Exporters call on BSP anew to rein in the surging peso

CEBU, Philippines – As the strengthening peso continues to negatively affect the dollar-earning sector in the country, especially the exporters, industry players reiterated their call to the Bangko Sentral Ng Pilipinas (BSP) to intervene with the further strengthening of the country's currency.

Exporter Benson U. Dakay said yesterday that BSP should start to consider alternative ways to help the struggling sectors, such as exporters, Business Process Outsourcing (BPO), tourism, and the families of OFWs (Overseas Filipino Workers), not to suffer from the negative effects of the strong peso.

Consistently, Dakay said the Philippine Peso has strengthened due to the surge in foreign currency inflows coming from the OFW remittances, improved export earnings, investments in the BPO industries and sharp increase in portfolio funds in the stock market.

He said while remittances from the OFW, export earnings and the BPO investments are good inflows that are going to stay for a long period in the country, Portfolio investments on the other hand, are speculative and short term investments.

"They [portfolio investments] may be pulled out of the country in a year or less. They are invested in heavily traded securities in the stock market because they have to be easily liquefiable or sold and remitted at short notice," he said.

Because of this, Dakay emphasized that the government should impose a tax on these "speculative investments or hot money" to slow down this inflow and at the same time earn additional revenues for "our cash-trapped government".

He said even deposits are taxed at 20 percent of the earned interest and withheld at that, income of reign funds in the stock market should be taxed at 15 percent if the investment is held fro 365 days of less, and 10 percent if less than 540 days and five percent if less than 720 days.

"Other countries such as Thailand is already doing this hot money taxation, why can't we?" asked Dakay, who is also the president of the Seaweed Industry Association of the Philippines (SIAP), and the former president of the PhilExport-Cebu.

BSP reported a BOP (Balance of Payment) surplus of US$6.54 billion up to September of 2010 and is forecasting the BOP surplus to hit US$8.2 bullion this year. With this, there will be a 50 percent increase over last year.

The Philippine Central Bank is also expecting the Gross International Reserve (GIR) to hit US$55 billion by December which is 30 percent higher than last year.

"With the abundant global liquidity, does the country need this kind of BOP surplus and GIR?" asked Dakay.

The Cebu private sector, not only the exporters, are the most pro-active group in the country to call the BSP to employ effective strategies in managing the foreign exchange movement, despite the earlier pronouncements made by BSP that "they can not directly intervene with Peso value versus the US dollar."

Earlier, BSP officer-in-charge Nestor A. Espenilla Jr., urged exporters to bear with the strengthening of the Philippine Peso to the US dollar, instead adopt other measures to stay competitive.

This time though, it's not only the exporters who are complaining of the strong currency, but also other local industry players, through the Cebu Business Club, Mandaue Chamber of Commerce and Industry and the Cebu Chamber of Commerce and Industry (CCCI).  (FREEMAN)