Watchdog, 2 gov’t agencies question Bangko Sentral’s ‘midnight deal’ on PHL banknotes shift from abaca to plastic

BANKNOTE. The P1,000 bill made of cotton and abaca. The Bangko Sentral ng Pilipinas (BSP) plans to pilot-test starting in the first half of 2022 the use of P1,000 polymer notes, a move opposed by the Philippine Fiber Industry Development Authority and the Philippine Council for Agriculture and Fisheries and a watchdog.

MANILA – An anti-corruption watchdog has asked the Senate to investigate the Bangko Sentral ng Pilipinas (BSP) following its rush decision to shift to using polymer/plastic in making banknotes from abaca-cotton for circulation starting next year, stressing this is expensive and will affect the livelihood of Filipino farmers.

In a statement published in Manila media and in online media, the watchdog called Pinoy Aksyon led by Bencyrus Ellorin said he supports the position of the Philippine Fiber Industry Development Authority (PhilFIDA), a government agency, against the shift for what it said was more expensive for the government and anti-Filipino farmers.

The PhilFIDA was joined by another government agency, the Philippine Council for Agriculture and Fisheries, by issuing its position paper recommending that the BSP retain abaca fiber in the production of Philippine banknotes in support of local farmers.

The PHilFIDA said it was opposing plans of the Bangko Sentral to shift to polymer plastic from abaca fiber in the production of banknotes starting next year.

“The move is a setback in the global drive to promote renewable, sustainable, and eco-friendly products,” said PhilFIDA executive director Kennedy Costales  during a forum with abaca farmers in  Leyte.

“BSP (Bangko Sentral ng Pilipinas) promotes plastic by shifting to polymer banknotes versus the biodegradable abaca which is the strongest, the longest and the most porous natural fiber in the world. Not to mention its permeability and excellent tear and bursting. It’s our job to protect our homegrown industry,” said Costales.

Currently, Philippine banknotes are made principally of 80 percent cotton and 20 percent abaca.

The BSP needs 100 to 150 metric tons of abaca fiber every year to produce bills, a small fraction of the 70,000 metric tons annual abaca production, according to PhilFIDA.

“Why is this being rushed? Hindi ba pwedeng pag-aralan muna mabuti, mag test, dahil maapektuhan and mga magsasaka,” Ellorin said. “ Sa panahon ngayon ng Pandemic, marami naghihirap, kailangan natin mag isip ng makakatulong sa kapwa Pilipino”.

Ellorin called the BSP transaction with a Filipino-Chinese contractor a “midnight deal.”

“BSP can help save money for the Government by not shifting to Polymer/Plastic Banknotes during this Pandemic as there is no emergency situation,” said PhilFida in a position paper.
BSP Deputy Governor Mamerto Tangonan announced last October that the BSP will test the use of polymer P1,000 bills through circulation before the Presidential election next year.

PhilFida had questioned why the BSP was insisting to shift to polymer/plastic banknotes amid the ongoing COVID-19 pandemic whereas, the Bank of England commissioned testing to better understand the actual risk of transmitting Covid 19 Virus via Banknotes. It concluded that there is no material difference in the viability of the virus on Polymer and Paper Banknotes.

Ellorin stated that Philippine Banknotes substrate is different from other Paper Banknotes in other countries – as the Philippines and Japan are the only two countries in the world using Philippine Abaca in their banknotes.

The use of Polymer by other countries should not be the basis for BSP to do the same as the paper they replaced is much different from the Philippine substrate, the group said.

“BSP has huge stock 1000-Piso printed and for printing – that is good for more than 2 years. Commercial Banks are saying the requirements of cash – banknotes is very low/slow as economy is down due to the effect of the pandemic,” it said.

The currency stocks relating to issuances of 1000-Piso can even last up to 3 years. BSP should instead put their efforts and time into continuously fostering and strengthening the digitalization and electronic banking transactions which have increased as now used by the Public due to the Pandemic situation.

In September 2020, BSP launched the Enhanced New Generation Currency (ENGC) banknotes and also said that Central Banks change the design and security features of banknotes every 10 years on average.

“Take note that it took about four (4) years before the shift to ENGC (from New Generation Currency-NGC) was finalized and launched. The shift should not be based on a simple check with countries using Polymer – who obviously will defend their decision. The long study is normal for any Central Bank when they make a change in their Currency. At BSP, just a year after, and during this Pandemic, have announced the shift to Polymer. Why is BSP in a rush?” asked PhilFida.

BSP suppliers for banknotes and banknote papers are passing through the pre-qualification process.

BSP in rushing to shift to Polymer will not subject the Suppliers involved in the Polymer Currency, Note Printing Australia (NPA), subsidiary of Reserve Bank of Australia (RBA), and CCL Secure to pre-qualification. Whereas, all the other Suppliers for Currency have to go through prequalification yearly.

NPA, it said, works very closely with CCL Secure (formerly Securency International), both of which Australian companies were allegedly convicted in bribery cases. BSP is going for a contract covering some years with RBA. Having a contract with RBA does not necessarily mean that the price will be beneficial to the Philippine Government, it was asserted.

“Why BSP did not consider having the printing job subject for bidding is a big question? Our Procurement Law was established to ensure our Philippine Government will get the best contract prices at all times for the benefit of the Filipino people,” the group said.

PhilFida said in comparing abaca-cotton banknotes versus polymer banknotes, for P1,000 notes, the cost is $80 per 1,000 pieces while a polymer-based banknote will cost US$150 – 200 per 1,000 pieces, depending on the selected security features.

PhilFida also refuted claims by the polymer industry that BSP will save money when it uses polymer for banknotes.

The Bank of England, estimated that the polymer £50 banknote will cost £50 million to £70 million more over 10 years than if it kept the existing paper banknotes, according to the National Audit Office in September 2020.

PhilFida added that a shift to polymer banknotes will result in the adjustment and even replacement of expensive cash processing machines or high-speed sorting machines that determine banknotes if fit for recirculation and unfit for destruction.

ATMs, desk counters, and vending machines need to be replaced or modified. Paper Currency printing machines need to be adjusted or replaced which are very costly, any added cost planned during this Pandemic situation is inappropriate.

PhilFida said polymer banknotes can easily be counterfeited due to the nature of its substrate, being Plastic, including the banknote security features applied therein, these can all be researched. Some security features can be easily counterfeited due to materials and equipment which are commercially available, some security features are being used in several packaging and ID materials.

It added that polymer banknotes were maybe durable as substrates, but are not as durable overall as banknotes, as the inks and security features will deteriorate and fade during circulation, as what happened in Nigeria and other tropical countries due to the smooth surface of the Polymer.

It also said polymer banknotes cannot be folded as it will leave a crease on the fold area that will affect the print considering that the Filipinos have the habit of folding the paper currency.

There are only two suppliers of polymer substrate in the world. Whereas, BSP have five prequalified suppliers for paper banknotes. Having only 1 or 2, could result in monopoly or collusion and definitely drive the price high. It may be that the price offer initially maybe low for purposes of convincing BSP, we call this penetration price. Expect high price in the future orders with this risky supply situation, the group said. (Jean Michael Penaranda)

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