China is undoubtedly a formidable economic force, causing concern for other countries, including Indonesia. The most recent worry revolves around the potential of China to devastate small and medium-sized enterprises (SMEs) in the Southeast Asian country.
Indonesian Minister of Cooperatives and SMEs Teten Masduki said that a digital app poses a significant threat to Indonesian SMEs.
During a meeting with the Indonesian House of Representatives’ Six Commission, Teten mentioned a Chinese app named “Temu.”
The app involves direct sales from factories to consumers, Teten said.
The app’s expansion into the Indonesian market — along with 57 countries — could have significant implications for SMEs and job opportunities there.
This is undoubtedly alarming for SMEs in Indonesia, because even without Temu, many of them are losing against Chinese products on e-commerce platforms such as Lazada and Shopee.
China has developed a draft act that allows establishing goods warehouses overseas. This development has caught the Indonesian authorities off guard. Through warehouses in Indonesia, China would have more direct access to consumers in the nation due to shorter distance and lower production costs.
If all Chinese e-commerce companies were to enter Indonesia, it is conceivable that the local industry would reach its lowest point. Several SMEs in Indonesia have already gone bankrupt due to their inability to compete with Chinese products in the e-commerce sector.
Indonesian House of Representatives’ Fifth Commission member Amin K, from the Prosperous Justice Party, has expressed concern about the impact of TikTok’s Project S on Indonesian SMEs, saying that they are facing a threat from social commerce.
The initiative capitalizes on the vast Indonesian market, but prioritizes selling products from Chinese SMEs, Amin K said.
TikTok examines patterns in Indonesian consumer behavior and collaborates with Chinese SMEs, Amin K said.
The advantages and disadvantages of e-commerce from China in Indonesia are controversial. Some say that many Indonesian SMEs also use TikTok to sell their products.
ByteDance (TikTok’s owner) Indonesia communications chief Anggini Setiawan has said the firm is committed to following Indonesian laws and commercial regulations.
TikTok has no plans to establish a cross-border business in Indonesia, Setiawan added.
The policy has been implemented to assist Indonesian SMEs, Setiawan said.
The Indonesian government must prioritize implementing policies that would benefit the SME ecosystem in Indonesia. One approach to achieve that goal could be requiring e-commerce companies to have a higher percentage of Indonesian products than foreign products. Implementing such policies would help provide Indonesian SMEs with more stability.
M. Syaprin Zahidi is a senior lecturer in the Department of International Relations at the University of Muhammadiyah Malang and is a doctoral student at Ghazali Shafie Graduate School of Government at the Universiti Utara Malaysia.
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