The rapid development in the digital realm has brought new dynamics to the economy through the presence of multinational digital companies in developing countries. One important aspect that does not escape this discourse is the issue of unequal competition between developed and developing countries in the domestic market. This situation proves that the economic power imbalance between developed and developing nations has deeply rooted in the world economy. It is reflected in the competition of e-commerce companies in Indonesia, which will be the main analysis of this article.
The assumption stated previously departs from the structuralist perspective adapted by the North-South perspective which touch upon the dynamics of multinational companies as the reflection of contemporary capitalist phenomenon. One of the central arguments is Lenin’s which argues that as capitalistic economies mature, accumulate, and their profits start diminishing, they do not have any other choice than to expand to countries with lesser economies and thus produce economic dependencies from those countries to them (Gilpin,1987). Furthermore, this foreign competitor will heavily dominate the economy of the country with lesser economies.
In the context of contemporary economy, this perspective aligns with the current dynamics of economic competition produced by multinational companies. The existence of multinational companies in developing countries may result in their domination as superior agents in the domestic market (Hitt, 2006, in Nurul, 2023). The irony is located in the fact that the multinational companies, which were claimed to be the agents that advance the economy of developing nations, actually perpetuates slow economic development of developing countries by continuing to escalate the dependency between developing countries to developed countries (Paul & Barbato, 1985). Multinational companies trapped local companies in their domination. Back to the structuralist perspective, Lenin, in Gilpin (1987), adds that the global capitalist economy actually does promote the development of developing countries. However, the development is uneven and thus exacerbates the economic imbalance in the developing countries. This argument is inherently intertwined with the statement that multinational corporations create a ‘city lights’ effect on developing countries, offering promises of modernity to nations unprepared for it while in fact these promises do not actually provide the opportunity for a full modernization (Paul & Barbato, 1985).
This unequal relationship has expanded to the digital sector in regards to the rapid digital development. Gawer & Bonina (2024) cited that digital platform companies, including e-commerce, from developed countries are expanding their market, through internationalization, to the developing countries as multinational companies. This situation is reflected in the development of multinational e-commerce companies in Indonesia.
Indonesia, as a country that is projected to be facing rapid digital development, is experiencing the development of e-commerce–the current trend of Indonesian domestic trade activities. Cahyaningrum (2024) mentioned that, according to SEA e-Conomy 2023 research, the Gross Merchandise Value (GMC) or e-commerce in Indonesia reached Rp 975.3 trillion 2023. Obviously, this high number is also influenced by the surge of online shoppers in Indonesia, which, according to Portal Statista, rose 65 million in 2022–more than three times since 2017 (Santoso, 2022). This data highlights the huge potential of Indonesia’s e-commerce market, particularly from the perspective of multinational e-commerce companies.
Ironically, Indonesia is stuck in the status of the consumer market instead of maximizing the situation to step up into a producer market of local e-commerce. This could be seen from the fact that the market of e-commerce companies in Indonesia is dominated by multinational companies such as (1) Shopee which is partly owned by Tencent, (2) Tokopedia which has now merged with Tiktok Shop owned by Bytedance, and (3) Lazada which is part of Alibaba (TMO Group, 2024).
Initially, the growth of local e-commerce companies in Indonesia did look promising with the existence of Tokopedia, Blibli, or Bukalapak at the beginning of their development. However, the presence of multinational e-commerce companies then produced high challenges for local companies in relation to the huge resources gap between local and multinational companies. In fact, e-commerce maintenance & development has its own complexities related to infrastructure, capital, investment, and resource requirements (Rumata & Sastrosubroto, 2020). Given the limitation in accessing those factors, Indonesian e-commerce companies struggled to lead the competition in the domestic market when faced with multinational companies. In some cases, Indonesian e-commerce companies even have to merge with multinational companies in order to maximize their profit or even just to maintain their existence. This situation is intertwined with Gawer & Bonina’s (2024) analysis which conveyed that multinational companies, through their dominance, create their own competition authority in the domestic markets of developing countries. They practice anticompetitive traits, abuse of dominance, and to the extent to create a situation that forces local companies to merge with them.
In the Indonesian e-commerce market, the abuse of dominance can be seen from Shopee’s actions to monopolize the delivery services of goods sold in the Shopee platform. Cahyaningrum (2024) describes that the alleged monopoly is a form of violation to the Pasal 19 huruf d UU No. 5 Tahun 1999 & Pasal 25 ayat (1) huruf a UU No. 5 Tahun 1999. The Indonesian government then took action in this situation through the Komisi Pengawas Persaingan Usaha (KPPU).
Returning to Gawer & Bonina’s (2024) analysis, the issue of merger between multinational & local companies is illustrated in the merger between Tiktok and Tokopedia/GoTo. Analyzing the root causes, the merger of these two companies stems from the Minister of Trade Regulation No. 31 of 2023 which prohibits social media platforms to conduct direct trade transactions (Riani & Untoro, 2024). This regulation then led to the merger of Tiktok and Tokopedia in order to give Tiktok the status as social e-commerce that has a license to conduct trading (Riani & Untoro, 2024). However, this strategy has moved into a concern when 75% of Tokopedia’s shares have gone to Tiktok’s hand instead of the other way around. This situation has proven once again that Indonesian e-commerce companies are still unable to compete with multinational companies both in the domestic market or even within the company. Unlike the Shopee case which received government’s attention, the merger of Tiktok and Tokopedia has not received the same attention–probably due to the unpredicted negative impact of this strategy for the local company. The Indonesian government should have been able to protect local companies in this merger situation by regulating the ownership sharing regulations.
From the previous analysis, it could be concluded that the dynamics of competition between local and multinational e-commerce companies in Indonesia show the strong roots of economic dominance of developed countries over developing countries which have now emerged in the digital platform sector. It cannot be denied that multinational companies do promote economic development in Indonesia. However, at the same time, these economic gains are not able to get Indonesia out of the dependency trap on developed countries, nor do they bring local companies the strength to at least dominate the domestic market. All in all, government regulation plays a central role in maintaining the competition between multinational and local companies.
