MVP urges gov’t to create ‘soft landing’ for peso

Philippine Long Distance Telephone Co. chairman Manny V. Pangilinan has urged the government “to consider ways to create a soft landing for the peso, by allowing it to rise at managed, if not also predictable fashion.”

Pangilinan issued the call as keynote speaker to the three-day 33rd Philippine Business Conference and Exposition which opened at the Manila Hotel last Wednesday.  

He warned that while the government “has taken the first steps to prevent any further unwarranted rise of the peso … the situation has reached the point of national urgency that coalitions of overseas workers and exporters have already broached the idea of dual exchange rates – not a good idea.”

According to Pangilinan, “it would be a reasonable exercise for the government to consider ways to create a soft landing for the peso by allowing it to rise at managed, if not also predictable fashion. A guided predictability will allow businesses to plan and operate better.”

The PLDT chief also said that “apart from dealing with the new problem of an appreciating peso, the government may have some difficulty closing the national budget deficit, without the help of one-time privatization proceeds.”  

However, he expressed belief that “market and international credit rating agencies gauge performance based on recurring streams of revenues, profits and cash, less on exceptionals, such as privatization receipts.”

Pangilinan credited the government with a “robust” economic performance, resulting in an “unprecedented” GDP (gross domestic product) growth of 7.3 percent in the first two quarters of this year, aided by election spending and remittances from overseas Filipino workers (OFWs), which is equivalent to 11 percent of GDP. 

He also mentioned the reduced budget deficit, “which fostered three consecutive years of five to six percent GDP growth, and enabled the peso to strengthen by more than 20 percent against the dollar since 2004. The strong peso with stable food prices helped inflation ease to a benign sub three percent.”

Pangilinan also mentioned the “strong growth” in the outsourcing business, in electronics exports and remittance-driven consumptions. He also cited the increase in foreign direct investment to $3.2 billion, “the highest level recorded in the past seven years.” However, the FDI in the Philippines was still far below its level, but domestic investments have been declining, he declared.

Pangilinan observed that the flows of foreign exchange “spawned by out-migration and our outsourcing businesses have caused a peso appreciation that undermines their very purpose. It is estimated that since 2004, a stronger peso has cost overseas workers and their families more than P188 billion in purchasing power.” It has also impacted adversely the position of certain key business.

“The telecommunications and the contact center business are among the most significantly affected by a rapidly appreciating peso. In the case of PLDT, our revenues drop by P579 million for every one peso appreciation to the dollar. As to our BPO (business process outsourcing) operations, operating margins have been compressed because of lower dollar-to-peso revenue translation, while our opex are in pesos and are subject to domestic inflationary pressures,” Pangilinan declared.

To further “accelerate” economic growth, Pangilinan proposed more investments in education, development of resource-based industries, principally tourism and mining, more investments in infrastructure and agriculture. “We must mitigate the upward trend of the peso and continue to lower the public debt-to-GDP ratio,” he stated.