PHILIPPINE NEWS SERVICE — South Korea and China have asked the Bangko Sentral ng Pilipinas to make their currencies convertible in the Philippines, citing increasing trade with the Philippines, a senior official of the central bank said.
South Korea and China sought the convertibility of the won and the renminbi with the central bank but some officials of the Bangko Sentral are wary of the arrangement.
Sources said senior central bank officials want South Korea and China to offer reciprocity before considering the proposal. This means that China’s and South Korea’s central banks will also have to accept the Philippine peso in their respective countries.
Only 16 currencies are convertible with the Bangko Sentral, making them easier to convert with local banks. These are the US dollar, Japanese yen, British pound, Hong Kong dollar, Swiss franc, Canadian dollar, Singapore dollar, Australian dollar, Bahrain dinar, Kuwait dinar, Saudi Arabian rial, Brunei dollar, Indonesian rupiah, Thai baht, the United Arab Emirates dirham and Europe’s euro.
Trade between China and the Philippines rose 20 percent to $3.78 billion in the first half of the year while that of South Korea grew 30 percent to $2.2 billion.
The Philippines enjoys a surplus of $243 million in its trade with China but suffers an $802-million deficit with South Korea, almost double the $466-million gap reported in the first half of 2005.
The convertibility of a currency with another country could facilitate trade and investments.
When dealing with countries whose currencies are not convertible in the Philippines, the trader will have to use currencies such as the US dollar, the yen, the euro and other currencies that the central bank accepts.
The central bank recently signed a bilateral swap arrangement with the Bank of Korea last year. The agreement allows for a two-way swap between the two of up to $1.5 billion in case one needs foreign exchange liquidity.
The bilateral swap agreement between the Philippines and China was signed in August 2003.
The swap agreements are part of the Chiang Mai initiative aimed at helping Asian nations recover from and prevent a repeat of the financial crisis of 1997.
The won is among Asia’s stronger currency lately, touching a five-and-a-half a month high at 937.2 per dollar on Friday, prompting South Korea’s vice finance minister to warn against its recent surge.