The curious case of our legal tender

The curious case of our legal tender

Sometime in 2006, the Bangko Sentral ng Pilipinas issued new banknotes. Few realized then, until somebody noticed that for the first time in our history, the name of the president of the benighted republic was misspelled. Instead of Arroyo, the name “Arrovo” was printed. Our legal tender bears the signatures of the president, no matter how illegitimate, and the governor of our central bank.

Embarrassed at such a monumental gaffe, the Bangko Sentral ordered the recall of the “Arrovo” bills, and it was only then that they explained that it was a printing error. You half-expected that heads would roll in the sprawling printing and mint facility of the Bangko Sentral on East Avenue. But no. Because they did not print those Arrovo bills. They were outsourced from some foreign country.

In 1976, then President Ferdinand Marcos ordered the construction of one of Southeast Asia’s most modern security printing facilities located along East Avenue, Quezon City, where the then Central Bank printed our legal tender as well as mint our metal coins. The Bank ordered security printing equipment from a European maker, the acknowledged leader in the field of banknote printing machines. Sometime in 1983, the machines were reconditioned and retro-fitted to incorporate more sophisticated features. But due to wear and tear over the past 32 years, they have been printing only the lower-denomination banknotes while the Bangko Sentral outsourced the printing of the higher denominations.

By 2007, the Bank’s outsourcing of our banknotes printing already reached record levels, as much as 900 million pieces per year. The yearly estimated cost ot outsourced currency printing is between 35 to 40 million dollars. It was at the time that the Bank conducted studies about the possible purchase of new printing equipment. The same had also become imperative because additional security features characterize modern banknotes (look at Thailand’s baht banknotes, for instance). The Philippines’ legal tender can be so easily counterfeited, that time and again, the public is fooled by illegal tender passed on by con-artist syndicates.

Outsourcing the printing of our legal tender costs the BSP, and therefore, the people of the Republic, a lot. At say, fifty US cents apiece, 900 million pieces translates into 450 million dollars, or about 20.7 billion pesos per annum. Recently, the Bank announced that it intends to demonetize our present banknotes and re-design the Philippine currency with new banknote sketches, including one where both slain democracy martyr Benigno “Ninoy” Aquino Jr. and his widow, people power icon Corazon C. Aquino, first President of the Fourth Republic, will be featured together. The Bank says these notes should be ready by November 2010, and some 702 million pieces of these new banknotes will be initially released.

702 million at 50 US cents equals 351 million American dollars, or 16 billion pesos at present exchange rates. Question is, if these machines need to be replaced, and the Bangko Sentral did studies in 2007 for the acquisition of new printing equipment, and they have been importing our legal tender in increasing volumes since 2000, then why in heaven’s name don’t they order the equipment and save a lot of money, aside from ensuring strict quality control standards and security? After all, “Arrovo” was a foreign outsourced printer’s egregious error, not the BSP mint’s.
Curiously, sometime in October last year, the BSP published an invitation to bid for a complete line of banknote printing equipment, with an approved budget of US 56,800,000.00. That 56.8 million pesos translates to only 2.6 billion pesos, much less than the 16 billion or so that they would need to outsource the printing of 702 million banknotes they are rushing for their self-imposed November 2010 deadline. 16 billion is still much, much more than the cost of a new line of printing equipment. What gives?

Simple arithmetic and no logarithms are required to show that it would be much cheaper for the Bank to procure new equipment to print our currency locally, rather than having it printed by various foreign entities which entails security risks. The Philippines and Nigeria are about the only populous countries in the world who still outsource the printing of their banknotes. Well, Nigeria and the Philippines are among the world’s notoriously corrupt countries, according to perception indicia from almost all multinational groups.

Strangely though, the invitation to bid published on October 26, 2009 was cancelled in December 2009, and last month, the Bank announced its intention to demonetize our present set of banknotes, to be replaced by imported banknotes starting November 2010.

Curiouser and curiouser, eh?

Who in the Bangko Sentral wants to keep importing and importing, instead of printing our bills at the East Avenue facility? Are representatives of foreign printing firms lobbying intensely so they keep making a pile out of our needs? Or is there a possibility of some money laundering going on? Hindi naman sana.

Meanwhile, the Bank continues to maintain their plant which though it has served us well through 32 years, requires huge overhead and maintenance costs, not to mention salaries of well-trained personnel who are idled by a breakdown of old equipment.

There is no reason why the Philippines can’t print its own paper money when all member nations of the Asean --- Laos and Cambodia included, have their own printing equipment to manufacture their own currencies.

Oh well, that’s the Arroyo government for you. It has a Bangko Sentral whose governing board, the Monetary Board is packed with her favourites, and though run professionally by highly-skilled middle management, curiously practice cost-inefficient methods of sourcing our legal tender.

She has destroyed the credibility of most every institution --- a subservient legislature, a judiciary packed with misfits and about to be headed by a super misfit appointed “like a thief in the night”, a supinely ineffective bureaucracy, an election commission which has graduated from inability to count manually to inability to count using machines, a military and police institution where promotions are a function of subservience to political demi-gods, And even non-governmental institutions such as religious institutions and media, have become so tainted with corruption. The legacy of Gloria Macapagal Arroyo. Pati ba naman Bangko Sentral?

This reminds me of how the Bank was given Mickey Mouse titles by one who would be president of the land, in exchange for some 1.5 billion pesos in emergency loans to save a bank that eventually turned belly-up anyway. Ask the Dumagats and the “remontados” of Norzagaray.

(banayo_at@yahoo.com)

LITO BANAYO
MALAYA Column for Friday, 19 March 2010