THEORY AND PRACTICE IN PUBLIC ADMINISTRATION

CASE ANALYSIS

1. Case Background

The Tourism Infrastructure and Enterprise Zone Authority (TIEZA), formerly the Philippine Tourism
Authority (Filipino: Pangasiwaang Pilipino saTurismo), is an agency of the Philippine national
government under the Department of Tourism responsible for implementing policies and programs of the
department pertaining to the development, promotion, and supervision of tourism projects in the Philippines.
Republic Act No. 9593 or “The Tourism Act of 2009” declares a national policy for tourism as an engine of
investment, employment, growth and national development, and strengthening the Department of Tourism
and its attached agencies to effectively and efficiently implement that policy, and appropriating fund thereof.
The Act supports the establishment of Tourism Enterprise Zones (TEZs) established to be the centers of tourism
development in the country. TIEZA is mandated to designate, regulate and supervise the TEZs established
under this Act, as well as develop, manage and supervise tourism infrastructure projects in the country.

The TIEZA is governed a Board of Directors (TIEZA Board) composed of Tourism Department Secretary,
the TIEZA Chief Operating Officer, the Tourism Promotion Board Chief Operating Officer, the Department of
Public Work and Highways Secretary, the Department of Environmental and Natural Resources Secretary, the
Department of Internal and Local Government Secretary, and five (5) representative directors that will be
recommended by the Tourism Congress.

Goal and Vision and Strategic Directions for Tourism to 2016:

The main goal of TIEZA is to have an environmentally and socially responsible tourism that delivers
more widely distributed income and employment opportunities. The stakeholders identified 21 strategic
cluster destinations (SCD) covering 77 existing and emerging tourist development areas (TDA) and their
tourism transportation, infrastructure and development needs and deficiencies that could be effectively
addressed through coordinated investment between 2011 and 2016, and help to deliver the targets of the goal
and vision for the industry. The 21 clusters provide an inclusive destination framework designed to ensure that
all Filipinos are able to participate in and enjoy the benefits of the tourist industry. Within the overall
destination framework, there are 9 SCDs that also have international airports and thus serve as the main
international gateways to the other SCDs.
 In 2010, the Philippines attracted 3.52 million international tourists staying an average of 8.21 nights
and spending an average of US$ 83.59 per day; and estimated 27.91million domestic travellers in 2010 staying
an average of 4 nights and spending an average of PhP 553.09 per day. DOT surveys indicate that in 2010, the
top tourist destinations were Metro Manila, Cebu-Mactan, Boracay Island, Camarines Sur, Baguio City, Davao
City, Zambales (including Subic), Bohol, Camiguin Island, Negros Occidental, Cagayan Valley, Ilocos Norte, and
Puerto Princesa. Overall, it is estimated by DOT/NSCB that in 2010 domestic and international tourism
contributed 5.76% to GDP and directly employed 3.69 million persons or 10.25 % of total employment in the
country.

2. Environmental Analysis

A. General Environment

As the infrastructure arm of DOT, TIEZA has been managing and operating several establishment.
Among those operational are: - Banaue Hotel and Youth Hostel - Hilaga Northern Philippines - Club
Intramuros Golf Course - Rizal Lights and Sounds Museum - Balicasag Island Dive Resort - Gardens of
Malasag Mountain Resort - Zamboanga Golf Course and Beach Park

Philippine tourism is regulated at the national level by the DOT under RA9593. It is responsible for
tourism policy and planning, international and domestic marketing, facilitating investment, the
accreditation of tourism enterprises, maintaining data on tourism and its economic impacts, and
supporting through capacity building the tourism activities of the LGUs. Its activities are financed
through annual appropriations, contributions from the Philippine Travel Tax, and profits from the
operations of Duty Free Outlets. At the local level, the LGUs under the Local Government Code of
1991 are responsible for licensing the operation of tourist enterprises on payment of a business tax,
inclusion of tourism in their CLUPs and zoning ordinances, regulating health, fire, and other safety
hazards, providing security in partnership with the PNP, and undertaking promotions activities
designed to attract tourists to their area.

B. Industry Environment

The Philippines has a rich and diverse set of tourism resources as represented by its extensive natural
and cultural heritage sites and landscapes that are globally unique, of which the Historic Town of
 Vigan, the Rice Terraces of the Philippine Cordilleras, the Baroque Churches of the Philippines, the
Puerto-Princesa Subterranean River national Park, and the Tubbatha Reefs National Park have been
recognised by UNESCO as World Heritage sites.

The Philippines has 10 designated International airports, as well as 34 principal airports used for
domestic scheduled flights. The international airports are served by 36 international airlines including
five (5) of Philippine origin (also domestic carriers) operating an average of 806 scheduled flights per
week with 197,000 seats per week from 42 foreign ports, and 3,000 flights with 348,000 seats per
week on domestic routes in 2010. In addition, there are 25 sea ports operated by the Philippine Ports
Authority providing passenger and RORO facilities served by 45 RO-RO and inter-island shipping
companies servicing a total of 184 routes; and 31,242.38 km of mainly asphalt and concrete paved
national highway system served with 6,000 inter-island buses.

The country has an estimated 96,052 hotel and resort rooms with another 16,654 rooms either in the
final planning stage or already under construction that is likely to bring total rooms capacity to
112,706 by 2014 sufficient to handle an extra 4 million domestic and international guests. While 314
inbound, domestic and outbound travel operators and 1,474 tourist transportation operators are
accredited with the DOT, many more are not accredited.

C. Internal Environment Analysis

The main source of international tourists is South Korea, the USA, and Japan followed by
China and other countries with leisure-based and visiting friends and relatives being the main reasons
for visiting. In the domestic market, the main sources are urban centres such as Metro Manila, Cebu,
Davao, and the secondary cities with visiting friend and relatives and leisure travel as the main
reasons for travelling

Between 1995 and 2010, the annual average growth of international arrivals was 4.7%
notwithstanding good recovery in arrivals between 2009 and 2010 while between 2005 and 2010 the
average annual rate of growth in the domestic market was 3.3%. These growth rates are quite low
relative to the competing countries such as Thailand, Indonesia, Malaysia and Viet Nam where long-
term international arrivals have grown at +8% per annum and domestic tourism at +5% per annum. In
terms of its position in ASEAN, the Philippines’ tourism performance by volume is ranked below all
ASEAN countries except for Myanmar, Lao PDR and Cambodia.

Presently, the Philippines has a poor international and domestic tourism growth performance
due to several identified tourisms development constraints. With this the industry is experiencing low
budget for tourism marketing and promotions, low tourism growth volumes and highly concentrated
pattern of tourism with limited local communities participation.
3. Problem Statement

The focal problem of tourism in the Philippines is the underdeveloped tourism sector relative to
its market and product development potentials. This is due to the inability to develop and expand air
accessibility to key growth destinations. To support this statement, the following were evidently present
and experienced in tourism industry:
- Inadequate international airport infrastructure which will result to inadequate air, sea and
road connectivity destination
- Limited number of competitive destinations due to inadequate destination sites and
infrastructure.
- Cumbersome operating business establishments due to discriminatory tax regime for
carriers
- Perceptions of the Philippines as an unsafe destination due to poor compliance to safety
standards

4. Alternative Courses of Action

A. Rapidly expand capacity of secondary international airports - Upgrading Secondary International

Airports & Increasing International Tourists at NAIA.
1. Increase accommodation space for tourist travelers.
2. Increase operational cost amount
B. Expand connectivity between Philippines and its key growth markets - Renegotiating Air Service
Agreements with Key Growth Markets, Reducing Air International Air Operations Cost in the Philippines &
Simplifying border formalities /procedures for key growth markets.
1. Increase numbers of key growth markets
2. Reduction in income due to reduction of air operations costs
C. Implement a strategic access infrastructure program between secondary international airports and
strategic destinations - Design and implementation of strategic access infrastructure subprogram &
Improving sea and road transportation services
1. Reduced safety and security incidences
2. Low Production during infrastructure creation and development

D. Implement a sustainable tourism destination infrastructure program - Designing and implementing

services infrastructure in tourist development & tourism site access and visitor infrastructure improvements.
1. Arranged Financing Structure
2. Increase Volume of Employees and Compensation
E. Develop diversified tourism products that engage local communities - Developing Major Mixed-use
Tourism complexes in the vicinity of the International Airports & Linking local communities to the tourism value
chain created by the major mix use tourism complexes upgraded tourist sites in their vicinity .
1. Private sector partners + financing secured
2. Upgrading requires complex systems
 F. Implement a PPP-based mandatory tourism enterprise accreditation system and facilitate tourism
investment and lower cost of business - Design and implementation of a PPP-based mandatory tourism
enterprise accreditation system & Facilitating business investment and simplifying business set-up and licensing
procedures and cost
1. Annual list of projects by value identified
2. Document processing time reduced to 10 working days.

G. Safeguarding natural & cultural heritage and vulnerable groups- Safeguarding natural & cultural heritage
& Safeguarding vulnerable groups
1. Preserved cultural heritage
2. Vulnerable groups were limited to society development growth

H. PPP-based marketing strategy and action plan - Strategic Marketing Subprogram, International and
Domestic Marketing Network Subprogram & Operational Marketing Subprogram
1. Marketing is re-orientated to key, strategic and opportunity/niche markets and products with
substantial funding, and good market penetration
2. Increases competition with competitors

I. Institutionalize roles and responsibilities of DOT and LGUs- Strengthening tourism governance structures,
Strengthening tourism policy formulation approaches & Strengthening DOT support for Local Government Units
(LGUs).
1. Policy body established Tourist Council’s (TCs) charter amended and DOT reorganization
completed
2. Increase Operational Task
J. Develop a competent well motivated and productive tourism workforce - Skills capability building ,
Improving labor relations, Professional Tourism Training and Education & HR Recognition, Networking, and
Development

1. Enhanced employability of entry-level trainees Increase Operational Task

2. Increase Personal Services Expenses

K. Improve governance in the area of safety, security, and in dealing with tourists - Subprogram for
Transparency and Host Community Involvement, Sub program for Improving Governance for Tourism
Development & Establishing a Tourism Crisis Management Unit
1. Crisis management unit established in the DOT
2. Backlog of workload due to several attended seminars

5. Recommended Alternative and Action Plan

Functional Objectives Strategies Time Frame Budget

Area
Marketing Marketing is re- Operational 2016-2020 P 3,784,662
orientated to key, Marketing
strategic and Subprogram
opportunity/niche
markets and products
with substantial
funding, and good
 market penetration
Production Developing and Linking local 2016-2022 14,245,573
marketing communities to the
competitive tourist tourism value chain
created by the major
destinations and
mix use tourism
products
complexes upgraded
tourist sites in their
Develop diversified vicinity & Developing
tourism products Major Mixed-use
that engage local Tourism complexes in
communities the vicinity of the
International Airports
Organization & Develop a Skills capability 2016-2022 646,000
Management competent well building, HR
motivated and Recognition,
Networking, and
productive tourism
Development,
workforce
Improving labor
relations &
Professional Tourism
Training and
Education
Finances Subprogram for Creation of an Audit 2016-2012 280,000
Transparency Committee in DOT
that will oversee and
inspect all tourism-
related activities,
programs

Total Budget 18.956,235

6. Financial Projections
A. Five Year Financial Projection
-Income Statement
Income Statement above shows the annual income and expenses of TIEZA as projected gaining a net
income of P 113,122,745.00. Prepared 5 year projection , assuming that all conditions were
continuously applied the company will gain a net income of P 565,613,725.

Subsidy Income refers to the agency generated income less unused plus other income generated
produced gross income of P 901,477,195.

Expenses refer as to company expenditures for a year, thus a five year projection will produce P
335,863,470 total expenses for the five year.

Summarizing the Income Statement , Gross Income generated less expenses incurred for 5 years
projection P 901,477,195 - P 335,863,470 = P 565,613,725.

-Balance Sheet
 Balance Sheet above shows the annual Total Assests = Total Liabilities + Total equity of TIEZA as
projected , P 149,877,590.00 total assets. Prepared 5 year projection , assuming that all conditions
were continuously applied the company will sustain a total assets of P 749,387,950.

Assets refers to the agency current assets pluss total current property, plant and equipment of
the company , as projected for five years will result to P 749,387,950.

Liabilities and Equity refers to accounts payables plus company equity, thus a five year projection
will produce P P 749,387,950

Summarizing the Balance Sheet as Total Assests = Total Liabilities + Total equity , then
P 749,387,950. = P 749,387,950.

Cash Flow

Transaction Debit Credit Current balance

 Current Balance -

Personal Services 38.09 38.09

Withdrawal of Salaries and

Wages 32.56 5.53

MOOE 34.07 39.60

Withdrawal of MOOE 30.18 9.42

Capital Outlay 67.71 77.13

Withdrwal for CO 67.71 9.42

Special Purpose Fund 0.58 10.00

Withdrwal for SPF 0.58 9.42

Above table show the projection for 1 year Cash Flow transaction for TIEZA. Includes the
deposits of personal services, maintenance operating and office expenditures and capital outlays as
well as the withdrawals as shown in every transactions. An estimated annual budget of P 140.45 M
allocated for the agency. In 5 year projection, assuming all key constrains were applied and
consistent, P 702.25 allocation budget for the agency.

Budget utilization were represented by the withdrwal transactions and the current ending
balance after a year transaction is 9.42M or 47.1 M as represented in a 5-year projection. With the
entries detailed above it is a 5 year projection of budget utilization is 702.25 M less 47.1 M will result
to 655.15 M .

B. Relevant Ratio Analysis

Summarizing the Income Statement , Gross Income generated less expenses incurred for 5 years
projection P 901,477,195 - P 335,863,470 = P 565,613,725.

Summarizing the Balance Sheet as Total Assests = Total Liabilities + Total equity , then
P 749,387,950. = P 749,387,950 for 5 year projection

Summarizing the Cash Flow Budget allocation in 5 year is P 702.25 – budget Utilization of 655.15
M = 47.1M ending balance available in the agency bank account.

In ratio analysis the agency produced an enormous amount P 565,613,725. Which are
allocated for other agency fundings. With the remaining balance of 47.1 M out of allocated budget for
the agency the numbers shows that TIEZA is a revenue generating agency for the Philippines. Aside
from this , it sustained its assets in a 5 year projection.

In 5 year projection, the amount allocated for the alternative action can be applied due
to availability of the funds for the agency thus can absorb the laid alternative action and plan for
improvements, developments and sustainability of the agency and be recognized as one of the top
government owned agency generating huge amount of revenues for the government utilization funds.