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Kayzer Saba Page 1 7/4/2013

APPRECIATION OF WHAT SHOULD NOT BE FULLY-APPRECIATED

A Summary of the Lecture of Dr. Raul V. Fabella on The Peso Appreciation and Sustainability of

Growth: Need We Worry?

Written by: KAYZER ALDRIN ZAPLAN SABA

Peso appreciation continues but no clear effect is felt by the common people. Reports about the

increase in value of Philippine peso is being promulgated every now and then [in fact, in 2007, the

Philippines had a 7.2 GNP growth];1 at the same time, ordinary residents continue to voice out grievances

due to the increase in prices of goods and lack of stable job. An increase in the value of peso againstdollar is said to be an indicator of a good economy, but to the people who do not feel its significance, it is

nothing but an abstract without a definite picture. The Philippines remains an underdog of theFirst World

Countries and has been static in its position as a developing country for more than three decades. No

matter how the peso appreciates, its effect is not abrupt to the common people.Dr. Raul Fabella, a professor of economics at the University of the Philippines Diliman, cited in

his lecture on Peso Appreciation that underdevelopment is a story not about the dearth of resources butabout blown opportunities.2The Philippines has diverse resources which is a potential source of raw

materials and export goods; however, factors like risk in investments and foreign diplomacy hinder the

Philippines from tapping and using its resources to stabilize the economy. Dr. Fabella used the quoteabout underdevelopment to emphasize that the current situation of the Philippines [has been classified

developingfor many years] is a result of missed opportunities, like the Japanese DFI in the 1980s,

Borrowed Petrodollars in the 1970s, and the NAIA Terminal 3 Constructions; such opportunities should

have triggered the economic transformation of the Philippines, but were not pursued. 3Many projects of past Philippine Presidents also seemed promising, but were not pursued and

some were interrupted because of different perils. For example, Carlos P. Garcia promoted a significantprogram called the Filipino-First Policy. Filipino-First Policy was designed to promote Philippine-madeproducts and to enhance both agriculture and economic industry.4 Industrialization was sought to be

started by companies in the Philippines in order to lessen the import of machines and equipments which

would benefit the country in the future if it would be successful; less amount would be allotted for importof steel because only the materials would be extracted abroad; the Filipinos were ought to create and to

assemble the machineries. If Garcias Plan was successful, it would have been the countrys saving grace

from poverty, which could be proven by different studies. Long-term projects, if promoted and succeeded,

will be a big contribution to economic stability of the country, and the effects will be felt by the commonpeople. History teaches but man never learns, a statement read by Dr. Raul Fabella to

Kayzer Saba Page 1 7/4/2013

1 Taken from the lecture of Dr. Raul Fabella,Peso Appreciation and Sustainability of Growth: Need We Worry? Ayala

Museum, 10 April 2008.2 Ibid.3 Ibid.4 Teodoro Agoncillo,History of the Filipino People (Quezon City: Garotech, 1990), 470.

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highlight his point on the mistakes that have been repeated by the Filipinos despite failures in the past; as

mentioned, an example would be the different blown opportunities.5

At present, the Philippines is said to possess a changed landscape; the Philippines has a Fiscal

consolidation, a better BOP with a lower inflation, a record level Forex reserve, and anInflation

Targetingprogram of theBangko Sentral ng Pilipinas. Peso Appreciation is said to be used to lighten theburden of inflation.6 The reports sound good if the reality of poverty in the Philippines will be taken as

consideration. The inflation rate may be lower and government organizations never cease to work for

economic improvement, but the effects are not visible to many Filipinos. This is similar with the case ofPeso Appreciation, the reports are convincing in words but the practical side does not show the peso is

really appreciating. Inflation rate decrease and Peso Appreciation are merely figures but the reality about

the living condition of the Filipinos is static, still meager and struggling for development. The Latin

American Syndrome will explain that thestrong currency is equal with strong economy;7 however, in thecase of the Philippines, it should not be concluded that if the peso continues to appreciate and becomes

stronger, the economy is also strong; this situation can be seen among the street children begging around

the corners of Quezon Avenue and Paco, young men and women working and studying at the same time

to live, and malnourished children and adults due to lack of money to purchase food and eat three times aday.

The primary saviors of Philippine economy and the main characters for the Peso Appreciation arethe Overseas Contract Workers; secondary factors are the Tradable Sector Shock and the BPO and

Tourism.8 In this situation, most of the benefactors are the ones with an OFW family member, who

benefit from a certain exchange rate of remittances. The OFW Families are also the ones affected if thevalue of peso depreciates [a reason why many of the families complain with the Peso Appreciation]. Most

Filipinos who do not have an OFW family remain unaffected because prices of goods remain high and

wages do not increase despite the appreciation. OFWs are affected by both appreciation and devaluation;

if the peso devaluates the more OFWs are willing to remit because of the high exchange rate; if theopposite takes place, OFWs decide not to remit first until the rate is relatively good. The Philippines rely

much on the remittances of the OFWs and considers this as a primary reason for Peso Appreciation. It

shall be noted that the remittances of OFWs contribute to the economy in the sense that investors areattracted and Philippine peso becomes an attractive currency, but this fact is not sufficient to conclude that

a strong economy exists in the Philippines because only few sectors are directly affected by this set-up. As

Dr. Fabella mentioned, the said salvation by the OFWs of the economic condition is one-sided, OFWFamilies against all other Filipinos [which is not totally true]. 9

It is a fact that most of the OFWs do not really favor Peso Appreciation because of the low

remittances, and personally favor the increase in dollar rate; on the other hand, the aforementioned all

other Filipinos are not directly affected, whether an appreciation or devaluation occurs. In short terms,majority of the people do not experience anything but continuing crisis whether the peso appreciates or

not. Changes are only evident in reports and currency image, not in reality. The current condition of the

Philippines is not Strong Growth but Strong Penury.10Kayzer Saba Page 2 7/4/2013

5 Dr. Raul V. Fabellas lecture6 Ibid.7 Ibid.8 Ibid.9 Ibid.10 Ibid.

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Peso Appreciation is a rhetoric endearment; it indeed benefits the nation especially the traded

goods sector; however, peso appreciation is not a long-term solution to answer the sustainability and

development of the Philippines economic status. A realistic proposal like a 6% appreciation increase peryear from 2007-2010 and pressure on the price of staples [to remain affordable] should be done by

analysts.11 The Ayala Corporation Treasurer and Managing Director Mr. Ramon G. Opulencia suggested

that the government should tap off-shoremarkets and engage in projects with different banks; thegovernment must not monopolize the projects and the market because these weaken the plans of private

sectors.12 The Philippines should indeed team-up with different sectors especially in economic plans;

however, every step should be analyzed and should benefit the majority; the plan should also besustainable for if not, it will just be like Peso Appreciation, short-term without a projection of long-term

effects.

Dr. Francisco G. Dakila, Jr. ofBangko Sentral ng Pilipinas sees the importance of Peso

Appreciation; Dr. Dakila suggested that the OFWs [being the primary source of appreciation], should begiven benefits in order to sustain the Peso appreciation. OFWs shall be given opportunities like reduce in

remittances charges and promote financial learning such as savings in investments; these projects are

designed to motivate the regular remittances of OFWs despite low exchange rate to sustain the currency

appreciation. If the peso is strong more investors will be motivated and the value of Peso will increase.

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Itis right that the government do something to promote its temporary source of possible income, but a more

defined long-term plan should be designed. Dr. Dakila suggested [for both long-term and appreciation]that the government should invest more in transportation infrastructures to encourage the traders in

provinces, diversify the export products, and tap markets in Europe and Asia aside from the United States

for Euro [for example], has a stronger currency.14 The reaction of Dr. Dakila is feasible but thegovernment should be ready to invest in such proposals. The focus must not just be concentrated on the

short-term appreciation but explore further possibilities.

The Philippines has been a developing country for a very long time, at until the present it has no

visible sign of becoming a developed or a fully-developed country. Policies being passed are just thesame, just different in names and guidelines, but the same restrictions especially in threats against foreign

diplomacy. The Philippines will not flourish if it will not risk investments in other possible ventures and if

it will not try to be independent [at least in some decisions regarding economic polices] from influencesof foreign countries. OFW Remittances should not be the only projected source of dollars; the country

should not be dependent on remittances alone because its effects are not universal. Peso Appreciation is

just a short-term solution to the Philippine economic crisis, and the government and experts should comeup with a feasible long-term solution [or if not, at least medium-term that can be developed as a long-term

project] to aid the Philippines. Projects of the past presidents and different government officials were

promising, but since there were a lot of restrictions, the policies were not sustained for a long time; other

policies flopped because the implementation was not based on the plan. The Filipinos should alreadycomprehend with the lessons of the past, and initiate the change for a progressive future.

11 Ibid.12 Reaction of Mr. Ramon G. Opulencia to the lecture of Dr. Raul V. Fabella13 Reaction of Dr. Francisco G. Dakila, Jr. to the lecture of Dr. Raul V. Fabella14 Ibid.