On January 27, the Joint Foreign Chambers (JFC) met with Department of Tourism (DOT) Secretary Alberto Lim at his office in Manila. This was the tenth of a series of meetings with key cabinet officials to present the recommendations of the JFC advocacy paper entitled “Arangkada Philippines 2010: A Business Perspective,” a copy of which was given to the secretary.
Henry Schumacher, Executive Vice President of ECCP, opened the meeting saying “as representatives of the foreign investment community we welcome this opportunity to discuss with you the barriers that prevent the rapid growth of tourism in the Philippines.” The Part 3 section on Tourism, Medical Travel, and Retirement has 34 recommendations—most gathered from a focus group discussion attended by foreign and local sector experts including the secretary himself—to improve the sector’s business climate.
The JFC expressed willingness to participate in the implementation of business reforms. For instance, in the planning and implementation of infrastructure projects, the involvement of business associations and non-government organizations is key to make the process faster and transparent. The JFC explained that local business associations have a key role in identifying important projects and ensuring that deals are made transparently. They recommended that the DOT form partnerships with local players in each of the tourist hubs to watch over infrastructure projects.
The JFC lauded the strategy of the Aquino administration to give priority to needed road infrastructure projects in tourism hubs.
The secretary reported that in the ASEAN Tourism Ministers meeting in Cambodia, the officials pledged to make ASEAN a regional tourism hub and to create a regional tourism development strategy, aimed at strengthening regional links, raising the quality of tourism products and services, increasing mobility through a common ASEAN visa that is comparable to the EU Schengen visa, increasing connectivity through the adoption of open skies policy in capital cities, and improving marketing strategies. The secretary explained that the government is working with GTZ in improving the quality and standard of tourism products and services.
The secretary expressed the need to improve the country’s marketing strategy despite the constraints in funding. He noted that more than half of the marketing budget is spent on attending the three key international travel shows: ITB Berlin Convention, World Travel Market in London, and the ASEAN Tourism Forum. The JFC noted the success of Thailand in attracting millions of tourists despite the occurrence of political crises such as the Red Shirt protests in mid-2010. “Their marketing campaigns must be very effective.”
Policy pronouncements of the new administration to implement an open skies policy have generated much interest among low cost carriers in the region. Singapore low-cost carrier Tiger Airways has partnered with SEAIR and will be flying to Macau and Hong Kong from Clark starting February. Jet Star and Air Asia are planning to expand their services to the country later this year. With a high demand for low-cost carriers, the Clark terminal should—in the medium term—be marketed as a budget terminal following the strategy implemented in Kuala Lumpur’s airport where the LCC terminal has more than 130 gates. The secretary replied that the Tourism Department is closely monitoring progress on the issuance of the Executive Order on open skies which President Aquino announced in November 2010.
The foreign chambers recommended that airport authorities of international gateways outside Clark should actively partner with tourist agencies in bringing in more low-cost carriers. For example, the international airports in Cebu, Davao, Iloilo, Laoag, and Puerto Princesa have existing capacity for more flights but little is being done to bring in more carriers. Clark has been very successful in increasing passenger movement from 7,880 passengers in 2003 to approximately 600,000 in 2009. This should be replicated by the other international gateways which need to be productive.
On the issue on the Common Carriers Tax and Gross Philippine Billings, the JFC recommends the reduction of airline taxes to make the country a cheaper destination and put off plans of foreign airlines to stop flights to the Philippines. The duties have made the country an unattractive market for foreign airlines, especially those which operate longer flights and therefore have higher ticket prices, in turn requiring them to pay more taxes. Foreign carrier service to Manila is much lower than comparable large Asian markets and risks further shrinking if tax reforms are not implemented. The secretary explained that the DOF is planning to negotiate bilateral agreements with countries where such airlines are headquartered to bring down airline taxes on a case-to-case basis. “It will have to be reciprocal.” Initial agreements should then be replicated and be a basis for further agreements.
Regarding the serious problem of Customs, Immigration, and Quarantine (CIQ) overtime charges, Secretary Lim explained that the Bureau of Customs has proposed that US$ 2 be deducted from the terminal fee to pay for the overtime of CIQ personnel. The secretary reported that the Finance Department will issue a department circular implementing this policy.
There is also the issue on the US Federal Aviation Administration downgrade of the Philippine aviation safety rating from Category 1 to Category 2 and a standing ban on Philippine carriers from flying to Europe—a result of the inability of the CAAP to enforce minimum international safety standards. The secretary ensured that highly-qualified personnel have been hired by the government to improve the country’s aviation safety standards.
The secretary justified the need to cater to the Meetings, Incentives, Conventions, and Exhibitions (MICE) market. There is increasing demand to hold conventions in the Philippines; however, existing facilities are extremely limited. There should be more investment in the building of large convention halls.
The department also plans to promote the country’s cultural heritage. Secretary Lim plans to further develop Intramuros by inviting investment in hotels, coffee shops, and restaurants and rehabilitating heritage sites such as churches. He explained his initial challenge is the transfer of thousands of informal settlers.
On the issuance of medical tourist visas, the JFC expressed concern on its 6-month and no extension limitations. “The visa should be valid as long as the medical condition requires.” This issue should be addressed before the new visa is announced to the public to avoid sending wrong signals to potential markets.
The JFC noted that the confiscation of the passports of more than a hundred Korean elementary school students was badly mishandled by immigration authorities. This incident made headlines in South Korea and damaged the image of the Philippines. The students had their passports seized by for taking English-language study courses without "special study permits." Secretary Lim said he will discuss this with the Bureau of Immigration.
The secretary also informed the JFC that the department has hired the respected firm Asia Pacific Tourism Training Institute to prepare an updated Tourism Master Plan. Principals of the firm prepared the UNDP Tourism Roadmap in the early 1990s.
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