A study of the Asian Development Bank (ADB) supports the idea of instituting framework that would allow different governments in the region to coordinate their exchange-rate policies and check over and undervaluation of currencies. In the study of Dr. Victor Pontines, a research fellow of the ADB Institute, it came out that such a framework was needed to assess the performance of the different currencies and also promote exchange-rate stability in the region.
A detailed presentation of the study would be given by Pontines at a forum organized by the government think tank Philippine Institute for Development Studies (PIDS) at the Neda in a Makati building on January 9. PIDS, in its advisory, said the study looked at the usefulness of having an Asian Currency Unit (ACU) Index for surveillance in Asia. Other studies similar to that of Dr. Pontines, PIDS said, suggest that what is needed for the region is a type of framework for exchange-rate policy coordination that would promote interregional exchange rate stability. Dr. Pontines suggested ways on how the region could capitalize on using the ACU Index in the immediate term for surveillance purposes. This will particularly help in assessing “over and undervaluation” of individual currencies from the regional ACU average. The Philippine peso, in particular, is being described by some business leaders as overvalued at this time, thus, posing negative effects on the economy. Donald Dee, vice chairman of PCCI, said the “over-valued” peso was creating problems at the grassroots. “If we don’t correct this, we would not be able to create jobs. Unemployment and poverty would still be a problem. The exchange rate is an issue and we need to manage it so industries can grow and we can be competitive,” Dee said. Sergio Ortiz-Luis, president of the Philippine Exporters Confederation, said speculators posing as economists were hurting the export sector, overseas Filipino workers, small businesses, and local manufacturers by making predictions that the peso would appreciate further. These predictions, he said, were not really based on sound scientific method but represented the advocacy of fund managers to push for a stronger local currency. The ACU Index, Pontines noted, would also be useful in flagging emerging vulnerabilities in individual economies in the region.
