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Jofie Yordan · · 5 min readJakarta: no longer the city to rule them all?
As the capital of Indonesia, Jakarta is the hub of the country’s tech ecosystem.
However, high labor costs are becoming a burden for startups fighting to achieve profitability, particularly amid pressure from the tech winter. This has led many to consider ways to make their operations more efficient.
In August, Shopee relocated its customer operations team from Jakarta to Solo and Yogyakarta, cities located around 500 kilometers from Indonesia’s capital. The ecommerce firm said it had been preparing for the move over the past year.
Nailul Huda, the director of digital economy at the research firm Celios, believes this is an effort by Shopee to reduce its costs, given that the minimum wage in Solo and Yogyakarta is lower than in Jakarta.
Besides Shopee, several other startups also have offices in either of these cities. Tokopedia, Sirclo, Privy, and Dagangan are some of them.
With a strong talent pool outside Jakarta, especially in Yogyakarta, this makes moving some operations away from the capital all the more reasonable. Still, companies need to make some considerations before they take the plunge.
Cutting costs
In Indonesia, salaries for startup employees are indeed higher compared to those who work outside the tech sector.
A study by Glints and Monk’s Hill Ventures found that fresh graduates in junior software engineering roles at Indonesian startups can earn US$300 to US$1,000 per month.
After gaining a few years of experience, this can increase to US$1,400 to US$2,800. These figures are much higher compared to civil servant salaries, for example, which range from about 2.6 million rupiah (US$169) to 4.8 million rupiah (US$315) per month.
Huda explains to Tech in Asia that the high salaries compel startups to be more efficient.
However, the option to move operations to cities like Yogyakarta and Solo has become attractive, considering the cost of living in those cities is also much more affordable compared to Jakarta.
“Earning 4 million rupiah in Jakarta might not be enough for daily living, but it could be sufficient in Solo and Yogyakarta,” Huda adds.
Salaries are one of the largest expenses for tech companies. So, having part of the team in cities outside of Jakarta can mean much lighter costs, which is a crucial factor for startups in the throes of the tech winter.
Finding talent
Is it necessary?
More to follow?
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The capital’s higher salaries and cost of living have some firms like Shopee and Tokopedia opening offices in other cities.
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