ByteDance's TikTok will invest $1.5 billion to become the controlling shareholder of Indonesian tech giant GoTo's e-commerce unit Tokopedia to drive long-term growth of Indonesia's small and medium-sized enterprises (MSMEs) and the country's digital economy as a whole.。

Under the agreement, Tokopedia will merge its Indonesian operations with TikTok Shop under the existing Tokopedia entity, in which TikTok holds a 75% stake, and will gradually invest more than $1.5 billion in the integrated entity to provide the capital needed for the business without further diluting GoTo's stake, enabling TikTok and GoTo to provide more comprehensive services to Indonesian consumers and small and medium-sized businesses.。

In addition, GoTo will benefit from the growth of the integrated Tokopedia business, gaining a sustained revenue stream commensurate with its size and growth, and will continue to serve as an eco-partner for Tokopedia, supporting GoTo Financial's digital financial services and Gojek's on-demand services.。

Indonesia's e-commerce market is dominated by platforms such as Tokopedia, Shopee and Lazada.。Until early 2021, TikTok launches shopping feature in Indonesia。Given its large user base, the business expanded rapidly and achieved remarkable results, thus squeezing the market share of other e-commerce companies.。

In September, the Indonesian government introduced new rules to ban direct e-commerce activities on social media in the country, forcing social media operators such as TikTok to separate their shopping functions from video sharing platforms, aiming to protect the local e-commerce market and millions of offline merchants.。

Indonesia was one of the first countries in Southeast Asia to boycott TikTok。After that, neighboring Malaysia said it was studying the possibility of regulating TikTok and its e-commerce business.。In recent months, the company has faced intense scrutiny from countries including the US, Europe and India over user data and national security issues.。

According to statistics, the total population of Indonesia is about 2.700 million, TikTok has more than 1 user in the country..2.5 billion, useful huge user base。TikTok suffered a major blow in October when it closed its online store in Indonesia, losing its second-largest global market after the United States.。

After the merger, the shopping function within the TikTok app in Indonesia will be operated and maintained by Tokopedia, which aims to resolve regulatory obstacles and restart TikTok's online shopping business in the Indonesian retail sector.。The two companies said in a joint statement: "The strategic partnership will be piloted in close consultation and oversight with relevant regulators, and the transaction is expected to close in the first quarter of 2024.。"

To ensure Tokopedia continues to operate in the best interests of Indonesia's digital economy, the expanded entity will set up a committee to facilitate transition and integration, chaired by GoTo Group CEO Patrick Walujo, complemented by joint support from both companies.。

"TikTok, Tokopedia and GoTo will transform the e-commerce industry in Indonesia, creating millions of jobs over the next five years," said Partrick Walujo.。"

In addition, the integrated enterprises will accept more than 90% of small and medium-sized enterprises to become merchants, in order to encourage their development, will provide a series of joint initiatives, such as:

• Promotion of Indonesian products on Tokopedia and TikTok;
• Focus on skills development, supplemented by upstream production and sales related resources to enhance the capabilities of Indonesian MSMEs.
• Provide support for marketing, branding and sustainable business practices to encourage merchants to sell products online.
• Help local brands to promote products in the international market;
• Establish technical centers throughout Indonesia to train local technical personnel;

• Ensuring fair competition in the market。

For Indonesia's biggest internet company, GoTo, though, the deal carries a degree of risk as it would help the main rival's operations in the country.。On the other hand, it also provides GoTo with a strong global social media partner that can increase the amount of shopping and payments made by both companies.。

In a note to investors, the company said GoTo would not need to fund Tokopedia in the future, and that its 25 percent stake in the venture would not be diluted by further financing from TikTok.。