Insights and Analysis

Better Air Connectivity Needed to Boost Tourism, Economy in the Philippines

August 24, 2011

By Lisa H. Kim

The news of Secretary of Tourism Alberto “Bertie” Lim’s resignation on August 12 disappointed many of his supporters, including allies in the aviation industry. Secretary Lim has strongly supported key aviation reforms aimed at boosting tourism in the Philippines. While some see policies such as “Pocket Open Skies” as harbingers of an enhanced tourism industry, critics point to the same reform as disastrous for domestic interests.

A plane readies for take off in the Philippines

As an archipelagic nation, the Philippines relies heavily on air transport. Tourism, touted as one of the nation’s major growth drivers, also  depends on the aviation industry.

Both camps, however, agree on the importance of air connectivity for the Philippine economy. As an archipelagic nation, the Philippines relies heavily on air transport for the movement of people and goods. Air connectivity links the country to global markets and to its Overseas Filipino Workers (OFWs), whose remittances contribute 11 percent of the country’s GDP and help sustain the economy. Seventy-two percent of total export earnings are from high-value commodities such as commercial crops, also transported via airways. And tourism, touted as one of the nation’s major growth drivers, depends on the aviation industry to shuttle tourists from one destination to another.

Despite its importance in the economy, the civil aviation industry has lagged for the past several decades – particularly compared to its ASEAN neighbors. Restrictive regulations and the sluggish pace of conducting bilateral Air Service Agreement (ASA) meetings have impeded rapid growth and expansion.

The majority of flights entering the country utilize the main international airport, Manila’s Ninoy Aquino International Airport (NAIA). This causes high congestion, resulting in frequent delays and higher airfares for passengers. The Philippines’ poor connectivity has been an inconvenience for both domestic and international tourists, putting a damper on the overall tourism industry. Along with the inconvenience caused by congestion is also the serious issue of safety. NAIA’s single runway has reached its saturation point due to the recent growth of domestic flight volume coupled with limited area for expansion.

Opening up secondary gateways through EO 29

Efforts at aviation reform extend as far back as the 1980s. The most recent is Executive Order (EO) 29, which was signed by President Aquino on March 14, 2011. More commonly known as the “Pocket Open Skies” policy, the executive order was issued in hopes of encouraging tourist arrivals to other parts of the country by allowing international carriers to service secondary gateways.

Previously, foreign carriers who wished to fly to gateways other than NAIA were granted these privileges only through the slow process of creating or amending bilateral ASAs. Between 1997 and 2006, there was an average of only one air traffic meeting per year. During these infrequent meetings, government officials determined seat entitlements for each country rather than letting market forces dictate supply and demand.

Foreign carriers could not easily expand services or provide new routes because of the restrictive regulatory environment. These limitations damaged prospects for growth and development for tourism in the Philippines. Fewer carriers or flight options means fewer tourists whose expenditures could greatly stimulate the economy.

A boost for tourism

Through EO 29, President Aquino intends to fully implement a previous executive order, EO 219, which liberalized the domestic airline industry in 1995. At a summit on Public-Private Partnership in Infrastructure in November last year, President Aquino confirmed his administration’s commitment to aviation reform: “Our national development requires promoting an open and competitive international aviation sector that enables Philippine and foreign air carriers to expand their operations, maintain a strong Philippine-based aviation industry, and ensure international connectivity in order to allow Philippine and foreign air carriers to plan and make long-term investments in the Philippine market.”

The Department of Tourism (DOT) pledged to double international tourist arrivals from 3 million to 6 million annually in order to generate $14 billion by the year 2016. EO 29 facilitates DOT’s ambitious plans and provides a much more investment-friendly regulatory environment for foreign carriers. During Secretary Lim’s term in office, the country saw an increase of visitors from 3.2 million visitors in 2009 to 3.52 million visitors in 2010. An influx of tourist arrivals will ignite growth through the creation of both direct and indirect jobs related to the tourism industry.

The impact of EO 29 for the average tourist means having the option to fly directly to various parts of the Philippines such as Cebu, located in the central region, or to Davao, in the southernmost island of Mindanao. Having access to these secondary gateways is one giant leap toward better connectivity, which will eventually translate to more competitive flight options and ticket prices for passengers, tourists, OFWs, and exporters. Opening up secondary gateways also presents a viable solution to NAIA’s problem of congestion and issues of safety.

The Philippines must continue to attract carriers to make use of these now readily accessible secondary gateways. Coupled with further development of these airports and the infrastructure of surrounding areas, the positive impact of increased air access for tourism, prices, investment, employment, and other matters of national interest will be unmistakable.

In the end, whether Alberto Lim’s resignation is a letdown or a victory may be beside the point. The task at hand is to continue improving air connectivity in order to benefit an enhanced tourism industry and boost the Philippine economy.

Lisa Kim is currently an intern at The Asia Foundation’s office in Manila, and is pursuing a master’s degree in Public Administration at Columbia University’s School of International and Public Affairs. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

Related locations: Philippines, Washington DC
Related programs: Inclusive Economic Growth


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