AAGGEENNCCYY BBUUDDGGEETT NNOOTTEESS

DEPARTMENT OF TOURISM (FOR FY 2016)

PREPARED BY THE

CONGRESSIONAL POLICY AND BUDGET RESEARCH DEPARTMENT

HOUSE OF REPRESENTATIVES

AUGUST 2015

1

Department of Tourism1

I. MANDATE AND ORGANIZATIONAL OUTCOMES

1.1 Mandate. The Tourism Act of 2009 (Republic Act No. 9593) mandates the Department of

Tourism (DOT) to be the primary planning, programming, coordinating, implementing and

regulatory government agency in the development and promotion of the tourism industry,

both domestic and international, in coordination with its attached agencies and other

government institutions. The DOT shall instill in the Filipino the industry’s fundamental

importance in the generation of employment, investment and foreign exchange.

1.2 Organizational Outcome. The 2015 GAA identifies the organizational outcome of the

DOT as “Tourism Revenue, Employment and Arrivals Increased”. The following key

strategies are identified: (i) Develop competitive tourist products and destinations; (ii)

Improve market access, connectivity and destination infrastructure; and (iii) Improve tourism

institutional governance and human resources.

1.3 Attached Agencies. The DOT has two attached agencies: the Intramuros Administration

which is responsible for the orderly restoration and development of Intramuros as a

monument to the Hispanic period of Philippine history, and the National Parks Development

Committee which is mandated to develop, preserve and manage parks in the country such as

Rizal and Paco Parks in Manila and the Pook ni Maria Makiling Forest Park in Los Banos,

Laguna.

II. BUDGET ALLOCATION

2.1 Total Budget. The proposed budget of the DOT for 2016 will grow by 44.2% to P3.6

billion from P2.5 billion in 2015. As a percentage of the total national government budget, it

will increase from 0.10% in 2015 to 0.12% in 2016.

2.2 The budget of the Office of the Secretary (OSEC) and the two attached agencies -

Intramuros Administration (IA) and National Parks Development Corporation (NPDC) -

will get a higher allocations in 2016 relative to 2015. The OSEC budget which accounts for

92.1% of the total DOT budget will grow by 28.8% to almost P3 billion from P2.3 billion

this year. The budget of the IA will increase by more than 10 times to P446.1 million from

P41.1 million in 2015. After declining by 33.8% in 2015, the NPDC budget will increase by

35.5% in 2016 to P213.6 million but still lower than the P238 million budget in 2014.

1 This document was prepared by Rosemarie R. Sawali as an input to the deliberations of the House Committee on Appropriations on

the FY 2015 proposed National Budget. The report benefitted from the inputs of Director Manuel P. Aquino and from the overall

guidance of Acting Director-General Romulo E. M. Miral, Jr. The views, opinions and interpretations in this document do not

necessarily reflect the perspectives of the House of Representatives as an institution or its individual Members.

2

TABLE 1 ALLOCATION BY DEPARTMENT/AGENCY, 2014-2016

(AMOUNTS IN MILLION PESOS)

Particulars Levels Share to Total (%) Growth Rate (%)

2014 2015 2016 2014 2015 2016 14-15 15-16

OSEC

1,737.7

2,307.2

2,953.5

86.4

92.1

81.7

32.8

28.0

IA

36.2

41.1

446.1

1.8

1.6

12.3

13.5

986.3

NPDC

238.0

157.7

213.6

11.8

6.3

5.9

(33.8)

35.5

TOTAL

2,011.9

2,505.9

3,613.1

100.0

100.0

100.0

24.6

44.2

Source of basic data: Budget of Expenditures and Sources of Financing (BESF) 2016

2.1 The DOT has other source of funds in achieving its goals through the budgetary support to

the Tourism Promotion Board (TPB) which is responsible for marketing and promoting the

Philippines domestically and internationally as a major tourism destination. The TPB will get

P1.64 billion budget in 2016, only P10 million higher than its budget in 2015. (Please refer to

Annex 1 for additional information on TPB.)

2.2 Budget by Type of Expenditure. The increase in the total DOT budget in 2016 will come

from higher allocation for Personnel Services (PS), maintenance and other operating

expenses (MOOE) and capital outlay (CO). The largest share of the budget is accounted for

by MOOE at P2.7 billion or 76.0% of the total DOT budget in 2016.

2.3 After declining in 2015, the budget for PS and CO will both increase in 2016. The budget

for PS which amounts to P400 million in 2016 is 17.2% higher than the P340.9 million in

2015. The budget for CO will significantly increase to P465 million in 2016. This can be

traced to the CO budget of the IA of P410 million which is intended for the preservation of

cultural properties under their MFO 1 on Intramuros Property Conservation and Preservation

Services.

2.4 Meanwhile, the budget for financial expenses, which includes management

supervision/trusteeship fees, interest expenses, guarantee fees, bank charges, commitment

fees and other financial charges incurred in owning or borrowing an asset property, will

remain unchanged at P1.5 million.

2.5 Staffing Summary. In 2015, the DOT has a total of 890 permanent positions of which 604

are in the OSEC, 227 in NPDC and 59 in IA. For the period 2013-2015, the number of

unfilled position is steadily increasing from 167 in 2013 to 179 in 2015 or an increase from

18.8% to 20.1% of the total available position.

3

TABLE 2

ALLOCATION BY EXPENSE CLASS, 2014-2016

(AMOUNTS IN MILLION PESOS)

Particulars Levels Share to Total (%) Growth Rate (%)

2014 2015 2016 2014 2015 2016 14-15 15-16

OSEC

PS 344.6 266.0 320.9 19.8 11.5 10.9 -22.8 20.6

MOOE 1286.9 2039.5 2626.9 74.1 88.4 88.9 58.5 28.8

CO 104.3 0.2 4.2 6.0 0.0 0.1 -99.8 2205.6

Financial Expenses 1.9 1.5 1.5 0.1 0.1 0.1 -18.2 0.0

Sub-Total 1737.7 2307.2 2953.5 100.0 100.0 100.0 32.8 28.0

IA

PS 22.0 21.9 21.8 60.9 53.4 4.9 -0.4 -0.8

MOOE 14.2 19.1 14.3 39.1 46.6 3.2 35.1 -25.2

CO 0.0 0.0 410.0 0.0 0.0 91.9 - -

Sub-Total 36.2 41.1 446.1 100.0 100.0 100.0 13.5 986.3

NPDC

PS 57.8 53.0 56.9 24.3 33.6 26.6 -8.4 7.4

MOOE 103.1 104.7 105.7 43.3 66.4 49.5 1.5 1.0

CO 77.1 0.0 51.0 32.4 0.0 23.9 - -

Sub-Total 238.0 157.7 213.6 100.0 100.0 100.0 -33.8 35.5

Total DOT

PS 424.5 340.9 399.6 21.1 13.6 11.1 -19.7 17.2

MOOE 1404.2 2163.3 2746.9 69.8 86.3 76.0 54.1 27.0

CO 181.4 0.2 465.1 9.0 0.0 12.9 -99.9 258297.2

Financial Expenses 1.9 1.5 1.5 0.1 0.1 0.0 -18.2 0.0

Total 2011.9 2505.9 3613.1 100.0 100.0 100.0 24.6 44.2

Source of basic data: BESF 2016

TABLE 3 UNFILLED POSITIONS, 2013-2015

Particulars

2013 2014 2015

Total Positions

Unfilled Total Positions

Unfilled Total Positions

Unfilled

Number % Number % Number %

OSEC 604 132 21.9 604 139 23.0 604 142 23.5

IA 59 15 25.4 59 16 27.1 59 16 27.1

NPDC 227 20 8.8 227 21 9.3 227 21 9.3

TOTAL 890 167 18.8 890 176 19.8 890 179 20.1

Source of basic data: Staffing Summary 2015 and NEP 2016

2.6 OSEC Programs and Projects. The new appropriations of the OSEC will reach almost

P3 billion in 2016, 28.4% higher than the P2.3 billion appropriations in 2014. Both

programs and projects will get higher new appropriations for 2016 with the former growing

by 5.8% and the latter by 91.7%. All the three programs of the OSEC will get higher

4

allocation in 2016. The growth in the budget for operations which constitutes the bulk of

the total budget at 38.5% will slow down to 3.0% in 2016 after growing by 62.8% in 2015.

2.7 The OSEC has identified two major final outputs (MFOs). The increase in the budget for

MFO 1 (Tourism Advisory Services) will modestly increase by 1.3% in 2016 to P930.6

million from P918.8 million in 2015. This is comparatively lower than the 631.1% increase in

2015 due to the transfer of the allocation for Grassroots Participatory Budgeting projects

(GPB) from MFO2. Activities under MFO1 include Tourism Development Planning,

Industry Training and Market and Product Development.

2.8 The budget for MFO 2 (Tourism Regulatory Services) will be almost P200 million in 2016,

11.9% higher than the P177.8 million budget in 2015. Identified activities under MFO 2 are

Tourism Standards Development, Regulation and Accreditation. The creation of an Office

of Tourism Standards and Regulations is provided under RA 9593 due to the recognition of

the need to adhere to international competitive standards of facilities and services.

TABLE 4

DOT OFFICE OF THE SECRETARY

PROGRAMS, ACTIVITIES AND PROJECTS BY MFO (AMOUNTS IN MILLION PESOS)

Particulars Levels Share to Total (%) Growth Rate (%)

2014 2015 2016 2014 2015 2016 14-15 15-16

General Administration & Support 204.6 279.4 329.3 11.9 12.2 11.2 36.6 17.8

Support to Operations 264.8 310.2 326.1 15.5 13.6 11.1 17.2 5.1

Operations 673.7 1,096.6 1,129.5 39.3 48.0 38.5 62.8 3.0

MFO 1: Tourism Advisory Services 125.7 918.8 930.6 7.3 40.2 31.7 631.1 1.3

MFO 2: Tourism Regulatory Service 548.1 177.8 198.9 32.0 7.8 6.8 -67.6 11.9

Total Programs and Activities 1,143.1 1,686.3 1,784.9 66.7 73.8 60.8 47.5 5.8

Total Projects 570.0 600.0 1,150.0 33.3 26.2 39.2 5.3 91.7

Total New Appropriations 1,713.1 2,286.3 2,934.9 100.0 100.0 100.0 33.5 28.4

Source of basic data: GAA 2014 and 2015, NEP 2016

2.9 The allocation for projects, on the other hand, will almost double to P1.2 billion in 2016

from P600 million in 2015. The tourism development project is called the Branding

Campaign Program - - “It’s More Fun in the Philippines” - which started in 2013 with a

budget of P1 billion. The DOT revitalized the campaign program by declaring 2015 as “Visit

the Philippines Year”. A dedicated website was created which contains the various events

that are scheduled this year.

5

III. SPECIAL PROVISION

3.1 The Special Provisions of the 2016 National Expenditure Program identified other sources

of funds for the DOT as follows:

3.1.1 Tourism Development Fund of P4.6 million which will be used for the development,

promotion and marketing of tourism in the country. This fund will be sourced from

accreditation, identification card, sticker and code fees as provided under Section 16

of R.A. No. 9593.

3.1.2 Income from Merchandising Operations of P150 million from the net profit of the

Duty Free Philippines. This will be used for tourism-related projects and activities.

3.2 Another provision indicates that P196.7 million appropriated for Tourism Advisory Services

and Tourism Regulatory Services will be used for Bottom-Up Budgeting (BuB) Projects.

IV. BUDGET UTILIZATION

4.1 Appropriations and Obligations. In addition to the new appropriations, there are other

sources of funds such as automatic and continuing appropriations and budgetary

adjustments. These sources of funds significantly contributed to the available budget for the

OSEC. In 2014, for instance, these additional sources increased the OSEC budget by P131.3

million or 7.7% of the new appropriations bringing the total available appropriations to P1.8

billion.

TABLE 5

DOT OFFICE OF THE SECRETARY APPROPRIATIONS AND OBLIGATIONS, 2011-2014

(AMOUNTS IN MILLION PESOS)

Sources of Funds 2011 2012 2013 2014

New General Appropriations 1290.1 1367.1 2445.0 1713.5

Automatic Appropriations 31.8 17.9 18.7 19.2

Continuing Appropriations 128.3 129.5 216.9 49.6

Budgetary Adjustments 213.0 2338.8 263.2 62.5

Total Available Appropriations 1663.1 3853.3 2943.8 1844.8

Unused Appropriations 219.8 218.5 60.9 106.8

Total Obligations 1443.3 3634.8 2882.9 1738.0

Obligations / Available Appropriations (%)

86.8 94.3 97.9 94.2

Source of basic data: NEP 2013 to 2016

4.2 For the period 2011-2014, an average of 93.3% was obligated by the DOT OSEC out of its

total available appropriations. As defined by the DBM, obligations refer to liabilities legally

incurred and committed to be paid by the government. The OSEC recorded the highest

utilization rate in 2013 at 97.9% while the lowest was 86.8% in 2011. Meanwhile, the IA and

NPDC posted average utilization rates of 83.7% and 97.9% for 2011-2014.

6

TABLE 6 OBLIGATION-APPROPRIATIONS RATIO, 2011-2014

Particulars 2011 2012 2013 2014 Average

OSEC 86.8 94.3 97.9 94.2 93.3

IA 44.3 99.1 91.3 100.0 83.7

NPDC 99.5 99.3 99.9 92.8 97.9

Source of basic data: NEP 2013 to 2016

4.3 In terms of the amount of unused appropriations, the OSEC recorded an average of P151.5

million for the period 2011-2014. The highest amount of unused appropriation it recorded is

P219.8 million in 2011. The IA and NPDC posted an average of unused appropriations

amounting to P13.8 million and P5.5 million, respectively during the period.

TABLE 7

UNUSED APPROPRIATIONS, MILLION PESOS, 2011-2014

Particulars 2011 2012 2013 2014 Average

OSEC 219.8 218.5 60.9 106.8 151.5

IA 51.6 0.4 3.4 0.0 13.8

NPDC 1.2 2.0 0.4 18.5 5.5

Source of basic data: NEP 2013 to 2016

4.4 Obligation and Allotment. The Commission on Audit (COA) publishes an Annual Report

on Allotments, Obligations and Disbursements of National Government Agencies (NGAs)

by expense class. Excluding Financial Expenses, CO generally recorded the lowest

obligation-allotment ratio for the period 2011-2014 for the DOT and its attached agencies.

It steadily improved from 77.5% in 2011 to full utilization in 2013 then it declined to 80.6%

in 2014. Meanwhile, almost all PS allotments were obligated in 2011-2014 but it is also noted

that the utilization rate for PS is on a downward trend from 99.7% in 2011 to 93.8% in 2014.

TABLE 8

DEPARTMENT OF TOURISM

OBLIGATION-ALLOTMENT RATIO BY EXPENSE CLASS, 2011-2014

Particulars Obligation-Allotment Ratio (%)

2011 2012 2013 2014

Total DOT 90.2 94.7 98.4 92.2

PS 99.7 98.9 98.6 93.8

MOOE 89.7 91.2 98.2 93.7

FE - 100.0 20.7 25.9

CO 77.5 96.4 100.0 80.6

Source of basic data: 2011-2014 COA Annual Report on Allotments, Obligations and Disbursements of NGAs

4.5 In 2014, the COA reported the allotments, obligations and disbursements of NGAs and

their attached agencies. On average, PS showed the highest utilization rate while CO posted

the lowest.

7

TABLE 9 OBLIGATION-ALLOTMENT RATIO

BY AGENCY AND BY EXPENSE CLASS, 2014

Particulars Total PS MOOE FE CO

DOT 92.2 93.8 93.7 25.9 80.6

OSEC 92.0 92.4 93.2 25.9 80.0

IA 99.9 100.0 99.7

NPDC 92.8 99.7 99.5 81.3

Source of basic data: 2014 COA Annual Report on Allotments, Obligations and Disbursements of NGAs

4.6 On a regional basis, those with the highest average obligation to allotment ratios from 2011

to 2014 with almost 100% are Regions V (97.9%), X (98.2%) and XII (99.7%). On the other

hand, those with the lowest average obligation to allotment ratios for the same period are

Regions VI (92.3%), VII (88.2%) and IX (90.5%).

TABLE 10

OBLIGATION-ALLOTMENT RATIO BY REGION, 2011-2014

Particulars Obligation-Allotment Ratio (%)

2011 2012 2013 2014

Total DOT 90.2 94.7 98.4 92.2

NCR 89.2 95.3 98.6 92.6

Region I 96.6 100.2 99.8 98.3

CAR 100.0 100.0 97.2 86.6

Region II 92.1 98.8 97.8 89.2

Region III 83.6 95.6 99.4 93.8

Region IV 99.8 59.1 99.0 75.0

Region V 99.9 99.8 99.9 97.9

Region VI 83.8 87.1 98.7 99.5

Region VII 104.2 100.0 82.4 66.2

Region VIII 100.0 99.9 93.1 99.8

Region IX 91.9 85.5 85.0 99.8

Region X 98.4 99.6 99.6 98.2

Region XI 96.8 99.9 99.6 94.7

Region XII 100.0 100.0 99.8 99.7

Region XIII 99.2 97.9 95.6 98.1

Notes: i) NCR data for 2011-2013 include IA and NPDC; ii) Data for 2014 Region IV represents the ratio of the sum of the obligation and allotments for Regions IV-A and IV-B.

Individually, the obligation-allotment ratio for Regions IV-A and IV-B are 95.0% and 46.1%, respectively. Source of basic data: Annual Report on Allotments, Obligations and Disbursements of NGAs (2011 to 2014), COA.

4.7 Another indicator to gauge agency spending is the utilization of Notice of Cash Allocation

(NCA) which is a cash authority quarterly issued by the DBM to central, regional and

provincial offices and operating units to cover the cash requirements of the agencies. The

proportion of NCA utilized (consisting of cash disbursements and outstanding checks) to

NCA released of the DOT has improved from 80.0% in 2013 to 87.4% in 2014. From

8

January to June 2015, the DOT has utilized P956 million out of the P1.3 billion NCA

released representing a utilization rate of 72.1%.

TABLE 11 UTILIZATION BASED ON NCAS, 2013 – 2015 (JAN-JUN)

(AMOUNTS IN MILLION PESOS)

Particulars

NCA Released NCA Utilized Utilization Rate (%)

2013 2014 Jan-Jun

2015 2013 2014

Jan-Jun 2015

2013 2014 Jan-Jun

2015

OSEC 4,157 1,757 1,184 3,291 1,571 866 79.2 89.4 73.2

IA 38 34 17 32 34 17 86.1 98.9 98.2

NPDC 315 272 125 286 198 73 90.7 72.7 58.3

TOTAL 4,509 2,063 1,325 3,608 1,803 956 80.0 87.4 72.1

Source of basic data: www.dbm/gov.ph/e-Fund Release/Status of Disbursements (2013-2015)

V. PERFORMANCE REVIEW

5.1 Organizational Outcomes. The 2016 National Expenditure Program (NEP) identifies

organizational outcomes/performance indicators of the DOT OSEC. The goal is to

increase tourism revenue, employment and arrivals.

TABLE 12

ACCOMPLISHMENT BASED ON ORGANIZATIONAL OUTCOMES

Particulars Baseline Actual Targets Actual as

of June 2015 2014 2014 2015* 2016

Tourism direct GVA (P Bn) 835.4 982.4 974.0 1147.9

% Increase 16% 17%

Tourism Employment (Mn) 5.4 4.8 6.3 7.4

% Increase 16% 17%

Tourist Arrivals (Mn)

International 6.8 4.8 8.2 10.0 2.6

% Increase 20% 21%

Domestic 47.7 NA 51.7 56.1

% Increase 8% 8.5%

Note: */ The 2015 targets in the 2015 NEP were used as the baseline for the 2016 targets. Sources: 2015 SONA Technical Report, 2015 GAA (Volume 1), 2016 NEP

5.2 For 2016, the DOT is keeping the medium-term administration target of 10 million

international tourist arrivals. Given the actual figures for 2014 and the latest available

data for 2015, this may already be difficult to achieve. In 2014, actual international

tourist arrivals were only 4.8 million which is less than half the 10 million target for 2016.

This is also lower than the 5.4 million baseline.

5.3 The target for international tourist arrivals in 2015 is 6.3 million representing a growth of

31.3% of the actual 2014 data. This is almost double the 16% target based on baseline

figures. Latest available data from the DOT show that international tourist arrivals for

9

the period January – June 2015 reached 2.6 million, 7.7% higher compared to the same

period last year.

5.4 Consistent with the lower actual international tourist arrivals in 2014 compared to

baseline, tourism employment was also lower at 4.8 million compared to the baseline

figure of 5.4 million. For 2015 and 2016, tourism employment targets are 6.3 million and

7.4 million, respectively.

5.5 It is interesting to note, however, that despite the lower international tourist arrivals in

2014, the actual tourism direct gross value-added (TDGVA)2 was higher than the

baseline by P147 billion, even exceeding the 2015 target. One possible explanation for

this is the higher-than-expected domestic tourist arrivals at 47.7 million, which

compensated for lower international tourist arrivals. However, 2014 actual figure for

domestic tourist arrivals is not yet available.

(Please refer to Annex 2 for other selected tourism indicators.)

5.6 Major Final Outputs. Under MFO 1 (Tourism Advisory Services), actual performance

of the OSEC exceeded targets. Among the performance indicators under MFO 1 include

number of technical assistance provided to stakeholders, number of persons trained in

the tourism industry and LGUs, and number of training days delivered. For 2015 and

2016, the OSEC further increased their target for all these indicators. (Please refer to Table

13 on the next page.)

5.7 Apart from accreditation, two additional regulatory services – monitoring and

enforcement - were added under MFO 2 (Tourism Regulatory Services) in 2015 and

2016. For accreditation services, the actual performance in 2013 and 2014 exceeded the

targets. In 2014, the actual number of accreditation applications and renewal acted upon

was 156.4% more than the target. It is surprising to note, however, that both the 2015

and 2016 targets were lower than the actual performance in 2014. The COA has raised

some issues regarding the Tourism Accreditation Program of the DOT which are

discussed in the next section.

2 TDGVA is an indicator used to measure the value added of different industries in relation to tourism activities of both inbound and domestic visitors in the country. Among the components of TDGVA are: (i) Accommodation services for visitors; (ii) Food and beverage serving services; (iii) transport services; (iv) Travel agencies and other reservation services; (v) Entertainment and recreation; and (vi) Country-specific tourism characteristic goods – shopping. (Source: Philippine Tourism Satellite Accounts, Philippine Statistics Authority – National Statistical Coordination Board)

10

TABLE 13 PERFORMANCE REPORT

BASED ON SELECTED INDICATORS, 2013-2014

Particulars 2013 2014 2015 2016

Targets Actual % Targets Actual % Targets Targets

MFO 1 - TOURISM ADVISORY SERVICES

No. of technical assistance provided to stakeholders

1201 2577 214.6 2868 4755 165.8 5233 5847

No. of persons trained in the tourism industry and LGUs

10519 16117 153.2 16826 30815 183.1 18504 20554

No. of training days delivered 642 840 130.8 1032 1902 184.3 1392 1330

% of entities assisted who rated the technical services as satisfactory or better

90% 95% 90% 95% 92% 92%

% of entities requests for assistance responded to within one week

90% 95% 90% 96% 92% 92%

MFO 2 - TOURISM REGULATORY SERVICES

Accreditation

No. of accreditation applications and renewals acted upon

3892 - 3588 5612 156.4 3661 5425

% of accredited entities with detected violations of accreditation

5% 1% 5% 0.44% 5% 5%

% of applications for accreditation acted upon w/in 15 days of application

90% 96% 90% 92%

Monitoring

% of submitted reports that resulted in the issuance of notice of violations and penalties imposed

No data available because the monitoring unit is not yet operational.

5% 5%

No. of accredited tourism enterprises monitored or surveyed with reports issued

1377 249

% of accredited tourism enterprises inspected twice over the past two years

80% 80%

Enforcement

No. of enforcement actions undertaken

No data available because the monitoring unit is not yet operational.

- 107

No. of accredited tourism enterprise operators with two or more recorded violations over the last two years as a % of total no. of accredited operators with recorded violation over the last two years.

- 59

% of submitted reports that resulted in the issuance of notice of violations or cancellation of accreditation

5% 5%

% of notification issued within 72 hours from receipt of monitoring report

90% 90%

% of accredited tourism enterprises inspected twice over the past two years

80% -

% of applications for accreditation acted upon within 15 days

90% -

Sources: Physical Plan 2014-2015 and Physical Performance 2013 (From the Transparency Seal); 2015 GAA and 2016 NEP

5.8 For monitoring services, there is a significant decline in the targeted number of

accredited tourism enterprises monitored or surveyed with reports issued from 1377

targets in 2015 to only 249 in 2016.

11

5.9 For enforcement services, the 2015 and 2016 performance targets are essentially the

same. Two additional indicators were included in the 2016 NEP – (i) number of enforcement

actions undertaken and (ii) number of accredited tourism enterprise operators with two or more recorded

violations over the last two years as a percentage of total number of accredited operators with recorded

violation over the last two years – replaced two indicators that were included in the 2015

GAA. VI. COA FINDINGS AND RECOMMENDATIONS

6.1 The Tourism Accreditation Program of the DOT has been cited in the annual COA

audit reports for 2011-2013. Under RA 9593, the DOT is mandated to “formulate and

promulgate rules and regulations governing the operations and activities of all Tourism

Enterprises3 (TEs), including but not limited to a national standard for licensing,

accreditation and classification of TEs, prescribing minimum levels of operating quality

and efficiency for their operation in accordance with recognized international standards,

impose reasonable penalties for violation of accreditation policies and recommend to the

LGUs concerned the suspension or prohibition of operation of a TE.”

6.2 The program will help ensure that TEs meet the minimum international standards for

quality and efficiency in operations. The DOT issues certificate of accreditation to the

applicant TEs that comply with the set minimum standards to operate tourism-related

facilities and services.

6.3 The 2013 COA Audit report observed the following: (i) most DOT Regional Offices do

not have database on TEs; and (ii) low rate of accreditation for the regions with complete

TEs listings. Out of the 15 regions, only three regions – CAR, Regions I and VIII –

have a database of the existing primary TEs4 (PTEs) and secondary TEs5 (STEs) in their

area of supervision. The combined accreditation rates for these three regions are 46%

and 38% for PTEs and STEs, respectively.

These issues indicate that not all TEs adhere to international standards for quality and

efficiency in operations which can have adverse effects on the image of the country as a

tourist destination, resulting in income loss from tourism activities.

3 Tourism enterprises refers to facilities, services and attractions involved in tourism, such as, but not limited to: travel and tour services; tourist transport services, whether for land, sea or air transportation; tour guides; adventure sports services involving such sports as mountaineering, spelunking, scuba diving and other sports activities of significant tourism potential; convention organizers; accommodation establishments, including, but not limited to, hotels, resorts, apartelles, tourist inns, motels, pension houses and home stay operators; tourism estate management services, restaurants, shops and department stores, sports and recreational centers, spas, museums and galleries, theme parks, convention centers and zoos. (Source: RA 9593) 4 Primary tourism enterprises refers to travel and tour services; land, sea and air transport services exclusively for tourist use; accommodation establishments; convention and exhibition organizers; tourism estate management services; and such other enterprises as may be identified by the Secretary, after due consultation with concerned sectors. (Source: RA 9593) 5 Secondary tourism enterprises refers to all other tourism enterprises not covered by primary tourism enterprise. (Source: RA 9593)

12

TABLE 14 ACCREDITATION OF TOURISM ENTERPRISES

RO

PTEs STEs

Existing Accredited % of

Accredited Existing Accredited

% of Accredited

CAR 525 235 45 40 34 85

I 349 182 52 101 18 18

XIII 116 35 30 71 29 41

Total 990 452 46 212 81 38

Source: 2013 COA Annual Report

13

ANNEX 1

TOURISM PROMOTIONS BOARD

The mandate of the Tourism Promotions Board (TPB) emanates from Tourism Act of 1999 (RA No. 9593) and its Implementing Rules and Regulations. The TPB is under the supervision of the DOT Secretary and attached to the Department for purposes of program and policy coordination. The TPB is in charge of formulating and implementing an integrated domestic and international promotions and marketing program for the DOT. The TPB is responsible for marketing and promoting the Philippines as a major global tourism destination with the end goal of increasing tourist arrivals and tourism investment. It is specifically tasked to market the Philippines as a major convention destination in Asia. Among its identified activities include the following: (i) take charge of attracting, promoting, facilitating, and servicing large-scale events, international fairs and conventions, congresses, sports competitions, expositions and the like; (ii) ensure the regular advertisement abroad of the country’s major tourism destinations and other tourism products, not limited to TEZs; and (iii) provide incentives to travel agencies abroad which are able to draw tourists and tourism investments to the country. The TPB is in-charge of promoting the country as a preferred tourism destination in 12 major markets, namely (i) Japan; (ii) China; (iii) Korea; (iv) Australia; (v) Singapore; (vi) Malaysia; (vii) Taiwan; (viii) Hong Kong; (ix) USA; (x) Canada; (xi) United Kingdom; (xii) Germany. For 2016, the TPB will get an allocation of P1.64 billion, only P10 million higher than its budget in 2015. In terms of performance indicators, the TPB is targeting five million tourist arrivals from its assigned markets. This target is part of the 10 million foreign tourist arrivals target of the DOT in 2016. As specified in the Special Provisions for the TPB budget in the 2016 NEP, the P1.64 billion budget in 2016 will be used for tourism promotion and marketing activities sourced from the following and constituted into the Tourism Promotions Fund in accordance with Section 55 of R.A. No. 9593.

(i) Seventy percent (70%) of the DOT share in the net income of the Duty Free Philippines Corporation;

(ii) At least twenty five percent (25%) of the National Government share from PAGCOR; and

(iii) At least twenty five percent (25%) of the National Government share from international airports and seaports.

14

ANNEX 2

TOURISM INDUSTRY PERFORMANCE

The contribution of the tourism industry to the economy steadily increased in the last five years.

From 6.4% in 2010, the share of tourism direct gross valued-added (TDGVA) to gross domestic

product increased to 7.8% in 2014. The report of the Philippine Statistics Authority – National

Statistical Coordination Board noted that among the tourism characteristic industries,

accommodation services had the biggest share to TDGVA at 32.6%. This was followed by

shopping of tourism goods (15.3%), miscellaneous (15.2%), transport services (12.6%),

entertainment and recreation (10.9%), travel agencies and other reservation services (8.6%), and

food and beverage services (4.7%).

SELECTED TOURISM INDICATORS

Particulars Actual Targets

2010 2011 2012 2013 2014 2015 2016

Gross Value Added (in P Billion) 573.0 678.4 764.9 861.7 982.4 974.0 1147.9

Share to GDP (%) 6.4 7.0 7.2 7.5 7.8 7.8 8.7

Direct Employment (In Million) 4.1 4.3 4.6 4.7 4.8 6.3 7.4

Total Receipts 849.3 1081.3 1235.6 1410.0 1743.6 1957.5 2307.1

International 135.5 158.5 195.2 225.3 274.6 350.4 455.0

Domestic 713.8 922.8 1040.4 1184.7 1469.0 1607.1 1852.1

Source: DOT as cited in the 2016 President’s Budget Message (Fiscal Year 2016)

The tourism sector plays an important role in the economy by generating employment

particularly in the countryside. Direct employment generated by the tourism industry has been

growing over the years from 4.1 million in 2010 to 4.8 million in 2014. The share of the tourism

industry employment to total employment in the country was recorded at 12.5% in 2014.

Total receipts recorded by the tourism industry in 2014 reached P1.74 billion, 23.7% higher than

the P1.41 billion recorded in 2013. Bulk of the receipts in 2014, amounting to P1.47 billion, was

accounted for by domestic travelers. On the other hand, about 15.7% or P274.6 million was

contributed by international travelers. In 2014, foreign tourist arrivals in the country reached

4.83 million which is 3.2% higher than the 4.68 million visitors in 2013.

FOREIGN TOURIST ARRIVALS

IN MILLION

Source of basic data: Department of Tourism

The ranking of the Philippines in the 2015 Travel & Tourism Competitiveness Report of the

World Economic Forum (WEF) improved by eight notches to 74th place out of 141 countries

from 82nd place out of 140 countries in the 2013 report. It should be noted, however, that the

15

results of the 2013 and 2015 reports are not strictly comparable due to changes in the

methodology and the number of indicators.

Among the tourism indicators, the country ranked highest in the following: (i) price competitiveness (24th) (ii) prioritization of travel and tourism (27th) (iii) international openness (29th)

On the other hand, the country generally scored low in infrastructure and enabling environment. Among the indicators in these categories are the following:

(i) safety and security (128th) (ii) health and hygiene (91st)

air transport infrastructure (67th) (iii) tourist service infrastructure (82nd) (iv) ground and port infrastructure (93rd)

information and communication technology-readiness (86th) (v) environmental sustainability (122nd)

Singapore which had a global ranking of 11th earned the highest spot in Southeast Asia, followed by Malaysia (25th) and Thailand (35th). Indonesia was 50th in ranking while Vietnam was 75th.