Fri, Jan 07, 2000 - Page 18 News List

Effect of NT rise on trade limited

COSTS Exporters have feared that the rise in the local currency will hit them hard, but analysts say otherwise

By Cybil Chou  /  STAFF REPORTER

The recent appreciation of the NT dollar will have a small impact on the cost and competitiveness of exporters' products in the short-term, analysts said yesterday.

However, while the currency's long-term appreciation is causing concern amongst exporters, importers are looking forward to the reduced costs.

The NT dollar closed yesterday at NT$30.854 to the dollar, down slightly from Wednesday's close of NT$30.80. Central bank intervention reduced the volatility seen in the market over the past few days, traders said.

Since last December, the US/NT dollar rate has been volatile, with the appreciation range of the NT dollar higher than the devaluation range, according to officials at the Central Bank of China.

"The currency will have a more significant impact on Taiwan's exports, particularly in the electronics and traditional industries," said Cheng Cheng-mount (鄭-s-Z), assistant research fellow at the Taiwan Institute for Economic Research (台灣經濟研究院).

Despite this, Cheng said that the appreciation would not have an immediate impact on the competitiveness of electronic products -- which account for a large percent of Taiwan's exports -- because of their expected price increase.

The large appreciation of the Japanese yen and the South Korean won has also resulted in an increase in the cost of products from those countries, Chen explained. Japan and South Korea are Taiwan's main competitors in electronic products.

Meanwhile, importers might enjoy lower import costs thanks to the appreciation. Traditional industries are likely to face a larger impact -- despite the effects not being immediate -- since a certain percentage of Taiwanese products are "virtually exported" through South East Asia, where they are manufactured or processed.

"We are concerned that the appreciation of the currency will affect textile exports in terms of being less competitive," said Michael Chang (張滄漢), deputy secretary general of the Taiwan Textile Federation (紡坡晰|).

According to Chang, Taiwan's textile industry is basically export-oriented, and textile manufacturers are worried that their profits would be reduced and, in the long term, will face losses.

Despite the fact that textile exporters have learned to avoid risks due to currency fluctuations, they expect the government to stabilize the currency.

Meanwhile, Chen Fei-lung (3?蛻s), chairman of Nan Chow Chemical Ltd, which relies on large imports of cooking oil and raw materials, said that the appreciation of the NT dollar was good news, slightly reducing their import costs.

"We can breathe a sigh of relief at the currency appreciation," said Chen.

Despite this, he said the shift in the US/NT exchange rate would not result in the reduction of the retail prices for their products in the domestic market.

Chen said they could possibly expect a 3 percent price reduction on imports, if the currency appreciation is maintained within 10 percent limit and the price of the imported materials is also limited.

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