Peso fall a ‘temporary’ setback, GMA says

SUBIC BAY FREEPORT — The peso’s recent setback is a result of "temporary events" in the world economy and does not represent a direct long-term threat to the economy, President Arroyo said here yesterday.

"Investors’ confidence is strong with the vigorous efforts of the government to balance the budget (and) improve the overall security situation," she told delegates to the sixth Luzon Island Congress of the Philippine Councilors’ League.

Mrs. Arroyo said proof of this confidence was the $1-billion investment of Hanjin Shipping to set up ship-building facilities at the Subic Freeport in Zambales and the $300-million investment by Hebei Jingniu Group, a large-scale transnational company based in mainland China that produces high-tech glass products.

She lauded the efforts of Subic Bay Metropolitan Authority chairman Feliciano Salonga and other SBMA officials to entice more investors to bring their business to the freeport zone.

"Our economic fundamentals are steady and strong, and the recent setback of the peso is a result of transient developments in the economy," Mrs. Arroyo added.

The President also said the government is expecting the peso to maintain its strength and resiliency over time as the global financial markets settle down.

She also asked the councilors to lead an "honest-to-goodness" energy conservation program to offset the rising cost of oil.

"Help us promote the use of oil substitutes like ethanol, natural gas and cocodiesel," Mrs. Arroyo said.

The government is undertaking a strategic program to cut down on oil-based power plants and to shift to those that run on natural gas and hydroelectric and geothermal power.

Mrs. Arroyo has directed the Philippine National Oil Co. to earmark P500 million to fund the massive planting of jatropha trees as a substitute for diesel fuel.

Earlier, Isabela Rep. Anthony Miranda said he had begun a jatropha plantation project in his district and had plans to establish an oil refinery plant to process the oil extracted from the jatropha seed, popularly known as "tuba-tuba" or physic nut.

"Jatropha is a very rich source of diesel fuel. Three kilos of seeds can produce a liter of diesel fuel," he said.

According to reports, jatropha fuel emits water vapor, rather than carbon dioxide, when burned.

Miranda said planting one hectare of jatropha trees can produce about 3,500 liters of diesel fuel in 18 months’ time. The jatropha tree can thrive in any environment and needs very little care.

Mrs. Arroyo said while the government is pushing for economic reforms, "our final hurdle is our outdated, outmoded and out-of-touch political system.

"And so, honorable councilors, your support for Charter change is indispensable and I am grateful for it," she said.

In closing, the President urged the councilor’s group to "join us in our spirited fight against graft by keeping an open eye on various government projects and undertakings."

Mrs. Arroyo said the councilors, as the leaders of the country, have the "moral obligation to bring our people together to build a strong, secure and enduring nation, well respected in the international community."

She also took the time to visit the warehouse of the Subic Task Force Anti-Smuggling, headed by retired general Jose Calimlim, and inspect several confiscated vehicles and other high-tax items smuggled into the freeport zone.

On the other hand, a moderate labor group claimed yesterday that the families of overseas Filipino workers (OFWs) lost an estimated P8.78 billion in spending power during the first quarter of this year due to the peso’s steep rise against the dollar.

Citing Bangko Sentral ng Pilipinas statistics, Trade Union Congress of the Philippines (TUCP) secretary general Ernesto Herrera said the peso averaged 51.88 to $1 from January to March this year compared to exactly 55 to $1 during the same period in 2005.

"This meant that dependents of OFWs lost P3.12 for every dollar, or a total of P7.94 billion, for the same aggregate amount of remittances — $2.545 billion — they received in the first quarter," he said.

On top of the P7.94 billion, Herrera said OFWs’ families lost another P842 million in purchasing power as a result of the fewer pesos they got for $270 million in additional remittances sent to them during the first quarter of this year.

"Thus, households that subsist on remittances forfeited a total of P8.78 billion in buying power, which they would have enjoyed had the peso stayed at the average of P55 to $1," he said.

OFWs remitted a total of $2.815 billion from January to March this year — $270 million or 10.6 percent higher than the $2.545 billion they sent home during the first quarter of 2005.

"In absolute terms, P8.78 billion is a lot of foregone buying power in a single quarter," Herrera said, adding that the money would have been enough to purchase up to 17,560 house and lot units at P500,000 each.

He added it was "even more lamentable" that while the families of OFWs are getting fewer pesos for every dollar, "the peso’s strength has not provided them any tangible economic relief whatsoever."

Three global financial institutions earlier projected that the peso would further appreciate to P45 to P48 against the dollar either within the year, or by 2007.

Herrera quoted Amsterdam-based ING Group N.V. as saying that it sees that the peso could go up to P45 to the US dollar.

He also said that London-based HSBC Holdings expects the local currency to hit P47.50 to a dollar, while New York-based Goldman Sachs Group Inc. is counting on the peso to rise to 48 to $1. — With Paolo Romero, James Mananghaya