TikTok’s Project S triggers alarm bells in Indonesia

Teten Masduki, Indonesia’s minister of cooperatives and SMEs, has expressed concerns over TikTok’s Project S, which he believes could pose a threat to the country’s microbusinesses and small and medium-sized enterprises.

The initiative is TikTok’s latest effort to sell its own products directly within its app. It is similar to Amazon Basics, the US ecommerce giant’s private-label brand. Project S is in the early stages of development and underwent a test run in the UK.

Although there are no indications that Project S will enter Indonesia, Masduki has urged the Ministry of Trade to revise its rules on online trade immediately.

Teten Masduki, Indonesia’s minister of cooperatives and SMEs / Photo credit: Cabinet Secretariat of the Republic of Indonesia

Among Masduki’s recommendations were to include regulations that prohibit direct cross-border sales made via ecommerce and add rules that offer further protections for MSMEs. For example, Indonesia could impose a minimum price on foreign items that can be sold on ecommerce platforms.

In response, TikTok Indonesia told Tech in Asia that Project S is not available in the country, emphasizing that the firm does not operate a cross-border business.

TikTok Shop is on the rise in Indonesia, so it’s no surprise that Project S has been a hot topic in the country lately. It was even brought up during a plenary session of the Dewan Perwakilan Rakyat (Indonesia’s House of Representatives), where the government was urged to take the matter seriously.

Project fear

Ecommerce cross-border transactions is not a new issue in Indonesia.

Following a government ban, Shopee and Lazada decided to shut down their cross-border services for several product categories, including fashion, food and beverages, and health and beauty, in 2021.

However, both ecommerce players already had cross-border businesses before the ban was imposed. In contrast, TikTok currently does not have such a service on its platform.

The Ministry of Trade also confirmed that TikTok Shop does not sell cross-border items.

See also: Can TikTok Shop catch up with Shopee, Tokopedia in Indonesia?

As for Project S, Masduki is concerned that TikTok’s algorithm will prioritize directing users to its own products rather than those sold by MSMEs, reported CNN Indonesia.

A TikTok Shop seller who requested to be identified only as Frizka shared similar concerns, saying that Project S could be a threat to her business.

Revisions to regulations

Modifications needed