The Ministry of Commerce of Indonesia on Tuesday, September 26, announced that work is currently underway to create a regulatory framework for regulating processes in the sphere of e-commerce.

The Ministry also stated that the Indonesian authorities do not allow transactions on virtual platforms, which in terms of their functional purpose and actual content are social networks. The official release of the department constants that the principal circumstance in the context of this issue is that the government does not intend to provide any opposition to advertising campaigns on these platforms, but is categorically opposed to financial operations in such digital spaces.

For users, these statements of the ministry in a practical sense mean that there is no possibility to buy or sell goods and services, for example, in TikTok and Facebook.

The government also announced its intention to establish a new norm, according to which a ban on the use of social networks as e-commerce spaces will be introduced in relation to companies that operate on these virtual platforms. The country’s authorities explain this decision by their desire to minimize the risks of misuse of publicly available data arrays.

On Monday, September 25, Indonesian Trade Minister Zulkifli Hassan said that the link between social networks and e-commerce should be separated. According to him, this must be done so that the virtual algorithm is not fully controlled. He also mentioned the importance of these efforts in the context of preventing the use of personal data for business purposes.

The Indonesian authorities have separately announced their intention to establish a regulatory system within which decisions will be made on which goods from foreign manufacturers can be sold on virtual platforms. This plan is due to the fact that the country is rapidly increasing the level of availability of products of companies from other countries through social networks.

Last week, Indonesian President Joko Widodo announced the need to regulate virtual social interaction platforms. According to him, the need for appropriate measures is due to the impact of these platforms on local businesses and the economy.

The intentions of the Indonesian government, which will not be implemented only in case of extraordinary unforeseen circumstances, which is unlikely, are a serious blow to TikTok’s ambitions in the sphere of e-commerce in this country. This state is the second largest market of the mentioned social network with 113 million users. The first place is taken by the United States. There are 116.5 million TikTok users in this country. The relevant information was made public by DataReportal.

In June, TikTok CEO Shou Zi Chew announced his intention to invest billions of dollars in Indonesia and Southeast Asia over the next few years.

The representative of the social network, after reports of the plan of the Indonesian authorities, noted that e-commerce appeared to solve the problem of local traditional small sellers by ensuring their interaction with creators who will help attract traffic to online stores. He stressed that the company respects laws and regulations. A representative of the firm also said that the social network hopes that the new rules that the Indonesian leadership plans to introduce will take into account the interests of more than 6 million sellers and almost 7 million creators of partner programs using TikTok Shop.

A report by Citi global bank, published on September 26, indicates that as a result of the introduction of new regulations, Shopee, the e-commerce arm of Sea Limited, and local players will benefit. Experts of the financial institution assessed the intentions of the Indonesian authorities as a positive event from the point of view of local platforms. The report also mentions the intensity of competition between TikTok and Shopee.