This is a re-posted opinion piece.
Between 2010 and 2014, the International Air Transport Association (IATA) sees a Southeast Asian country emerging as one of the world’s top 10 markets for air travel.
The country is not, sorry to say, the Philippines, but Indonesia, which IATA expects to be the sixth-fastest growing market for international travel in the next three years.
At a projected compound annual growth rate of 9.3 percent, that translates to 22.7 million international passengers by 2014. Indonesia is also expected to be the ninth-largest domestic market for air travel by that year, hitting 38.9 million passengers at an annual growth rate of 8.7 percent.
Last year, Jakarta’s Soekarno-Hatta International Airport handled 43 million passengers — nearly double its intended capacity. But Indonesia is expected to finish a new terminal by 2013.
In comparison, the Ninoy Aquino International Airport handled 27.1 million passengers last year. It can be argued that Indonesia is several times larger than the Philippines so its passenger traffic should be bigger than ours.
Also, NAIA already has an unused, not-so-new terminal. But the continuing legal wrangling over this terminal will keep the Philippines from being one of the region’s top markets for air travel in the near future.
Foreign airlines can’t be expected either to put in a good word for the Philippines. By the end of October, the last of the European carriers still operating direct flights to and from the Philippines, KLM Royal Dutch Airlines, will cut its daily flights from Manila to just six days a week.
The seven-day schedule will be restored in April next year for the summer traffic, but that month will also mark the end of KLM’s direct flights between Manila and Europe.
Sources in the investment community told me that henceforth, all KLM flights between Europe and Manila must make a stop in Hong Kong.
With the end of long-haul direct flights to Europe, KLM crew will also no longer stay for a night or two in Manila, usually at the Sofitel Philippine Plaza because of its accessibility to the NAIA. At an average of 30 rooms daily, that’s a hotel occupancy loss of about 11,000 nights a year.
KLM, which marks its 60th year of operations in the Philippines on Dec. 5, reached this decision after being informed that effective Nov. 1, the Philippine government would slap a value-added tax (VAT) of 12 percent on airline crew accommodations. Additional fees will also be levied soon on excess baggage, mail and other cargo.
This is on top of the common carrier tax that has been the main beef of KLM for some time, which foreign airlines cannot pass on to passengers. The Bureau of Internal Revenue has brushed aside the complaints.
Over 20 foreign carriers plus Philippine Airlines and Cebu Pacific also lost this week another battle, with the Supreme Court ruling that the carriers should double the overtime pay and allowances of Bureau of Customs personnel at the NAIA.
The carriers, belonging to the Board of Airline Representatives, have long argued that the Philippine government should shoulder all personnel expenses at Customs, and naturally opposed the doubling of the pay. In October last year, the Court of Appeals declared the Customs administrative order unconstitutional. The Supreme Court overturned the CA ruling this week.
Customs and the Department of Finance will reap millions of pesos in annual savings from the SC ruling. But what the country loses in terms of investor goodwill must be factored in by policy makers.
The Philippines may be open for business under new management, but it has not dispelled the perception that “we’re not very welcome here,” a foreign investor grumbled.
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While business optimism remains high, thanks largely to the clean image of President Aquino and his efforts to level the investment playing field, it’s pretty clear that major investors are either proceeding with utmost caution or not proceeding at all.
That $15-million coconut juice investment, while welcome, is, admit it, not much to crow about, especially because it had been in the works long before P-Noy’s latest visit to the United States.
Now that P-Noy has caught the travel bug (the Middle East and Europe next year), I guess he has fallen into his predecessors’ routine of justifying foreign trips by citing the amount of investment deals signed, committed or even mentioned in passing during the visit. Returning from Japan, he touted $1.4 billion in investment commitments. That must be from his meetings with executives of four Japanese companies, among them Toyota and Marubeni whose promise was to expand operations here.
As in the US where he didn’t address business groups, P-Noy didn’t meet with Japan’s business federation to pitch the Philippines as an investment destination. Maybe he thought such meetings useless since the two countries are in recession. Or maybe he didn’t want to be asked for specifics on what the new management was doing to improve the Philippine business climate.
Judging from the response to his flagship public-private partnerships (PPP) program, investors so far have been largely underwhelmed.
Critics have started saying PPP means nothing more than “PowerPoint presentations.”
The tepid or cautious response to the PPP must have prompted Transport and Communications Secretary Mar Roxas to say recently that the government will tap official development assistance (ODA) to finance several major infrastructure projects including airports and light rail systems.
Investors read the statement to mean that about four or five PPP projects presented to them by Roxas’ predecessor Jose de Jesus in November last year, during a meeting at the Marriott hotel, had been taken out of the PPP list.
This again smacks of policy instability that could add to the misgivings of investors, but perhaps Roxas could clarify things.
Investors are in fact waiting for the government to start the bidding for the extensions of the Light Rail Transit 1 and 2.
An investor pointed out to me that successful PPP projects require hard work, not ODA or unsolicited bids. And the impression is that the government is not prepared for the needed work.
At this rate, we won’t be able to catch up with our better performing neighbors.
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By: Ana Marie Pamintuan – Sketches
Source: The Philippine Star, Sept. 30, 2011
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