Yes, we have breached the P46 mark! Though realistically we are still closer to P47 (at P46.95), there is always a sense of euphoria whenever we breach a mark. The peso has been steadily building up recently, for 10 straight months. We have been hovering near P46 for more than a week, and crossing it, our economists are breathing easier. The Bangko Sentral ng Pilipinas (BSP) reports an all-time high of $25 billion in gross international reserves, and announced that our balance of payment surplus is at $282 million. For the same period last year, this figure was in reverse — we had a deficit of P277 million. We are indeed inching our way to better times, with the BSP pre-terminating some of its loans (with others maturing as far away as 2008). Of course, most of us know that the real heroes in this scenario are the overseas Filipino workers who have been remitting their hard-earned dollars regularly. Their monthly remittances are also now breaching the $1-billion mark. Singly, this factor has contributed heavily to the significant improvement in the country’s fiscal position.
While we are ecstatic over our cash mountain, we look with envy at our neighbor, big China. Our $25-billion reserves may be the biggest we’ve seen in a long time, but China reports that they had just added $136 billion to their foreign reserves, in the first quarter. Their reserves are at a whopping $1.2 trillion. Their global trade surplus is $46 billion, for the first quarter alone, and their trade surplus with the US is over $232 billion in 2006. In fact, some US lawmakers are blaming China for the loss of US manufacturing jobs.
But this staggering piece news may just play up to our advantage. China is perceived globally as a fountainhead of dollars, awash as it is right now. But some analysts also see this as translating to higher wages and rising inflation, and the neighboring (poorer) nations can capitalize on this to boost their export business.
The improving peso is seen as a setback for the local export industry, but we are still a long way from claiming a trade surplus with anyone. It is a great sign that Readers Digest, in a recent poll, has named some of our exports as “trusted” in the region. Notable among these names are San Miguel Beer and Emperador in the liquor category; Carrier and Condura in air-conditioning; PLDT MyDSL as Internet service provider, Boysen Paints, Goodyear, Petron, Purefoods, Wilkins and Miladay Jewelry included in the list. Our neighbors in India, Vietnam, Malaysia and Thailand have adjudged these products to be of export quality. Similarly, they have adjudged some of our local hospitals like St. Luke’s and Makati Med as being trust-worthy, meaning they wouldn’t mind getting medical help from these establishments. This should translate well for our medical tourism efforts, especially when the survey results from Readers Digest get published sometime this year.
Among the Philippine exports that have been seen improvement in recent months is the chicken exports (cut and chicken products) mainly to Japan since we are still, thankfully bird flu free. Overall, our exports to Japan have increased, with RP export accounting for 1.4 percent of Japan’s total imports of $99 Billion.
Our no. 1 market is still the United States, with Japan landing second. Surprisingly, Hong Kong comes in third, overtaking China, something which has not happened in recent years. Our disk drives and mobile phone chips are exported to these countries, and we have a few semi-conductor companies doing comfortable business in the country today, among them Intel, Toshiba and Texas Instruments. The latter is perceived to be the market leader in analog chips, and it is a vote of confidence when they announced their plan to invest an additional $1 billion in their new plant in Clark.
Maybe the new-found cash problems of China (in reverse of ours) are starting to pay off for us. Labor costs in China have of late been climbing, and some of the big manufacturing concerns who have shifted their focus to China in recent years are noticing the steady climb. With the higher cost of living and rising inflation comes higher wages, and their minimum wage translates to higher than ours in some areas. Companies like Walt Disney which have set up camp here have voiced out this concern. It would be great to have some of these multinationals back here again. Remember Mattel and other such concerns which used to employ hundred and hundreds of Filipino factory workers until our militant unions forced them out? Aris, a garments factory dealing heavily in exports, used to occupy a huge compound in the Oranbo area, and they had hundreds of factory workers as well. It has since closed shop, due again, I heard, to labor unrest. Now this big compound houses a big Korean garden restaurant. These companies are now thriving well in other Asian countries like Thailand. This country, although rocked recently by natural disasters like the recent tsunami, and political turmoil, is manufacturing home to many multinational companies. Wacoal bras has also set up its factory there, and if you’re wondering why this brand sells here locally at Rustan’s for about three times as much, it is because their factory is in Thailand and they can afford to sell these products at a third or a fourth of the price in the Philippines.
Of course, it helps that the investor-locators in Clark now enjoy tax and duty incentives similar to their other counterparts in other special zones in the country. Executive Order 619 came at the right time. Under the new law, investor-locators are exempt from national and local taxes but they should pay five-percent tax on gross income earned.
Here’s hoping for more foreign investments pouring into the country. And while we are talking wish lists, here’s hoping Australia will finally see fit to accredit our Philippine exports. They have been giving us the run-around when it comes to our local bananas and pineapples entering their market, something about phytosanitary restrictions and their fear of contamination. In the interest of fair trade, why don’t they give substance to their claim of championing the cause of developing countries like the Philippines?
Mabuhay! Be proud to be a Filipino.
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