Chinese-owned Temu to face compliance issues in Indonesia, local officials warn

Budget shopping app provider Temu, owned by Pinduoduo parent PDD Holdings, may face regulatory hurdles if it enters the Indonesian market, local officials have warned.

The platform's business model of selling from manufacturers directly to consumers is in conflict with domestic regulations that require "an intermediary" or "a distributor", Isy Karim, the director general of the domestic trade department in the country's trade ministry, said last week, according to CNN Indonesia.

Karim said the government would closely watch the situation, adding that Temu has not yet applied for an e-commerce licence to run its business in the market.

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The potential entry of fast-growing Temu into one of the biggest e-commerce markets in Southeast Asia has been monitored by other local officials, who have voiced concerns over jobs and consumer prices.

The logo of Temu is seen on a mobile phone displayed in front of its website, in this illustration picture taken April 26, 2023. Photo: Reuters alt=The logo of Temu is seen on a mobile phone displayed in front of its website, in this illustration picture taken April 26, 2023. Photo: Reuters>

Temu may be the second Chinese-backed shopping business to hit regulatory roadblocks in Indonesia. TikTok, the video and shopping platform owned by Beijing-based ByteDance, retained its Indonesian operations after a US$1.5 billion merger deal with local giant Tokopedia in January, but the move resulted in about 450 job cuts at TikTok's Indonesian arm.

Teten Masduki, minister of the country's Cooperatives and Small and Medium Enterprises Ministry, worried that Temu may disrupt small and medium-sized businesses and eliminate jobs in the distribution sector, according to The Jakarta Post.

The deputy chairman of the Indonesian Chamber of Commerce and Industry, Sarman Simanjorang, said Temu's potential entry may reduce prices given that there are no intermediaries between factories and buyers.

Temu did not immediately respond to a request for comment on Monday.

Since its launch in the United States in September 2022, Temu has quickly gained traction for its low pricing, now available in more than 70 markets across the globe. It established a Southeast Asian presence last year with operations in the Philippines and Malaysia.

In 2022, Indonesia emerged as the largest online shopping market among all Association of Southeast Asian Nations (Asean) countries, achieving revenue of US$51.9 billion that year, accounting for 52 per cent of the Asean total, according to the International Trade Administration of Indonesia.

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