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Tuesday, September 18, 2012

Tourism: It’s the infrastructure, Philippines

By RICARDO SALUDO

Ric Saludo’s CenSEI colleague Jerome Balinton contributed this column

In his third State of the Nation Address, President Benigno Aquino 3rd reported 2.1 million tourist arrivals in the first half of 2012, with the Department of Tourism aiming to boost that figure to 4.6 million by the end of 2012 and 10 million by 2016.

The Philippines has certainly improved in international arrivals over the last three years. Based on the UN World Tourism Organization’s Tourism Highlights 2012 Edition, the Philippines had 3.9 million arrivals last year, up from 3 million in 2009 and 3.5 million in 2010.

Despite the country’s positive figures, however, it still trails other countries in the Southeast Asia region. In terms of 2011 international tourist arrivals, it trailed Malaysia (24.7 million), Thailand (19.1 million), Singapore (10.4 million), Indonesia (7.7 million), and Vietnam (6.0 million), and was ahead of only Cambodia (2.9 million), Myanmar (0.4 million), and Brunei Darussalam (0.24 million).

Resources and reforms needed. But for the 2016 target of 10 million tourists, substantial resources and reforms are a must. In its “Asean Travel & Tourism Competitiveness Report 2012,” released in May, the World Economic Forum (WEF) ranked the Philippines 94th out of 139 countries in its global travel and tourism competitiveness index (TTCI) based on 14 pillars.

In Asean, the Philippines ranked seventh among eight countries. On a scale of 1 to 7 on the 14 pillars, the Philippines was “average-to-worst” in terms of air and ground transport infrastructures (2.8), tourism and ICT infrastructures (2.6 and 2.5, respectively), natural and cultural resources (3.3 and 2.2, respectively), and health and hygiene (3.8).

The country was rated “average-to-best” in policy rules and regulations (4.4), environment sustainability (4.2), safety and security (4.1), prioritization of travel and tourism (4.5), price competitiveness (5.2), human resources (4.7), and affinity for travel and tourism (4.6).

In rating Asean countries, the WEF report classified them into four groups: “Singapore is in a league of its own, leading Asean in all but two pillars of the TTCI. Second, Malaysia and Thailand do well, despite a few weaknesses. The third group consists of Vietnam, Indonesia, and Brunei Darussalam, which all display very wide performance swings. Finally, both the Philippines and Cambodia present serious shortcomings in most pillars.”

According to project manager Thierry Geiger, “Physical infrastructure plays a critical role in promoting economic development, inclusive growth, and regional integration, by improving a country’s productivity, connectivity, accessibility, and attractiveness. Yet, infrastructure represents one of the biggest challenges faced by Asean countries, owing to years of under-investments and a lack of planning in the context of rapid economic growth.”

Aviation is key. The importance of infrastructure is highlighted in a 2001 study from the UN Economic and Social Commission for Asia and the Pacific. “Promotion of Investment in Tourism Infrastructure” listed among suggested measures for a favorable atmosphere for investment in tourism infrastructure in the Philippines: “The government should eliminate barriers to infrastructure development by increasing access and incentives for airport development, modernization of air traffic control systems and structure, the improvement of highways and roads, and the development of parks, beaches, and convention facilities.”

According to the study, availability of international air access is one of the controlling factors of the nature and magnitude of the international visitor market.

In 2007, the US Federal Aviation Administration (FAA) downgraded the Philippines from Category 1 to Category 2, after identifying 88 significant safety concerns. This led to preventing Philippine carriers from adding new routes to the US Meanwhile, in 2010, the 27-nation European Union, restricted Philippine-registered carriers from flying in its airspace for failure to comply with international safety standards.

In late January, an FAA technical review still found 23 significant safety concerns. At the same time, a presidential spokesperson acknowledged that the country’s aviation status was keeping it from fully promoting tourism.

President Aquino remains upbeat. “Tourism is very important to the Philippines. We have paid particular attention to road and air infrastructure and the implementation of the Pocket Open Skies Policy which eases restrictions on foreign airlines, allowing them to land in international airports around the Philippines and opening up the country to more foreign visitors,” he said in a UN WTO report on Global Leaders for Tourism.

In July, the Chief Executive told the 7th Consuls-General and Tourism Directors Tour that the policy has already generated almost a 15 percent increase in incoming and outgoing flights to the country from January to June 2012. The Pocket Open Skies Policy was instituted by an Aquino executive order in March 2011.

But the inability to provide gateways for international flights remains a major impediment to the growth of tourism. The Philippines is “internationally poorly connected,” summed up economist Roy van der Weide in his 2010 paper for the World Bank, “Philippine Tourism: A Small Sized Sector.”

Not just poor airports. Van der Weide identifies infrastructure constraints to tourism development as below-par international and domestic airports, poor ground transport services, and lack of adequate accommodations. While van der Weide thinks Clark has the space needed to make it a modern-day international airport, he notes it is located almost two hours away from Manila, and that travel time could easily get longer without the necessary investment in the ground infrastructure.

(Excerpt from The CenSEI Report on tourism constraints. For a free copy with in-depth studies, data and other online research, email report@censeisolutions.comThis email address is being protected from spambots. You need JavaScript enabled to view it. .)

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