Revisiting Indonesia halal tourism policy in light of GATS Free

The vast growth in international service trade in 1970 gave rise to the idea of liberalising the industry. After the first discussions in the General Agreement on Tariff and Trade (GATT) Tokyo Round (1973–1976) and subsequent rounds of negotiations, member states finally concluded the General Agreement on Trade in Services (GATS) in December 1993. The agreement demonstrates that not all negotiations succeed. The failure to establish an agreement in several service sectors, such as maritime transport, shows this tendency (Fuchs, 2008). However, the ongoing GATS negotiations are a crucial and indispensable framework for facilitating the global liberalisation of services and development mechanisms to assist developing countries, thus promoting services and fostering collaboration (Mattoo and Stern, 2008).

As a multilateral trade services treaty established among states, GATS is a legally binding agreement that regulates the rights and obligations of its members in the services sector, including tourism. Tourism is included as one of the services covered in GATS because it contributes to more than one-third of the entire value of international services trade and is one of the most rapidly expanding sectors. The demand for domestic or international tourism is closely linked to income levels and has consequently raised global wealth (Cattaneo et al., 2010).

Currently, halal tourism is a type of tourism that is flourishing. The emergence of this kind of tourism can be attributed to the global growth of the halal industry. Some scholars argue that because of increasing awareness among Muslims of adhering to Islamic values in their consumption patterns of products and services (Battour and Ismail, 2016; Samori et al., 2016). According to the 2023 Global Muslim Travel Index (GMTI) survey, Indonesia emerged as a second destination for halal tourism worldwide. The ranking is derived from evaluating four variables: Access, Communication, Environment and Services (ACES) (Bahardeen et al., 2023). In addition, as a Muslim-majority country, Indonesia is widely regarded among the global Muslim community as a country that is accommodating and welcoming to Muslim travellers. Consequently, it is unsurprising that Indonesia become a primary destination for Muslim travellers.

Regional governments issue regulations on halal tourism in Indonesia through regional regulations. Currently, five regions in Indonesia regulate halal tourism (Nurjaya et al., 2021; Santoso et al., 2022). The legal source of these regulations is commonly based on Law No. 10 of 2009 on Tourism (Tourism Act), Law No. 23 of 2014 on Local Government (Local Government Act), and Law No. 33 of 2014 on Halal Product Assurance (Halal Act), which do not explicitly cover halal tourism. Meanwhile, the substance of halal tourism regulations indirectly refers to Fatwa No.108/DSNMUI/X/2016 of the Indonesian Ulemas Council (MUI) on guidelines for implementing Sharia-based tourism. However, within the Indonesian legal system, MUI Fatwa does not have binding force since its status is a non-governmental organisation without the authority to make law (Effendi et al., 2021; Susilawati, 2019). To date, there is no national-level regulation specifically governing halal tourism.

Indonesia’s halal tourism regulation manifests its sovereignty as an independent state. This is supported by the GATS preamble, which explicitly states the right to regulate. Consequently, it is unlawful for foreign countries or laws to interfere in Indonesia’s domestic affairs (Shaw, 2003). However, the right to regulate is not absolute because it must consider the principle of mutual benefit and guarantee an overall balance of rights and obligations among member states (Hestermeyer, 2008). Although GATS does not explicitly govern halal tourism, it can be perceived as a subcategory of the tourism sector covered within GATS. Therefore, as a GATS member state, Indonesia shall consider this formula when promulgating regulations on halal tourism concerning its liberalising commitment.

The Indonesian legal system confers jurisdiction over matters of international relations to the central government (Yusdiansyah and Dramanda, 2023). Consequently, the central government is responsible for implementing the GATS commitment to liberalise tourism services. In the tourism sector, the local government, either at the provincial or regional level, has the authority to regulate tourism development based on a master plan comprising the industry, destination, marketing and governance. Tourism Act rules that the tourism plan is promulgated by regional regulation. Differences in the authority given by law between central and local governments raise a potential lack of awareness of Indonesia’s commitment to tourism under the GATS. This situation might have two possible outcomes. The legislation on halal tourism is aligned with Indonesia’s obligations under the GATS or, conversely, normative conflicts.

This article will examine the situation. It will start by elaborating on domestic regulation backed by religious reasons under the World Trade Organization (WTO) system, particularly halal policy within the GATS regime. Then, Indonesia’s halal tourism policy will be examined in addition to its commitment to GATS. Finally, the authors will offer solutions to overcome possible outcomes from Indonesia’s halal tourism legislation policy.

The present study uses normative legal research. The normative approach entails examining the ideal state of the law. During the inquiry, normative methodologies in research are used to apply a theoretical framework to address factual challenges encountered by society (Lieblich, 2021). The study uses secondary data in primary legal materials encompassing international treaties and jurisprudence. This study primarily uses GATS, the Tourism Act, the Halal Act and regional regulations on halal tourism as its key data sources. Secondary legal materials refer to publications authored by scholars.

Historically, the interaction between religion and international law was close. Religious values inspired many institutions, doctrines and well-known international law scholars. Former International Court of Justice judge Christopher G. Weeramantry explained this relation by saying that international law is driven by an idealism that may have parallels with religion (Janis and Evans, 2004). However, this interaction became reluctant after the Westphalia Peace Treaty ended the religious war in Europe and became a turning point from traditional to modern international law. The emergence of a modern state with a secular nature, as a foundation of modern international law, leads to a suspicious attitude toward religion (Kennedy, 2004).

The interaction between religion and international law is now contentious and complex (Evans, 2005). There are three different schools of thought which explain this issue. Firstly, separationist groups argued for a complete separation between religion and international law. The reason is that international law aims to be universal, which means it should apply to all belief systems. Secondly, contrary to the previous, the accommodationist group asserts that religion plays a beneficial role in shaping the rules of international law. This theory is supported in the case of humanitarian law, which was heavily impacted by religion in the early stages of its formation. Last is the double-edge group. This group opined that religion has contributed positively to international law but also has had a detrimental impact on the development of international law in other events (Baderin, 2009).

When governments agreed to establish the WTO with its regulations in 1994, there were multiple reasons. Initially, it is imperative to prevent countries from implementing trade-restrictive measures that serve their interests and negatively impact the global economy. Secondly, traders and investors require a certain level of security and predictability. The inability of national governments to handle the difficulties brought on by economic globalisation is a third justification. The last factor is the need for enhanced fairness in global economic interactions (Bossche, 2005).

When all those factors were applied in international trade in the services sector, states agreed to establish GATS as a basic rule. Before the GATS emerged, trade in services was governed by bilateral and regional agreements. It is typically represented in Friendship, Commerce and Navigation (FCN) treaties covering service trade. However, services trade flows multiplied even though no multilateral policy and developing countries stood on the winning side. To uphold this situation, The USA and other developing countries encourage the international community to make an intergovernmental treaty concerning trade in services. The Tokyo Round, which took place from 1973 to 1979, allowed multilateral agreements to include rules about services for the first time (Marchetti and Mavroidis, 2011). The Uruguay Round of trade negotiations, which lasted from 1986 to 1993, successfully addressed the issue of services, and governments eventually agreed to establish GATS (Mattoo et al., 2008).

According to its Preamble, the GATS promotes trade expansion “under conditions of transparency and progressive liberalisation and as a way of boosting the economic growth of all trading partners and the development of developing nations.” As a result, trade expansion is not viewed as a final objective but also as a tool to support growth and development. The GATS guides world trade in services in three main ways:

1. making sure that relevant rules and regulations are more transparent and predictable;

2. giving a standard set of rules for international transactions; and

3. promoting gradual liberalisation through multiple rounds of negotiations.

Within the agreement’s structure, that latter idea is equivalent to facilitating more market access and granting national treatment to foreign services and service suppliers across various sectors (Mattoo et al., 2008).

It is evident from the historical record of the WTO, in particular GATS, that globalisation and economic factors formed their fundamental foundations. Religion did not have a place in the legislative history, even for the public-morals exception stipulated under Article XIV GATS (Sarkar, 2021; World Trade Organization, 2007). However, the panel decision regarding the Gambling Case stated that religious-backed commerce regulations may indicate public moral standards. Hence, this decision might be a basis for the state’s trade policy supported by religious principles (Ruhaeni and Aqimuddin, 2023). In sum, the GATS implicitly allows domestic trade regulations based on religion as long as they align with the GATS objectives and principles.

An Islamic approach to tourism is currently a global trend. According to the Global Muslim Travel Index (GMTI), this phenomenon has expanded since 2009. GMTI data for 2023 shows Indonesia is one of the leading halal tourism markets (Bahardeen et al., 2023) (GMTI, 2022). However, the concept and terminology of this phenomenon remain varied between both countries. The premise remains: tourism must comply with Islamic law or Syariah (Amir Abdullah et al., 2020; Jaelani, 2017; Satriana and Faridah, 2018; Wahyono and Razak, 2020) Battour and Ismail stated that halal tourism is any tourism object or activity that Muslims are permitted to use or engage in according to Islamic beliefs. They claim halal tourism is related to consumer products and services, and the location of the activity is not limited to the Muslim world. Therefore, halal tourism is not synonymous with destinations in an Islamic or Islamic majority population state. Non-Islamic states can also supply products and services as long as they are aligned with Islamic standards (Battour and Ismail, 2016).

In 2017, GMTI presented a novel methodology for evaluating the quality of travel amenities and services within a given tourism location. The framework referred to as ACES framework, an acronym for Access, Communications, Environment, and Services, is used to assess the degree of inclusion and assistance provided to Muslim visitors in a particular place. The Services element accounted for the highest proportion of points, representing 40% of the total. This was followed by the Environment, Communications and Access factors, contributing 30%, 20% and 10%, respectively (GMTI, 2022).

The access criteria assess the level of accessibility of a place concerning the top destinations for Muslim travellers. Multiple elements are considered to evaluate the convenience level in reaching the intended location, such as connectivity, visa requirements and transport infrastructure. The Communication criteria assess the communication capabilities of a place and its attempts to promote the destination to Muslim guests. This set of standards encompasses three primary factors: communication proficiency, destination marketing and stakeholder awareness. The Environmental factor assesses a site’s general environment and ambience, considering its attractiveness and appropriateness for Muslim travellers. This criterion comprises essential variables: public safety, faith restriction, enabling climate, Muslim visitor arrivals and sustainability. Finally, the services category evaluates the breadth and excellence of services provided to Muslim travellers within a specific location. This criterion emphasises multiple crucial elements: availability of prayer places and mosques, halal dining options, Muslim-friendly airports, Muslim-friendly accommodations and heritage experiences and attractions (GMTI, 2022).

Halal tourism is also associated with economic opportunity, branding and marketing. With a Muslim population of 1.9 billion in 2023, halal tourism will provide the states with potential income. Therefore, the states must brand tourist sites as halal destinations to attract Muslim tourists. In this context, halal tourism regulations ensure certainty and adherence to implementation standards (Jaelani, 2017; Satriana and Faridah, 2018).

Indonesia does not have specific regulations concerning halal tourism at the central government level. Currently, the local government issues halal tourism provisions based on the Tourism Act, Local Government Act, and Halal Act. Unfortunately, neither of these acts explicitly regulates halal tourism. However, Article 5 of the Tourism Act implicitly related to halal tourism. Paragraph 1 states that tourism is organised based on upholding religious norms and cultural values as an embodiment of life in a balanced relationship between humans and God, amongst humans, and humans and the environment. The following paragraph states tourism principles that uphold human rights, cultural diversity and local wisdom. Providing benefits for the welfare of the people, justice, equality and proportionality in tourism are also considered and stipulated in paragraph 3 of Article 5 of the Tourism Act.

Tourism Act stipulated that several stakeholders, including the community, businesses, government entities and local authorities, can facilitate the implementation of tourism in Indonesia. Tourism development is facilitated by implementing tourism master plans at various administrative levels, including national, province and district/city levels, as stipulated by regulatory frameworks. The several tiers of government, namely, national, provincial and district, have distinct authorities. However, one similarity is the authority to identify and determine tourism destinations. According to Article 30, letter (e) of the Tourism Act, the jurisdiction to administer and oversee the organisation and administration of tourism is granted to the district government. Thus, the Tourism Act allows provinces and districts to arrange and organise tourism activities. Furthermore, the Local Government Act explicitly specifies the region’s authority to oversee tourism. According to Article 11, paragraph 3, Tourism is considered a discretionary government matter, which implies the region’s capabilities and resources to handle the sector.

Halal Act also does not explicitly regulate halal tourism. The objective of the Halal Act is to ensure that products that enter, circulate and are traded in the Indonesian territory must be halal certified. The definition of product covers not only goods but also services. As part of services, halal tourism may fit within the product scope. The Halal Act also changed the halal certification process from voluntary to mandatory by introducing the Halal Product Guarantee Agency (BPJPH) as an authority to issue halal certificates (Ruhaeni and Aqimuddin, 2022). Through this act, it can be argued that the halal-ness of products, including halal tourism, shall get halal certification.

Indonesian Ulema Council (MUI), through its National Sharia Board (DSN), promulgated fatwa DSN-MUI Number 108/DSNMUI/X/2016 on Guidelines for the Implementation of Tourism Based on Sharia Principles. This fatwa is the most comprehensive regulation governing the implementation of halal tourism in Indonesia, which consists of various provisions on halal tourism, like parties, hotels, tourists, spas, saunas, massage and related travel agencies. However, Fatwa DSN-MUI is a non-binding regulation under the Indonesian legal system. Consequently, there is no legal obligation to incorporate the fatwa as a source of law in regulating halal tourism (Susilawati, 2019).

Currently, halal tourism regulations in Indonesia are implemented at the provincial and district levels by enacted regional rules. In the realm of halal tourist development in Indonesia, it is worth noting that of the Five Provinces, only West Sumatra has successfully incorporated halal tourism into its regional tourism development master plan. Several provinces, including Aceh, West Java, Riau and East Java, have implemented halal tourism at the district level, even though they are not officially mentioned in their tourism master plans. This finding suggests a lack of uniformity in regulating halal tourism (Santoso et al., 2022). From a normative standpoint, the central government must establish guidelines and criteria for halal tourism to foster harmonious policies.

Upon closer examination of the regional halal tourism regulations in four provinces – West Sumatra, Riau Island, West Java and West Nusa Tenggara – it becomes evident that there are similarities (Table 1). Specifically, the process of determining halal tourism destinations or organising such tourism involves various factors, including accommodation, food and beverages, travel agencies and tourist activities. Halal certification is necessary due to these diverse variables. Halal certification requirements in the regional rule on halal tourism can be justified as this regulation is designed to adhere to higher laws. This particular situation will pertain to the Halal Act, which mandates that goods and services circulated and traded in Indonesia must possess halal certification.

This requirement for halal certification under GATS will indirectly limit Indonesia’s market access to foreign service providers. In other words, the regulation of halal tourism can potentially conflict with GATS Article XVI on market access. Nevertheless, the provisions of GATS, in contrast to the provisions on trade in goods, have not established the permissible or prohibited types of trade policies. Instead, they enable member countries to commit to liberalise services.

Several studies have addressed the lack of regulations governing halal tourism and solutions to the need for specific regulations. The Halal Tourism Act needed to respond to the industry’s rapid development by providing clarity and a support system to local governments (Ramadhani, 2021; Santoso et al., 2022; Surwandono et al., 2020). However, previous studies did not specify the reasons for enacting the Halal Tourism Act based on international trade, specifically GATS, as Lee (2002) and Fayed (2002a) demonstrate that GATS significantly impacts tourism in the Republic of Korea and Egypt, respectively. Due to the absence of a specific halal tourism act in Indonesia, GATS should be considered a factor when enacting the halal tourism act. This is due to Indonesia is a member of the GATS. Therefore, Indonesia has international obligations that must be met and that do not contradict domestic laws.

GATS encompasses 12 service sectors and 161 sub-sectors, except those provided in the exercise of government authority and those related to air traffic rights. Tourism and travel-related services, which fall under category 9 of the services sector classification list, have minimal coverage, with only hotels and restaurants, travel agencies and tour operators, tourist guide services and “Others” as subsectors (Joshi and Malhotra, 2014). At first, the tourism sector under the GATS regime was relatively narrow, with over 140 designated activities identified in other areas of commitment. For example, tourism-related services are included in commitments to business, construction, engineering, educational, health-related and social services (Fayed, 2002b; Lee, 2002).

Article 1:2 of the GATS specifies four modalities of trade of services. First is a cross-border service supply transported from one country to another (Mode 1). Individuals travelling to another country to use a service may constitute consumption abroad (Mode 2). Tourist is the best example of this. A commercial presence (Mode 3) occurs when a foreign corporation establishes a subsidiary or branch in another country. Individuals travelling to render a service in another country are considered natural persons (Mode 4). According to the GATS, the modes of supply vary in importance and represent the growing relevance of specific trends, particularly the development of commercial presence (Hoad, 2002).

The tourism sector has the most GATS commitments, with 86.87% of its members making commitments in at least one tourism sub-sector. However, there is a vast difference between the number of commitments made by members by mode of supply and sub-sector. In total, 139 members of the state have made commitments in hotels and restaurants to open up business opportunities, while 116 members have made commitments in “Travel Agencies and Tour Operator Services.” Developing countries have trouble opening up mode two because big corporations in developed countries have merged “Travel Agencies and Tour Operator Services” into one big business. Only 18 members have committed to the “Other” while 70 have done so in the “Tourist Guide Services” category. Lower commitments to “Tourist Guide Services” can be explained by governments encouraging locals to become guides and giving their people jobs (Joshi and Malhotra, 2014).

Articles I:1 through 3 GATS restrict the scope of measures impacting trade in services taken by governments and public authorities at all levels of government, as well as non-governmental organisations exercising delegated functions (e.g. government-mandated regulators or licensing bodies). In turn, this indicates that activities that are entirely commercial and involve no government involvement fall outside the scope of the GATS. Measures that affect trade in services are a broader idea. Article XXVII(a) said that a measure could take almost any form, such as a law, rule, procedure, decision or administrative action. Furthermore, affecting trade suggests that it can be used in various situations. Governments will broadly view the GATS when deciding whether domestic policies are compatible measures or not (Mattoo et al., 2008).

Article XX:1 of the GATS requires all members to submit a schedule of commitments. The schedule specifies a member’s access and other sector-specific commitments. A so-called “hybrid method” schedules obligations under GATS – members of commitment in the sectors mentioned on a list schedule. Article XX:1 mandates that all members list their commitments in a timetable but does not specify any particular industry emphasis (Mattoo et al., 2008).

GATS stipulates legal obligations for members that are typical of trade agreements. They are Market Access (Article XVI), Most-Favoured Nation Treatment/MFN (Article II), National Treatment (Article XVII), General Exceptions (Article XIV) and Transparency. The Market Access clause stipulates that a member shall not award services and service suppliers a treatment less favourable than that specified in their schedule of commitments. It includes discrimination against foreign service providers and implementing quotas or restrictions. MFN treatment requires all members to grant the most favourable treatment to any trading partners promptly and without conditions.

Moreover, it prevents members from justifying its discriminatory trade policies, for example, based on human rights, labour rights and environmental performance concerns. Similarly, national treatment means that foreigners and citizens shall be treated the same or non-discriminately (Lee, 2002). GATS provides rules on General Exceptions as stipulated in GATT. General exceptions can be made, for example, to protect public morals, human, animal or plant life or health, as long as the measures can be justified, are seen as necessary, and are not applied arbitrarily or endanger trade liberalisation. Finally, this policy should be in line with the transparency principle. It means that member countries must publish and send notice procedures shortly. Members shall report to the Council for the Trade Services about new laws, rules or administrative procedures (Fayed, 2002b).

According to Article XX:1 GATS, each country must submit a schedule of specific commitments. This article refers to the state’s promise to offer market access and national treatment for the service activity at the terms and conditions indicated in the schedule. When a government commits, it binds the defined degree of market access and national treatment. It agrees not to implement new policies restricting market or service operation entry. Specific commitments have the same effect as tariff binding in that they assure economic operators in other countries will not change the conditions of entry and operation in the market to their detriment.

As a GATS member country, Indonesia has submitted a schedule of specific commitments. In horizontal commitment, Indonesia’s set limitation on market access for cross-border supply and consumption will be determined explicitly in each sector and sub-sector. Unless otherwise specified, international service providers are permitted to have a commercial presence in the form of a joint venture/representative office. A joint venture is a legal entity organised under Indonesian law and domiciled in Indonesia in cooperation between foreign and Indonesian (national) capital. A joint venture enterprise should be a Limited Liability Enterprise (Perseroan Terbatas/PT) and a foreign capital share of not more than 49% (WTO SC/43, 1994).

National treatment is restricted to four modes of supply. Each sector or sub-sector specifies the first and second modes of supply. If the income is derived from interest, royalties, dividends or fees from services performed in Indonesia, the commercial presence will be subject to a 20% income tax. Foreigners (natural and juridical person) are not permitted to possess land. On the other hand, a joint venture enterprise may retain the rights to land usage (Hak Guna Usaha) and building rights (Hak Guna Bangunan) and may rent or lease land and property. Any legal or natural person is allowed and must meet professional qualification standards.

Under the tourism sector and in the sub-sector of hotels, Indonesia does not have limitations for cross-border supply and consumption abroad on market access limitations unless stipulated in horizontal commitment. Hotels in the eastern part of Indonesia, Kalimantan, Bengkulu, Jambi and Sulawesi, can be owned 100% by foreign investors. However, establishing Starred Hotel, which provides accommodation, food, beverage and other services, should align with public morals, religion, security and national order. Indonesia declared it unbound for natural persons’ presence unless it is for top management and highly skilled professionals. Regarding national treatment limitations, Indonesia does not have restrictions for cross-border supply and consumption abroad. Only 3-,4- and 5-starred hotels are permitted, and foreign service suppliers should be for high paid-up capital in commercial presence mode of supply. The presence of natural persons should be aligned with horizontal commitment (SC/43, 1994, p. WTO).

Travel agents and tour operators have unlimited market access for cross-border supply and consumption abroad. However, the commercial presence of travel agents and tour operators is limited to 30 providers. Indonesia did not allow for a natural person’s presence unless for a technical advisor. Regarding national treatment limitations, cross-border supply and consumption abroad have no limitations. Tour operators’ commercial presence is limited to Jakarta and Bali travel agents. Regarding natural person presence, it should align with horizontal commitment.

Indonesia gave no limitation (none) for cross-border supply and consumption abroad in market access restriction under the tourist resorts sub-sector. In the eastern part of Indonesia, Kalimantan, Bengkulu, Jambi and Sulawesi, commercial presence allowed for 100% of capital shares owned by foreign investors. Only a resort manager is permitted by a foreign natural person. The first and second supply modes under national treatment limitation, Indonesia, are given no restrictions. The presence of commercial and natural persons is similar to that of the hotel sub-sector (WTO SC/43, 1994).

Indonesia has implemented halal tourism, a policy based on Islamic law, to meet the demands of Muslim travellers. As previously stated, GATS does not directly govern service trade based on religion. Nevertheless, GATS ensures that each member state has the right to regulate, including the establishment of halal tourism regulations, as long as these regulations do not contradict the objectives of GATS and the liberalisation commitments made by member states.

The GATS solely governs and oversees the liberalisation commitments established by each member state in the tourist sector. Therefore, GATS does not include any explicit regulations or standards pertaining to halal tourism. In an institutional context, global halal tourism adheres to the criteria established by the Organization of Islamic Conference/OIC (Kharrazi, 2022). Nevertheless, these standards lack the legally binding nature of member-state obligations under the framework of the GATS.

Several studies have been conducted on the impact of GATS on tourism (Fayed, 2002b; Hoad, 2003; Lee, 2002). GATS member countries’ commitment to liberalising the tourism sector has positively influenced global tourism development. Conversely, it also generates potential adverse effects as trade barriers. Likely, the inclusion of halal tourism in trade in services within the GATS regime tends to be perceived as a trade barrier similar to halal certification for commodities in the GATT framework.

Halal tourism in Indonesia is regulated by local regulations. Referring to those regulations, particularly in Chapeau, it can be seen that the Tourism Act, Local Government Act and Halal Act were used as the primary legal basis. Meanwhile, the normative substance refers to the DSN-MUI fatwa Number 108/DSNMUI/X/2016, which is not legally binding within the Indonesian legal system. As explained earlier, no norms explicitly regulating halal tourism existed in either Act. In sum, regulatory policy regarding halal tourism in Indonesia is decentralised, where the province and district have the authority to enact regulations.

This policy model indicates that Indonesia’s international commitments under the GATS might be inconsistent with the norms established in the halal tourism legislation. This possibility results from the fact that, although there is a principle in the Indonesian legal system that lower laws must not conflict with higher rules, regulations enacted at the provincial and district levels do not explicitly correspond to the norms in international law. In other words, province and district rules should not contradict national law – in this case, Indonesia’s GATS commitment – because Indonesia has ratified GATS. While GATS does not explicitly govern halal tourism, it can be construed as encompassing the tourism sector governed by GATS. In this instance, the regulation of halal tourism needs to align with Indonesia’s commitments within the GATS tourism sector. Indonesia has outlined its obligations in the tourism sector with an explicit schedule that has been submitted to the WTO.

Indonesia’s service commitments under the GATS specify how services are provided, considering restrictions on market access and national treatment. Each sector and subsector will further determine the commitments related to cross-border supply and consumption abroad. Commercial presence is required through a joint venture formula with a company form requirement of Limited Liability Enterprise, and foreign capital ownership is limited to a maximum of 49%. Income Tax for foreigners will be charged at 20% on income earned in Indonesia. Natural presence is required to have professional certification. For the Tourism sector, Indonesia’s commitment is only given to three sub-sectors: hotels, travel agents and tour guides, and tourist resorts.

Foreign investors are permitted to have full ownership of hotels in some regions of Indonesia. Indonesia’s horizontal commitment restricts foreign ownership to a maximum of 49%. In contrast, this clause differs from general commitment. Only those with a professional certificate in tourism or a position in upper hotel management are permitted to enter Indonesia. Only three, four and five-star hotels can have foreign presence due to national treatment limits in the hotel subsector.

In regional regulation on halal tourism, hotel is one of the regulated variables. It is found that Sharia accommodations are required to adhere to Islamic law’s criteria. Possessing a halal certificate will determine the legality of the halal hotel. Consequently, it will refer to the Halal Act while determining halal certification. Within the framework of the WTO, the certificate of halal products has the potential to create issues with the Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) regime (Johan and Schebesta, 2022). Therefore, there remains the potential for an overlap between Indonesia’s GATS commitment and the certification of halal standards for Syaria hotels.

The halal tourism regulations do not provide comprehensive guidance on foreign ownership of Sharia hotels or foreign staff. In that case, Indonesia’s GATS commitment’s liberalisation will take effect. In eastern Indonesia, halal tourism destinations allow for full foreign ownership of hotels in the region, specifically for three-, four- and five-star hotel categories. This commitment will inevitably face competition from locally managed hotels. Because multinational hotel chains have more experience and resources, local hotel owners may suffer from competition. Foreign workers in the tourism sector are either selected for high-level management positions or possess international certification. The lack of reciprocal recognition between Indonesia and the certifying authority raises concerns about the validity of this commitment, as Indonesian authorities may not acknowledge it. This provision also applies to resorts established in Indonesia and included in Indonesia’s halal tourist destination area.

Indonesia’s commitment is only directed towards business actors operating in the Jakarta and Bali regions, specifically for travel agencies and tour operators. Indonesia has designated Jakarta as the sole inclusion among its ten halal tourist attractions. Therefore, this guarantee applies to agents and tour travelers in Jakarta. A similar issue will arise as Sharia agents and tour operators must also apply for certification to operate any halal tourist business. As previously stated, the implementation of halal certification may potentially conflict with Indonesia’s obligations under GATS.

The aforementioned explanation suggests that there is a potential conflict between the provisions of GATS and the halal tourism regulation in Indonesia. This possibility emerges because halal certification is necessary for the development of halal tourism. This requirement for halal certification can be interpreted as an effort to restrict foreign service providers’ access to the Indonesian market. Article XIV (a) GATS may serve as a justification in the event of a dispute against Indonesia concerning its halal tourism policy. Indonesia can argue that the requirement for halal certification in the context of halal tourism serves the purpose of safeguarding public morality. In WTO case law, religious reasons may be included in the definition of upholding public morals. The requirement for halal certification for products and services in Indonesia is aimed at ensuring compliance with the religious beliefs of the majority Muslim population in the country.

Halal tourism is regulated explicitly by Indonesian laws through regional regulations. The critical substance of the regulation is the mandatory halal certification for the implementation of halal tourism, which covers hotels, travel agents, tour operators and tourist resorts. This obligation may be incompatible with Indonesia’s stated intent to liberalise the tourism sector under the GATS. In the event that Indonesia is contested in the WTO dispute settlement forum for its halal tourism policy, it may invoke the justification that the policy is implemented to safeguard public morality, as stipulated in Article XIV (a) GATS. Therefore, it is crucial to enact legislation at the national level that is explicitly intended to regulate the sector of halal tourism. Indonesia’s international obligations under the GATS in the tourism sector must be considered while creating these national regulations. It is imperative to ensure that Indonesia’s pursuit of halal tourist regulation aligns with its international obligations in the tourism sector as outlined by GATS to hinder disputes by other members.

Authors would like to thank to The Research and Community Service Institute (LPPM) UNISBA for support this research.