Inconsistent

EDITORIAL

Last month in Davao City, President Aquino told hoteliers at the Philippine MICE Conference that by 2016, when he hopes tourist arrivals will hit 10 million, the country will need an additional 37,000 rooms. MICE stands for meetings, incentives, conferences and exhibitions.

Days later, before the Euromoney Philippine Investment Forum in Makati, P-Noy repeated the invitation to invest, saying that the three priority sectors of his administration are agriculture, tourism and infrastructure.

In both events, P-Noy’s come-on to investors was the same: “We are offering competitive fiscal and non-fiscal incentives to tourism enterprises.”

Industry players are sighing that the President isn’t putting his money where his mouth is. Or else something keeps getting lost in translation between Malacañang and executive agencies.

P-Noy, when he was a senator, had voted for Senate Bill 2218. Consolidated with the House version, this became Republic Act 9593 or the Tourism Act of 2009, which recognized tourism as an engine of investment and economic growth.

Under RA 9593, the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) is tasked to designate Tourism Enterprise Zones (TEZs) where the government hopes to attract both local and foreign investors through fiscal and non-fiscal incentives.

The incentives can be granted only until 2019. But the incentives need implementing revenue regulations, which to this day have not been issued. So investors in the three designated TEZs, who have so far plunked in over P114.2 billion and paid over P3.38 million in requisite fees, are left hanging.

Last March 5, or two days before P-Noy’s speech at the MICE gathering, the Board of Investments (BOI) approved a resolution, limiting hotel developers in Metro Manila, Cebu City, Mactan Island and Boracay only to capital equipment incentives.

The BOI invoked the Omnibus Investment Code or Executive Order No 226 in restricting the grant of incentives. Covered by BOI Resolution 2013-001 are new investments in the four areas to set up or operate accommodation establishments “such as but not limited to hotels, resorts, apartment hotels, tourist inns, motels, pension houses, private homes for homestay, ecolodges, condotels, serviced apartments, and bed and breakfast facilities.”

This followed the approval on Nov. 13 last year by the Philippine Economic Zone Authority (PEZA) of its own resolution, which stopped the creation of new TEZs in Metro Manila, Cebu City, Mactan Island and Boracay.

The BOI order scrapped the five percent gross income tax incentive and income tax holiday offered to locator enterprises at TEZs in the four areas. Retained were the tax and duty-free importation and zero-VAT rating on local purchases of capital equipment.

Both the BOI and PEZA resolutions are not retroactive. The new PEZA guidelines were circulated to revenue officers last February.

The one who’s hurting is Tourism Secretary Ramon Jimenez, who needs to have his marketing pitches overseas backed by solid policies and action back home.

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In a memorandum to Malacañang dated last April 5, Jimenez noted that in luring tourism investments, one way for the country to compensate for inadequate infrastructure is to offer fiscal incentives.

“Changing the rules of the game at a point when the Philippines is still taking off from such efforts would not only render its campaign inutile but would also be detrimental to the credibility of the Philippines in the local and international community,” Jimenez wrote. “It would also adversely reflect on the rule of law and political stability in the country, and poses the country as a party to be dealt with caution or suspicion in future dealings, or worse, as a party not to be dealt with at all. Truth be told, it is more difficult to repair strained relations with investors than to attract investors.”

Jimenez wrote that the inconsistent policies could expose the government to legal action. Also, “they mar the very core of the Philippines’ good will and good faith.”

Since Jimenez is pitching for foreign direct investments, it might help his cause if he cited big-ticket tourism investments other than the three he mentioned in his memo that he said were adversely affected by the inaction on revenue regulations. One is a designated TEZ owned by the Iglesia Ni Cristo and the other belongs to the Araneta clan. Ordinary folks will agree that these investors can do without tax breaks. The third project is owned by the Filipino distributor of Konica and Minolta products.

But Jimenez does have a point in calling for consistent policies. Once the government offers an investment incentive, it should not be revoked midstream.

The Philippine Hotel Federation Inc. also expressed concern about the recent location restrictions, in a letter dated March 19 to Trade Undersecretary Adrian Cristobal Jr., BOI vice chairman and managing head.

Federation president Arthur Lopez cited the National Tourism Development Plan of the Department of Tourism, which estimated that the country has a current accommodation shortage of at least 2,000 rooms in Central Visayas alone and at least 1,600 in Metro Manila and the Calabarzon.

Lopez noted that the payback period for hotel investments averages 10 to15 years, making the returns lower than for other real estate classes.

He said there is “healthy competition” among hoteliers in the four newly restricted areas. But he added, “the Philippines is very far from attaining the quantity, quality and variety that our regional competitors, particularly Bangkok, Bali, Phuket, Singapore, Hong Kong and other Asian cities are able to offer.”

The federation emphasized that hotel expansion must be fast-tracked in preparation for the country’s hosting of the Asia-Pacific Economic Cooperation summit in 2015.

As Jimenez pointed out in his memo, at stake is the credibility of the country in delivering on its “mandates, promises and representations.”

Last week I asked a European expat why his compatriots preferred to visit Thailand, Indonesia and other Southeast Asian countries rather than the Philippines. The lack of direct flights to Europe is a major reason, he said. Also, they don’t like spending extra and traveling another four to five hours from Southeast Asian hubs to the Philippines “just to see the same palm trees and beaches.”

We need to do more if we want to get the word out that our attractions are worth those extra hours of air travel and expenses, that it truly is more fun in the Philippines, the expat said.

Jimenez is working to raise international awareness of the Philippines. Other agencies that play a role in tourism development must do their part.

Source: Ana Marie Pamintuan, The Philippine Star. 29 April 2013.