For nearly six years since President Fidel V. Ramos took office, the Philippine economy has shown remarkable growth. That achievement, however, is now in doubt as the nation suffers from major currency crises spreading across Southeast Asia.
But Cesar Bautista, trade and industry secretary of the Philippines, asserts that despite currency jitters and stock falls, the economic fundamentals of the country remain strong. “The currency problem, which started in Thailand, is very bad and it affected everybody in the neighborhood,” Bautista said in an interview with The Japan Times. He was visiting Japan to attend the two-day Asia-Europe Meeting of economic ministers held in Makuhari, Chiba Prefecture, last weekend.
“But in a way,” he added, “there is both good news and bad news.” Substantial falls of the Philippine peso will eventually lead to a better balance of trade in the future, he said. “Our currency has probably been artificially overvalued,” he said. “The peso will probably be able to seek its more realistic value so that we will have more competitive exports. And we will probably have a better balance of trade.”
Following the effective devaluation of the Thai baht on July 2, the peso fell roughly 27 percent in value against the dollar as speculators found similarities between Thailand and the Philippines, such as an asset bubble and a massive trade deficit. Bautista, however, discounts such observations, saying the Philippine economic situation bears no resemblance to that of Thailand.
For one thing, he said, the Philippines, with the amount of its short-term debt being very small, has “no pressure” to be ready for immediate payment. Although the nation’s trade balance in goods remains negative, its exports are growing faster than its imports, riding on the steady growth of supporting industries. Thus, the trend is good, he said.
In addition, he said, the Philippines’ earnings in services and investment are so strong that the nation’s overall balance of payments has been positive. “The Philippines still is a big opportunity for investors … because they can get their money back,” he said. “It is not something like aid and charity. It’s business. They get their money back.”
Bautista acknowledges, however, that there is a lot to learn from the ongoing economic turmoil in Asia. “There are many lessons. But my particular feeling is that even if you are an attractive country for investment and there is a lot of foreign currencies coming in, it is always necessary (to ensure) that … those foreign investments and foreign exchanges must be for productive use,” he said.
What is important, he said, is to be fully aware of the presence of speculative money and act with discipline, rather than shutting speculators out of the nation. “The number one problem is fundamentals, and it’s your own responsibility,” he said. “I think that we should all move toward more and more liberalization. But at the same time, you must be able to change your management of regulations (to keep them up to date).”