Indonesia's new ban on social media e-commerce transactions throttles TikTok's ambitions for SE Asia

The move comes shortly after TikTok's commitment to invest billions of dollars in Indonesia to build its e-commerce platform TikTok Shop.

Indonesia's trade minister has announced a ban on e-commerce transactions via social media platforms, posing a significant setback to TikTok's efforts to boost its e-commerce business in the country as reported by The Reuters .The government cited the need to protect traditional offline merchants and small businesses from predatory pricing on social media platforms as the primary reason for the ban.

This move comes shortly after TikTok's commitment to invest billions of dollars in Indonesia, with a focus on developing its e-commerce platform, TikTok Shop. TikTok, which has 125 million monthly active users in Indonesia, aimed to turn its large user base into a substantial revenue source for e-commerce.

A TikTok Indonesia spokesperson expressed concern about the ban's impact on the livelihoods of the approximately 6 million local sellers active on TikTok Shop. The trade minister stated that the regulation's main goal is to ensure fair competition and protect user data. Additionally, the regulation mandates a minimum price of $100 for specific items purchased directly from abroad through e-commerce platforms in Indonesia. TikTok has been given one week to comply with the regulation or face possible closure."

Research firm BMI stated that the recent ban on e-commerce transactions via social media platforms in Indonesia is unlikely to negatively affect the growth of the digital marketplace industry, with TikTok being the primary business impacted. Indonesia's e-commerce market is currently dominated by local tech firm GoTo's Tokopedia, Sea's Shopee, and Alibaba's Lazada. E-commerce transactions in Indonesia totaled nearly $52 billion last year, with TikTok accounting for approximately 5% of that figure, according to consultancy Momentum Works.

TikTok, with 125 million active monthly users in Indonesia, has launched TikTok Shop in the country to leverage its significant user base. This user figure is nearly equivalent to its European user base and just behind its more than 150 million U.S. users. TikTok recently introduced an online shopping service in the United State