Unlike gov’t, exporters see no cause for cheer
By Doris Dumlao
Philippine Daily Inquirer
First Posted 21:05:00 02/17/2008
CONTRARY TO GOVERNMENT EXPECTATIONS, PROSPECTS for the exports sector will remain bleak this year due to the peso’s continuing rise against the dollar and a marked slowdown in the US economy, according to exporters.
The government last week reported that the export sector would become competitive this year. The authorities set the official growth target at 8 percent. This is still subject to review by the country’s economic managers.
But according to Philippine Exporters’ Confederation (Philexport) president Sergio Ortiz-Luis Jr., about 300,000 jobs had been lost after several exporting companies either closed shop or laid off part of their workforce.
“As they manufacture, their losses increase,” Ortiz-Luis told reporters at the sidelines of an economic briefing last Friday. “This December, sales went up, but these were (shipped) at a loss.”
This early on, exporters expect no growth in earnings for 2008.
Export earnings jumped by 21.4 percent year-on-year in December, reversing the 2.1 percent contraction in November. For the whole of 2007, export earnings contracted by 6 percent.
“Our problem with the exchange rate is that, obviously, the peso is overvalued,” Ortiz-Luis said. “It should be at 43:$1.”
In 2007, the peso gained by 18.8 percent, becoming Asia’s best performing currency.
As the peso rose, the export sector became a victim of “trending,” the Philexport chief said.
Assuming that behind the strong peso is a weak dollar story, there is still no reason why the local currency should continue to gain, he said.
In the past, for every 100-point rise in the Philippine Stock Exchange index, the local currency would gain by one peso against the US dollar.
But since the US subprime market triggered a global crisis, driving down stock prices, the local currency has never pulled back by as much as one peso, Ortiz-Luis said.
He added that very few exporters could afford the hedging mechanism offered by some banks.
“And what’s the point of hedging if you’re losing already,” he said.
Many of the companies decided to downsize instead, the Philexport official added.
Ortiz-Luis said the government must really do more for the battered export sector.
Lowering power rates to trim the cost of doing business would be a big help, he added.
Ernie Santiago, executive director of Semiconductor and Electronics Industries in the Philippines (Seipi), estimated that the sector had seen a 30-percent decline in earnings since June or July last year when the peso appreciated at a faster pace.
“The ones here will probably stay, but the new ones will think,” Santiago said.
Bangko Sentral ng Pilipinas Governor Amando Tetangco said monetary authorities would continue to allow a market-determined exchange rate to temper excessive volatility.
The central bank has already undertaken measures to curb the peso’s rise, including the build-up of foreign reserves and use of foreign exchange to settle external debts ahead of maturity. But the strong peso, Tetangco said, also played a part in moderating the rise in consumer prices, including oil.
“When we talk about exports, one of the things we mention is the exchange rate,” Tetangco said. “But the exchange rate is only one of the factors that affect competitiveness.”
On the supply side, he said, exporters must think of going up the value chain.
“On the demand side, one consideration is that everybody is expecting a slowdown in the US economy. It will be key to remember that, for us as well as other emerging economies, there are some mitigating factors,” Tetangco said. “One is the diversification that we have pursued over the years in both markets and products.”
While the US is still an important trade partner, Tetangco said, it no longer dominates the export market.
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