Temu is a new Chinese retailer that has exploded on the e-commerce scene in the last two years. The marketplace, which offers very affordable consumer goods typically shipped directly from producers in China, has been a lightning rod for controversy. Although not everyone agrees, it seems likely that China’s economy is in the midst of a production glut and is attempting to rebalance by exporting away the surplus. This would explain why Temu has suddenly appeared, pushing heavily discounted goods into overseas markets.
While consumers might find Temu’s inexpensive offerings attractive, some governments are less enthusiastic – and Indonesia is one of them. The government has steadfastly refused to grant Temu a license or other approvals to operate in Indonesia, and has sought to shut the app down and have it removed from app stores whenever it pops up.
The main concern is that they don’t want inexpensive Chinese goods flooding the market and putting pressure on Indonesian retailers and manufacturers who might be unable to match Temu’s prices. As Temu’s advantage is thought to stem from a structural imbalance in the Chinese economy, Indonesia has made it clear that it does not want to absorb China’s excess production at prices that might damage the local economy. So they are blocking it.
Does this mean Temu has no shot at accessing the Indonesian market? Not necessarily. But they will probably need to make some concessions to local economic interests in order to get it. Last week I wrote about how the European Union has been trying to leverage market access in order to force compliance with sustainability standards in the production of certain commodities. Countries like Indonesia have balked at the idea, but it’s actually a tactic Indonesia has used itself.
An obvious case would be TikTok. Indonesia banned TikTok from making in-app sales in 2023, which is how the video platform (owned by ByteDance, also a Chinese company) makes most of its money. Since entering the Indonesian market in 2021, TikTok had grown rapidly and blocking such purchases effectively put TikTok’s Indonesian operations on hold. It wasn’t immediately clear what the end game was, either.
A few months later ByteDance purchased a controlling stake in the Indonesian e-commerce platform Tokopedia. Tokopedia, which merged with Go-Jek a few years ago to form a mega tech company called GoTo, has been struggling, and losses at the e-commerce platform were dragging down GoTo’s earnings. In other words, it would have really helped GoTo to have a foreign company with an existing and effective sales and distribution network come in at that particular time and buy Tokopedia.
It was therefore quite convenient that TikTok, shortly after having its in-app sales siphoned off, showed up at just that time and met the call. Can we say definitively that this was part of a grand strategy to use market access to achieve beneficial economic ends? No. But that’s what ended up happening.
That wasn’t the first time either. For many years Netflix was blocked on networks operated by state-owned Telkom. Telkom, and its subsidiary Telkomsel, are by far the largest providers of wireless and broadband internet in Indonesia, so this meant Netflix had limited options for penetrating the Indonesian market.
The ban was lifted in 2020, and when it was Netflix began carrying a lot of Indonesian content and doing sizable development deals with Indonesian producers. There’s no conclusive proof here but it sure seems like Indonesia once again leveraged market access to secure terms from Netflix that were beneficial to the local economy.
The Indonesian government doesn’t want to absorb China’s excess manufacturing, or to be an outlet for deeply discounted Chinese goods, which will place local producers and retailers at a disadvantage. It is therefore blocking Temu from operating in the Indonesian market, and that might be the end of the story right there. But if Temu wants access badly enough, I wouldn’t be surprised if they get it after making some concessions and under terms that are more beneficial to Indonesian interests.