Appreciating Philippine peso hurts exporters

Exporters are compelled to slowdown operations as the peso appreciates, according to a survey by Philexport.

Sixteen of the 27 exporters who responded to the survey are forced to cut operations by 20 percent to 65 percent as the peso gains strength.

This is just one of the many painful adjustments that the country’s small and medium exporters have to make as the peso fluctuates from P45 to 46 against the dollar.

Alongside a slowdown in operations, nine exporters had to retrench workers by 15% to 60%.  About 18 exporters reported a narrowing of profit margins by three to 20%, aside from reducing their prices as buyers complained about rising prices of their products.

A company even decided to stop accepting orders until the peso hits competitive levels, the survey noted.

The peso-dollar exchange rate of P45 proves to be far below the exchange rate needed by exporters to maintain their price competitiveness which is in the range of P48 to P52 as indicated in the survey.

The exporters’ clamor for a competitive exchange rate has been made in light of the various competitiveness challenges of the country such as high shipping, labor, electricity and financing costs; limited access to finance, and poor infrastructure.

All of these translate to high production cost, marginal productivity gains and as a result, declining competitiveness that require a long time to address by both the government and the private sectors.

Survey respondents made a number of proposals to address the appreciation of the peso. These include supporting a competitive exchange as in other East Asian economies; putting up a foreign exchange stabilization fund and reducing the foreign borrowings of the country to obliterate the need to adopt a policy that is biased towards peso appreciation.

Meanwhile, as the value of the peso continues to appreciate, exporters, through the advocacies of the Export Development Council and the Philippine Exporters Confederation, Inc., are asking for further simplification and streamlining of bureaucratic procedures and documentary requirements, increased government support in export promotion and marketing and fiscal incentives to small and medium enterprises, particularly those outside the export processing zones.