Arroyo's strong warning to protect peso<\/p>\n
MANILA: President Gloria Macapagal-Arroyo has announced that
\nthe Philippine government would not rule out the imposition of
\ncurrency controls to defend the peso from speculative attacks.
\nShe issued the statement at the end of her visit to Malaysia, a
\ncountry that successfully defended its currency, the ringgit,
\nthrough temporary capital controls at the height of speculative
\nattacks on Asian currencies, including the peso, by predatory
\nportfolio fund managers.<\/p>\n
There was more than symbolism in this message that the
\ngovernment is prepared to use more unconventional monetary
\nweapons to stop the slide of the peso exchange rate. The
\nannouncement came hard on the heels of an unprecedented Bangko
\nSentral ng Pilipinas decision imposing fines on nine big banks,
\nthree of which were foreign, found speculating against the peso
\nfrom June to July, when the exchange rate fell to as low as 54
\npesos to the US dollar. This came parallel to the Bangko
\nSentral's decision to implement its earlier plan to raise banks'
\nreserve requirement to shield the peso from speculative attacks
\nas well as to halt inflation.<\/p>\n
Whether or not the President's announcement was coordinated
\nwith the Bangko Sentral (reports say they acted independently of
\neach other), the government has sent out a double-barreled
\nmessage that it would use its weight more forcefully to defend
\nthe peso and not allow speculators to make the currency a hapless
\nvictim.<\/p>\n
The market got the message that the government meant business
\nthis time. The currency market was stunned, if not scared, at the
\ndemonstration of political will to intervene in currency
\ntransactions. The peso over the past two days strengthened one
\npercentage point against the dollar.<\/p>\n
Whether or not capital controls will work in the Philippines
\nto provide a respite to currency depreciation, allowing the
\neconomy to catch its breath in the climb to economic growth, is
\narguable. Neither is there an assurance that what worked in
\nMalaysia, which dug in to defend its currency in defiance of the
\northodox monetary policies in place in the region during the 1997
\nfinancial crisis, will produce the same results in the
\nPhilippines.<\/p>\n
Prime Minister Mahathir Mohamad's monetary heresy was a
\ntemporary measure and has since been relaxed, but only after it
\nput Malaysia's economic footing on firmer ground for staging a
\nrecovery.<\/p>\n
The warning issued by President Macapagal is that if the life
\nof the economy is threatened, thereby also fuelling political
\ninstability, the government is prepared to use all possible
\nweapons and monetary instruments to curb the appetites of free-
\nwheeling market forces preying on weak currencies and sluggish
\neconomies.<\/p>\n
The Mahathir experiment, which has strong nationalist
\novertones, has proved that even small states are not entirely
\nhelpless against the onslaught of market forces. While this might
\nbe an era when the fad calls for integration into a globalized
\ntrading system, it has also been shown that globalization,
\nincluding that of currencies strapped to the US dollar or other
\nstrong currencies, has plenty of shortcomings. It has also
\ndemonstrated that there are still instruments left in the hands
\nof the economies of the developing world to chart relatively
\nautonomous economic and monetary policies not generally favored
\nby the World Bank, the International Monetary Fund or the Asian
\nDevelopment Bank.<\/p>\n
Even in the World Bank, a number of senior officials have
\nstudied the Malaysian model and have found out that, in the
\ncontext of certain circumstances, it has something to recommend
\nto combat the currency crisis. If this is what President
\nMacapagal Arroyo learned in Malaysia, that quick lesson is more
\nthan enough to justify her first state visit.<\/p>\n
To be sure, the visit has produced other results, few of which
\ninvolve the usual claims of bringing in the goodies, like new
\ninvestment promises, etc. The signing of the ceasefire agreement
\nwith the Moro Islamic Liberation Front is a good enough starting
\npoint for laying the groundwork for further peace talks.<\/p>\n
There was also strong symbolism in returning to Manila via
\nMindanao, the region that received a heavy accent from the visit
\nin terms of reviving the moribund project of rebuilding the East
\nAsia Growth Area with Malaysia, Indonesia and Brunei. The accent
\nis on the southern frontier, and its development is tied to
\nhaving peace in Mindanao.<\/p>\n
-- Philippine Daily Inquirer\/Asia News Network<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/arroyos-strong-warning-to-protect-peso-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }