In the past few years, everyone has been saying that the world is full of insecurity and uncertainty, and contradictions and rifts are becoming increasingly obvious. For individuals, past expectations and experiences are difficult to extend smoothly, and the sense of loss of control is getting stronger. At the same time, they are always faced with fierce collisions of different values ​​​​and lifestyles.For enterprises, especially overseas enterprises, the challenge is even greater. Internationalization is originally a difficult problem. Under such a situation, many countries have become more paranoid.

For example, India arrested four industry executives a few days ago, one of whom was a vivo employee, on suspicion of money laundering. On the same day, the Indian Law Enforcement Directorate also raided vivo’s office.

Vivo has repeatedly denied claims of money laundering and said it will take all feasible legal measures.

The international community is not surprised by this kind of behavior of India. India has done too many such things in recent years.

In July last year, the Indian Law Enforcement Directorate conducted raids on vivo and related companies in 44 locations for the purpose of investigating money laundering and froze more than 100 bank accounts of vivo. In the same month, OPPO was also accused of evading tariffs. In June this year, India accused Xiaomi of illegal remittances and froze 4.8 billion yuan in Xiaomi's bank account.

Although Chinese mobile phone brands account for 80% of India's share, all of them have been accused by India.

There is also heavy investment in the mobile phone industry, which can stimulate employment. In contrast, the Internet industry is lightweight and is more vulnerable to hunting. More than 200 apps such as TikTok and WeChat in China were directly banned and replaced with Indian short video, social networking and other apps.

These Chinese companies in foreign countries may have taken every step in their business operations correctly, but they will still be hit by unforeseen disasters. For example, Xiaomi has done a good job in localization in India. It has hired Indians as branch executives for a long time, but it still has a lot of troubles.

The fundamental reason why India suppresses Chinese manufacturing brands so much is because of its ambition and national strategy to replace "Made in China" with "Made in India".

India has always defined itself as a great power due to its unique history and size. At present, there is a higher economic growth rate than China, a huge consumer market, and the dividends of Sino-US friction, the Russia-Ukraine war, etc., which accelerate the reshaping of the global industrial chain. Therefore, the Modi government promotes the "China Industrial Substitution Policy" to realize the substitution of Indian manufacturing and capital for China.

But it's just a beautiful dream. The poor business environment in India is not commensurate with its economic potential. Incidents such as arbitrary freezing of foreign investment occur frequently. There are also problems such as backward infrastructure, imperfect industrial chains, and low execution caused by the separate administration of the central and local governments.

India's huge size and growth rate make many companies think it is a hot spot for investment, and they are attracted to it. However, they are persuaded to leave due to the poor business environment. Fund freezes and high fines can directly crush small and medium-sized enterprises. Large enterprises have invested too much in the early stage and cannot withdraw easily. They can only wait for the opportunity.

After all, India is a big country. It is the fifth largest economy in the world after the United States, China, Japan, and Germany. It is becoming the most populous country in the world. Big countries are subtly turning around in the game, and it has become a big mountain on the head of enterprises.

However, Indonesia, the world's 16th largest economy that cannot participate in the game of great powers, has also been very paranoid recently. At the end of September, the Indonesian Ministry of Trade announced that social platforms including TikTok are not allowed to engage in e-commerce services, and only gave one week to make adjustments.

A few days ago, TikTok was forced to shut down its e-commerce business in the Indonesian market. TikTok has 1.67 billion users worldwide, including 113 million in Indonesia, second only to the United States (data comes from third-party data platform Fastdata). Its e-commerce platform TikTokShop also does best in Indonesia, with the longest live broadcast and the largest number of viewers.

All of a sudden, TikTokShop's development in Southeast Asia fell into a trough. At the same time, the platform's 6 million "displaced" sellers also lost their source of income and fell into trouble and confusion.

Although Indonesia’s new e-commerce regulations do not specifically refer to TikTok, it seems that TikTok is the only one that has been greatly affected.

It is necessary to talk about Indonesia’s e-commerce ecology here.

Indonesia has a population of 270 million and ranks fourth in the world. However, its e-commerce industry is still in its infancy, so it has great development potential. The top four e-commerce platforms in Indonesia include Shopee invested by Tencent, accounting for 36% of the total; Tokopedia, a local Indonesian e-commerce platform, accounting for 35%; Lazada invested by Alibaba, with a 10% share; and Bukalapak, another Indonesian local e-commerce platform, also has a 10% share.

TikTok's e-commerce business TikTokShop only accounts for 5% of the share, but only TikTokShop has been hit because the top four e-commerce platforms are only engaged in e-commerce and have no social business.

The picture shows the popular e-commerce shopping platform in Indonesia

For this ban, the reasons given by the Indonesian government are firstly to protect offline small, medium and micro enterprises. For this reason, the new law also stipulates that the online sales of imported goods priced below US$100 are restricted; secondly, Indonesian officials believe that TikTok has participated in "predatory pricing" and that it integrates social media, e-commerce and banks, and may form a monopoly.

Upon closer examination, you will find that these reasons are quite unreasonable.

First of all, if it is to protect offline small, medium and micro enterprises, just banning TikTokShop, which accounts for 5% of the market share, does not make much sense.Moreover, the relationship between e-commerce and the real economy is not either/or. Without e-commerce, offline entities would not necessarily be better off.

Take China as an example. When e-commerce was born, there were debates such as "Does e-commerce inhibit the development of the real economy?" However, in the process, that is, in more than ten years, such debates have quietly disappeared. It is not because physical stores have disappeared, but everyone is talking more about how to better integrate online and offline. Behind e-commerce are manufacturing, logistics and other entities, and entities cannot bypass e-commerce.

The initial stage of e-commerce will indeed bring some impact, but not all of the impact is bad, and a large part of it may even have a stimulating effect. In the era before e-commerce, to buy computers, you had to go to places like Zhongguancun Electronics City. Anyone who has been there knows there are pitfalls here, full of huge profits and fraud. A large part of the cost of physical stores is spent on rent and distribution channels, so in the early years, channel monopolies like Gome and Suning were able to do very well.

High rents, high channel costs, and overcapacity of homogeneous products were the most common complaints about physical stores in the past, and these have destroyed some physical stores. E-commerce later led to the development of logistics, new marketing, payment, Internet infrastructure, etc. It was actually a leap.

In this process, e-commerce itself is also evolving. It started as shelf e-commerce. China’s local e-commerce platforms Taobao and JD.com defeated strong foreign rivals such as eBay and Amazon. Later, the two major e-commerce giants upgraded their consumption, giving Pinduoduo an opportunity. The rise of Pinduoduo allowed people to see the strong consumption potential of the sinking market. Later, due to the ultra-high traffic costs of e-commerce giants, live streaming appeared, avoiding the costs of bidding rankings and through trains. The ultra-high pit fees and commissions of Wei Ya and Li Jiaqi gave birth to brand self-broadcasting, and the live streaming e-commerce industry is still evolving. Douyin has also developed interest e-commerce based on its short video business.

E-commerce has a self-innovation mechanism, and its territory is gradually being improved through full business competition. In short, it gives consumers with different needs and incomes more choices.

From the beginning, I thought that e-commerce was a threat, and live streaming e-commerce was a threat, which was very unfriendly to the development of new industries.

Secondly, there are mostly local Indonesian sellers on TikTokShop. They sell things and promote brands on this platform, which is actually to avoid the ultra-high traffic costs in the shelf e-commerce ecosystem. The Indonesian government's practice of blindly banning rather than regulating it actually hurts small and medium-sized Indonesian businesses.

So when TikTokShop suffered this change, Indonesian small and medium-sized businesses and consumers expressed strong dissatisfaction. There is a hashtag #KamiUMKMdiTikTok on TikTok used to discuss and question the ban (we are small and medium-sized businesses on TikTok), and related content has been viewed more than 170 million times.

The protection of small, medium and micro enterprises is false, and the Indonesian government obviously has other considerations behind it.

03

Indonesia’s e-commerce ban may seem hasty, but in fact it has been planned for a long time.

Indonesian regulators have been investigating TikTok for a long time, worried that TikTokShop would monopolize the market.

In July this year, Teden, Minister of Cooperatives and Small and Medium Enterprises of the Ministry of Small and Medium Enterprises of Indonesia, began to criticize TikTok for harming the interests of small and medium-sized enterprises and importing goods that had an impact on them.

TikTok later stated that it would not promote cross-border e-commerce in Indonesia. All merchants are 100% registered commercial entities or local micro-business owners. TikTok is supporting the development of local small and medium-sized enterprises.

It seemed that the crisis had subsided, but in September, Tedden began to accuse TikTokShop of "monopolizing" business practices and should follow the United States and India in sanctioning TikTok. The Indonesian Trade Minister also changed his previous neutrality and believed that TikTok Shop would threaten small and micro enterprises.

Then at the end of September, the ban was officially introduced.

Why did this sniper only target TikTokShop, but did not involve e-commerce giants such as shopee, tokopedia, lazada, etc., and there was no room for maneuver?

This can be seen from the social development history and environment of Indonesia.

Indonesia is the world's largest archipelagic country, consisting of 17,500 large and small islands. It is known as the "Country of Ten Thousand Islands" and has a very large land span. Going from east to west is equivalent to going from Ireland to Central Asia.

The natural environment is very complex, and the social environment is also quite complex. There are many ethnic groups, many religions, and many cultures here. Many people invest in Indonesia because they are optimistic about the vast market and stable development environment. However, one thing that needs to be taken into consideration is that although Indonesia has high stability, it is actually relatively low in openness.

Indonesia used to be a Dutch colony and developed independently after World War II. It just began to use its rich oil resources to promote the development of related import substitution industries. In the 1970s, the oil market was good, and Indonesia's import substitution industry developed rapidly.

Later, in order to change its over-reliance on the oil industry, Indonesia began to become export-oriented in the 1980s, and at the same time vigorously introduced foreign investment to develop domestic manufacturing. Generally speaking, during this period, Indonesia moved from being closed to opening up, and its manufacturing industry was greatly developed until 1997.

The Asian financial crisis in 1997 caused Indonesia heavy losses. The per capita local currency depreciated significantly, and per capita GDP returned to the development level of the 1970s. Enterprises went bankrupt, workers lost their jobs, prices soared, and riots occurred frequently. This is Indonesia's deep memory of the risks of globalization.

Judging from the causes of the Asian financial crisis, there is no doubt that the speculative behavior of international hot money bears an important responsibility. However, the reason why Indonesia has become the most severely damaged country in Southeast Asia is largely due to the lack of supervision in Indonesia during the opening process. A large amount of capital flowed to the stock market and real estate without guidance, spawning serious economic bubbles.

Although Indonesia has re-entered a stage of leapfrog growth over the years, Indonesian society is conservative and hesitant on the issue of openness due to previous experiences, and has chosen a conservative and balanced development path.

As an Internet rookie that is newer than BAT and has developed more rapidly, TikTok has "out of the circle" in the global digital media market to a degree that Chinese Internet companies have never achieved before. TikTok Shop and the small, medium and micro businesses behind it that represent the "new forces" have worried large Indonesian consortiums and government officials.

Behind many Indonesian e-commerce platforms are the blessings of traditional Indonesian forces or Southeast Asian consortiums.

In 2021, Tokopedia will merge with Indonesian taxi giant Gojek to form GoTo Group, and GoTo Group may have close ties with the Indonesian government. Gojek co-founder Nadiem Makarim was elected as Minister of Education and Culture in 2019, one of more than 30 presidential cabinet officials.

The parent company of Shopee is Southeast Asia Internet giant Donghai Group, a Singaporean enterprise. Singapore has close relations with Indonesia and is Indonesia's largest source of investment. Many Chinese investors must first transfer to Singapore before investing in Indonesia.

The investor behind Blibli, another e-commerce platform, is Djarum Group, one of the largest consortiums in Indonesia, which is mainly engaged in the tobacco business.

These historical and current connections are intertwined and fermented in a more paranoid international atmosphere, making overseas companies like TikTok face a more severe living environment and adding more variables to the company's global operations.

When TikTok encountered a series of crises in the United States, its competitor Facebook founder Zuckerberg expressed concern: "I think (TikTok's ban) is a very bad precedent. No matter what the solution is, it must be treated with extreme caution and seriousness... This will create a A very bad long-term precedent...it will likely have long-term consequences in the rest of the world. TikTok is a competitor. Maybe [TikTok being banned] will make it easier to launch Reels, but you can't run a company just looking at next month or next quarter."

Although Zuckerberg’s Facebook is the beneficiary of TikTok’s ban, he also realizes that TikTok’s ban will not make Facebook better in the long run. Regardless of the company or the country, development is focused on the long term. Moreover, once this precedent is set, every country will use the same excuse to close down, and the environment will be damaged. In the end, Facebook, Google, etc. will also become victims.

After Indonesia's ban on TikTok Shop was introduced, many people believed that Indonesia's four major e-commerce platforms would eventually benefit, and the stock prices of some e-commerce platforms soared. But is this really a good thing?