New Indonesian eCommerce Rules Hinder TikTok’s Expansion Goals

TikTok’s plan to invest heavily in Indonesian eCommerce is apparently hitting a roadblock.

As Bloomberg News reported Thursday (Sept. 28), the company is now subject to new rules in Indonesia that block social media platforms from handling direct payments for online purchases, a distinction that so far applies just to TikTok.

According to the report, TikTok is allowed to advertise to its more than 100 million users in the Southeast Asian country, but those customers now need to visit a different app or site to make purchases. This forces TikTok to add another app or risk being shut down.

“This development has a chilling effect on the long-term growth outlook for the e-commerce market,” Simon Torring, co-founder of eCommerce research firm Cube Asia, told Bloomberg. “TikTok Shop brought real innovations to Indonesia’s e-commerce market.”

Bloomberg said the new rules stem from a wave of opposition to TikTok’s entry into the massive Indonesian eCommerce space. Among the company’s largest critics, the report said, is government minister Teten Masduki.

“We should not be late to regulate the digital economy,” Masduki told a parliamentary commission on Sept. 8. “If we are, our SMEs will disappear, local e-commerce firms will disappear, and the consumers will bear the losses.”

Sources told Bloomberg that TikTok’s local public policy and government relations executive, Rofi Uddarojat, attempted to negotiate with government officials in a meeting this week to let the company be involved in local eCommerce. 

TikTok officials were still trying to get a meeting with Indonesia’s president as of Tuesday (Sept. 26), only to be rebuffed, the sources said.

The company’s CEO, Shou Zi Chew, said during a forum in June that TikTok planned to invest billions in Indonesia and other Southeast Asian countries as it looks to expand its eCommerce sales from $4.4 billion in gross merchandise value to $20 billion.

The company is turning its attention to Asia as it deals with pushback in the U.S. from lawmakers who want to ban the platform. In a hearing in Washington in March, Chew spent hours being grilled on data privacy, online safety and his company’s potential ties to China’s Communist Party.

Putting those possible threats aside, PYMNTS has written that banning the platform would harm brands, retailers and influencers who rely on it to drive sales. A number of companies have also invested heavily in creating content for TikTok to pull in younger consumers who use the site.