Exporters unsure of hitting target-A A +A
Sunday, August 19, 2012
THE Philippine Exporters Confederation (Philexport) expressed concern that the full-year export growth target of 10 percent may not be achieved if the exchange rate will continue to go below the P42.50-to-a-dollar level.
In an interview on Saturday, Philexport president Sergio Ortiz-Luis said that at the P42.50 exchange rate, many indigenous exporters can no longer get orders and will be forced to shut down.
“If it would continue to go below that level, then this would further jeopardize their business,” Ortiz-Luis said.
Indigenous exporters are those who do not rely much on imported raw materials in the production of export goods.
Ortiz-Luis said it will not only be the export sector that will suffer with the current exchange rate but also other dollar-dependent industries like the business
process outsourcing (BPO) firms and dependents of overseas remittances.
“We were expecting we would hit the 10 percent growth target but when tensions (between) China and the Philippines and the strong peso arose, we think it would already be difficult for us to achieve growth at this state,” he said.
Ortiz-Luis also said that the current factors challenging the growth of the industry are on top of the impact of the crisis in Europe and the United States, which are main markets of Filipino exports.
He said, however, that if the tension with China eases and the exchange rate will stay at the P42.50 level, “then achieving the growth target is still doable.”
Optimism ran high among exporters of hitting the growth target in the past months, especially when May exports grew 19.7 percent, the highest since January 2011. The export earnings in the first five months of the year rose by 8.4 percent to $22.4 billion from $20.7 billion in the same period in 2011.
But June exports slumped to 4.2 percent, making the sector register an average growth of 7.7 percent to $26.8 billion in the first half of the year from $24.8 billion in 2011.
Ortiz-Luis cautioned that the strong peso will also discourage the entry of investments into the Philippines. He said the country will have a difficulty in attracting small BPO firms, which have the potential to grow big here.
“We have strong peso, high labor, high electricity rates, we will lose our chance to Vietnam, Thailand, India and other Asian countries,” he said.
To address this, Ortiz-Luis said the government should ban foreign funds in special deposit accounts (SDA); stop obtaining foreign-denominated loans and continue paying the country’s dollar debts; and monitor the “hot” money that is making its way to the stock market, similar, to what other countries are doing.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the net inflow of foreign “hot money” hit $962.75 million in July, the highest in almost two years. Hot money refers to speculative investments that can move quickly market to market.
While the BSP is doing measures to temper the appreciation of the peso, Ortiz-Luis said the “strong peso-strong republic” mindset should be put into proper perspective.
“We now have 80 million dependents on dollars not on peso. The strong peso is bad for the majority of the population,” he said.
These dependents cover the estimated 12 million overseas Filipino workers, and dollar-dependent industries like tourism, BPO and exports.
Published in the Sun.Star Cebu newspaper on August 20, 2012.