20230724 tiktok
The rule is part of newly tightened trade regulations aimed at ensuring local e-commerce services. Image Credit: Reuters

Jakarta: TikTok will suspend its online-retail operation in Indonesia from Wednesday to comply with curbs on social commerce, a big setback for the startup in one of its fastest-growing markets.

The company will stop facilitating e-commerce transactions on TikTok Shop Indonesia from 5 pm Jakarta time on October 4, it said in a statement Tuesday. The company said that its priority is to remain compliant with laws and regulations and that it will coordinate with the Indonesian government for its next steps.

Indonesia last week announced sweeping regulations that will force ByteDance Ltd.'s TikTok to split its shopping feature from the popular video-scrolling service in the country, an unprecedented separation that could stall TikTok's e-commerce thrust just as it was gaining traction against Sea Ltd. and GoTo Group.

The rule "- which bars social commerce companies from handling direct payments for online purchases "- is part of newly tightened trade regulations aimed at ensuring local e-commerce services, such as GoTo's Tokopedia, won't be squeezed out. Indonesia also seeks to keep its 64.2 million micro, small and medium enterprises that contribute 61% of its gross domestic product from getting hurt by social commerce companies.

"We need to be careful with e-commerce," President Joko Widodo said at a government event on Tuesday. "It can be very good if there are regulations but can turn bad if there aren't any regulations."

Indonesia is the first and largest market for TikTok Shop, and online shopping has become the social media app's fastest-growing feature with a burgeoning fan base in the country. TikTok started the shopping feature in Indonesia in 2021 and its instant success has encouraged it to expand into online retailing in other markets, including the US.