- Indonesia’s Ministry of Commerce said on Tuesday it was working to further regulate e-commerce, adding that the country does not allow transactions on social media platforms.
- “We see this as a positive development for traditional e-commerce players in Indonesia – especially Sea Ltd. given the recent intensity of competition between TikTok and Shopee,” Citi said.
- President Joko Widodo said micro, small and medium-sized enterprises saw a decline in sales due to the influx of foreign goods made available through social media.
Two sellers offer goods for sale via a TikTok live stream.
Bay Ismoyo | Afp | Getty Images
Indonesia’s Ministry of Commerce said on Tuesday it was working to further regulate e-commerce, adding that the country does not allow transactions on social media platforms.
“One of the things that is regulated is that the government only allows the use of social media to facilitate promotions and not transactions,” the ministry said in an official press release.
This means users in Indonesia cannot buy or sell products and services on TikTok and Facebook.
The government said it would also ban social media companies from acting as e-commerce platforms to prevent misuse of public data.
In a media conference on Monday, Trade Minister Zulkifli Hasan said “the connection” exists [between social media and e-commerce] must be separated so that the algorithm is not completely controlled” and this “prevents the use of personal data” for business purposes.
Indonesia also announced that it would also regulate which goods can be sold abroad, adding that these products would receive the same treatment as offline domestic goods. The move comes as foreign goods become increasingly available in Indonesia through social media platforms.
On Saturday, Indonesian President Joko Widodo called for social media regulation, citing the platforms’ impact on local businesses and the economy.
“Because we know that it affects MSMEs, small businesses, micro-enterprises and also the market. There are markets where sales are starting to decline due to the influx,” he said in a statement.
Indonesian regulations will destroy TikTok’s e-commerce ambitions in the country.
According to DataReportal, Indonesia is TikTok’s second-largest market with 113 million users, just behind the United States with 116.5 million TikTok users.
In June, TikTok CEO Shou Zi Chew said the app “will invest billions of dollars in Indonesia and Southeast Asia over the next few years.”
“Social Commerce was created to solve a real problem for local traditional small sellers by connecting them with local creators who can help drive traffic to their online stores,” a TikTok spokesperson said after the move Indonesia.
“While we respect local laws and regulations, we hope the regulations take into account their impact on the livelihoods of more than 6 million sellers and nearly 7 million affiliate creators who use TikTok Shop,” they said.
Citi said in a report on Tuesday that the move will benefit rival Shopee, the e-commerce arm of Sea Limited, and Indonesia’s domestic players.
“We see this as a positive development for traditional e-commerce players in Indonesia – especially Sea Ltd. given the recent intensity of competition between TikTok and Shopee,” the global investment bank said in its report.
“Depending on the timing of implementation and the transition process to the potential alternative app, we believe any disruptions that TikTok sellers experience during the transition will likely be beneficial for Shopee and other traditional e-commerce platforms in the coming months,” said Citi.