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Read, Debate: Engage.
| topic: | Economic Opportunity |
|---|---|
| located: | Indonesia |
| editor: | Leo Galuh |
Textile vendors at Tanah Abang market in Indonesia are unhappy with their earnings, which have decreased by 50 per cent. Tanah Abang, a district of Central Jakarta, is home to Southeast Asia's largest textile market. Even though Covid restrictions have passed, its detrimental effects are still visible in some traditional markets and shopping malls in Indonesia's capital.
Since many e-commerce platforms have altered consumer behaviour, conventional shops that require physical contact between sellers and buyers have fallen by the wayside. Domestic Micro, Small, and Medium Enterprises (MSMEs) must keep up with the latest digital developments to stay afloat.
MSMEs dominate business activities in Southeast Asia, accounting for an average of 97.2 per cent of a country's total enterprises from 2010 to 2019, according to a report published by the Asian Development Bank. Indonesia, in particular, is a hotspot for MSMEs. In 2018 alone, MSMEs contributed approximately 61.1 per cent to Indonesia's GDP and accounted for 97 per cent of the Indonesian workforce, the highest among Southeast Asian countries.
However, the Indonesian government takes a different perspective on raising the digital economy. The Chinese-based popular video-sharing service TikTok introduced TikTok Shop as an e-commerce platform in September this year, a move that Indonesia's government claims could potentially disadvantage Indonesia's MSMEs. It says the price of imported Chinese goods would devastate domestic prices, a practice known as predatory pricing.
Understandably, the government wants to protect domestic MSMEs to prevent them from losing market share. However, the government should consider the potential for development and innovation demonstrated by domestic MSMEs before trying to control an open and unrestricted market. Undoubtedly, every TikTok user and seller has preferences for particular products over which the government has no control.
Due to the decreasing opportunities of offline systems, Indonesian sellers are transitioning to the digital economy. Here, online sellers can showcase their innovation and creativity whilst promoting locally made products. Sellers who use TikTok Shop can attract buyers with simple, cost-effective video interactions using their smartphones, an enticing feature for sellers and buyers.
According to a Meltwater report, Indonesia has 213 million internet users as of 2023 and has become one of the world's largest internet markets. Moreover, most of them are the young generation who are often actively online, particularly TikTok users. With such a figure, there is no reason for the Indonesian government to protect domestic MSMEs overly.
Domestic MSMEs should demonstrate their ability to adapt to the current global digital economy development. Otherwise, they risk falling behind their counterparts in other countries.
Image by Solen Feyissa.
