Indonesia keeps close eye on Chinese e-commerce platform Temu

JAKARTA – The government is on high alert over the potential entry of Chinese e-commerce platform Ago, arguing it could undermine local micro, small and medium-sized enterprises (MSMEs) and disrupt domestic supply chains.

Ago’s business model of selling products directly from factories to consumers seemed to contradict Government Regulation No. 29/2021 on trade, said the Trade Ministry’s domestic trade director general, Isy Karim.

“Factory-to-consumer is not compatible with our policies. Every activity from factory to consumer must have an intermediate, a distributor,” Isy said on Wednesday, as quoted by CNN Indonesia.

“We will monitor the situation closely,” he vowed, even as Temu had yet to obtain an operating license for Indonesia.

Ago is a sister company of Chinese e-commerce giant Pinduoduo, launched by China’s PDD Holdings in September 2022.

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The marketplace lets more than 80,000 suppliers, credible from China, sell directly to international consumers, AP reported last year.

Ago’s entry into Southeast Asia began last year as the platform extended its reach to the Philippines and Malaysia.

Cooperatives and Small and Medium Enterprises Minister Teten Masduki previously voted apprehension about the impact of a possible entry by Temu, saying it could disrupt activities of small businesses and eliminate jobs in the distribution sector.

Ago, now operating in more than 58 countries, directly connected factories with buyers, Teten explained, thereby cutting out resellers, affiliates and third parties in the supply chain, which would threaten the business of domestic MSMEs.

“What worries me is there’s another digital cross-border application, which I think will enter our market and be more disruptive than TikTok Shop,” Teten said on June 10, as quoted by Detik.

PDD Holdings according to its most recent annual report employs more than 17,000 people.

Meanwhile, research companies Marketplace Pulse estimates that there are some 150,000 sellers in the Temu fulfillment model and around 1,000 who are self-fulfilling orders.

Indonesian Chamber of Commerce and Industry (KADIN) deputy chairman Sarman Simanjorang stressed the need for regulators to pay attention to Temu’s potential entry, highlighting issues related to significantly reduced prices due to direct transactions from factories to consumers.

He warned that Temu’s entry could endanger local MSMEs and industries, such as garment manufacturers, and emphasized the need for immediate action from the relevant ministries and agencies.

“The basis of (selling directly from) factories to consumers allows for significant price cuts,” Sarman said on Wednesday, as quoted by Kumparan.

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Deputy Trade Minister Jerry Sambuaga noted that all e-commerce platforms had to comply with Trade Ministry Regulation No. 31/2023, which stated the goal of promoting “fair and just” competition.

“We have already enforced this by halting activities that did not comply. However, if they have the proper licenses and sellers follow the correct procedures, then it is not an issue,” said Jerry on Jun 13.

If Temu wanted to enter the Indonesian market, the company would have to adhere to this regulation, Jerry emphasized.