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THE BUSINESS OF GOVERNANCE
It would appear that more people would not
benefit from the peso’s increasing strength
than those who are benefiting.
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I
often receive feedback from readers of my columns and articles.
Most of these are from readers who have interests similar to mine.
These are advocates of development issues, businessmen, academics,
professionals, and students. Still another group of readers are
those who like my occasional saunters into the realm of music,
literature and the arts. It is delightful to receive comments
from them.
It is just as exhilarating to get feedback from unexpected quarters.
Serafin is one such reader. He works in Dubai. He asked me to
explain "ang pagbaba ng palitan ng dollar on an OFW point
of view." According to him the strengthening of the peso
is "malaking kabawasan yan sa padala namin (sa pamilya)…."
Serafin asks: "okay nga po na sinasabing pag ganyan ang palitan,
gumaganda ang ekonomiya ng Pilipinas? Pero di naman po yan nararamdaman
ng kapwa nating Pilipino dyan. Halos everyday tumataas ang bilihin.
Ano po sa palagay nyo"?
My answer: When the peso gains in strength against the dollar,
the effect on the economy is mixed. There are those who benefit
and there are those who are negatively affected. From the government
side, the Department of Finance benefits from the reduction of
the debt service for foreign borrowings. This is because less
pesos are required for dollar-denominated debts. However, the
strengthening of the peso can also reduce the income of the Bureau
of Customs. The peso value of imported goods will be lesser if
the peso is strong. This means that the tax imposed on these imported
goods will also go down.
When the peso strengthens, the effect of increases on the price
of oil is also mixed. The cost of government expenditures which
require oil products, like transport, will go up. On the other
hand, the increase in oil prices will be softened by a stronger
peso because the peso value of these increases will not be as
high.
We also know that exporters are among the losers when the exchange
rate of the peso viz a viz the dollar goes down. They will be
getting less pesos for their exported products. On the other hand,
importers will gain. They will be paying less pesos for what they
import.
Serafin, now to your question. When the peso strengthens, does
it mean that the economy is getting better? Not necessarily. If
the economy is export oriented or relies heavily on exports, the
sector suffers with a stronger peso. If the economy is import
oriented, it will benefit from a strong peso.
What is the impact on OFW families? It is fairly obvious that
OFW families will be getting less for every dollar remitted to
them. They are getting less pesos for their regular allowance
from their OFW breadwinners. Not many OFWs can afford to increase
their remittances to offset the strengthening of the peso.
A strong peso can have a negative impact on sectors like the agriculture
sector which exports products like sugar, fruits, and products
which are dependent on locally-sourced material. It can also impact
on manufacturers of other exports. Employees of these companies
which are losing due to the strong peso suffer because many businesses
have to close. It would appear that more people would not benefit
from the peso’s increasing strength than those who are benefiting.
Serafin asks another question: "Posible po ba na magkaroon
ng isang batas or whatever to protect us OFWs with regards to
regulating the exchange rate?
Serafin, there was a time when the exchange rate was fixed by
the government to a particular level. At present however, the
peso is allowed to float. This explains why in your own words
"araw-araw nagbabago…" Such is the nature of a
free enterprise economy.
Nobody admits it but it is known that the Bangko Sentral intervenes
under certain circumstances. There are limits to what it can do,
however. It will have to spend huge sums of money to reduce the
supply of dollars. Also, it has no control over the international
financial economy.
Now, for your final question, Serafin. What can the government
do to protect OFW families from the onslaught of a stronger dollar?
First, it must insure the delivery of basic social services. OFW
families would be among the beneficiaries. If social services
are delivered swiftly, efficiently, and economically, OFW families
would not need to buy these services from the private business.
I am referring particularly to education and health.
Secondly, it must monitor and regulate the prices of basic commodities
so that Filipino families, including those of the OFWs, will not
be subject to market manipulation and sharp movements in prices.
Those who manipulate prices should be dealt with severely.
Thirdly, government must protect OFWs and their families of get-rich
quick investment schemes which promise high returns for financial
products. Organizations have been set up to capture the earnings
of OFWs. It is time that these outfits be regulated.
Finally, I would like to end with a proposal from Dr. Benjamin
Diokno. He is proposing that a moratorium on foreign borrowing
from banks be declared. Instead, he suggests that through the
Bangko Sentral, government can borrow from OFW remittances. In
this way, the losses that OFW families are suffering can be reduced
by interest income from loans to government.
I hope I have answered your concerns, which I am sure are shared
by many OFWs.
(Ms. Leonor Briones is a former National
Treasurer of the Republic of the Philippines. She is currently
teaching at the University of the Philippines' National College
of Public Administration and Governance. She is also a co-convenor
of Social Watch Philippines. She also writes a column for the
Business Mirror)
Other Feature articles:
- Dog-Day afternoon
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On Doing the Right Thing
- One Statistics
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From A Distance
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Of Command and commandeered votes
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Coming soon: young bureaucracy?
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What to do the morning after the night before
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Out Where the Country Begins
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Questions Begging for Answers
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Attaining the MDGS: Are We Really On Track?
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The sky is not falling?
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The Governance of Fraternities
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Bribery, Debt and Borrowing
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In Praise of the Senate
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Recapturing the Power of the Purse
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Making History Softly
