Exporters defy hedging, want additional subsidy

Since the hedging facility had been not much of a help to the majority of exporters, a proposal from the group has been raised for the government to re-direct the hedging funds for promotion purposes instead.

Philippine Exporters Confederation (PhilExport) national trustee and corporate secretary Luis S. Sicat said that the exporters need additional funding for promotional campaigns overseas, rather than hedging.

“Hedging is not effective for most exporters. Most of them do not understand hedging, and that this facility adds risks especially to small and medium exporters,” Sicat said in an interview.

The hedging fund of P1 billion, which is made available for exporters through Development Bank of the Philippines (DBP), can only be accessed by a few exporters, he said.

According to Sicat, most exporters are hesitant to avail of the hedging facility because of the strict documentation requirements, and most of the exporters do not have time, or confidence to complete all the required documentations.

In hedging, banks requires a timetable of the forward foreign exchange protection, most exporters are not certain if they will hit the target date, because of many intervening factors, such as raw material availability, calamities, lack of manpower pool to do the fast delivery, and uncertainty of the market demand.

Besides, banks require a cap in hedging. DBP for instance requires a minimum of US$10,000, with terms ranging from one to three months for the FX Insurance and 1-12 months for the Foward FX Rate Protection.

Sicat said it would be best for the government to re-direct the fund as additional reserve on top of the existing P280 million Export Development Fund (EDF).

In July of this year, the Department of Trade and Industry (DTI) and Department of Finance (DoF) through the DBP, introduced the hedging program to shield exporters from further losses resulting from the continued peso appreciation.

Under this government-led program, exporters may apply for the two products available under the program - foreign exchange (FX) insurance and forward FX rate protection.

In Cebu, there are only very few exporters who are currently availing of the hedging facilities offered by different banking institutions.

Exporter Michael Basubas said earlier that SME exporters do not have enough confidence to take the risk in hedging, because of the uncertainty in the overseas market demand.

Financial experts had been urging exporters to take hedging as their “refuge” in the times of heavy financial “battles” brought about by the upswing of peso against the greenback.

Majority of exporters maintained that hedging is not the answer in these hard times, but an actual help from the government for international promotion in terms of financial assistance will be more appreciated.—Ehda M. Dagooc