MANILA, JUNE 11, 2007
(STAR) By Ma. Elisa P. Osorio - The government through state-run bank Development Bank of the Philippines (DBP) is readying a $1- billion fund to help exporters cope with the continued strengthening of the peso against the dollar.

Exporters said the strong peso is causing them $4.5 billion in losses each month as locally-made goods become more expensive to foreign buyers.

“We are coming up through DBP a hedging facility to help exporters. There are three options that we are offering and hopefully by next week we can finalize (the details),” Trade and Industry (DTI) Secretary Peter B. Favila said in an interview Friday.

“This is in response to the clamor of exporters,” Favila added.

Before the weekend, Favila met with Finance Secretary Margarito Teves and DBP president Reynaldo G. David to discuss the hedge fund for exporters. The three proceeded to Malacañang after their meeting at the DTI Makati office.

A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Its primary aim is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.

According to the DTI, the $1 billion could be used to take short term positions and have six turn-overs per year. “Effectively that is $6 billion,” the DTI said.

The DTI said the money earned is enough to cover roughly 10 percent of the $50 billion export industry.

DBP refused to say where they will get the $1 billion seed money. In the coming days, DBP is expected to come up with the rules of the fund and set the rates.

The DTI said they are hoping that other commercial banks will follow the lead of DBP and create their own hedge funds for exporters.

“DBP is taking the lead and Landbank may also follow suit,” DTI said. Teves, who is part of the group discussing the fund, is the concurrent chairman of Landbank.

Exporters have been complaining that the government has not been giving them enough support ever since the peso grew stronger against the dollar.

“We are losing P4.5 billion every month ever since the peso grew stronger,” Philippine Exporters Confederation Inc. (Philexport) president Sergio Ortiz-Luis Jr. said.

Ortiz-Luis said the multi-billion loses come from foregone orders and other missed opportunities. Ortiz-Luis said the industry is already taking a beating as the peso continues to gain strength against the dollar.

“I don’t know how to react. We are all affected. A number of small and medium sized firms have even stopped taking orders,” Ortiz-Luis lamented.

Ortiz-Luis explained some small and medium sized exporters resorted to cutting orders to cope with the continued strengthening of the peso against the dollar rate.

Aside from exporters, Ortiz-Luis said overseas filipino workers (OFWs) are likewise affected by the appreciating peso. “At a certain point, they (OFW) will think it is not worth it anymore and they will come back,” he warned.

Chief News Editor: Sol Jose Vanzi

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