Yohana Belinda, Jakarta – Following a meeting with the Cooperatives and Small and Medium Enterprises (SMEs) Ministry, TikTok Indonesia says it has no intention to roll out its Project S in Indonesia.
The statement comes after concerns emerged that the initiative posed a threat to micro, small and medium enterprises (MSMEs) in the country.
Project S refers to an initiative by TikTok to sift through user data in order to identify well-selling products in a country and then capture that demand with products sold by the platform itself.
Anggini Setiawan, TikTok Indonesia's head of communications, said the ministry had granted her company the opportunity to explain Project S further on July 26.
"We have briefed the ministry, and we would like to set the record straight on the misinformation concerning TikTok Shop in the media and online. It is not true that we will launch a cross-border initiative in Indonesia," Anggini told reporters on Wednesday.
"We do not intend to create our e-commerce products or become a wholesaler that will compete with Indonesian sellers."
Anggini added that, throughout the last two years of TikTok Shop in Indonesia, it had always been supportive of Indonesia's MSMEs.
"We feel that our tailored TikTok Shop model for the Indonesian market empowers and benefits local sellers, and we will continue to use it," she said.
Ministry expert staffer Fiki Satari said the ministry had called TikTok in response to complaints from MSMEs about Project S.
He revealed that, during the meeting, the ministry and TikTok had discussed how to boost MSME growth through digital platforms, in line with the government's goal of digitalizing 30 million MSMEs by 2024.
"We are extremely open to encouraging all stakeholders to collaborate by ensuring that MSMEs immediately join digital platforms. The digitalization is aimed at reaching 30 million, and the optimal data is currently 22 million," Fiki said.
"Digitalization is a solution, but we must upgrade the playing field. Imports are cheap. The cross-border platform policy is illegal despite protecting SMEs, which is what we're talking about."
Meanwhile, Tenggara Strategics, a think tank affiliated with The Jakarta Post, noted that the launch of Project S added to the fears of Indonesian MSMEs regarding cross-border markets.
Hermawati Setyorinni, the chair of the Indonesian MSMEs Industry Association (AKUMANDIRI), said that the problem was exacerbated by Indonesia's lack of adequate cross-border marketplace regulation, particularly on social commerce. Due to their low cost and small volume, products sold through cross-border marketplaces are currently exempt from customs and taxes.
Cooperatives and SMEs Minister Teten Masduki had earlier claimed that Project S could put local MSMEs under pressure. He said TikTok Shop already posed a threat to the local online retail business and expressed concern about the fact that many products sold through social commerce were made in China and reportedly lacked compliance with local standards.
As a result, Teten called for a reform of Trade Ministry Regulation No. 50/2020 concerning business licensing, advertising, guiding and supervision in trade via electronic systems so as to subject social commerce to e-commerce rules and put a price floor on products sold by social commerce providers.
Amin AK, a member of House of Representatives Commission VI, said protecting MSMEs was critical since they employed 97 percent of the country's workers. He stated that foreign producers, particularly those from China, obtained 90 percent of the entire Rp 476.3 trillion ($31.76 billion) e-commerce value recorded by Bank Indonesia.