The pros of plastic
 

 

By Binod Bhattarai

Nepali Times News

August 2001

 

Will we have the much-discussed polymer banknotes any time soon?

 

You can roll them, twist them, soak them and use the edge as an emergency toothpick. They don’t crumple or rip, and they are water-resistant, so sweaty palms don’t stain them, and immersion in panchamrit does not destroy them. And, they harbour fewer germs. None of this new improved polymer business detracts from the traditional magic of these banknotes—they’re still good, hard cash.

 

An Australian company has been trying to convince Nepal’s central bank to start using plastic money for several years now, but without success. Officials from Note Printing Australia (NPA) were in town earlier in the year to make yet another pitch to Nepal Rastra Bank (NRB) officials.

 

NRB did not say yes, but it didn’t reject the idea either. Instead, officials brought up technicalities like the tender process to avoid having to take a decision quickly. NPA officials, surprisingly, are in no hurry. With close to a dozen countries—Bangladesh, China, Thailand and Indonesia in the neighbourhood—already trying out plastic in some or all denominations, they think sooner or later, Nepal will, too.

 

“It’s the best possible way to ensure your notes last longer and appear decent throughout their lifetime,” says Steven Wong, Asia vice president of Note Printing Australia. To demonstrate, he takes out a 100-yuan bill from his wallet, dips it in a glass of water, and twists and crumples it. At the end of this punishment, the note unfolds perfectly and lies flat on the table, with barely a crease.

 

A subsidiary of the Australian Reserve Bank, the NPA is the leader in polymer banknote technology. Wong’s pitch for polymer goes something like this:

  • It is soil resistant, and therefore cleaner;

  • It is non-porous and so does not absorb liquids like sweat and beverages, which makes it last longer in humid conditions;

  • It is resistant to tears as the polymer substrate is more robust than paper; and

  • It is a green, recyclable technology. 

Possibly the best part of the new cash is its durability—polymer is said to last four times longer than paper. The NPA’s promotional material claims that the polymer successors to Aus$10 paper bills, which lasted no more than eight months, have a life-span of at least 32 months, close to three years. Australia has been using polymer for currency of all denominations for the past decade. “Polymer is best for the denominations that circulate the most,” explains Wong. The Thais use polymer for their Baht 50 banknotes, the Bangladeshis for the Taka 10 bill, the Chinese for their 100 yuan note.

 

The new technology also has enhanced security features, such as the notes’ unique transparent window, which cannot be reproduced by photographic devices, and additional printed security images/ features on the window. Additionally, says the NPA, all security features possible on paper are also available on polymer.

 

NRB officials don’t doubt the new technology. They’re even willing to consider that the new banknote may have cost benefits vis-à-vis  paper money, which the NRB has to print by the million every year. “We’re not against the new idea, we are also thinking about trying polymer in Rs 10 bills,” says Ram Babu Panta, deputy governor of the NRB. “But we have to take into account our constraints—such as in tendering, where we need at least three bidders. In this case, the NPA is the only one we know of that produces these notes.”

 

The other problem is that the law mentions banknotes printed on paper as legal tender, and no official wants to risk interpreting that broadly to also include plastic—not, they say, in times where every government decision comes under intense by the scrutiny anti-corruption body and the Public Accounts Committee. Will there be amendments made to the law? It’s too early to tell, but as if in anticipation of the possibility of plastic money, the draft of the new NRB act says “material” where it earlier said “paper.”

 

And legislation isn’t the only problem, say NRB officials. Plastic money, too, has disadvantages that need to be considered:

  • Plastic money does not fold easily, and many Nepalis do not carry a wallet;

  • NRB has already phased out notes for ones and twos, and is introducing coins;

  • Most note-sorting in Nepal is done by hand, and paper is perhaps better suited to that;

  • Cash is stored in stapled bundles here, and plastic notes are difficult to staple. Besides, the staple hole could be the place where that near-impossible tear starts;

  • The cost of phasing out paper and printing plastic works out if there is volume—Nepal might not have a large enough number of notes to be recycled;

  • The law says notes out of circulation have to be burnt, so the recycling argument may hold only after amendments; and

  • Access to security paper is restricted, but anyone has access to plastic.

Notes in high circulation in Nepal last no more than a year at best. Smaller denominations, like the Rs 1, Rs 2, Rs 5 and Rs 10 notes, those sometimes-nauseating scraps that bus conductors, cab drivers and vegetable vendors hand back to you, last no more than six months. The NRB generally has new notes of these denominations ready just before Dasain and Tihar. On average the bank prints about 20.5 million pieces of fives, as many ones, about 20 million pieces of tens and about the same number of twenties every year.

 

One—perhaps the most compelling—economic argument for trying out polymer is its durability, which would eliminate the need to spend money on printing money every year. “Polymer notes are said to be durable for seven-eight years in ideal conditions, and that could mean savings on printing in the long run,” agrees Panta. The flip side: an initial printing cost that is two-and-a-half to three times higher than that for paper. But, adds Panta: “If our own cost-benefit analysis shows what the company says is true, there is no reason not to try it out.” Trying this out with smaller denominations also makes sense because there is less incentive for counterfeiters to try to reproduce the money.

 

Even if the logistics work out on paper, this will be a dodgy move. Every year the NRB spends about Rs 100 million on printing new banknotes—switching to polymer will mean a big loss for some businesses. There’s also the question of kickbacks, an unspoken, but generally assumed cost in any government or semi-government contract. Still more people will lose out on these.

 

If we do decide to go plastic, it will be quite some time after the new central bank act is ratified. That itself may or may not happen in this session of parliament. In the meantime, our filthy notes will have to keep on doing what they do—spreading germs and falling apart.

    

 

 

 

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