BEIJING, December 7 (TMTPost)—ByteDance Ltd.’s short-video star TikTok will resort partnership with a local company to revive its e-commerce business in face of the Indonesian government curb.

Credit：Visual China

TikTok has struck an informal agreement with GoTo Group to invest in Tokopedia, the Indonesian technology company’s unit, and work together on a online shopping service, Bloomberg reported. Final details, which could change before the announcement, are said to be made public as soon as next week. The report cited people familiar with the pact that TikTok agreed to work with Tokopedia on various areas instead of competing directly with the Indonesian e-commerce platform,and the agreement is subject for regulatory approval, which indicated it could fall through in the end. The Financial Times’ source revealed that TikTok is in advanced negotiations to invest in Tokopedia and the deal could be complete as early as this month.The report said the deal, as the first such arrangement by TikTok, could become a new model for overcoming regulatory setbacks and government opposition.

Recent news echoed news last month about TikTok’s new investment as a way to restart TikTok Shop in Indonesia. The ByteDance’s video app was said late October that it is discussing to invest into Tokopedia and could create a joint venture and build a new e-commerce platform with the partner. Direct investment into Tokopedia was considered as a possible solution to regulatory hurdle for it might help smoothen TikTok’s relation with the Indonesian government.  

The reported deal is TikTok’s latest effort to restart its e-commerce business following the Indonesia government’s ban two months ago. The Ministry of Trade announced late September that Indonesia doesn’t allow transactions on social media platforms, which effectively bans users from buying or selling products or services on TikTok and other social media platform. The ministry said social media companies will also be prohibited from doubling e-commerce platforms to prevent misuse of public data., and it will work to further regulation on e-commerce in the country. The Minister of Trade Zulkifli Hasan said the connection between social media and e-commerce “must be separated so that the algorithm is not all controlled”and this prevents the use of personal data for business purposes. 

Indonesia’s regulation poses a significant threat to TikTok’s e-commerce ambition. South Asia, a region with total population of 630 million, is one of TikToks’s biggest markets by user numbers, and Indonesia, the region’s biggest economy, is its second largest market behind U.S. TikTok CEO Shou Zi Chew said in June that his company will invest billions of dollars in Indonesia and South Asia over the next few years. While not specifying the spending plan, Chew said the short video company has 8,000 employees in Southeast Asia, and 2 million small vendors selling their wares on its platform in Indonesia. As of April, TikTok has 116.5 million active users aged 18 and above in the United States and 113 million active users located in Indonesia, according to its self-service tools. TikTok facilitated US$4.4 billion of transactions across Southeast Asia last year, a seven-fold increase from $600 million in 2021, but it still trailed far behind Shopee’s $48 billion of regional merchandise sales in 2022, according to consultancy Momentum Works.

While TikTok respect local laws and regulations, the company hop regulations take into account its impact on the livelihoods of more than 6 million sellers and nearly 7 million affliate creators who use TikTok Shop, a spokesperson said after Indonesia’s ban. TikTok announced days later that it stopped facilitating e-commerce transactions on TikTok Shop Indonesia October 4. It said to remain compliant with laws and regulations is the priority and it will coordinate with the local government for next steps.

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