THE United Nations Economic and Social Commission for Asia and the Pacific (Unescap) thumbed down the measures implemented by Asian governments, including those made by the Philippine government, to help exporters cope with weaker demand and stronger currencies.

The Unescap said in its latest report titled “Key Economic Developments and Prospects in the Asia-Pacific Region in 2008” that while there are many means by which governments across the Asia-Pacific region are undertaking to help exporters, the effectiveness of these measures remain uncertain.

“Assistance to exporters is only a short-term coping mechanism for the loss of earnings. Exporters still must confront the fundamental challenge of maintaining competitiveness in the face of rising prices in foreign currency terms,” the Unescap said in the report.

“In the longer run, exporters will be able to cope only by increasing the value-added component of their products through greater productivity. This will enable exporters to move away from low value-added products which are most susceptible to purely price-based international competition,” the UN agency added.

In the Philippines the Unescap cited the establishment of a $1 billion-worth hedging fund that seeks to protect exporters against currency movements and the move to increase local demand for dollars from individuals and enterprises to ease the pressure on domestic currencies.

The Unescap said these and measures to encourage the holding of dollars by domestic entities may not be able to help exporters. This, the UN agency said, would only discourage investors from making dollar investments due to the perception that there will be further dollar depreciation.

“While allowing a more convertible currency for outward investment is a sensible long-term measure for improving integration into the global economy, it is unlikely to have much effect on currency appreciation in the near future,” the report said. “Investors will not be keen to make dollar investments when there is a perceived likelihood of further dollar depreciation.”

The UN agency said Asian countries would benefit more from sustained efforts to increase the importance of domestic demand in their economies, which would reduce their dependence on the external sector.

“Currency management through the buildup of foreign reserves is also curtailing better use of the region’s excess savings. Redirection of these resources from investment in foreign assets toward the financing of sizeable domestic infrastructure requirements would produce greater long-term benefits by increasing productive capacity,” the Unescap said.

The UN agency said that stronger currencies have decreased the export competitiveness of countries, particularly in the Philippines, which has among the highest currency appreciation in the region at 15.5 percent.

The report added that since 2006, the countries which have seen the greatest real effective exchange-rate appreciation against the dollar have been the Philippines and Thailand.

“Countries in the region, therefore, have lost competitiveness in their exports not only to the United States but also to their other trading partners,” the report said.

Export earnings in dollar terms have suffered in recent months. The Unescap said export growth in the Philippines remained low in September at 4.6 percent year-on-year after a fall of 4 percent in the previous month.

The impact has been greatest in low-technology intensive manufacturing sectors and those sectors that have a low import content, such as agriculture and commodities.

In the Philippines the report said the most affected by the currency appreciation were the export sectors of textiles, furniture, banana and pineapple. 

Meanwhile, due to the weak demand for exports, the Unescap projects that Southeast Asian countries, including the Philippines, will witness slowing or relatively unchanged gross domestic product (GDP) growth rates. 

Developing countries in the ESCAP region are expected to see a moderate slowdown in economic growth to 7.8 percent in 2008 from the projected 8.2-percent combined GDP growth in 2007.

“Strong domestic demand would be an added support, both through consumption in fast-growing countries and fiscal-policy accommodation. The strong fiscal position of nearly all countries in the region is likely to enable accommodative policies in response to external-sector weakness in coming months,” the report stated.

“Because most are highly export-dependent economies, weak United States demand will reduce the contribution of their exports to overall growth,” the report added.

The UN agency expects growth to come from domestic demand, through both consumption and investment. In the Philippines the report said that private consumption will remain robust due to overseas Filipino workers’ remittances. 

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THE United Nations Economic and Social Commission for Asia and the Pacific (Unescap) thumbed down the measures implemented by Asian governments, including those made by the Philippine government, to help exporters cope with weaker demand and stronger currencies.

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