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Jakarta Post

China’s TikTok enters race to digitize Indonesian SMEs

  • Norman Harsono
    Norman Harsono

    The Jakarta Post

Jakarta   /   Mon, July 13, 2020   /   11:42 am
China’s TikTok enters race to digitize Indonesian SMEs A man arranges waste bins made of recycled materials in Cibinong, Bogor, West Java, on June 5. TikTok’s owner, Beijing-based ByteDance, plans to take a US$100 million loss this year to provide free advertising credits to SMEs worldwide willing to try the platform’s new services. (Antara/Yulius Satria Wijaya)

TikTok, one of the world’s fastest-growing social media platforms, has entered the race to digitize pandemic-worn small and medium enterprises (SMEs) in Indonesia.

A TikTok Indonesia representative said on Friday that the Chinese video-sharing platform wanted to capture as many of Indonesia’s 6 million SMEs as possible with its new advertising service for businesses.

Read also: Digital tools give SMEs opportunity to evolve

The timing is ideal for TikTok as many Indonesian SMEs have flocked to online platforms to market their products as the COVID-19 pandemic continues, said TikTok Indonesia direct sales leader Pandhu Wiguna.

“We’re targeting all SMEs with no specific location or business segment,” he told The Jakarta Post by text message after an online webinar.

TikTok’s owner, Beijing-based ByteDance, plans to take a US$100 million loss this year to provide free advertising credits to SMEs worldwide willing to try the platform’s services.

With Friday’s announcement, TikTok added to a list of tech heavyweights, including photo-sharing platform Instagram and e-commerce platforms Tokopedia and Lazada, taking part in Indonesia’s plan to digitize 2 million small businesses this year. 

The plan, kicked off by President Joko “Jokowi” Widodo on May 14, provides for training of SMEs in the use of online business services.

The government hopes to have 10 million micro, small and medium enterprises (MSMEs) go digital by the end of the year to help them recover from the financial burden caused by the coronavirus outbreak, Cooperatives and Small and Medium Enterprises Minister Teten Masduki said earlier this month.

He added that there were currently about 8 million MSMEs that had an online presence, either through e-commerce platforms or social media, about 13 percent of the MSMEs in the country.

Previously, ride-hailing firms Gojek and Grab launched their own efforts to help digitize Indonesia's small businesses.

“This is to push SMEs, whether online or offline, so they can continue to exist,” said Coordinating Maritime Affairs and Investment Ministry undersecretary Odo Manuhutu on Friday.

Read also: Start-ups help SMEs digitalize during COVID-19 pandemic

He said 789,000 SMEs had been digitized between May and June, which equals to 40 percent of the total year-end target. 

However, Odo pointed out the uneven distribution of the digitized SMEs. Some 86 percent were from Java. The remaining 14 percent were from Sulawesi, North Sumatra and Bali. 

None of them were from the impoverished areas of eastern Indonesia.

A recent Mandiri Institute study found that online micro, small and medium enterprises (MSMEs) had longer business runways – the amount of time an enterprise had before going bankrupt – than their offline counterparts.

“MSMEs' impact on the economy could become greater if more entrepreneurs go online,” said Mandiri Institute head T. Yudo Wicaksono on July 10.

Overall, digitalized MSMEs can help reduce 1.5 percent of the economic burden on Indonesia’s gross domestic product (GDP) that has resulted from COVID-19, the study concludes.

Read also: Govt teams up with Lazada for training program to push SMEs online

However, 63 percent of small business owners struggle with access to affordable and stable internet connections, while 26 percent struggle to access financial services, according to a separate Sea Insight study.

Despite its fast growth, TikTok was only the 13th most used social media platform in Indonesia in December last year, the latest Hootsuite We Are Social report shows.

Usage of the video app has risen during Indonesia’s partial lockdown, officially called PSBB, but the report shows that American social media platforms remain the top dogs.