Guinigundo insisted on BSP allowing market forces to determine the exchange rate at a time when all other economies across the globe that suffered from the recent recession have been tightening their regulatory screws on the excesses in the financial system while using the exchange rate as a weapon in sustaining their export offensives. -- Abe P. Belena, PHILEXPORT News and Features <--back
2. Domestic travelers fueling spectacular growth in air and sea travel industry
From only 2.2 million in domestic travelers who rode on Cebu Pacific flights across the islands in 2005, the number hit 8.8 million last year.
The impressive quadrupling of local air travelers has prompted Cebu Pacific into ordering seven air buses for deployment this year, the airline's vice president for commercial planning, Alex Reyes, revealed during the retrospective forum organized by the Department of Transportation and Communications (DOTC) at the Philippine Ports Authority headquarters in Manila yesterday.
In all, Reyes said his company is set to increase its fleet plying previously unserved routes across the archipelago to 43 airbuses by 2014, in addition to older planes already plying old and newly opened destinations.
For the rest of the local aviation industry, 20 more new airbuses are seen to be added to their fleets. He attributed the rapid growth of the aviation industry to the opening of new airports, modernization of older ones and the more affordable rates domestic airlines are now offering to passengers.
The 8.8 million in yearly domestic travelers is still tiny as the industry targets to duplicate the record of Malaysia of serving one of every two Malaysians a year. This would mean getting 50 million Filipinos to travel by air across the islands each year.
Similar high growth is also expected in the domestic shipping front as Christopher Pastrana, president of the Philippine Roro Operators Association (PROA) revealed during the same forum that his own company has partnered with a ship-building company in Australia to launch 10 roll-on-roll-off (RoRO) vessels to ply inter-island routes this year.
This, he said will cost the joint venture US49 million in new investments at a price of $1.9 million per vessel. Each of the vessels will carry up to 500 passengers besides the buses and other vehicles it will be moving across the islands.
Pastrana sees the fielding of new state-of-the-art ferry boats in the country would somehow dent the notorious record of the country in the maritime industry worldwide.
He noted that globally, the Philippines holds the worst record in maritime disasters because of the deployment of "floating coffins" masquerading as passenger ships. In Asia, the country is only second to Bangladesh at the bottom of maritime industry development. -- Abe P. Belena, PHILEXPORT News and Features <--back
3. BSP calls for efficiency-enhancing measures to address exporters' woes
Noting the differing impact of the strengthening of the peso against the dollar on various sectors, the Bangko Sentral ng Pilipinas (BSP) maintains its long-held position to address the aggravating effect of a strong peso on the declining price competitiveness of Philippine exports via long-term efficiency-enhancing measures alone.
According to the BSP Deputy Governor Diwa Guinigundo, it is for those sectors that are being negatively affected by the strengthening of the peso to strive to be more competitive and minimize costs through efficiency-enhancing measures.
Guinigundo likewise noted that the long-term performance of the export sector is not determined by price competitiveness alone. Efforts to improve power and transportation infrastructure, as well as, human resources will help improve overall external competitiveness, he added.
However, with an increasing number of companies going out of business, it appears that long-term efficiency-enhancing measures undertaken by both the public and private sectors will have to be complemented with a host of short-term policy measures, including the efforts to stem the appreciation of the peso given a slowdown in overall economic activity.
As cited by Oscar Barrera, chemical sector Trustee in the board of the Philippine Exporters Confederation, Inc. (PHILEXPORT), the countrys key economic fundamentals do not warrant an appreciation of the peso.
The Philippine economy is growing at a pace much slower than most of the economies in Asia. And unemployment figures are disconcerting while trade balance is in perennial deficit.
The continued peso appreciation is not a result of solid economic performance but of volatile portfolio investments and the resilience of workersremittances, Barrera pointed out.
The currency market is mispricing these quirks to the detriment of the goods market and the overall economy.
Just recently, the Philippines slipped eight notches in the growth opportunities ranking of US-based accounting firm Grant Thornton due mainly to the substantial risk posed by the country's continued reliance on workers' remittances to long-term economic growth.
Stagnation of local industries, increased import dependence, and worsening competitive position in terms of exports and as an investment location are among the ill consequences of a strong peso, as cited by the country's leading economists. -- Ritchelle Alburo, PHILEXPORT News and Features <--back
4. Strong peso to delay export sector's recovery
Exporters foresee the export sector's recovery will extend into 2011 should the peso-dollar exchange rate does not improve this year.
Sergio Ortiz-Luis, Jr., President of the Philippine Exporters Confederation (PHILEXPORT), in an interview said the sector could regain losses brought about by global trade slump amid the better performance of the electronics and metal sectors in the months of January and February.
"Unfortunately, the SMEs (small and medium enterprises) especially the indigenous exporters who were poised to rehire and normalize activities last December, are not accepting orders because of the exchange rate. They lose and they can't raise their prices because they won't be competitive," he said.
Ortiz-Luis said exporters were hoping that the sector could recover this second half of the year what they have lost in 2008, had the indigenous exporters been spared from the strengthening peso.
He said big-ticket services exports projected to rise 20 percent this year were expected to buoy the sector's growth, along with electronics and semiconductors.
"Hopefully, the exchange rate can improve so indigenous exporters can start accepting orders and rehire their people. Otherwise, we will end up with exporting of usual import-dependent exports with low value-added," he stressed.
Indigenous exporters are more affected by the strong peso as they have almost 100 percent local costs but only earn less from their exports because of dollar's weakness.
"For the semiconductor, P44 (forex) plus is okay. But for the indigenous exporters, it cannot be lower than P46 because prices here remain," said Ortiz-Luis.
The peso fell back to the P45 level against the US dollar this month from last April's P44.63 and March's P45.74 average.
"The way it goes, we have to wait for 2011 to recover what we have lost because of the crisis," he added.
The PHILEXPORT projected a growth of only 10 to 15 percent for the exports industry this year.
Aggregate merchandise exports for the first two months of 2010 however rose by 42.4 percent to $7.146 billion during the same period last year due mainly to the robust performance of electronics sector. -- Danielle Venz, PHILEXPORT News and Features <--back
5. Adoption of pro-active FTA strategy pushed
The adoption of a more pro-active strategy for free trade agreement (FTA), including embedding trade agreements in national programs of economic reforms, will allow the Philippines increase its overall FTA usage.
This was stressed by a team of Asian Development Bank (ADB) researchers led by Ganeshan Wignaraja and his two Filipino associates, Dorothea Lazaro and Genevieve de Guzman, in a seminar organized recently by the Universal Access to Competitiveness and Trade (UACT).
They pointed out that the FTAs are now utilized as trade policy tool particularly with stalled Doha talks. Philippine trade with FTA partners is also increasing.
To this end, they raised the need for better coordination between negotiators and agencies especially frontline actors and expansion of industry/sectoral research capacity.
More staff resources are also important to strengthen negotiation capacity, they added.
To encourage more businesses to use FTAs, the ADB researchers said the country must intensify information dissemination and upgrade the use compatible rules of origin (ROO).
ROOs are the basis for determining what goods are eligible for preferential access under the FTAs.
They said the country should strengthen information through creation of FTA portal with FTA tariff rates, make ROO database available online and develop business process and step-by-step procedures in order to intensify information dissemination on FTA.
These measures are expected to address concerns of nonuser firms of FTAs on the lack of information on trade agreements.
An FTA experts pool, success stories, small and medium enterprises-focused outreach and designation of an FTA desk officers in implementing agencies are also crucial.
To upgrade ROO administration, the researchers raised the need for a self or third-party certification of preferential certificate of origin (CO) and extension of information technology-based system or one-stop shop center for FTAs.
They also identified considerations for a region-wide FTA which are co-equal ROOs, expanding cumulation and uniform origin regulations.
"More public-private consultations and business associations also play key role," they added. -- Danielle Venz, PHILEXPORT News and Features <--back
6. Next administration asked to renew tax reform efforts
The next administration must renew tax reform efforts to generate much-needed revenues and reduce government debt to enable it finance development expenditures, according to the Asian Development Bank.
"That could include rationalization of fiscal and investment incentives and indexing excise taxes to inflation. Enhancing tax administration is equally important, including cracking down on tax evaders and enforcing anticorruption programs in tax and customs agencies," it said in its latest Asian Development Outlook (ADO) 2010.
The ADB also underscored the crucial role of higher private investments in upgrading infrastructure and in making the economy productive.
"Sluggish private investment reflects infrastructure deficiencies, particularly in power and transport, and weakness in governance and the policy climate," stressed the report.
The ADB 2010 attributed the Philippines' low investments in infrastructure and social services mainly to its tight fiscal situation, high levels of public debt and a business climate that hampers private investments.
Inadequate infrastructure, inefficient bureaucracy and policy instability were blamed for the country's drop in global competitiveness ranking, it said citing the World Economic Forum.
The report added the attainability of the projected 3.8 percent gross domestic product (GDP) growth for this year and 4.6 percent in 2011 also depends on the economic and fiscal policies undertaken by the next government.
The Bank's projected economic growth for the Philippines next year took into account a stronger global recovery which was expected to spur exports and remittances.
"The forecast is subject to more uncertainty than usual, since the new administration's economic and fiscal policies will have an important bearing on the momentum of growth," it noted.
The report identified risks in the growth forecasts, including the impact of a more severe El Nino drought on agriculture and food prices and on trade and growth; and the slower-than-projected recovery in the global economy as well.
"Significant fiscal slippage could unsettle financial markets and raise the country's risk premium," it said. "It will be important that the new government commit to a medium-term plan to strengthen the fiscal position." -- Danielle Venz, PHILEXPORT News and Features <--back
