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Thursday, February 9, 2012

Philippine foreign tourism - Promising but still behind

CROSSROADS (Toward Philippine Economic and Social Progress)
Philippine foreign tourism - Promising but still behind
By Gerardo P. Sicat

Selling the country as a tourist destination has been in the news for some time. At last, the Tourism Department claims that it has found the magic taglines: “It’s more fun in the Philippines.”

Those words invoke whatever pleasant experience one might imagine about the country, perhaps “sun, beaches, natural beauty, historic churches, golf courses and water sports, retirement, medical treatment and hospitality, or unique and unspoiled way of life.”

“Our lag in foreign tourism.” Much progress has been achieved in the Philippine tourism industry. The industry is maturing. The Development Plan estimates that on average, tourism revenues account for six percent of the GDP. Visitor arrivals have been growing by an average of eight percent per year in recent years.

But visitor arrivals in the country have been overtaken by Vietnam in a short time. And Cambodia has been catching up on us quickly. Decades ago, our neighbors Malaysia, Thailand and Indonesia have just left us farther behind. Visitor arrivals in the Philippines are less than half of tourists to Indonesia and only 20 percent of those to Thailand.

“Generating high demand.” Advertising promotion as a way of raising demand for Philippine tourism is important. The aim of taglines is to condition the tourist to conjure images that are pleasant.

It is one thing to raise demand, but another to provide the required supply of tourist services. Efforts to improve policies when they are lacking can make wonders. The “open skies” policy which brought in more tourist air carriers to the country has raised the level of tourist arrivals. Still more hard work is needed.

“Creating the supply of services.” If the idea of fun involves a Philippine tourism experience as one of them, the idea of by-passing Manila as a tourist destination is a good idea.

The move to transfer the main tourist gateway of the country to the Diosdado Macapagal International Airport at Clark is a good move. This move has to be supported by finishing the construction of medium sized airports in the islands where tourism is being directed to ferry traffic from the gateway and other urban centers in the country.

That has to be accompanied by building good hotel facilities – world class for great impact – along which smaller hotel facilities for budget travelers. More private risk capital is needed to get invested in these and other ancillary facilities.

“Lessons from the past: Cebu experience. Cebu’s growth as a tourist destination happened by accident, not by immediate design. During the Vietnam War, the facilities of Cebu received a major expansion because the Mactan airport in the little island off Cebu was built.

Initially, the airport was too large for domestic traffic. When larger aircrafts and foreign jet landings were allowed in the Mactan airport, domestic and foreign tourism boomed. It helped that the Mactan Export Processing Zone was also established and that brought in additional business demand for hotels as well.

When some of the properties in Mactan Island were developed for tourism with the entry of name hotel establishments, the capacity for a larger intake of new tourists became even more possible. Eventually, Cebu’s tourism growth led toward greater awareness by international visitors of the charms of Bohol and other neighboring islands. (But note that many tourist hotels funded by government in Cebu have also failed as a warning.)

The new tourist traffic did not intrude into the highly congested city proper in Cebu City. They did not get ensnared into unpleasant urban blight and overstressed and limited city infrastructure that is the Cebu metropolitan experience. This is the kind of suffering that tourist visitors to Manila complain about.

Boracay experience. That Boracay’s beach is fantastic and experiencing it is idyllic is without question. The island is now world famous and deserves to be so. It grew essentially as a result initially of domestic tourist traffic, but it has evolved into one also attracting foreigners. But it is a small island and it has a limited capacity for future growth.

Reaching Boracay from any destination in the country is not an easy experience, though it has its charms. This was by small airplanes from Manila or by adventurous, long land and sea journey now with ro-ro.

A large tourism estate with big hotels and pleasurable facilities on the Caticlan side – which is charming by itself and which is on the Panay island – would expand and elevate the tourism value of Boracay. But no one thought of it because that would have involved big foreign investment dollars.

For this to happen, a large airport in the island of Panay that can bring it international class traffic would have been required.

“Supply of services: Hotels, airports and foreign investments.” Here,the country’s business climate has a lot to explain why we have not reached the scale of development of tourism that we see happening in Pattaya and Phuket in Thailand, in Bali in Indonesia, or in Penang in Malaysia.

It takes an enormously long time before our country could settle its underlying foreign investments issues. Even today, we have hangups that are fundamentally hindering the natural progress of the tourism sector as much as it has hindered progress in industrial and agricultural development in the country.

“Protection” has been the name of the game involving the tourism sector for years. It began with protection for the national airlines. For years many sectors have urged “open skies.” What we got, becausethe lobby of the local airline industry has been very strong, was open skies with many qualifications.

Luckily, the government has now implemented “open skies”. The initial results in new tourist traffic are encouraging, and it is only the beginning. But many features of the tourism investment climate still has to improve.

“Protection” has also been strong in the regulations and practices surrounding the support industries of the tourism sector. Foreign tourist group operators still are unable to participate as fully in theindustry because many activities and services still have to pass the“filters” of protective regulations that limit marketing tourism activities.

The classic problem has been in the hotel business itself. Many regulations have prevented the presence of the big foreign hotelinvestors for years. A major impediment here has been the constitutional provision against land ownership and the equity restrictions pertaining to land in corporations. Associated businesses tied up to these provisions have impeded a vibrant growth of the tourist sector over the years.

The idea of “tourism estates” now embodied in the Philippine Tourism Act of 2009 (R.A. 9993). This new law adopts the export processing zone approach to the industrial economic development which has been successful in the country.

These enterprises should be underwritten by private risk capital and not by the government financial institutions. They should find foreign or experienced domestic partners in the business in underwriting their capital.

The entry of more capable players in the tourism industry, including foreign risk capital experienced in the business, will assure larger inflows of foreign tourists, especially the moneyed kind, if targeted well under the concept.

Countries with more open rules concerning the participation of foreign capital in the tourism sector have moved far ahead of us. Look at tourism in Singapore, Hong Kong, Thailand, Malaysia and Indonesia. And examine what is now happening in Vietnam. With the progress of tourism, everyone, including those who seek protection from foreign competition, actually enjoy higher incomes and larger businesses.

My email is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/

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