Devita Ariyanti has been selling hijabs in a small shop in the Indonesian city of Yogyakarta for four years. Her biggest challenge used to be delayed deliveries. Now she faces a more existential threat to her business: cheap imported hijabs on e-commerce platforms like Shopee, Lazada and TikTok Shop.
Devita sources her hijabs from wholesale markets in the city, which is known for its traditional handicrafts. The hijabs cost between 150,000 rupees ($9) and 400,000 rupees ($25), significantly more expensive than the cheapest hijabs sold on e-commerce websites.
“Fortunately, I have loyal customers,” said the 43-year-old entrepreneur Rest of the world“But I have to admit that it is hard to compete with cheap imports sold online. So if the government wants to help us (with a higher import tax), that would be great.”
It is companies like Devita’s that the Indonesian government wants to protect. It plans to impose import tariffs of up to 200 percent on a wide range of goods, including textiles, clothing, shoes, cosmetics and electronics. The measures are primarily aimed at Chinese imports, which have increased sharply in recent years as e-commerce platforms have become increasingly popular.
“If we are flooded with imported goods, our micro, small and medium-sized enterprises could collapse,” Zulkifli Hasan, Indonesia’s trade minister, said in a briefing in July. These companies account for about 60 percent of the country’s gross domestic product and employ about 120 million people, according to government figures.
Indonesia is Southeast Asia’s largest e-commerce market, accounting for nearly half of the gross merchandise value of the eight largest platforms, according to consultancy Momentum Works. The value of e-commerce sales in Indonesia reached $77 billion last year, authorities say.
Under regional trade agreements, Chinese imports in Indonesia were subject to low or no tariffs. But as online sales of cheap clothing, shoes and electronics soared, the government stepped in to protect local businesses. President Joko Widodo has repeatedly raised concerns about cheap Chinese goods and urged consumers to avoid imported products. The country has imposed the region’s strictest restrictions on cross-border e-commerce sales, setting a de minimis limit – the threshold below which goods are not subject to import duties – of $100, then lowering it to $75 and finally to $3. Last year, authorities also banned shopping on social media platforms, forcing TikTok Shop to close. But the platform was back online after about two months and said it had met requirements.
Other governments in Southeast Asia are also cracking down with higher import tariffs and bans on certain goods. Malaysia imposes a 10% sales tax on imported goods under 500 ringgit ($106), while the Philippines has imposed a 1% withholding tax on online retailers. In Thailand, the entry of Chinese e-commerce company Temu has sparked calls for higher tariffs on certain imported goods. More taxes and restrictions on e-commerce companies could be imminent across the region, said Simon Torring, co-founder of research firm Cube Asia. Rest of the world.
“E-commerce has become so big that it is obvious that it is having an impact on local businesses,” he said. “Indonesia is the first country to take real action and local retailers in other countries in the region are also pushing their governments to take action. The entry of Temu in Malaysia and the Philippines is causing great concern because it has become so big in Europe and the US.”
Indonesian authorities have said Temu’s direct sales model violates local laws that require sales through a middleman. Other companies, including Shopee, Lazada and TikTok Shop, are all based in Indonesia and source goods from China to sell on their platforms.
The government’s plan to introduce a higher tax rate will help local industry, said Bhima Yudhistira, director of the Centre for Economic and Legal Studies, a think tank. Rest of the world. However, he warned that higher import tariffs could also lead to tensions between the countries. “If the government is not careful, it will cause problems, including retaliation or worse,” Bhima said.
“Indonesia is the first country to take real action, and local retailers in other countries in the region are also putting pressure on their governments to take action.”
While Southeast Asian countries are trying to rein in Chinese e-commerce companies, they are also pulling out all the stops to welcome Chinese electric vehicle makers such as BYD and GWM by offering them subsidies and other incentives to set up manufacturing bases. Indonesia has a trade deficit with China, but authorities were forced to roll back some import restrictions earlier this year after complaints that they were slowing production.
In Jakarta’s Tanah Abang, Southeast Asia’s largest textile market, many shops have closed because they cannot compete with cheap imports. Others have simply switched to selling imported goods to survive. More than three-quarters of shoppers are now resellers, selling items they bought in livestreams on TikTok Shop and Shopee Live.
In a small ready-to-wear shop, a local jasa tipor personal shopper, posted stories on her Instagram account as she packed a large suitcase with items to resell to customers across Indonesia. In another store, two Jasa Titip from Malaysia went live on TikTok with a phone mounted on a tripod.
“These cute pants are only 89 ringgit ($20),” one exclaimed as her friend held up a pair of beige cotton pants.
Higher import tariffs will also fail to stem the flood of illegal imports at the archipelago’s hundreds of unmanned ports. While the government must do more to stop these shipments, it must also ensure that local companies that rely on imports are not penalized, said Wisnu Wahyudin Pettalolo, vice chairman of the Indonesian Chamber of Commerce. Rest of the world.
“We are not against imports,” said Wisnu, who is also a member of the Ministry of Commerce’s working group on illegal imports. “But the government must have clear classifications of goods that can and cannot be imported. Because whether we like it or not, we still depend on raw materials from overseas and some products cannot be manufactured locally.”
Away from the hustle and bustle of Jakarta, Rakhmawati started making batik clothing during the pandemic. The 43-year-old from North Sumatra sources fabrics from Yogyakarta and Solo and sells the finished items for between 150,000 rupiah ($9) and 1 million rupiah ($63). She occasionally posts pictures on Instagram but relies almost entirely on her regular customers and local markets for sales, she said. Rest of the world.
“Of course I’m worried about the e-commerce sites that sell cheaper goods,” she said. “My products are more expensive, but they are handmade and have unique designs. My customers still value that.”
