SINGAPORE/JAKARTA (Reuters) - Indonesian online retailer Bilna spent two years looking for a chief technology officer before it finally discovered Ridy Lie, who had returned home after eight years with Amazon in the United States.

Employees work at their desks at Mediatrac, a data analytics start up company in Jakarta, Indonesia, April 13, 2016. REUTERS/Darren Whiteside

Until Lie, the company had struggled to find someone who could “take us to the next level,” said Eka Himawan, group chief financial officer at the company, which was renamed Orami after a merger this year.

“He is the one who is guiding (the engineers) and telling them: this is how the things are done in Amazon and this is how we should do it,” Himawan said.

Even as internet giants like Alibaba and SoftBank are making major investments in startups heavily exposed to Indonesia, recruitment of talented executives is proving to be a huge drag on the country’s technology sector.

Indonesia is the most populous country in a region where 3.8 million internet users are coming online every month. A recent report by Google and Singaporean state fund Temasek [TEM.UL] estimated that Southeast Asia needed to attract investment worth $40-50 billion in sectors such as ecommerce over the next decade to potentially become a $200 billion internet economy, with Indonesia poised to receive a big chunk.

But the tech talent needed to drive such growth is scarce, the result mainly of shortcomings in Indonesia’s education system, a lack of experience and the low salaries on offer compared with those available in the United States.

Highly skilled workers account for only about 10 percent of total employment in the archipelago of 250 million people, the lowest ratio of any major Southeast Asian nation, according to the World Economic Forum.

“I would say it definitely means things grow slower. If I compare a startup in Indonesia with startups in some other places, they will tend to be less on the cutting edge of technology, less efficient,” said Vinnie Lauria, a founding partner at Singapore-based Golden Gate Ventures.

Some investors are offshoring tech work to fill the talent gap as they seek to grow startups. So far, however, no private Indonesian tech firm has reached a valuation of more than $1 billion, compared with more than 20 in China.

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“The solution of last resort is to solve the problem out of the country,” Adrian Vanzyl, CEO of Thailand-based Ardent Capital, told Reuters in April.

Ardent has invested in Thai logistics firm aCommerce, which has engineers in Indonesia but leaves “a lot of the core platform development” to staff in Thailand, he said.

Another creative work-around is a fly-in-fly-out approach to get people with specialized knowledge to advise local startups on a temporary basis.

“Spend three or six months ... to help the company scale,” Chua Kee Lock, chief executive at Vertex Venture Holdings, part of Temasek, told Reuters.

HURDLES AHEAD

Skills shortages are only one of many challenges startups and technology investors face in Indonesia. Others range from difficulties in finding materials for training engineers to poor logistics and frequent policy flipflops.

When Jakarta’s taxi drivers protested violently against ride-hailing apps like Grab and Uber in April, the government bowed to pressure and forced the tech firms to partner with local transportation companies.

The government is also trying to pursue back-taxes from Yahoo and Twitter, and has ordered companies that deliver content over the internet to establish Indonesian offices and pay Indonesian taxes.

Indonesia ranks 109 out of 189 countries in terms of ease of doing business, according to a World Bank Study, below neighbors such as Singapore, Malaysia, Thailand and Vietnam.

But for startups and their investors, the talent shortage is the biggest headache.

“Getting good people is tough. The education system is mismatched - what’s taught in university isn’t much in use at work,” said Lie, who worked in a development engineering team at Amazon before joining Orami.

The government plans to tackle the skills shortage by putting coding on the public school curriculum and through knowledge transfers from foreign investors.

“There is plenty of capital available ... and Indonesia is exploding on every possible level,” said Vanzyl at Ardent.

“Why are things growing less fast than they can? The answer is talent shortage. That is the number one factor.”