Exporters want to keep forex rate at P42.50 to $1
Ensure that the foreign exchange rate won’t go lower than P42.50 to a dollar.
Sergio Ortiz-Luis Jr., Philippine Exporters Confederation, Inc. (Philexport) president, made this call to the government during an interview on Saturday.
Ortiz-Luis said that a stronger peso wouldn’t mean a healthier economy especially with the cash inflows from overseas Filipino workers and the export industry still coping with the recent global economic crisis.
“If it goes lower than P42.50 many indigenous exporters will be affected to the extent of closure. They can no longer compete for orders and will be forced to shut down. If it would continue to go below that level, then this would further jeopardize their business,” he said.
Ortiz-Luis said that this would affect many Cebu exporters , who manufactured products using raw materials sourced here.
If the peso would continue to strengthen and go lower than P42.50 then it could affect the total revenue contribution from Cebu.
Aside from export manufacturers, service exporters like those from the outsourcing industry would also be affected because they’re mostly dollar dependent and usually negotiate rates in dollars.
“It could affect our competitiveness. We’re actually growing the outsourcing industry which is a major contributor in our economy now,” said Ortiz-Luis.
Nevertheless, he said that the export industry was confident of achieving the target 10 percent growth rate this year especially with the average growth rate from January to May was at 8.4 percent.
“The tensions between China and the Philippines and the strong peso however affected the performance in June with only 4.2 percent growth making the average as of June to only 7.7 percent,” he said.
May registered the highest growth rate in exports at 19.7 percent since January 2011, according to the Philexport website.
The export earnings from January to May this year increased by 8.4 percent or $22.4 billion compared to only $20.7 billion in the same period last year.
June exports slowed down to only 4.2 percent, affecting the overall average growth of only 7.7 percent to $26.8 billion in the first half of the year from $24.8 billion last year.
Ortiz-Luis however said that July’s export growth was slow and they’re expecting a slow one too in August.
“Again if the peso remains strong, we think it would already be difficult for us to achieve the target 10 percent growth by yearend,” said Ortiz-Luis.
He said a strong peso would also discourage the entry of investments in the country, especially from small outsourcing firms.
“We already have high labor cost, the highest electricity rates in the region plus a strong peso. All this will make us less attractive to investors and could lose it to countries like Vietnam, Thailand, and India,” he warned.
Ortiz-Luis said he believed that the government could do something about controlling the foreign exchange rate, in fact he believed they’re already doing something about it.
“They (government) are already banning foreign funds in special deposit accounts (SDA). That is one thing that they’re doing right. They should also stop obtaining foreign-denominated loans because we have a lot of Peso in our system and continue paying our dollar debts,” said Ortiz-Luis.
He also encouraged the government to closely monitor the influx of “hot” money into our stock market, which could affect our foreign exchange rate.
“It (hot money) should not be considered a foreign direct investment because it does not generate employment. This could lead to speculation because they can put it in and withdraw it as quickly which is dangerous,” he said.
