T

he government is on track to establish a special economic zone for companies involved in aircraft maintenance, repair and operations (MRO) services, after giving tax incentives in a bid to push forward the archipelago'€™s aviation industry.

Industry Minister Saleh Husin said the ministry was considering Bintan, Riau, to establish the special zone, as MRO facilities were already established there.

'€œThere are requests from the companies to focus on one place to develop the MRO services, so it can be integrated,'€ he said on the sidelines of the Singapore Airshow recently.

Saleh added that Bintan had a strategic position as many airlines went to nearby Singapore for
MRO. '€œWe know that Singapore has limited space and it can be expensive to have MRO services there. Why don'€™t we develop it in a nearby location like Bintan, so people can switch to having the services there?'€ he said.

The government is said to be in ongoing discussions with companies like GMF AeroAsia, national flag carrier Garuda Indonesia'€™s MRO service subsidiary, on its facilities in Bintan, as well as other companies.

Currently, GMF is developing a hangar in Bintan, which is being built in a joint venture with Bintan Aviation Investments, a subsidiary of Singapore-based Gallant Venture, dating back to 2014.

Gallant Venture has the concession to build an airport in the area, which is slated to operate by 2017, with the company providing land for the hangar development for GMF. The hangar is slated to have the capacity to contain wide-body aircraft such as Boeing 747 and Airbus 330.

Meanwhile, the country'€™s biggest low-cost carrier Lion Air Group has also established an MRO service at nearby Hang Nadim Airport in Batam, which is close to Bintan.

Saleh said companies establishing MRO facilities in Bintan would get incentives that were applicable to special economic zones, as stipulated in the economic package.

The incentives would include a tax holiday or tax allowance, according to Saleh, adding to the scrapping of taxes on aircraft components for the industry.

The aircraft MRO business is estimated to be worth US$1 billion per year, with Indonesian businesses currently taking up only 30 percent.

There are an estimated 60-70 aviation MRO companies in Indonesia, with GMF AeroAsia the only one certified by the European Aviation Safety Agency (EASA) and US Federal Aviation Administration (FAA).

GMF AeroAsia president director Richard Budihadianto said in an official statement that the expected total spending for MRO over the next five years would reach $32 million, with engine maintenance hitting $28 million worldwide, giving the opportunity for local MRO to access international markets.

Commenting on the plan, State-Owned Enterprises Minister Rini Soemarno said she had also pushed Garuda Indonesia to negotiate with aircraft manufacturers such as Boeing and Airbus to hand over the servicing of their aircraft to Garuda, as it had purchased plenty of their products.

GMF signed a deal with Netherlands airline KLM worth $3.5 million on aircraft components and engine maintenance on Wednesday. It was estimated to have signed deals worth more than $100 million during the Singapore Airshow.

Rini also said the government was mulling other places for the MRO service area, including Biak in West Papua, Makassar in South Sulawesi, Manado in North Sulawesi and Kualanamu in North Sumatra.

'€œBasically just the places that can be easily reached by foreign airlines for servicing,'€ she said, adding that the government planned to establish the area in two years.

The government would also need to prepare the human resources and technicians needed for the industry.

Meanwhile, Indonesian aircraft parts manufacturer Pudak Scientific'€™s director Andreas Wangsanegara said he understood that MRO companies should probably be concentrated in Bintan, though he called on the government to also develop a specialized aircraft parts manufacturing area on Java.