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The Importance of Infrastructure and Tourism Development

2 February 2009

Privilege Speech of Rep. Ferdinand Marcos Jr.
Batasang Session Hall
House of Representatives

Mr. Speaker,
My Colleagues in the House of Representatives,
Ladies and Gentlemen:

On this first occasion for me to address the House this year, let me begin by wishing one and all a prosperous new year, even if there are more reasons for anxiety than optimism about prospects for the future.
Amidst all the talk of crisis and gloom in the world economic situation today, I am reminded of what the old folks used to say about tidal waves in our part of the Pacific.

They said that when a tidal wave hits, there are basically three responses. First are the people who say, “I’ve seen it all before.” They do nothing and are drowned.

Second are those who say, “I’m getting out of here,” and they hide and seldom have homes to come home to.
And then, third, are those who say, “This is a tidal wave, I better learn to surf tidal waves.”
Today, Mr. Speaker, I would like to discuss how we Filipinos can surf “the tidal wave” now engulfing the world economy – since it would be disastrous if we do nothing, and neither can we hide from it.
From all that has already happened, this much we know. The crisis now gripping the US, Europe and Japan – and spreading into the emerging economies – is the worst the world has known since the Great Depression in 1929. It has arisen from an era of profound irresponsibility in Wall Street, corporate boardrooms and the halls of power in the world’s biggest economies. And it will not blow away overnight or even years.
As President Obama has summed it up: “Executives who should have known better made imprudent and dangerous decisions, seeking profits with too little regard for risk, too little regulatory scrutiny, and too little accountability. Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn’t afford. Politicians spent taxpayer money without wisdom or discipline, and too often focused on scoring political points instead of the problems they were sent to solve. The result has been a devastating loss of trust and confidence in [economies, financial markets, and governments].”
The words sound as though developing countries in Asia and Latin America were the ones being admonished. But it is the high and the mighty of global capitalism who are stricken. And it is not a pretty sight.
Some may relish the thought of how the mighty have fallen from their pedestal. But you soon realize that the crisis affects us all. In the age of globalization, the ordeal of the West is also our headache. We can neither ignore nor hide from the tidal wave. We have to surf it too.

Stimulus, Resiliency or Pump-priming?
It is in this light, Mr. Speaker, that the Administration has proposed – and Congress is cooperating – in the passage of a P300-billion “Economic Stimulus Package”, or Economic Resiliency Plan as Economic Planning Secretary Ralph Recto prefers to call it.
There is a quibble about names because strictly speaking the term “economic stimulus” refers to the use of fiscal policy -- government spending or tax measures -- to revive an economy in recession. Our economy is not in recession. Far from it. It grew by 4.6% last year, and should grow again this year – though probably more slowly.
But whatever we call it – stimulus, resiliency plan or pump-priming -- the aim is the same: to boost economic activity during a period of economic weakness by increasing short-term aggregate demand. The theory is that if more goods and services are being bought, economic activity will go on and there is less chance that falling demand will lead companies to lay off workers.

We will not get into the debate now raging in the US whether a fiscal stimulus is more effective than monetary policy in dealing with the current crisis, or whether the Obama package can really get the job done. We have our own challenge to face. And this we must focus on.

The idea of producing our own stimulus package to cope with the crisis is welcome and sensible. But I will quickly add that it will only work if the plan is sound and the priorities are right. We must allocate the resources to the right projects -- and ensure that the money is not frittered away in the trough of corruption and greed.

Understandably, because of the corruption scandals that have marked our recent history, many in both houses of Congress are concerned that the Stimulus fund will be emaciated by kickbacks, ghost projects and overpricing.

I share their concern. And I say that it should be fully addressed before a single peso of stimulus is ever spent.

But after acknowledging the need for caution and prudence, let us also be clear that inaction is not an option here. As with the tidal wave, we could drown if we do not appreciate the danger -- or if we hide from the challenge before the nation.
This is the time for us to act – when our economy and the nation are strong and stable, when we have the resources to make major public investments to strengthen the economy, and when we can effectively cushion the social impact of the global crisis.
This time of challenge can also be a time of opportunity for us. From our position of stability, we can use this period to upgrade national capacity, sharpen our competitive edge and strengthen our position in the global economy – such that when the crisis passes two or three years hence, we can be a serious player in the world.
What then should be our priorities? What are the areas that offer the greatest opportunities for us? And how can we shield ourselves from the global crisis?

I am frankly quite confused in the way the Stimulus Package has been presented by the NEDA and some members of the Senate. You would think, from the way it has been played up in the media, that the P300-billion package represents a clear chunk of the P1.415-trillion budget – distinct from the regular appropriations to the different departments. Yet when Secretary Recto presented it to the media it was one confusing train. There was no clarity in both the projects and the numbers.

He talked of upgrading infrastructure, saving and creating jobs, protecting the poorest of the poor, stimulating the exports sector, enhancing competitiveness, etcetera – but he did not spell out how much goes to what specific program, and how they all add up and cohere into a strategy for economic strengthening.

One is left with the feeling that there is really no distinct P300-billion stimulus fund. Some just got carried away by all the talk about massive stimulus plans in other countries and thought we should also have our own.

But that said and all spinning aside, I believe we have a 2009 national budget that provides major pump-priming of the economy and support for social services. And we in Congress need to ensure that our road map through the crisis is coherent and that we will reach our destination. The devil, as they say, is in the details.

It is in this light that I want to highlight two major priorities that should be at the top of our stimulus agenda -- if we truly want to stimulate economic activity, create new jobs to cushion our people from the crisis, and strengthen our position for the inevitable rebound in coming years.

Modernizing Infrastructure

The first of these priorities is the modernization of infrastructure in our country. Everyone got it right that this is a must in order to create jobs and stimulate the domestic economy. What is not clear is what kind of infrastructure we should be spending on in order to get the biggest bang from every peso.

The NEDA talks about government accelerating spending for “fast, off-the-shelf infrastructure which has simple engineering requirements and no right-of-way problems.” I don’t know about you but that sounds to me a little troubling.

What kind of infrastructure can arise from very simple engineering? Will it help to close the huge “infrastructure gap” that has kept our country behind in the development race with our Asian neighbors?

Although job creation is one reason for putting infrastructure development in the stimulus plan, there should be no doubt about our primary objective here. It is to build necessary and modern infrastructure that will serve the economy and our people long into the future.

As the World Bank has described it in its World Development Report, “Infrastructure is the wheel of development.” Without infrastructure you can get nowhere.

Over the last two decades we have been hobbled by the failure to plan infrastructure development in a comprehensive way so as to answer real needs at both national and local levels. The tingi and small-time mentality has diverted our attention away from major projects to minor ones. And when we did venture into major projects like NAIA 3, the nation oftentimes got stuck with a grossly overpriced and graft-ridden deal.

Whenever any of us visits our Asian neighbors, we know quickly how huge is the gap between our infrastructure and theirs. Upon arrival at their airport terminals, you are reduced to awe at how modern and spunky they all look compared to ours. During the drive to the city, you marvel at their fine highways and the way the traffic moves so smoothly; and you wonder why in Metro Manila it is such a struggle to move anywhere under Gov. Bayani Fernando’s Metro Gwapo program. And when you venture from their capitals to their countryside, you are silently envy their road systems and you wonder how they got it right while we got it wrong.

It is time, Mr. Speaker, to address seriously and purposively the poor quality of our infrastructure and bring it up to par with the modern world. We cannot close the gap overnight. But the effort must begin now – with every policy, every program and every peso we put into infrastructure development.

Since we do not have the money to spend on everything, obviously we have to prioritize public spending on infrastructure. The list of needs is long – road systems, airports, ports, transport systems, sewage facilities, water supply systems, electrical installations, and other infrastructures vital to growth and quality of life. Therefore we need a coherent plan of action.

The government owes it to Congress and the nation to explain how public money will be spent and on what projects. I would hope that projects are chosen in terms of how they can best boost the economy and help the most people, not on the basis of their proponents and their properties.

It is also important that the infrastructure gap between the metropolis and the countryside is seriously addressed and lowered. We in this chamber have a big stake in this because too often many of our regions are subordinated to the claims of imperial Manila and the bigger cities. In order to strengthen the domestic economy, the stimulus plan must reach out to all. Otherwise it will fail.

Finally, it is imperative that we root out once and for all the malpractices infesting our public works system and bureaucracy that have earned the scorn of the World Bank and the international community, and damaged our international image severely.

Let us stop pretending that when our country is tagged as one of the most corrupt in Asia and the world, the shame sticks only to a few rotten apples in the barrel. The barrel itself is under indictment and that includes all of us.

It is our collective responsibility – of Congress no less than the Executive, of civil society no less than the media – to wipe away this shame. Unless we end the system of patronage, bid-rigging and kickbacks in our public works system, our infrastructure will always be backward and inadequate. The nation will never get the full worth of its money invested in infrastructure.

The sad and bitter irony is that we who are strapped for funds get only 60 centavos out of every peso spent on infrastructure. The other 40 go to kickbacks, predatory pricing and other malpractices in the system. Our oversight and regulatory mechanisms are simply not working. They have been captured or defected to the enemy.

This is why there is so much public cynicism and distrust of government and public officials in our country today. There is cynicism about the integrity of officials. And there is cynicism that the culture of corruption can ever be stopped.

Mr. Speaker, in addition therefore to the stimulus that we put into infrastructure development, we should demand a new culture of honesty and fair-dealing from our public works program. Let us demand more from contractors and government departments in the building of modern infrastructure for the nation. Let us send a message to all private entities that want to build infrastructure in our country that they can operate in a level playing field and under the rule of law.

The infrastructure component of the 2009 budget should not be just another public works program. It should not aimed only for the short term. It should rather be the first of many instalments for the infrastructure of a modern 21st century economy.

Tourism Development

As important as infrastructure development in boosting the economy is the aggressive development of Philippine tourism during this time of crisis and uncertainty.

I know what some will immediately say – that at this time of global slowdown, there will be fewer people travelling so we should not expect more tourists to be visiting us this year.

My answer is this:

First, regardless of the slowdown in the West, tourism will remain a major global industry, accounting for one out of every 9 jobs and 11% of consumer spending. In 2008, tourism arrivals totaled 924 million, a growth of 2% over 2007 despite the second half slowdown. In 2009, the World Tourism Organization projects either modest growth or at worst a standstill.

At its first meeting this year – last January 28 in Madrid – the WTO Tourism Resilience Committee declared that tourism can play a major role in stimulus programs because of “its immense capacity for creating jobs and its recovery potential.”

Tourism in short will be at the cutting edge of the global economy this year.

Second, the challenge to us is how to get a greater share of the tourist traffic of over 900 million this year. The area of greatest tourism traffic growth today is the Asia Pacific, which has been growing by 13% in recent years. By getting a good portion of this traffic, we can make up for any shortfall in tourists from the US and Europe.

From the estimated 3.5 million tourists we received last year, we can aim for 3.8 to 4 million arrivals this year. If Malaysia can get 18 million, Thailand 14 million and Singapore 10 million from the traffic, why can’t we aspire to get 4 million this year?

Third, infrastructure development naturally complements tourism development like hand in glove. As we develop airports, roads, ports and transport systems, so do we increase the carrying capacity of our country for both domestic and international tourism. It makes perfect sense to kill these two birds with one stone – spend our infrastructure money in such a way that tourism will benefit.

Fourth, tourism is a major jobs generator as a labor-intensive industry. Today, the travel and tourism industry – with 1.4 million jobs -- accounts for 4.1% of jobs in the economy. But this can be substantially increased to as much as 10% percent of employment – the global average -- if we fulfill the promise and potential of our tourism.

Fifth, tourism is a major dollar earner, and every dollar we earn from tourism is classified as exports in the country’s book of accounts. Last year, tourism receipts totaled over $4 billion. We earn on average $880 from every tourist visitor. At this time therefore when our export earnings are contracting because of the economic slowdown in the West, tourism can help make up for the shortfall if we increase the number of arrivals.

Sixth, tourism benefits all regions and provinces once they are integrated by adequate infrastructure into the loop of tourism development. I know this like the palm of my hand because I have been governor and now am representative of Ilocos Norte, where tourism is an indispensable source of income and jobs.

Seventh, domestic tourism complements international tourism in our tourism industry. The domestic component is estimated to be much larger than the international one. When you combine the two together, they represent a major contribution to our economy. At this time therefore when government policy seeks to encourage consumer spending, highlighting tourism makes a lot of economic sense.

In a study undertaken by McKinsey some years ago, the consultancy firm projected tourism as a major driver of growth in the Philippine economy if only we will focus on what has to be done. With strategic investments in the sector and careful attention to what we can offer the tourist, McKinsey said that we could achieve 5 million tourists a year in no time, and that from there on we could reach the high end of global tourism.

Sadly, Mr. Speaker, we could not heed that study because of lack of resources and different priorities for public spending. Today I say it’s time we take up the challenge.

I submit that tourism is deserving of a stimulus package as any other sector in the government’s priority list. It is a mistake that we only allocated P1.2 billion to tourism in the national budget when it can contribute so much more to economic growth and national development.

In advocating intensive tourism development during this period of global uncertainty, I am not just pushing for better infrastructure and more hotel accommodations. I am batting for a comprehensive program to upgrade our tourism facilities and services so that we can finally compete in this vital global industry. That program should include more affordable packages for tourists, better facilities, better security and a totally improved tourism experience for everyone who visits our country.

Both the promise and the failings of Philippine tourism were starkly brought home by a Chinese tour operator who visited me a few years ago. She told me: “I can bring one million tourists to the Philippines. But can you provide for them? Can you offer good competitive prices for their travel? Can you ensure their safety?”

Sadly, I could not answer her affirmatively on all her questions, Mr. Speaker.

The reality is: Demand outpaces supply in our travel and tourism industry. More people want to come here than we can handle – because of the inadequate number of flights, rooms and facilities available. Our carrying capacity for tourism stands at the lower end of the scale. And our prices are still too high to seriously compete among the tourism giants.

We have much to learn from what Thailand did with its tourism at the start of the Asian economic crisis in 1997 – a crisis which began incidentally on its shores. In the face of the collapse of its financial system and real estate market, and the massive contraction of its economy, Thailand made a key decision to use tourism as a weapon to get back on its feet. With Amazing Thailand as its banner, it consecrated itself to a multi-pronged program to turn itself into a top tourist destination in the world and enable tourism to contribute to national income in a big way.

Today, just a decade later, Thai tourism accounts for nearly 7 percent of Thailand’s GDP. Thailand is the 18th most visited country in the world with 14 million tourists annually. (France is first with over 79 million tourists.) The average stay of tourists is 9.19 days. Thai cuisine is now ranked as one of the top five in the world. And the country competes in nearly every tourism category – from beaches to wellness to shopping to adventure tourism and whatever.

I do not see why we cannot do the same – the same focus, the same dedication, the same no-nonsense attitude to always reach for more than what had been achieved before.

To the credit of our tourism program today and Secretary Ace Durano, tourist arrivals and receipts have been steadily growing over the past four years. Last year, visitor arrivals reached 3.5 million – a new record. Average stay was 8.9 days. In terms of tourism receipts, it is estimated that receipts exceeded $4 billion.

Even more encouraging, there was visitor growth from every region last year, with Asia and Europe leading the way. Major increases in arrivals came from China, Korea, Taiwan, Hong Kong, Singapore, Vietnam, Russia, Scandinavia, Australia and Canada. The prognosis is that these markets will continue to increase this year, regardless of the crisis.

The point is that the total world tourist traffic is huge and we are getting only a small share of it so far. Even if the traffic volume were to contract this year because of the crisis, it’s no big deal for us to keep or increase our market share if we put together the right package. That is the lesson of every country that has aggressively developed its tourism.

Investing in tourism now is sound because it can boost the economy by generating jobs, increasing foreign exchange income, spreading benefits to the countryside, and enable us to become more competitive in this vital global industry.

If we focus on both transformative reform and capacity building, we can take Philippine tourism to a new plane as McKinsey has suggested. As we improve infrastructure and facilities, we will transform the total service and image we present to the world.

When we learn to exploit tourism, instead of exploiting the tourist, the real dividends will come. Tourism will become “a gift that keeps on giving” to our country.

Not Temporary Relief, But Long-term Gains

There are other initiatives, Mr. Speaker, that are eminently worthy of support in the stimulus program, particularly those concerning the school building program and social services. What I have discussed here are just two programs that can contribute immensely to a successful pump-priming effort. They can boost the economy during this period of contraction in the biggest economies of the world. And more significant, they provide not just temporary relief but long-term gains for the nation.

Infrastructure development is vital because it will expand capacity in our economy and fill a major gap that has kept us backward. By moving aggressively to modernize our infrastructure, we start the indispensable process of national modernization. It will catalyze private investments and trade in the economy. It will create demand in the domestic economy.

Tourism development is equally important because it is a natural beneficiary of infrastructure development and it can contribute substantially to GDP. When government moves aggressively to develop tourism, private investments in the industry will follow. Tourism is a potent generator of jobs. It has positive downstream effects on other industries. And it is the perfect industry for the natural resources we have and the hospitable people we are.

By linking our investments and efforts in these two sectors together, we will get more value from every peso in the stimulus plan.

In these two sectors, our investments will not go toward building a bigger bureaucracy. The jobs will be created in the private sector. It is not government that will expand but economic capacity and activity.

In these sectors where we have lagged so far behind other countries, the challenge is to focus our efforts on filling needs and closing gaps. Let us finally start meeting global standards in both infrastructure and tourism. Standing pat on what we have will not do.

To those who think that catching up in infrastructure and tourism development is beyond our capacity as a nation, let me just remind you of a fairly recent success story in our country.

Just over a decade ago, during the presidency of President Ramos, the biggest joke was our telecommunications system. Lee Kuan Yew visited Manila and he chuckled at the perennial complaint of Filipinos at the time: our biggest problem after getting a PLDT line was getting a dial tone. No one then thought that we would ever catch up with the world despite the deregulation of telecommunications in the country.

Yet with the advent of wireless telecommunications in the ‘90s, the Philippines leapfrogged into the modern world in just a few years. Today more than half of our people have cellphones. We have one of the most modern telecommunications system in the world. And no one is more adept at using texting than we Filipinos.

I see the same thing happening in infrastructure and tourism if we make a singleminded commitment to catch up. Modern technologies are perennially coming up with new ways for doing and building things. Travel is becoming easier and faster. Who would have thought that some of the most travelled people in the world today would be Filipinos?

All it takes is a decision to pursue a new course towards the future – and the resolve never to stop until goals and objectives are won.

We should not wait until 2010 to make this commitment. We can start the process now -- through the Economic Stimulus Package.

Thank you, Mr. Speaker.

International Tourism Challenged by Deteriorating World Economy
Madrid, 27 January 2009

• In 2008, international tourist arrivals reached 924 million, up 16 million over 2007, representing a growth of 2%.
• Tourism demand slowed significantly through the year under the influence of an extremely volatile world economy (financial crisis, commodity and oil price rises, sharp exchange rate fluctuations), undermining both consumer and business confidence and resulting in the current global economic recession.
• The second half of 2008 saw growth come to a standstill with the number of international arrivals declining slightly – a trend which is expected to continue in 2009.

Weakening Overall Demand
The overall 2% growth in international tourism for 2008 builds on the strong results of the first part of the year before the collapse of the financial markets. The second half of the year showed an abrupt shift in trend with international tourist arrivals flat or showing negative growth in each of the last six months of 2008. Overall, the 5% growth between January and June gave way to a 1% decline in the second half of the year. Though certainly not immune to the economic woes, tourism has initially resisted the economic downturn better than other economic sectors, such as construction, real estate or car manufacturing.

As the current troubled economic scenario is expected to continue well into 2009 and probably beyond, UNWTO’s initial forecast for this year is for an even more modest performance. According to the January 2009 issue of the UNWTO World Tourism Barometer, international tourism is expected to stagnate or even decline slightly during the year. But, there is still a high degree of uncertainty and much will depend on the evolving economic conditions. If the economy starts to show signs of an earlier recovery, international tourism might grow slightly in 2009 but, if the economy deteriorates further, then the current forecast might be revised downwards.

Given the global uncertainty and with economic forecasts experiencing continued downward revisions, UNWTO will closely monitor developments to provide the most accurate analysis possible.

Mixed results by region in 2008

For the year as a whole, all regions were positive except Europe, which suffered a stagnation in arrivals. The best performances were registered in the Middle East (+11%), Africa (+5%) and the Americas (+4%) – in the case of the Americas, due to the strength of traffic to the USA up to August and the favourable performance of most Central and Southern American destinations.

Growth was negative in the last six months of 2008 in both Europe (-3%) and Asia (-3%). The drop is even more significant in Asia given its double digit growth in 2007 and strong showing in the first part of 2008 (+6%). On the other hand, the Americas (+1%), Africa (+4%) and the Middle East (+5%) still posted positive results in the second half of the year, although with a significant slowdown compared with the period between January and June.

Despite the general deceleration, in 2008 several destinations around the world showed very positive results in all world regions, - notably Honduras, Nicaragua, Panama, Uruguay, the Republic of Korea, Macao (China), Indonesia, India, Egypt, Lebanon, Jordan, Morocco and Turkey.

These results reflect international tourist arrivals only, for which comprehensive data is currently available. For domestic tourism, which is highly important for many destinations, UNWTO expects that it will show a more or less similar slowing trend. Results for international tourism receipts will be presented in a later stage. However, the experience of past years suggests that the growth of receipts tends to follow fairly closely that of arrivals.

2009 Outlook linked to Global Economic Performance

The slowdown in advanced economies, which are facing a contraction in gross domestic product for the first time since World War II, is already spreading to major emerging markets such as China, India, and Brazil.

UNWTO expects 2009 international tourism to be in the range of 0% to a 2% decline. Along with the Americas, Europe will be the most affected region in terms of overall tourism results as most of its source markets are already in, or entering into, recession. In Asia and the Pacific results are expected to be positive, although growth will continue to be much slower compared with the region’s performance in recent years; the same applies to Africa and the Middle East.

Notwithstanding this assessment, UNWTO highlights the fact that the softening of international tourism growth follows four historically strong years:
• +7% a year on average between 2004 and 2007, or well above the 4% long-term trend;
• 2008, with an increase of 2% based on a strong first half performance.

UNWTO’s response

History proves that crises can also provide opportunity because they call for substantial efforts and industry solidarity. Moreover, if short term crisis actions can be aligned with the continuing longer term global poverty and climate needs, the overall industry structure may actually be strengthened.

Against this background, UNWTO is increasing its response efforts to provide the sector, and its Members in particular, with the necessary support to help them endure these challenging times.UNWTO will focus on three interrelated initiatives:
• Supporting the sector’s immediate response through its recently established Tourism Resilience Committee to strengthen market intelligence and best practice sharing.
• Advocating tourism’s priority inclusion in general economic stimulation measures.
• Advancing tourism in the new Green Economy as a sector that can deliver on smart growth, intelligent infrastructure and clean energy jobs.

Our message will continue to be that this is a highly resilient sector that will return to strong growth when the overall economic crisis abates and one that can contribute more than others to poverty alleviation, climate response and a Green New Deal.