CEBU, Philippines - The initial positive reaction of the international market on the newly elected President Benigno Simeon “Noynoy” Aquino III that prompted the peso to strengthen against the dollar has taken its toll on the export industry.
Economist Dante Canlas said during a seminar initiated by the Bangko Sentral ng Pilipinas (BSP) in Cebu at the Cebu City Marriott Hotel last week that the post election positive expectations in the Philippines is one of the factors behind a weak dollar relative to the peso.
The other factors are the uneven recovery of the economy of the United States, a large budget deficit of the US Federal Government and increasing OFW dollar remittances.
Exporters in the country, including those in Cebu have been asking the government to implement measures to reign in the value of the peso against the dollar, as the appreciation of the Philippine currency has been hurting the industry. The volatility of the country’s foreign exchange market has also aggravated the situation.
Canlas, professor of the School of Economics of the University of the Philippines, said the government has to hasten import liberalization and tariff reduction, among others, to address the appreciation of the peso.
“By not delaying this trade policy further, even for so-called sensitive products, demand for dollars shift up. (The government) can make it easy for these sensitive products to enter the country, raising demand for US dollars, (which will result in an increase of the value of the dollar), and tax them for vertical equity reasons,” he said.
Local manufacturers of shoes, garments, steel and agricultural products, among others in the country, have also cried foul of the flooding of imported goods in the local market, as this has gradually killed the local manufacturing industry.
Canlas said however that the real and ideal way to stabilize the peso-dollar exchange rate is to raise productivity. This means improving the approaches to production to raise efficiency in use of human, physical, public infrastructure and technological capital.
Productivity improvements also allow local firms to specialize and discover their respective competitive advantage, thereby raising capacity to export.