JAKARTA (The Straits Times/Asia News Network): Indonesia this week joined Australia, India and the United States in taking a firm stand against TikTok, dealing a massive blow to the video-sharing platform by banning it from facilitating e-commerce sales by third parties.
Trade Minister Zulkifli Hasan said on Wednesday (Sept 27) that revisions to local trade regulations to disallow social media platforms from providing payment facilities, among other things, came into effect the day before, after a high-level Cabinet meeting on Monday.
This means that Facebook, TikTok and other social media platforms cannot be used for buying and selling products and services in Indonesia. They can still be used for marketing and promotions.
Social commerce platforms have a week to comply with the new rules, said the minister at a press conference in Jakarta.
Indonesia’s move comes after India banned the platform in 2020 as part of the crackdown on Chinese-owned apps that it claimed were secretly transmitting users’ data to servers outside India.
TikTok, owned by Chinese company Bytedance, is also facing possible bans and scrutiny in the US and Europe, and has been banned from official devices in countries like Australia, France and Britain.
The ban in Indonesia likely means that Bytedance will have to reconsider its global strategy, given that the country is one of the largest TikTok users in the world, said PermataBank chief economist Josua Pardede.
TikTok has 125 million users in Indonesia, including two million small businesses on TikTok Shop, its commerce arm.
Indonesia was one of the first few countries where TikTok Shop was launched outside of China, and observers have said that it was meant to be a blueprint for the platform to expand to other online shopping markets.
TikTok Shop quickly gained momentum. It is now the fifth-largest e-commerce platform in Indonesia after entering the market in 2021.
A spokesperson for the app said on Monday that while it respects local laws and regulations, it hopes Indonesian regulations take into account the impact on the livelihoods of more than six million sellers and close to seven million affiliate creators who use TikTok Shop.
“Given the barriers to business development, TikTok will reassess its business strategy approach in Indonesia,” said Pardede, noting that the country’s current policy will be observed by other governments to determine the impact and effectiveness of such a ban.
Before this, the relationship between TikTok and Indonesia was flourishing. Chief executive Chew Shou Zi attended a large-scale forum held at the Ritz-Carlton Hotel in central Jakarta in June, where he, as well as Indonesian Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan, gave speeches.
Chew announced at the event that his platform will pump “billions of dollars” into small and medium-sized enterprises (SMEs) in South-east Asia over the next few years.
This includes a US$12.2 million (S$16.7 million) investment to support more than 120,000 SMEs, entrepreneurs and young people in the region over the next three years.
Investment remains the priority of the Indonesian government, and it is unlikely to turn away any firms which will help to boost the country’s growth, said ISEAS – Yusof Ishak Institute senior fellow Siwage Dharma Negara.
“The government will likely continue to negotiate with not just TikTok but also other social media platforms to make sure that its regulations are implementable and fair,” said Dr Siwage, who is also co-coordinator of the institute’s Indonesia Studies Programme.
E-commerce makes up a significant part of Indonesia’s economy, and a report by Singapore-based venture firm Momentum Works found that Indonesia was the biggest online spender in South-east Asia in 2022, accounting for 52 per cent of the region’s total gross merchandise value (GMV), which refers to the value of goods sold via e-commerce platforms
South-east Asia’s total GMV in 2022 was reported to be US$99.5 billion and Indonesia’s tally was US$51.9 billion, almost 13 times that of Singapore’s US$4 billion.
In recent weeks, officials in Indonesia have laid the ground for a ban on social commerce, the subset of e-commerce involving consumers interacting with sellers while buying and selling products and services.
They pointed out that such practices by companies like TikTok, Shopee and Meta adversely affect micro, small and medium enterprises.
But while acknowledging that such a move will reduce the burden on companies that are unable to compete, especially online sellers that peddle cheap imported products, experts stressed that a ban on social commerce could have negative effects too.
Pardede said that banning TikTok Shop has the potential to slow down the pace of digitalisation of economic activities, and is counterproductive for the economy.
He urged the government to find ways to better allow domestic producers to digitalise so that “the multiplier from this economic efficiency is mostly used by Indonesians”.
A ban on social commerce could be seen as the government taking into consideration the plight of sellers which are not digitally savvy, but this could come at the cost of creativity, warned Dr Siwage.
He noted how Indonesia has also stressed that it wants to create conditions for new entrepreneurs and highlighted how in 2016, the country announced ambitious plans to create 1,000 online start-ups in less than five years.
“Will such regulation hamper creativity? We need to keep in mind the message that is sent when we make such moves,” said Dr Siwage.
“For digital entrepreneurs to flourish, you need to have innovation and in the long run, bans such as this one in question might not be good for innovation and creativity.”