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Chinese-Owned Temu Faces Compliance Issues in Indonesia, Warn Local Officials

Temu, a Chinese-owned cheap shopping app company, may meet regulatory challenges when it joins the Indonesian market. The platform's business model is incompatible with state legislation, which necessitate the involvement of an intermediary or distributor. Concerns have been expressed regarding prospective job losses and their influence on consumer pricing.

Credit: Handout

The platform's business model, which involves selling directly from producers to consumers, is incompatible with state legislation that demand the use of an intermediary or distributor. Isy Karim, director general of the domestic trade department in Indonesia's trade ministry, stated that the government will closely monitor the issue because Temu has yet to apply for an e-commerce licence to operate in the market.

Local officials are concerned about Temu, a rapidly developing e-commerce company, potentially entering one of Southeast Asia's largest markets. They have expressed concern about prospective job losses and their influence on consumer pricing. This is not the first time a Chinese-backed retail company has faced regulatory issues in Indonesia. TikTok, owned by Beijing-based ByteDance, had similar challenges but was able to keep its operations in the country via a merger with local behemoth Tokopedia. However, the merger resulted in over 450 employment cutbacks at TikTok's Indonesian arm.

Teten Masduki, Indonesia's Minister of Cooperatives and Small and Medium Enterprises, voiced fear that Temu's entry will disrupt small and medium-sized firms and result in job losses in the distribution industry. Sarman Simanjorang, deputy head of the Indonesian Chamber of Commerce and Industry, believes that Temu's possible arrival may result in lower prices because there will be no intermediaries between companies and purchasers.

Temu, owned by Pinduoduo's parent company PDD Holdings, has yet to react to demands for comment on the incident.

Temu has grown in popularity since its arrival in the United States in September 2022, owing to its affordable pricing. It currently operates in over 70 markets worldwide and expanded into Southeast Asia last year, with operations in the Philippines and Malaysia.

In 2022, Indonesia will have the largest online purchasing market in the Association of Southeast Asian Nations (ASEAN). The country generated $51.9 billion in revenue, accounting for 52% of total ASEAN online shopping income, according to the Indonesian International Trade Administration.

  • Chinese-owned budget shopping app provider Temu may face regulatory hurdles if it enters the Indonesian market.

  • The platform's business model conflicts with domestic regulations that require the involvement of an intermediary or distributor.

  • Concerns have been raised about potential job losses and the impact on consumer prices.

Source: SCMP

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