Indonesia wants to ban social e-commerce, TikTok is injured

Author | Maji

Edit | Liu Jingfeng

In Indonesia, TikTok's largest market in Southeast Asia and its first overseas stop to test its e-commerce business, TikTok Shop is ushering in a storm.

On September 25, local time, Indonesian Trade Minister Zulkifli Hasan said that he would sign the amended Trade Minister Regulation No. 50/2020, which deals with business licensing, advertising, guidance and supervision of business actors for transactions through electronic systems. In the new regulations, social media will be banned as a sales platform.

Image source: Pexels

In February 2021, TikTok Shop was the first to launch in the Indonesian market. Since then, TikTok has begun to expand its e-commerce business further to Thailand, Vietnam, the Philippines, Malaysia and Singapore in Southeast Asia, as well as more overseas markets such as the United Kingdom and the United States.

Compared with Europe and the United States, TikTok Shop's performance in Southeast Asia is eye-catching, especially the performance of the Indonesian market. Singapore-based research institute Momentum Works estimates that TikTok Shop's market share in Indonesia will jump from 4.4% to 13.2% in 2023.

With the signing of the new regulations, TikTok Shop Indonesia may face many variables.

Indonesian Trade Minister Zurkifli Hassan recently said that e-commerce and social media platforms must be separated, and this is to prevent the use of personal data for commercial purposes.

"Social commerce can only promote goods or services. Promote goods or services. Direct transactions are not allowed, direct payments are not allowed, no more business activities are allowed, he can only be used for promotion. It's like TV, on TV, you can advertise, but you can't sell, you can't collect money. Because it's a digital platform, his job is promotion. He said.

In addition, for goods imported into Indonesia, the new regulations will also regulate the list of goods allowed to be traded and treat them on the same basis as domestically produced goods. "For example, food must have a halal certificate." "In electronics, there must be a standard to prove that this is the right product, so the treatment is the same as that of domestic or offline traders," Hassan said. ”

When asked if TikTok Shop would shut down with the new rule amendments, Hassan stressed that the regulation targeted all existing social e-commerce companies, including TikTok Shop, and did not mention a single brand.

Previously, it was reported that Indonesia may ban social media for e-commerce transactions.

Image source: Pexels

According to media reports, several Indonesian government officials have been advocating the separation of social media and e-commerce, claiming that the move is to prevent companies such as TikTok from engaging in monopolistic practices that harm small and medium-sized enterprises in the country.

According to data released by the Indonesian E-commerce Association, as of October 2021, Indonesia has more than 64.2 million MSMEs, accounting for 61% of GDP, of which only 29.6% have been digitized.

In order to protect local small and medium-sized enterprises, Indonesia's trade ministry announced in July that it was revising regulations on online trade, including a rule that restricts the minimum price of imported goods on the country's e-commerce platforms to no less than 1.5 million rupiah (about 100 US dollars).

Some Indonesian cross-border sellers told Xiaguang News Agency that as early as 2020, when Indonesian Customs raised cross-border small packet tariffs, a considerable number of Indonesian cross-border e-commerce sellers gave up cross-border business and switched to local business.

On September 12, Indonesia's deputy trade minister said at a parliamentary hearing that Indonesia was planning to ban trading goods on social media under new trade regulations.

In response to possible restrictions on social commerce in Indonesia, TikTok has said that separating social media and e-commerce into different platforms will hinder innovation, hoping that the government will level the playing field for the company, and TikTok has contributed to the success of millions of local businesses over the years.