Bernardo M. Villegas
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Tourism: Next Engine of Growth

          The two engines of growth most responsible for the consumption-driven economy of the Philippines today are the remittances from overseas Filipinos and the earnings of the Business Process/Knowledge Process Outsourcing industries of today.  The former continues to grow at 3 to 5% annually, whatever happens to the global economy.  The latter is growing at double-digit rates of 15 to 18% and show no signs of slowing down in the next five to ten years.  In fact, the IT-related services are expected to surpass the OFWs in earnings in the next two years.  Together the two of them can account for as much as 25% of the Philippine GDP.  Some people are beginning to worry that we may be putting all of our eggs in the same baskets.  There is no question that we have to diversify our engines of growth.

           A recent report of the World Travel and Tourism Council (WTTC) gives a clue to another engine of growth that can take the slack of any of these two sectors if they begin to sputter.  Especially vulnerable are the voice-oriented BPO services that can be partly made obsolete by robotization and increased digitalization of information.  The millennials are no longer depending on voice to obtain information about products and services.  They are increasingly using their smart phones to answer all the questions that they may have.  Indeed, data from the Business Process Outsourcing Association of the Philippines show that the growth of voice-oriented BPO is less than that of non-voice Knowledge Process Outsourcing services such as medical transcription, animation, health management information, gaming, engineering and architectural services, etc.  Although we can assume that at least for the next five years, call centers will continue to employ more people and generate more foreign exchange earnings, we have to be ready to replace these earnings from another major sector of the service industry.  The most obvious candidate is tourism and travel.

          According to WTTC, the Philippine travel and tourism industry contributed in 2015 a total of P1.43 trillion or 10.6% to Philippine GDP.  This figure includes the multiplier effects of tourism and travel on investments, suppliers of goods and services, and induced income impacts.  This contribution is expected to grow by 6.6% in 2016 and can grow at an annual rate of 5.4% in the next years, leading to total earnings of P2.6 trillion by 2026.  As regards the direct contribution (those coming from hotels, travel agents, airlines, and other transport services) the figure in 2015 was P569 billion, representing 4.2% of GDP, growing by 6% in 2016 to P604 billion and by 5.3 annually in the next ten years, ballooning to P1 trillion by 2026.  The number of foreign tourists in 2016 is estimated to be 5.5 million and is extrapolated to grow yearly at 6.6% annually, hitting 9.19 million by 2026.  This expected demand will induce investments to grow from P76 billion in 2015 to P140 billion in 2026 registering an annual growth of 5.5%.  The sector generated 1.3 million jobs in 2015. This figure includes employment by hotels, travel agents, airlines and other transport services as well as restaurants, shopping centers, and leisure industries directly supported by tourists, whether foreign or domestic.  Such employment is projected to rise by 3.1% in 2016 and by 2.4% yearly in the next ten years so that by 2026, there will be 1.65 million jobs in the industry.

          I consider these forecasts of WTTC as conservative if the new Administration is able to do a much better job than the present one in implementing the numerous Public Private Partnership Projects (PPP) involving the construction of airports, railroads and other transport and communication infrastructures that will make our very attractive tourist destinations more accessible.  Although it would be great if we can attain the target of 10 million or more foreign tourists in the next five to ten years, it must be pointed out that there are already some 40 million domestic tourists who are discovering their own country and traveling with their whole families in tow.  These are not only the families of the ten million OFWs who are increasingly discovering Coron, San Vicente, Siquijor, Malapascua,  Camotes Island, Camiguin, and many other less known destinations.  These families include the 20 to 30 percent of the population who are already part of the middle class and are spending more on travel and leisure. 

          In a recent trip to Dubai, I was struck by an advertisement that appeared in “Open Skies,” monthly magazine of the Emirates Airline.  It announced that starting March 30, 2016, Emirates would begin a daily service to Cebu and Clark.  The advert lists a guide to the “idyllic beaches and vibrant city life of the Philippines.”  What would appeal to foreign tourists can also attract some of these 40 million Filipinos who are looking for travel destinations in their own country.  Let me quote from what Emirates highlights as the attractions of Cebu and Clark:  “South of the capital, the island of Cebu is the most populated in the Philippines, but is rich in cultural heritage while boasting of plenty of places to eat and an abundance of entertainment.  Cebu City is certainly the hub of these experiences, but the rest of the island is a mix of endless beautiful beaches and idyllic natural hideaways.  Head north to Bantayan or south to Moalboal where the crystal waters are perfect for diving or south to Panagsama Beach, where bars, restaurants and budget-friendly accommodation are available.  Clark is highlighted as a future gateway to the country and at the heart of Clark Freeport Zone.  Despite that positioning status, there’s far more to it than you might think.  Whether your’s after Duty Free Shopping or fine dining, fantastic hotel options or spa breaks, Clark has it all.  In the spirit of the country, it also embraces the outdoors, with hot air ballooning, sky-diving and natural hot springs all worth visiting while you’re there.” 

     Actually, the whole of Central Luzon can be developed as tourist destination also for domestic travelers once the next Administration has the common sense to declare Clark as the new International Airport and endow it with the necessary infrastructures for connectivity to all points in the Archipelago. I am glad to note that Ayala Land, the leading real estate in the country, is already casting its lot with Central Luzon by buying some 200 hectares of land in the lahar-enhanced town of Porac, Pampanga.  I am sure many other real estate and resort developers will follow suit.  Central Luzon is also the gateway to the many attractive tourist destinations of La Union (already the surfing capital of the Philippines) and the Ilocos region.  Objectively, one of the outstanding accomplishments of the Marcos clan (Bongbong, Imee, and Imelda) is to transform Ilocos Norte into a tourism paradise for travelers from China, Taiwan and Hong Kong.

          The next Administration has its job cut out for it in the area of transport and communication.  Through much closer coordination among the three relevant departments, i.e. Department of Transport and Communication, Department of Public Works and Highways and the Department of Tourism, the travel and tourism industry can actually surpass OFW remittances and the IT-BPM sectors as the number one engine of growth.  Thousands of small and medium-scale enterprises will mushroom around this industry, such as restaurants, bed-and-breakfast facilities, beach and other leisure resorts, golf and other sports centers, museums and other cultural attractions , transport services such as Uber and Grab Taxi, etc.  It is about time that the Philippines joins its ASEAN neighbors in making tourism a most dynamic sector for inducing the growth of income and employment.  For comments, my email address is bernaro.villegas@uap.asia.