A key problem in developing countries is the lack of reliable provision of high-quality goods, especially agricultural and food products. Effective quality control is especially challenging in developing countries, where the supply chains tend to be long and dominated by fragmented small-scale players. Given that quality can be altered at each point along the supply chain as the goods exchange hands, quality assurance is needed at each stage in order to ensure the final output quality. Therefore, the incentive of an upstream or downstream producer to provide quality depends on the actions of the other players along the supply chain. In the context of Indonesia’s Halal certification mandate, this study aims to examine the impact of a large-scale government-led mandatory quality certification program on quality provision along the supply chain.
The proposed study will proceed in two steps. In Step 1, the researchers will partner with the government agency authorised to implement halal certification (i.e. BPJPH) to conduct a representative survey of 50 slaughterhouses as well as their downstream trading partners. The survey will allow to characterise the structure of the food supply chain and document how quality incentives are distributed along the chain. Importantly, it will shed light on the potential benefits and key barriers of adopting halal certification for various players along the chain. In Step 2, the researchers will test and scale up an intervention to overcome barriers to adoption based on the findings of the first step, and will conduct a rigorous impact evaluation of halal certification on quality provision and firm performance. To examine the spillovers along the supply chain, they will randomise the intervention at the supply chain level and treat firms at different points across different supply chains. They will also conduct follow-up surveys to examine the impact on the formation of new trade linkages and entry into new (export) markets as a result of obtaining the official certification.
Promoting Halal certification is a policy priority in Indonesia. This project will shed light on which interventions may improve a firm’s adoption of halal certification and its performance outcomes. If successful, BPJPH could scale up the intervention to other industries. Findings about potential spillovers and complementarity along the supply chain will also directly inform the effective targeting of support policies among firms to meet the national target.
