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| Just a few months ago, TikTok announced it would invest billions of dollars in the country. |
Indonesia will ban social media companies from allowing direct payments on their platforms, according to Trade Minister Zulkifli Hasan. The move means the platforms will only be able to advertise products and not conduct direct transactions.
This is part of a new set of tighter trade rules that could be introduced by Indonesia’s Trade Ministry this week. The new policy aims to help Indonesia’s 64.2 million micro, small and medium-sized enterprises – which account for 61% of gross domestic product – avoid being squeezed out by social commerce companies.
TikTok is currently the only social media company that allows e-commerce transactions directly on its platform.
Indonesia is TikTok Shop’s first and largest market. The online shopping platform TikTok Shop is growing rapidly with a growing user base. TikTok is ambitiously expanding in the Indonesian market to expand to other markets, including the US.
With the new regulation, Indonesia will be the first country in Southeast Asia to take action against the Chinese company. This will have a big impact on TikTok Shop. Just a few months ago, TikTok announced that it would invest billions of dollars in the country.
TikTok has since objected to the proposed policy, arguing that separating social media and e-commerce would not only stifle innovation but also disadvantage millions of Indonesian sellers and consumers, some of whom rely on TikTok Shop for their livelihoods.
“Social commerce was created to solve a real problem for small, traditional merchants by connecting them with local creators who can drive traffic to their online stores,” TikTok explains. “While respecting local laws and regulations, we hope that regulation will take into account the impact on the lives of the more than 6 million merchants and nearly 7 million affiliated creators who use TikTok Shop.”
Online retailers like Shopee and Tokopedia could benefit if TikTok Shop is restricted. Shopee also relies on beauty and personal care products to attract customers.
In the Indonesian market, Tokopedia has 34 million monthly active users (MAU), Shopee has 138 million and Lazada has 37 million, as of August 2023.
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