Feb 27, 2007

[Philippines] Rising Peso Good or Bad?

Flickr: toni-travels - Money

Working in the Makati business district, it's inevitable that most if not all of the coffee shops in the area primarily stock business newspapers in their magazine racks more than anything else. While having "lunch" with my partner sometime after midnight, I came across an interesting BusinessWorld article entitled, Peso rise so far only benefiting gov't - exporters on the front page of their February 26, 2007 edition. I'd link to the website version of the article itself if only they didn't believe in a pay-per-view philosophy when it comes to the site.

The gist of the article was about how the rising value of the Philippine peso is actually bad for the country given that nearly 65% of our national income is from dollar earners like exporters and OCWs. Given I too work within the BPO industry, I have to admit there's some merit to his analysis. In the past few years, costs have risen between 10-12% simply because of the increased strength of the Peso. While I'm not sure how accurate the estimate of 65% really is, it's sufficient to say that there will definitely be a significant impact on our business if the Peso continues to rise.

I'm not sure if I agree with what the article had to say about a possible collapse of the export industry should the Peso hit Php40.00 to the 1.00 USD, but overall the article has a point to make. On the plus side the increased strength of the peso has reduced the value of our foreign debts while at the same time reducing our oil import costs.

At the end of the day, the question of whether or not the rise of the peso is a good or a bad thing remains up in the air. If we really are a dollar-driven economy, then yes, we are in for some dire straits ahead, I suppose. However I feel that given our knowing this is happening, it isn't enough for us to just sit back and watch it happen. If they really think this is such a big thing, then industries should develop strategies around this eventuality and redesign our business models to instead take advantage of the increased value of the national currency. In the long run, an increase in currency value has to be a good thing. Putting in government controls to arrest the rise of the peso cannot be a sensible answer.

Photo linked from Flickr user toni-travels' photostream.

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