indonesia’s halal economy has continued to expand. According to data published by the Indonesian Ulema Council (MUI), the Halal Value Chain (HVC) sector contributed 27% to GDP in 2025, up from 25.45% in 2024. This progress was accompanied by 10.99 million halal-certified products, a 26.15% increase in halal product exports to USD 52.4 billion, and an Islamic finance market share that reached 30.3% of total national financial assets. The leading sectors of the halal value chain grew by 6.21% throughout 2025. Meanwhile, Islamic banking financing grew by 9.66% year-on-year, with total assets surpassing Rp1,006 trillion in September 2025, while the ratio of total Islamic financial assets to GDP reached 54% in October 2025.

The State of the Global Islamic Economy (SGIE) Report 2024/2025 also placed Indonesia third globally, with a Global Islamic Economy Indicator (GIEI) score of 99.9, an increase of 19.8 points from the previous period. Meanwhile, the SGIE 2025/2026 Report placed Indonesia fourth globally, behind Malaysia, the United Arab Emirates (UAE), and Saudi Arabia, while Bahrain ranked fifth.

This momentum continued in 2026. According to Bank Indonesia, Islamic banking financing reached Rp720 trillion in June 2026, growing by 11.43% year-on-year, while third-party funds reached Rp816 trillion, an increase of 13.13%. The halal supply chain also grew by 5.5% during the same period.

The government has incorporated the Islamic economy into its national development priorities. Under the 2025–2029 National Medium-Term Development Plan (RPJMN), Indonesia targets an increase in the contribution of the Islamic economy to GDP to 56.11% by 2029, from a baseline of 46.72% in 2023 and an interim target of 49.04% in 2025. As outlined in the national development framework, this ambition is linked to strengthening Indonesia’s position as a global Islamic economic hub.

Yet this progress reveals a fundamental paradox. Indonesia has one of the world’s largest Muslim populations and a vast domestic market for halal products, supported by an increasingly developed halal industry. However, these advantages have not yet been fully consolidated into an economic force capable of securing a stronger position in global halal value chains.

From Market to Global Producer

A large domestic market does not automatically make a country a major player in the global halal industry. Indonesia therefore needs a clear roadmap to move beyond its role as a consumer market and become a producer, exporter, investor, and influential participant in the global halal ecosystem.

Achieving this transition requires policy certainty and strong institutions capable of maintaining the credibility and competitiveness of Indonesia’s halal industry. It also requires the government to strengthen bilateral economic cooperation, particularly with countries in the Middle East, to expand Indonesia’s role in the global halal economy.

The opportunity is substantial. Indonesia has production capacity and access to the ASEAN market, while Middle Eastern countries offer investment potential, established trade networks, and access to regional and international markets. Gulf investors could support industrial development and help Indonesian businesses move up the value chain. In return, Indonesia could serve as a production base and a gateway for halal products entering ASEAN.

This relationship should go beyond conventional trade. It could develop into an integrated cross-border network connecting capital, production, technology, distribution, and market access. Such a partnership would allow Indonesia to capture more value from its halal industry while enabling Middle Eastern investors to participate in productive sectors with access to a large and growing regional market.

Danantara Syariah

The central challenge, therefore, is to transform the strength of Indonesia’s halal market into globally competitive production, investment, trade, and financing capabilities. This transformation could be supported by an institutional platform that mobilizes Islamic economic and financial resources and channels them into productive investment.

In July 2026, the National Sharia Council of the Indonesian Ulema Council (DSN-MUI) proposed the establishment of Danantara Syariah to consolidate Indonesia’s Islamic economic and financial potential. According to MUI’s report on the proposal, the idea reflects concerns that the economic potential of the Muslim community remains dispersed across multiple sectors, including Islamic banking, insurance, capital markets, Islamic rural banks (BPRS), Baitul Maal wat Tamwil (BMT), zakat, and waqf.

In September 2026, MUI reported that the proposal had been conveyed directly to Rosan Roeslani, CEO of Danantara and Indonesia’s Minister of Investment and Downstreaming, during the Sharia Economic Society’s High-Level Meeting on 10 September 2026. The proposal remains an idea for institutional development rather than an established entity. Its realization would require further consideration by the government, businesses, financial institutions, Islamic scholars, and the wider public.

Nevertheless, the proposal raises an important strategic question: why might Danantara Syariah be necessary, and how could it help consolidate Indonesia’s halal economic strengths into a globally competitive force?

If established with a clear mandate and strong governance, Danantara Syariah could serve three strategic functions.

First, it could act as an investment partner, connecting global capital and technology with strategic projects in Indonesia. This would require more than attracting financing: investment should strengthen domestic industrial capacity, support technology transfer, and help Indonesian businesses become more competitive.

Second, it could serve as an instrument of economic diplomacy. By linking Indonesian companies and institutions with investors and business networks in the Gulf, the platform could help expand Indonesia’s commercial presence in international markets. This would also give bilateral cooperation a more tangible economic foundation through joint ventures, industrial partnerships, and long-term investment.

Third, it could function as a global value-chain orchestrator. Rather than operating merely as an investor or capital owner, Danantara Syariah could connect state-owned enterprises, private companies, micro, small, and medium-sized enterprises (MSMEs), global investors, technology providers, financing institutions, and international markets within an integrated economic ecosystem.

This approach would be particularly important if Indonesia aims to move beyond exporting individual halal products and toward participating in higher-value stages of production, technology, logistics, and distribution. The ultimate objective should be to ensure that investment generates lasting productive capacity rather than simply increasing the volume of capital entering the country.

The strategic rationale can also be examined through the Eclectic Paradigm, or Ownership, Location, and Internalisation (OLI) framework developed by John Dunning (1988). The framework explains international investment decisions through three types of advantages: ownership advantages, location advantages, and internalisation advantages.

Although Dunning’s OLI paradigm was originally developed to explain the international investment decisions of multinational enterprises, it can be applied as an analytical framework to consider Danantara Syariah’s potential cross-border investment strategy.

Indonesia offers location advantages through its production capacity, domestic market, and access to ASEAN. Gulf countries can contribute capital, investment networks, technology, and access to other international markets. Ownership advantages could emerge from the expertise, resources, brands, and capabilities of participating companies and institutions. Meanwhile, the question of internalisation concerns how partnerships should be structured to protect strategic capabilities, coordinate production, and create lasting value across borders.

The proposed Danantara Syariah could provide an institutional platform for connecting these complementary strengths. However, its effectiveness would depend on a clear investment mandate, professional management, transparent governance, credible risk assessment, and measurable economic outcomes. Sharia compliance should be integrated with commercial discipline rather than treated as a substitute for sound investment decisions.

Ultimately, the opportunity is not simply to establish another Islamic financial institution. It is to build a cross-border halal value chain that connects Indonesian production with Gulf capital, technology, and global markets. If designed effectively, Danantara Syariah could help turn Indonesia’s large halal economy into a stronger instrument of economic diplomacy and international competitiveness.

For Indonesia, the real test will be whether its Islamic economic potential can generate greater domestic value, stronger industrial capabilities, and a more influential position in global trade. Building an economic bridge with the Middle East could be an important step toward achieving that ambition.