SINGAPORE, Nov 30 (Reuters Breakingviews) – TikTok is willing to become a friend rather than foe to hold onto its overseas strongholds. At least that’s how things appear to be shaping up in Southeast Asia where China’s ByteDance-owned short-form video app is exploring investing in a unit of Indonesian tech pioneer GoTo (GOTO.JK) to get past a ban on social media companies directly engaging in e-commerce.

Indonesia is trying to ensure “fair and just” competition and protect merchants but success abroad is increasingly important for technology firms staring at digital saturation in the world’s second-largest and sputtering economy. Companies can leverage their experience of operating in a large country, expertise in mining customer data and put their excess cash to work.

TikTok CEO Shou Zi Chew was feted in Indonesia where it has 125 million monthly active users when he pledged in June to invest billions of dollars in the region. The country’s e-commerce gross merchandise value will nearly triple to $160 billion between 2023 and 2030, a report by Google, Temasek and Bain & Co estimates. But the global giant failed to anticipate regulatory hurdles in its biggest market for online shopping.

Jakarta-based GoTo, formed through a merger of ride-hailing company Gojek with e-commerce outfit Tokopedia in 2021, could be tempted into a deal. Its shares rose 12% on the news last week but remain down 70% since its initial public offering in April 2022. Though the company is trimming losses, its operations are yet to turn profitable.

For new CEO Patrick Walujo, a tie-up with TikTok could be a tempting way to stem market share losses at Tokopedia, which also faces fierce regional rivals such as Alibaba-backed (9988.HK), Lazada and U.S. listed Sea’s (SE.N) Shopee. TikTok’s viral video app would provide Tokopedia with a powerful new growth avenue for its online shopping and payments business.

An alliance between the duo would raise the potential for further consolidation. Rival Bukalapak (BUKA.JK) backed by Singapore sovereign wealth fund GIC, and smaller firm Blibli, owned by Global Digital Niaga (BELI.JK) – part of Indonesian conglomerate Djarum Group – could rethink their strategies.

Giving up and retreating is an option: Chinese online retailer JD.com (9618.HK), shut down its Indonesian and Thailand e-commerce sites this year because of intense competition and is focusing instead on logistics and warehousing. Yet as tech companies from the People’s Republic to Indonesia pull out all the stops to lift growth amid waning investor support, desperate new alliances are bound to emerge.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

CONTEXT NEWS

TikTok, owned by China-based ByteDance, is in talks to invest in a unit of Indonesia’s GoTo, among options the company is exploring to resume its online shop in its biggest e-commerce market, Bloomberg reported on Nov. 22 citing people with knowledge of the matter.

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