The Impact of Aircraft Spare Parts Import Duty Exemption on the MRO Industry's Competitiveness and Its Services Export

Abstract

—This study aims to identify the impact of import duty exemption on aircraft spare parts on the competitiveness and service export of the Aircraft Maintenance, Reparation, and Overhaul (MRO) industry including factors affected MRO competitiveness. In addition, this study aims to identify the problems encountered during the implementation of the policy, the types of aircraft parts to be exempted and the criteria for products to be eligible for exemption from import duties. The method of this study used qualitative and quantitative descriptive analysis, Porter’s five-force model and Analytical Hierarchy Process (AHP). The results of the study showed that the import duty exemption policy increased MRO services from 30 percent to 49 percent during 2013-2017. Constraints in implementation are procedures and differences in customs areas where the longest is for bonded zones. Special customs policies for MROs as well as the exemption of import duties for goods related to MROs which 90 percent originating from imports will greatly encourage competitiveness which relies heavily on aircraft down time. The types of goods that need to be exempted from import duties are consumable and repairable groups in both new and non-new capital goods categories.