The Indonesian government has put together a plan to merge nine state-run companies, including flag air carrier Garuda Indonesia, low-cost airline Citilink and companies that run major tourism sites.

The Indonesian government has put together a plan to merge nine state-run companies, including flag air carrier Garuda Indonesia, low-cost airline Citilink and companies that run major tourism sites. (Photo: Reuters)

The move is expected to allow the companies to eliminate unnecessary costs and work together on initiatives such as discount travel packages. It may also make it easier to direct public funds to Garuda, which fell into the red in the first six months of this year.

The idea has the backing of President Joko Widodo. In addition to the airlines, the new company will oversee firms operating in the tourism sector.

The goal of the integration is to create synergies among the state-owned enterprises. With airlines, airports and tourism companies operating under a holding company, the aim is to eliminate vertical barriers and enable them to offer cheaper travel packages to travellers.

The size of the holding company should also make it easier to secure financing from banks. There are also hopes that consolidating administrative departments create efficiencies.

The tourism and airline businesses are vital to Indonesia's economy. Widodo has wanted to integrate them for some time. "The headwinds in the travel industry provide a good opportunity to start integrating and transforming the tourism and aviation sectors," he said at a ministerial meeting on COVID-19 in early August.

Many observers believe the actual purpose of setting up the holding company is to shake up Garuda's management. Indonesia's flag carrier fell into the red in January to June, suffering a net loss of 723.26 million USD.

Indonesia has many tourism assets, including Bali, one of the world's top resorts. The industry accounted for about 5 percent of the country's gross domestic product (GDP) in 2019. GDP declined 5.32 percent in this year’s second quarter against a year earlier as the pandemic took a toll, the first time since 1999 that Indonesia's economy has contracted. Widodo hopes tourism will serve as a catalyst for an economic recovery.

Source: VNA