Project Background and Overview

The Philippines Government identifies the competitiveness of industry and services as a core component of the Philippine Development Plan, 2011–2016. Its agenda includes creating a better business environment. The Government and the private sector identified tourism for longer term development based on recent sector growth performance, job creation possibilities across the archipelago, and positive externalities to other sectors.

Tourism directly and indirectly employs more than 3.7 million; many of these jobs are outside the main urban centers of Manila and Cebu. Employment through community-based tourism projects has also been growing rapidly. Employment and incomes generated through tourism help families escape poverty.

Against this backdrop the Asian Development Bank (ADB) is providing technical assistance (TA) to the Philippines Government through the Department of Tourism (DOT) to improve competitiveness in tourism through interventions to support a regulatory review, raise service standards, and develop skills in the sector. This technical assistance will be provided to DOT through the’ Improving Competitiveness in Tourism Project’.

The Philippines Government through the Department of Tourism (DOT) has embarked on a development strategy designed to increase the number of international tourists, employment and income generating opportunities for its citizens. The vehicle for this is the National Tourism Development Plan (NTDP) 2011-2016 which has been endorsed and is now in operation. The NTDP shifts away from the traditional approach of public provisioning of services to the sector and towards greater private sector participation.

Thus, key features of the plan include: (a) recommended adoption of a public-private partnership (PPP) framework for quality assurance and accreditation of hotels and resorts; (b) a PPP in tourism industry skills development and funding; and (c) a regulatory review of the sector; among other interventions.

Employers in the tourism sector have identified a consistent skills mismatch of new entrants to the tourism sector including those graduating from institutions and those seeking employment as new entrants to the labor market. The Philippines Government has identified that this shortage of skilled labor is negatively impacting on its international competitiveness in the tourism sector. At the same time, projections are that the demand for skilled labor will continue to rise with new hotel and gaming developments projected to develop over 7500 rooms within the next 3 years in Manila alone, which will equate to increased employment opportunities.

The ‘Improving Competitiveness in Tourism Project’ (the “Project”), aims to improve the relevance of vocational and higher education courses, primarily through establishing more effective linkages between industry and Institutions, and secondly by involving Industry in the provision of the education where possible. Industry will provide the ‘demand’ for labor, which should then be ‘supplied’ by institutions through the provision of tailored programs suitable in terms of content, quality, cost, timing, availability and acceptance by Industry.

This is to be achieved through a number of strategies including more formal linkages between Industry and Institutions, and developing models of teacher return to industry programs (and eventually teacher / Industry exchange). Industry will then have more ‘ownership and input’ of education programs to produce suitable graduates.

The focus is on developing and delivering shorter length courses (less than 12 months) with clusters of skills being taught, in additional to having a lengthy practical component supported by a well-managed on the job training program. Using a more effective institution/industry strategy should also include using skilled and experienced industry staff conducting practical assessment as part of the on the job component.

This should assist to produce a competitive labor market, characterized by an increase in skills of job seekers. The pathway should also become seamless from graduate to effective employee in Industry.

5 Graduates of post-secondary education providers in the Philippines will be in much greater demand from employers if they have better quality skills which they can demonstrate effectively in the workplace. Whilst there is currently an oversupply of graduates from post-secondary institutions, the major contributing factor is that the skills that the graduates hold, are not accepted by employers as being of sufficiently high standard. Indeed, many employers re-train employees after they have been engaged in employment.

Skills in the sector are also embodied in services standards of tourism providers such as hotels and resorts. Implementing a world class hotel and resorts accreditation system that signals quality benchmarked against internationally recognized standards is critical for improving competitiveness of the sector. It can also drive skills development in the sector. The DOT has drafted new standards and is piloting these standards. The Project will assist DOT with the pilot.

The 2011 World Economic Forum Tourism and Travel Competitiveness Index ranks the Philippines 98^th out of 139 countries in its regulatory framework. The cost of doing business in the sector is a major contributor to Philippines low ranking in the sector. The DOT has launched a review of regulations affecting the tourism sector starting with establishing the framework for regulatory impact assessments (RIA). The Project will assist DOT roll out the RIA program.

The impact of the Project is to increase employment in the tourism sector as one critical channel for achieving inclusive growth. This will be measured by an increase in employment above the long term average growth rate (the long term average growth rate is approximately 3.5% per annum, estimated from 2000 to 2010). The outcome of the project is an improvement in the competitiveness of the Philippines tourism sector. This will be measured by an improvement in the ranking of the World Economic Forum’s global tourism and travel competitiveness index by at least 15 places from its 2011 baseline ranking of 98^th in the world.