Indonesia’s trade minister announced on Tuesday that TikTok, China’s popular video app, and GoTo, Indonesia’s tech conglomerate, will launch a trial e-commerce collaboration for several months, while regulators evaluate its effects on small traders in the country.
TikTok said it would pay $840 million to acquire a majority stake in GoTo’s e-commerce arm Tokopedia, after Indonesia prohibited online shopping on social media sites in September, citing the need to safeguard small businesses and user data.
The two companies said they would start their partnership on Tuesday with a pilot phase, under the guidance and oversight of relevant authorities.
“Technology is not a simple thing. We will give a three to four months period for trial, as there may be a need for improvement,” Indonesia’s Trade Minister Zulkifli Hasan said at an event to inaugurate the partnership at a national online shopping festival called Beli Local Initiative.
He said the main goal of the trial was to assist sellers to resume their business after the suspension of TikTok Shop.
Zulkifli said the ministry would audit and review the partnership after the trial phase, adding that the regulation was intended to protect small businesses that employ 90% of the country’s labor force.
TikTok has been aiming to leverage its 125 million user base in Indonesia into a substantial source of e-commerce income, as the country’s e-commerce gross merchandise value is projected to more than double to $160 billion by 2030.
Analysts said the agreement with Tokopedia, Indonesia’s largest e-commerce platform with about 67 million users, would enable TikTok to compete more effectively with established rivals such as Shopee, owned by Singapore-based Sea (SE.N), and Lazada, owned by Chinese e-commerce behemoth Alibaba (9988. HK).
Jefferies analysts said in a note that the pilot program was likely to offer the same user experience as before with TikTok Shop, highlighting its rapid growth rate in Indonesia.
They said TikTok Shop’s total online transaction value soared to $6 billion this year before the ban, a feat that took Tokopedia 10 years to achieve.