Saturday, 26 January 2013
Wednesday, 23 January 2013
After years of speculation and rumors, Google officially announced on Wednesday the opening of its Philippine representative office, also naming former Friendster executive Narciso Reyes as its first country manager.
Google Philippines will be the search giant’s fifth representative office in the Southeast Asian region, following consecutive establishment of bases in Malaysia, Thailand, and most recently Indonesia over the past several years, aside from its regional Singapore office. The Philippine office will reportedly be located in Makati.
Tuesday, 22 January 2013
OUTSIDE THE BOX
IN September 2010 Guido Mantega, Brazil’s finance minister, made this observation: “We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.”
From January to September 2010, the US dollar had dropped 25 percent against the Brazilian real. Brazil took many steps to lower the value of the real against the dollar, including a tax on certain inbound foreign-currency flows. The dollar has since 2010 appreciated against the real to where it is now almost 25 percent higher than where it was when Finance Minister Mantega expressed his complaint.
So how is Brazil’s economy doing in the midst of currency devaluation that would improve their export performance? Economic growth in 2011 was 2.7 percent and the most recent forecast for 2012 is 1.03 percent. The Rio Times: “Despite the news, Finance Minister Guido Mantega has insisted on many occasions that he believes 2013 will see growth of 4 percent or more.” Brazilian inflation is also running at 5.6 percent in part due to the weak currency.
Devaluing a nation’s currency to increase exports is not a new concept in the least. It has been going on since the 1980s. All the major economies—the US, Japan and Europe—have made this idea almost a centerpiece of their economic policy. And it has worked perfectly. There has been a big winner: China.
In 1980 China exported 5 percent of the world’s textiles; now it is 32 percent. In 1980 China held 1 percent of office equipment exports; in 2011 it was 30 percent. In 1980 China exported 2 percent of all global manufactured goods; in 2011 the number was 15 percent.
What currency devaluation did not do was stimulate exports. What it did do was stimulate overseas investment. Here are two stories that tell it all. Delphi was formerly General Motors component division. GM sold it off in 1999. Two years later, Delphi fired 11,500 workers. In 2005 it closed 45 plants in the US, production moving to China.
Visteon, formerly Ford’s component division, was spun off in 2000. In 2009 it went bankrupt, closing all but one of its 33 plants in the US and laying off 25,000 employees. It now has 171 plants and facilities in other countries, primarily China.
As the US dollar continued to depreciate, US companies found it necessary to invest abroad to maintain and enhance the value of their assets.
But every time I discuss the Philippine peso and how artificial devaluation is a mistake, someone tells me that I am pushing to keep the Philippines an import-dependent economy.
The reality is something completely different.
From January to October 2012, the Philippines imported $51 billion worth of products. We exported $48 billion. But a closer look at the numbers gives a different and more precise picture of the Philippines trade situation.
We imported $14 billion of electronic products and exported $21 billion. The next single largest import category, costing $11.5 billion, was crude oil and petroleum products. The Philippines does not produce oil.
We imported $1.2 billion of iron and steel. We have limited iron ore supplies and besides, iron ore requires mining to extract. $2.6 billion was spent on plastics and chemicals, again raw materials produced from primarily oil and mining. PHL does not have a broad timber-products industry so we spent nearly $1 billion importing paper and paper products. Another half a billion dollars was spent on metalliferous ores mined in another country.
Do you like your daily pan de sal? A little less than $1 billion was spent on imported wheat and corn. The nation imported over $3 billion worth of food and live animals for food. You might want to ask for camote fries instead of potato fries the next time you go to Jollibee in order to keep the Philippines from being import dependent.
If you think it is all those cheaper Chinese imported products that are making us “import dependent,” note that the bill for consumer goods, including cars and appliances, was only $6.3 billion. We spent more on industrial machinery and transportation equipment.
The Philippines sits on some of the richest mineral deposits in the world. Yet we exported more coconut products and fruit as we did mineral products. Yet according to the government, it’s buko juice that is going to grow the Philippine economy.
The problem is not the value of the peso or the amount we spend on imports. The problem is 30 years of continuing government policies that keep the economy from properly developing.
E-mail to email@example.com. My web site is www.mangunonmarkets.com and Twitterme@mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.