Competitive peso key to export growth, FDI inflow (Business Mirror (Philippines))

Filipino manufacturers can compete more effectively in the Association of Southeast Asian Nations (Asean) region if the government takes steps to improve the competitiveness of the Philippine currency, according to economists.

Raul Fabella, National Scientist and professor at the UP School of Economics, suggests that with tariffs in the Asean having been removed or lowered drastically, the national government should look into boosting the competitiveness of the peso to help domestic enterprises keep ahead of their rivals in the regional market. A competitive national currency will also entice the entry of needed foreign capital, since the Philippines is currently not among the more attractive destinations for foreign direct investments (FDI) in Asean due to issues such as high power and labor costs, Fabella added.

Victor Abola, an economist with the University of Asia and the Pacific, echoed Fabella’s views on the need for a competitive Philippine currency, while urging the Bangko Sentral ng Pilipinas (BSP) to widen its focus beyond price stability to include output growth and employment generation in making decisions on the exchange rate.

Fabella and Abola made their presentations at a forum in Makati City that was organized on May 26 by the Competitive Currency Forum and the Department of Trade and Industry office with support from the Philippine Exporters Confederation Inc. (Philexport).

Fabella said the national government should have strived for a more competitive peso a long time ago to attract more foreign investors, as well as give support to the manufacturing sector.

Perhaps, we may consider providing our trade-in-goods sector with some exchange-rate cover if we are not to lose [FDI]¦. Perhaps, we might need some exchange-rate cover in the form of more competitiveness built into our currency to compensate for the competitive gaps¦in our infrastructure.

He said that, compared to tariff protection, currency protection is more encompassing and widespread in its impact. He explained that the exchange rate, as a protection instrument, extends throughout the world, whereas the protectionist impact of the tariff and quota is only within our borders.

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