You're Complaining About PHP Devaluation But Do You Know Some Asian Powerhouses Have WEAKER Currency?

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Social media comments can be very toxic, aren't they? Sure, I didn't vote for Philippine President Ferdinand R. Marcos Jr. However, I can't blame him for anything beyond his control. The late former Philippine president, Benigno Simeon C. Aquino III, had nothing to do with the prices of gasoline being lower. Neither does former Philippine president, Rodrigo R. Duterte, have anything to do with the prices of gasoline. We find that the US Dollar (USD) is definitely getting stronger in proportion to the Philippine peso (PHP). Yes, it could reach up to PHP 60.00 or even higher. I remembered experiencing this during the time of former Philippine president, Joseph M. Ejercito aka Joseph Estrada. I really blamed Estrada back then for it even when it wasn't his fault either. 

People can start panicking over the devaluation of the PHP. There are plenty of crude comments on Facebook I wouldn't bother screenshotting them all. Instead, I decided to finally write this economics post which will enlighten us. 

Let's think about Asian powerhouses with a weaker currency

Let's do a bit of a conversion rate between certain currencies against the PHP which is USD 1.00 is equivalent to PHP 58.76. Now, for a list of some currencies weaker than the PHP as of today:
  1. USD 1.00 is equivalent to 144.60 Japanese yen (JPY).
  2. USD 1.00 is equivalent to 1,419.62 South Korean Won (SKW).
  3. USD 1.00 is equivalent to 23,875.00 Vietnamese Dong (VND).
Now, for converting the PHP to these rather depreciated or weaker currencies:
  1. PHP 1.00 is equivalent to JPY 2.46.
  2. PHP 1.00 is equivalent to SKW 24.19. 
  3. PHP 1.00 is equivalent to VND 405.97.
If we convert the JPY, SKW, and VND into PHP then we get an idea of how weak these currencies are:
  1. JPY 1.00 is only PHP 0.41.
  2. SKW 1.00 is only PHP 0.041.
  3. VND 1.00 is only PHP 0.0025.
What we can observe is these currencies are weaker than the peso. Just imagine if you computed the equivalent in dollars for each weak currency with PHP 58.76. This is what we get to show how they're practically disadvantaged against the USD and the PHP is actually a stronger currency:
  1. Japan would need PHP 8,499.2988 to achieve USD 1.00.
  2. South Korea would need PHP 83,442.4244 to achieve USD 1.00.
  3. Vietnam would need PHP 1,403,324.25 to achieve USD 1.00.

So where has the Philippines gone wrong in spite of the PHP being theoretically stronger than the JPY, SKW, and the VND? 

Why isn't the Philippines the richest of these four countries? China may have a stronger currency (Chinese Yuan or CNY) which is worth PHP 8.26. Singapore would have their dollar (SGD) worth PHP 41.14. Yet, we also read that these nations with weaker currencies have better economies than the Philippines? We need to take a look at one thing--the economic policies.

I was reading through the late Lee Kuan Yew's famous book, From Third World to First. It would be interesting to see how Lee Kuan Yew himself had trips to Vietnam and Japan. What truly interested me about Vietnam was the late Do Muoi, founder of the Doi Moi policy. The Communist leader Do Muoi got the economics right whereas a lot of Communists get economics wrong. Like Deng Xiaoping of China, Do Muoi knew what he had to do to transform Vietnam's Communist state into a powerhouse. I still keep reading about how Vietnam did better than the Philippines during the pandemic in spite of a weakened VND. Japan was hit by the Hiroshima bombing but 10 years later--it became another economic powerhouse. 

We can talk about South Korea too. We can talk about the Han River Miracle. I remembered when I wrote about South Korea's difference from North Korea (read here). Now, it's time to think about how South Korea actually beat the Philippines for a very long time. South Korea is now exporting its culture around the world, not North Korea. Have you ever watched Korean shows from North Korea? Maybe, you've been watching shows from China but why none from North Korea? Maybe you're getting a Xiaomi (Chinese) or a Samsung (South Korea) but why are there no Koryolinks? I went to the malls many times and no one sells a Koryolink. 

The difference lies with the economic policies. Unfortunately, the Philippines has been long stuck with Carlos P. Garcia's stupid Filipino First Policy. The policy has caused the Philippines to fail. Garcia wanted to make sure that majority of the businesses were owned by Filipinos. There's always the lie I hear that only foreign direct investors (FDIs) will get rich if you let them invest in your home country (read here). Not so surprisingly, one of the framers of the 1987 Constitution of the Philippines, Hilario G. Davide Jr. even said that we must retain the 60-40 to "preserve sovereignty". Once again, it fails because 100% share ownership means that an FDI doesn't need a Filipino partner. It's only people like Teddy Casino of Bayan Muna who still insist it works. However, Lee Kuan Yew called it a third world mentality. Kishore Mahbubani had indirectly refuted Davide Jr. about FDI (read here). Mahbubani knew how to make Singapore a successful model ASEAN country. Sadly, the Philippines has been left behind and corruption in the government isn't the only reason. It's more on the economic restrictions that have been holding it backward. Then again we know corrupt officials also love protectionism because it gives them power. 

That's why I wrote that weaker PHP means economic charter change is an urgent bill (read here). That means mass media companies can now openly receive foreign funding and ownership. I believe that the Public Services Act of 2022 will be key to improving the Philippines' public services. Just imagine if the Philippines will have cheaper services as a result of more public service providers. It's all about supply and demand. Trying to put the utilities into purely government hands will be proven disastrous in poorer socialist states like Venezuela and North Korea. Meanwhile, socialist countries like China and Vietnam are doing better by accepting FDI as part of their policy. That's why I still admire Deng and Do even if these men are Communists. Mao Zedong's ideal society only brought poverty and misery. Deng's new policies made China a powerhouse. 

We need to take advantage of the weakening PHP now. A weaker PHP may be more attractive to FDI. FDIs can stay invested as long as they follow rules such as environmental laws, labor laws, and taxation laws. Follow and the FDIs get to stay and invest. Disobey the rules and the FDIs are treated as bad tenants. Besides, FDI will be more helpful to local businesses in the long run (read here).

References

Books

"From Third World to First--The Singapore Story: 1965-2000) by Lee Kuan Yew
Harpers Collins Publishers

Videos

"The Singapore economic model - VPRO documentary - 2009"  by VRPO Documentary (September 8, 2018)

Websites



"Miracle on the Han River Part II, or Regression to the Mean? South Korea’s Economy in Transition" by Yoon-shik Park (December 2014)

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