NEWSDAY NOVEMBER 20, 2 K 14 The new $TT50-bill and its impact on business By Business Correspondent Thursday, November 20 2014 click on pic to zoom in TRINIDAD and Tobago became an independent nation in 1962 and issued its first currency in December 1964. Since then there have been a number of changes to the notes themselves including the removal of the portrait of Queen Elizabeth and the reflection of the new premises of the Central Bank in 1985. The $50 and $100 notes were introduced in 1977 and a commemorative circulation $100 note was issued in 2009 to celebrate the country’s hosting of the 60th Commonwealth Heads of Government Conference that year. In all these cases our national symbols and emblems were used, and it is hoped that this continues to be the case. The $50 note, however, has been the most colourful in the country’s currency history. Shortly after introduction in 1977, the $50 note was removed from circulation but again re-introduced in 2012 to commemorate the nation’s 50th anniversary of independence. The removal in the first instance was never officially explained although it was rumoured that this was because of the disappearance of a number of boxes of the currency during shipment. This year, the $50 note has once again been introduced, apparently to commemorate the 50th anniversary of the establishment of the Central Bank. It is interesting that just two years after its re-introduction in 2012, after having spent millions of tax payers money on design and printing, the note has again been redesigned. This redesign is of real significance however, as the note has been changed from paper-based to polymer, a plastic-like material. The significance of this change is not to be trivialised as it has far-reaching effects on almost every sector in the economy and directly impacts every citizen in very personal ways. Interestingly enough, since the introduction of this polymer based note in 1988, only eight countries have switched to polymer notes. Australia, Bermuda, Brunei, New Zealand, Papua New Guinea, Romania, Vietnam and Canada have made a complete switch, whereas fourteen other countries have only their lowest currencies made of polymer, and yet others have opted for a hybrid polymer/paper note. The rest of the world has not yet been convinced that this change is for the best and for good reason. Costa Rica, Haiti, Honduras and El Salvador have all attempted a trial run of polymer notes. However, they unfortunately discovered that in tropical climates, the ink does not bind well to the polymer and the notes began smearing badly. Despite the fact that the cost of producing a polymer note has been estimated at a little over twice the cost of the paper note, a lot has been stated about the benefits to be derived from switching from paper to polymer notes. However, these arguments need to be placed in context. Advocates for the change to polymer notes cite certain advantages such as enhanced security features and durability. However, real world experience has shown that these advantages may be illusory and the cost of using the notes can outweigh the benefits. In fact, Canada’s experience has been that although the notes have been propagated as harder to counterfeit, it was just a matter of time before persons were able to replicate the technology on the note. Canada introduced the polymer in 2011 and since then at least 59 counterfeit versions of various denominations have been caught across the country. Heavy reliance is still placed on paper notes by over 95 percent of the economies of the world and has been significantly upgraded to capture many of the security features of the polymer note at a much lower cost. Both paper and polymer notes can contain security features such as intaglio, offset and letter press printing, latent images, micro-printing and intricate background patterns. They both can incorporate watermarks, security threads and can be embossed. Up to 2006, the polymer notes also enabled a new security feature unavailable at the time on paper, that of a transparent window. Since 2006 De La Rue has developed paper transparent window technologies which have countered the advantage of polymer. In the Trinidad and Tobago context, the need for the enhanced security features derived from the polymer note therefore raises two questions: firstly, were there any security breaches of which we are not aware, and secondly, what was the cost of those to the taxpayer? In most countries the justification of the extra costs incurred on enhanced security features has always been followed by a clear identification of the cost that have been incurred from forgery and the benefit of the new measures. The cost and benefit to all stakeholders are then abundantly clear. Since there has not been any national outcry against the $50 note, and no announcement of security concerns by the authorities, one is left to ask why the apparent sudden need to re-issue the note. The second major advantage proposed for the adoption of the polymer bill is the durability, but is this really the case? Some countries have reported that the polymer notes can melt under extreme heat such as tumble dryers and in the sun, can tear easily once cut, and as the polymer money is handled, it continues to fade as it moves from one hand to another. Other countries have also had some major concerns with the adoption of polymer. Polymer notes feel more like plastic than paper, which can cause problems in the event the bills get wet as they tend to get stuck together. This can be an annoyance for people who are trying to make a payment with wet bills, and could potentially lead to a purchaser handing a retailer two bills instead of one. This will also prove to be a challenge especially for the elderly and the infirm as they attempt to go about their daily business. Bank tellers may find this problematic as well, since sticky bills can be more difficult to count by hand. In addition, paper money can be folded easily and placed in a pocket or wallet without a problem. The same can’t be said for polymer money, which is designed specifically to resist attempts at folding. When a polymer banknote is folded, the action creates a crease in the middle of the bill. While paper notes fold back without much problem, the crease in the polymer bill remains there permanently. One wonders whether this would hinder its effect in using it in dispensing or sorting machines. Money sorting machines in banks, casinos and other cash-intensive businesses are built to handle paper banknotes, and they do so with relative ease. The polymer banknote design is a different texture, one which is foreign to traditional sorting machines. The strength of the polymer material could potentially be enough to cause sorting machines to malfunction, since they are not designed to deal with bills of a different material. Having the machines altered to conform to new currency can be costly; having them replaced outright would be even a greater financial cost. UK’s cash businesses have opposed the switch to polymer citing a lack of research as to the cost impact of its introduction. Finally, the destruction of the note, regardless of the fact that it can be held in circulation for a long time, is still necessary and this raises many issues as the options for disposal all lead to environmental concerns as the burning of polymer notes pollute the air as it releases toxic gases, polymer is not biodegradable and the cost of recycling can be high, assuming facilities exist to recycle the notes. After all these considerations then, perhaps the first comment that has to be made is on the process that was used to make the decision to switch. A simple comparison with the efforts of the Bank of England will highlight the difference with which all stake holders and the average citizen are treated. The Bank of England plans to introduce a £5 polymer note in 2016 and a £10 note a year later. When it took a decision to consider a change from paper to polymer notes, it spent three years of research and a 10-week consultation that was made up of online surveys, independent focus groups, national events and conventional surveys before any decision to move to polymer notes. The Bank of England pursued public consultations to get buy-in, as well as responses to improve on the design and thus address public concerns where they arose, and has committed itself to an open and transparent process. The institution has given the commitment, were the public to oppose the introduction to the new note, it will be prepared to back down. This is fundamentally different from informing the public (all stakeholders) of the re-issue of the $50 note and indicating the change to the use of polymer instead of paper, without any feedback to identify concerns and modify design to address these concerns. In most of those countries that have introduced the polymer note there was extensive consultation with the wider public. The question arises in the case of Trinidad and Tobago: what, if any, consultations were held with the banks, and other groups such as the supermarkets to determine the impact the introduction of these new notes will have? How are retail establishments to accommodate these bills in tills that were not built for extra notes? Clearly, the introduction of the polymer notes has had challenges of acceptance and thus its use has been limited. For any currency to be regarded as a legal tender, it must be generally acceptable. The same can therefore be said of our $50 note. If it is refused by the banking or cash industry in Trinidad and Tobago, is it still considered legal tender? A review of the experiences of jurisdictions that have introduced polymer notes suggests that there are difficulties that include counterfeits, cost of introduction, cost to financial institutions, difficulties in handling and maintaining integrity of the note. The major concern, however, is the effect on financial stability and confidence in the financial system if these $50 notes, so proudly introduced, have to be once again recalled, reissued or withdrawn.
Posted on: Thu, 20 Nov 2014 08:40:56 +0000
Trending Topics
Recently Viewed Topics
© 2015