Bernardo M. Villegas
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Tourism the Next Growth Engine (Part 1)

          Slowly but surely, the tourism industry is becoming the third engine growth in the service sector, following remittances from Overseas Filipino Workers and the BPO-IT sector.  Tourism Secretary Wanda Teo recently announced that the figures for foreign visitors in the first two months of 2017 show encouraging signs that the target of 7 million foreign tourists for the whole of 2017 is attainable.  In January 2017, there were 631,639 arrivals while in February 2017 there were 579,178 foreign tourists, half of them from South Korea and the United States.  These figures for the first two months of the year already represent 17.30 per cent of the targeted 7 million visitors.  This is the good news.

         The not so good news is that the Philippines is way behind its neighbors in foreign tourism.  In 2016, for example, Thailand attracted 33 million foreign visitors, Malaysia 27 million, Singapore 16 million, Indonesia 12 million, Vietnam 10 million, and the Philippines, 6 million. These figures can be found in a detailed report on Philippine tourism issued by the CLSA think tank based in Hong Kong.  In a publication issued last February 2017 entitled “Mabuhay! Philippine tourism still full of potential”, analyst Jose-Paolo Fontanilla of CLSA analyzed the Philippine tourism industry and made projections for the next six years.  He painted a bright scenario, projecting that international tourist arrivals will grow at 16% annually for the next six years so that by 2022 total arrivals will break the 14 million mark.  Foreign exchange receipts by 2022 will account for 3.5% of GDP.  There is an upside in what is called Dutertenomics, i.e. if the massive infrastructure projects both from the government and private sector side (PPP) are actually implemented, the influx of foreign visitors could even be beyond expectations.  Note that a good number of the planned projects involve the improvements of airports in the major tourism destinations like Cebu, Bohol, Palawan, Iloilo, Bacolod, Davao and Cagayan de Oro.

         Also contributing to a positive outlook is the rebalancing strategy being followed by the Duterte Administration in shifting greater attention to our closer relations with our Northeast Asian neighbors such as China, South Korea, Japan and Taiwan, potential sources of increased tourism flows into the Philippines.  The CLSA study project Chinese tourists to the Philippines to pass the 4.5 million mark by 2022, which would still be half of Thailand’s Chinese visitors.  By that time China could account for 32% of the country’s tourist arrivals, surpassing South Korea as the Philippines’ top source of tourists, perhaps as early as 2019.  In fact, the one million mark of Chinese tourists to the Philippines may already be reached this year 2017.   There is a lot of room for growth for tourists from Japan, Singapore, Taiwan and Malaysia, as well as Australia and the United Kingdom.

         As a whole, international tourist arrivals can grow at the brisk rate of 16% annually (already keeping pace with the growth of the BPO-IT sector), compared to only 9% during the six years prior (2010-2016).   Total arrivals will reach 14 million tourists who will be contributing 3.5% to GDP by 2012, up from 2.4% in 2016.  Growth of per capita tourist spending will, however, grow only at about 8% annually because of the predominance of the Chinese tourists who typically spend only 60% of the total weighted average.  At these growth rates, inbound tourism suffers in comparison with the other growth engines of the Philippine economy, such as OFW remittances and the BPO-IT sectors.   Tourism also should include the more than 65 million domestic travelers, as estimated by the Department of Tourism.  If domestic tourism is included, the gross value added contributed by the tourism sector is already equivalent to 8.2% of GDP as of latest actual data in 2015.  The CSLA analysis expects this to reach 12.6 of GDP % by 2022.

         Even more important than its contribution to GDP is the employment generating potential of the tourism sector, especially in the countryside.  For example, the proliferation of bed and breakfast facilities in the rural areas of Palawan, Bicol, Southern Tagalog, Central and Eastern Visayas—catering especially to the more than 65 million domestic tourists—offer employment opportunities to the families of the households of farmers who are among the poorest in the Philippines.  As of 2015, the tourism sector was estimated to have a total employment of 5.0 million, representing about 12.7% of the global workforce in the country.  The Duterte Administration is targeting to bring this number up to 6.5 million by 2022, which would bring up the rate to 14.4% of total employees which is close to the employment rate of manufacturing today.   Of the total employed in the sector, the Accommodation and Food and Beverage sector accounts for 35%; passenger transport 36%; recreation, entertainment and cultural services 7%; retail trade on tourism-characteristic goods 6%; travel agencies and tour operators 1% and miscellaneous 15%. 

            Another study done by Anthony Nafte on January 16, 2017 entitled “Up, up and way:  ASEAN tourism” reported that tourism in the Philippines has still a lot of room to grow. Foreign and domestic tourism combined in the Philippines, together with indirect and induced sending, are already  contributing 10.6% to GDP as of 2016.   This still lags Thailand in which the Travel and Tourism (T&T) industry contributes 20.8% to GDP, followed by Vietnam at 13.9%, Malaysia at 13.1%.  Indonesia is the only one among its peers that has a lower contribution of 9.6%.   Mr. Nafte surmised that the Philippine T&T share of GDP could potentially double with stepped up investment being undertaken by industry stakeholders to be able to handle the potential surge of tourists from China and the rest of the world.  The report also identifies one upside for the Philippine T&T sector:  the retirement industry following the example of retirement havens like Spain.  A special visa for indefinite stay and multiple entries can be offered to retirees from ageing countries in Europe and especially Northeast Asia such as Japan, South Korea, Taiwan and Hong Kong.  The minimum age for a retiree visa could be set at 35.  Coupled with the retirement industry is medical tourism in which Thailand has led the way.  (To be continued).