Threats to Local Traders
“We want the government to close TikTok Shop, or at least regulate it. I feel bad for my employees,” said Mr Tanjung. Indonesians spent more money on the Chinese-owned app than anywhere else in the region over the past year, as TikTok Shop rapidly gained a substantial regional market share and millions of sellers since its 2021 launch. But government ministers in South-east Asia’s biggest economy have threatened to ban the app outright because of its impact on local sellers, including those at Tanah Abang who rely on offline buyers. Mr Tanjung said a tunic he sells at 60,000 rupiah (S$5), can be found for 40,000 rupiah on TikTok Shop, undercutting his business. “I don’t know where they source their products to sell at such low prices. Ours are our own products and we cannot sell them at that price,” he said. After a daily revenue drop of more than 80 per cent from 30 million rupiah to five million rupiah in recent months, he was forced to lay off five of his 30 employees. Laws in the archipelago nation do not cover transactions through social media platforms such as TikTok, Facebook or Instagram. But President Joko Widodo said new regulation on social media transactions could come as early as Tuesday. Current trade regulations do not specifically cover direct transactions on social media. Deputy Trade Minister Jerry Sambuaga said earlier in September that “social media and social commerce cannot be combined”, vowing to ban the mix of the two and citing TikTok’s “live” features which allow people to sell goods.
Need for Regulation and Level Playing Field
In Indonesia, most regulations can be published by the government, and laws require the approval of the Indonesian parliament. Mr. Widodo did not mention any specific companies to provide further information about the regulations, which will be drafted by the Ministry of Trade. After President Widodo said on Monday that the draft was “being finalized at the Ministry of Trade,” the new regulations are likely to be submitted soon and will try to mitigate the monopolistic practices Jakarta deems detrimental. Experts and economists say such regulations would create fair competition for local businesses. “The key is to regulate social commerce to be on par with e-commerce and traditional offline retailers,” said Mr. Nailul Huda, a researcher at the Institute for Economic and Financial Development. “The government must strengthen protection for local products by tightening regulations on imported goods and providing negative incentives for imports.” Changes to trade regulations from 2020 can be classified as ministerial-level, and as such, are not subject to legislative approval.
Conclusion
The new regulations from the Indonesian Ministry of Trade that will soon be implemented must be fair because they can protect local MSMEs. The crackdown on trading platforms such as TikTok Shop and other e-commerce platforms in Indonesia is a critical effort that must protect micro, small, and medium enterprises (MSMEs) and local small businesses as well as offline markets from price monopoly practices and unfair competition, as evidenced by the difficulties faced by traders in Tanah Abang in selling their goods and the wider economic disruption. The government must ensure sustainable development for all interests in the Indonesian market, which will continue to grow. Regulations that prioritize the protection of local businesses that are vulnerable to predatory practices and protection on the digital economy side also need to be balanced to avoid disrupting innovation, especially in e-commerce technology that has an impact on the economic growth of the community and the country.
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