Stronger peso worries Cebu exporters

CEBU, Philippines - The strengthening of the Philippine peso against the US dollar is now starting to cause panic among exporters in Cebu.

PhilExport-Cebu is set to submit a position paper to the Office of the President and other key government agencies on the sudden appreciation of Philippine Peso vis-à-vis the US Dollar and the Euro.

“It’s too bad. The exporters are worried. We will be submitting our position paper to the Office of the President, Department of Trade and Industry secretary and other key government agencies,” said PhilExport-Cebu executive director Fred Escalona in an interview with The Freeman yesterday.

The peso gained strength versus the US dollar to P44 level in the last few years, from as high as P46 level per one US dollar exchange.

The Philippine Peso, after peaking at an intraday high of P44.60 on April 7, 2010 strengthened to a 20-month high of P44.77 vis-à-vis the greenback.

According to PhilExport-Cebu it breached the psychological level of P45 already the day before.

“Our surviving exporters are still trying to cope with the effects of the global recession while there are still no clear signs of a sustainable market recovery. The additional pressure brought on the industry by the appreciating peso could put more exporters out of business. It is time for the government to act decisively; hence we humbly appeal for government’s firm support again,” PhilExport-Cebu emphasized.

Although this is good news for importers and to those who service the country’s foreign debt, however, the unchecked appreciation of the peso is bad news for the already challenged export sector as it further exacerbates the stakeholders in competing with its neighbors who have consistently been adhering to rigid currency control mechanisms.

Not even the negative inflation report of 4.4 percent in March and the announced BSP interventions could dampen the market’s interest in the local currency, the draft position paper emphasized.

“While government sees the recent developments on the Peso positively, the export industry, which is one of the two major economic drivers, continues to struggle further. The export industry contributed roughly US$50 billion in export earnings to the economy in 2008 before it suffered a 21.7 percent drop to US$38.3 billion in 2009 due to the global recession,” the draft position paper stated.

The exporters have been competing harder during the crisis due to stiff global competition, high cost of doing business and the exodus of skilled workers to lucrative destinations overseas.

With the sudden surge of an already firm peso, the exporters face another crucial challenge as their dollar earnings are being eroded progressively.

Exporters feared that this development could lead to further business closures as profit margins continue to shrink.

The Cebuano exporters underscored that without the incentive to invest in capacity building and for product marketing and promotion, the ranks of the unemployed will continue to swell further, with the bulk coming from the export sector that includes regular workers as well as workers in the exporters’ supply and value chains.

PhilExport-Cebu through the position paper urged DTI to abandon its suggested plan to realign the balance of the P1 billion budget allocation for the Export Support Fund (only P11.6 million was released) permanently and fast track the approval of meritorious project proposals that are pending with the Export Development Council.

It also called the attention of the Development Bank of the Philippines (DBP) to actively promote the P1 billion forex hedge fund for exporters.

Bangko Sentral Ng Pilipinas (BSP) should also rationalize their market intervention policy and set tighter intervention levels to avoid wide swings in the exchange rates that could prove disastrous to the exporters.

The Department of Finance (DOF), which favors a strong currency should also formulate a balanced approach in addressing the concerns with regards to the current account, debt servicing and export performance that has direct impact on jobs creation.

Finally, the draft position paper also pointed out the important roles of the Department of Foreign Affairs (DFA), and Philippine Overseas Employment Agency (POEA) to craft investment portfolios for OFWs wherein invested funds are channeled into projects that will stimulate further development in the industrial sector.

The position paper was signed by Presidents of different export sector organizations, such as the Cebu Furniture Industry Foundation (CFIF); Gifts,Toys and Houswares Exports Association (GTH-Cebu); Fashion Accessories Manufacturers and Exporters (FAME-Cebu); Mactan Export Zone Exporters and Manufacturers (MepzCem); Seaweed Association of the Philippines (SIAP); Association of Food Industry Manufacturers and Exporters (AFIME), and Industrial Goods Sector Association.