Friday, November 30, 2007 Group calls for P47 to 1dollar
AN industry group from the Confederation of Philippine Exporters (Philexport)-Cebu has joined the rest of the export sector in calling for the government to peg the exchange rate at P47 to the dollar.
“We will support the P47 exchange rate vessel. This is a good move of the President (Arroyo) if she will agree with the proposal,” said Cebu-Gifts, Toys, and Houseware (GTH) former president Jenifer Cruz.
He said GTH will soon formalize their appeal through Philexport Cebu.
Cruz believes it is high time for the government to make some interventions that would allow the exchange rate to play within the range of P47 to P48 per dollar.
Cruz said the government should now seriously look into the continued appreciation of the peso against the greenback amid fresh forecasts showing the currency is predicted to further strengthen next year.
He fears that when the currency continues to appreciate and reach P38 to a dollar, the “export industry will die.”
‘Win-win’
At P47 against the greenback, “everyone is on a win-win situation,” Cruz said.
“A lot of people will benefit — overseas Filipino workers, business process outsourcing, tourism, and all dollar-earners,” he added.
Cruz said that pegging the exchange rate to P47-to-P48 range will promote predictability and allow businesses to look ahead and plan better.
On the part of GTH-Cebu, he said that while the organization is projecting a 10 percent growth this year, it may meet this target or that revenues will be “flat.”
“We try to be good exporters but a lot of external factors— material defects, holidays, wage hike, etc.— are causes of delay. If the government is bent on helping the industry, it must do something immediately,” Cruz said.
Philexport president Sergio Ortiz-Luis Jr. earlier told a national paper that the economy can afford a 10-percent depreciation of the peso — at P47 against the dollar — which would result in a marginal increase in inflation of 1.2 percent.
Studies
He said this is based on studies and statements made by government agencies themselves, including the Philippine Institute of Development Studies, the University of the Philippines School of Economics, the Bangko Sentral ng Pilipinas (BSP) and even the University of Asia and the Pacific.
The BSP earlier said the foreign exchange rate is dictated by supply and demand forces in the market.
Although financial analysts have been strongly encouraging exporters to capitalize on hedging to avoid further losses due to the unpredictable foreign exchange rate in the country, small and medium enterprises (SMEs) have not embraced the option, said Luis Sicat, Philexport trustee and corporate secretary.
“Hedging is not effective because many SMEs don’t understand it. There are also a lot of financial documents needed because they deal with banks,” said Sicat in an interview with reporters.
Cruz said “SMEs don’t have the luxury of time.”
He said that in order to hedge, one company needs to have a minimum transaction of $10,000, “but some exporters are only earning $5,000.”
As for the $1-billion foreign exchange hedging facility provided by the Development Bank of the Philippines, Sicat believes it will be in the best interest of the government and the export sector to redirect the funds, and augment the P280-million allocation for export promotions.
Sicat and Cruz, along with other GTH members attended the Cebu-GTH general membership meeting last Tuesday at the Casino Español Cebu.
During the meeting, state-owned Philexim and Cebu-GTH signed a memorandum of agreement that will intensify the objectives of Philexim’s wholesale financing program. (MMM)
