Breakingviews – Indonesia ruins the TikTok party in Southeast Asia

SINGAPORE, Sept 28 (Reuters Breakingviews) – June must now feel like an alternate reality for TikTok CEO Shou Zi Chew. Dressed in a traditional batik shirt, he was in Jakarta promising to invest billions of dollars in Indonesia, apparently to the delight of government officials, industry executives and consumers. However, on Wednesday, President Joko Widodo’s administration banned e-commerce transactions on social media platforms. ByteDance’s short video app business, which has 125 million monthly active users in the country, appears to be the main, if not the only, target.

Trade Minister Zulkifli Hasan said reporters that the regulation, which will come into force immediately, aims to ensure “fair and equitable” business competition and help protect user data. But some lawmakers recently complained about the impact of TikTok’s growing online sales on the country’s 64 million micro, small and medium-sized businesses, many of which have no online presence. This is a sizeable block of votes that politicians cannot ignore, and national elections, including a new president, are less than five months away. TikTok said in a statement that it was “deeply concerned” about the regulation, particularly how it would affect the livelihoods of 6 million sellers and nearly 7 million affiliate creators who use TikTok Shop in the country.

Indonesia is key to TikTok’s hopes of growing its e-commerce sales in Southeast Asia. Despite only starting out in 2021, its platform, with the help of the company’s core viral video offering, sold $4.4 billion worth of goods in the region last year. That figure could rise to $15 billion by 2023, according to research firm Momentum Works, and the archipelago is home to 275 million people who make up about half that number. Meanwhile, the company has sought to allay fears that it could flood Indonesia with cheap Chinese goods, saying it has no plans to implement a cross-border business.

There is also a provision for that in the new rule, with a minimum price of $100 set for certain imports. This will apply to all e-commerce platforms, including Tokopedia, part of local pioneer GoTo. (IR A.JK), which works closely with the large group of local merchants; and Singapore-based Sea’s (SE.N) Unit Shopee, which has been increasing spending and incentives to maintain its dominant market position, despite shareholder opposition. Like TikTok, it is mainly based on the sale of beauty and cosmetic products. For Shopee and others like Alibaba (9988.HK) For Lazada, seeing one of its main competitors limping along seems like a victory that could be even bigger if other governments in the region adopt Indonesia’s approach.

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(The author is a Reuters Breakingviews columnist. Opinions expressed are his own.)

CONTEXT NEWS

Indonesian authorities on Wednesday announced new regulations prohibiting social media companies from making direct e-commerce sales on their platforms. Trade Minister Zulkifli Hasan told reporters that the restrictions, which will take effect immediately, are aimed at ensuring “fair and equitable” business competition. The move is aimed at curbing TikTok’s strong growth in Indonesia, which is home to tens of millions of small merchants who politicians say have been negatively affected by unit ByteDance’s integrated app.

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