The polymer experience in Papua New Guinea

By Leonard Wilson Kamit, Deputy Governor, Bank of Papua New Guinea.

On 19th April 1975, exactly 5 months before Independence, Papua New Guinea introduced its own notes and coins called Kina and Toea. It is a decimal currency with 100 toea equal to one Kina. All notes and coins are issued and distributed by the Bank of Papua New Guinea, and in 1991 the Bank decided to issue its first note on polymer.

Before I go into the detail of the circulation experience of the K2 polymer note, it may be helpful for me to give you a profile of Papua New Guinea, and the reasons we decided to try polymer.

Papua New Guinea is a developing country rich in natural resources. With a population of 4 million, and 90% living in rural areas it is a country that is steeped in tradition and culture but also hungry for new technology. You can see its location on this map.

Since Independence of Papua New Guinea in 1975, the Bank has been dealing with the various challenges of introducing a sovereign currency. They can be summarised in 3 areas:

1. Changing from barter trading to trading in a regulated currency system

2. Distribution/Communication/ Public information on notes and currency in a difficult to access environment.

3. Providing a currency that is acceptable to the community at large and can stand up to the rigours of harsh circulation conditions.

1a Barter trading was widely practiced until 1960. This included trading in items such as the Kina (pearl shell), animals, produce, boar tusks. Whilst these are no longer legal currency they are still very important for ceremonies and cultural events.

2a Papua New Guinea terrain includes mountainous regions (highlands) which are difficult to access. Communication to these outlying areas is very difficult as television and newspapers are not widespread. Some 90% of the population live in rural village environments and there are around 700 languages.

Therefore most people in the rural areas do not utilise the banks, or even use wallets or purses to put their notes, instead they just squeeze the notes and put them in their pockets or store them in containers.

In some regions of Papua New Guinea particularly in the Highland regions people bury money and consequently the notes get very dirty and worn out very quickly. The people have the perception that if they put their money in a bank it will go missing or it will not be readily available if they require it for traditional/customary obligations such as paying bride price and other customary ceremonies where traditional money is also used.

3a Until 1975 the basic currency utilised was the Australian currency. With Independence of Papua New Guinea in 1975 the Kina currency was introduced. This included five paper note denominations. It is accepted by people from all regions of Papua New Guinea, and its use is not restricted, like traditional monies, to certain tribes or areas.

We can now focus on the K2. As you can see the design elements of the note feature some key traditional features of Papua New Guinea life. On the front design is a stylised bird of Paradise, grasping the kundu drum with the spear in the background. On the reverse are some of the traditional currencies including an axe, arm band, clay pot and dog teeth necklace.

The K2 is a high circulation note and the best choice for a durable polymer substrate. With the 1991 South Pacific Games looming, this offered an excellent opportunity for the Bank to trial polymer banknotes. In creating a polymer note from the paper note design we were very careful not to make many changes to the design so that the public would accept the change. A window was designed into the note, which featured the Bank of Papua New Guinea crest. In addition a special South Pacific Games overprint was placed on the note.

4. Performance of polymer K2

When the note was first issued the public perception was somewhat mixed. This was expected, especially when introducing a change from acceptability of the old 2 Kina paper note, to a polymer note. Incidentally, the public's perception and acceptability of the new polymer note has improved from what was noted five years ago.

Following the issue of this note normal circulating K2 notes were issued and in 1995 a special 20th Anniversary of Independence overprint note was issued.

Durability

Most people prefer to use the lower denomination especially the K2 and K5 notes because of our culture where family ties are very strong, it is easy to give away smaller denomination to friends and relatives than to give away the larger denomination. This also gives rise to handling problems as during the process of giving away money, it is usually squashed up into a smaller object and handed out.

The average life span of polymer notes is two years compared to the K2 paper note which has an average life span of around four to six months. The polymer note is advantageous in high humidity and rainfall climates such as Papua New Guinea. It is also difficult to tear the note on its edges unless cut by a sharp instrument. As the notes are often buried for safekeeping in many rural areas, polymer notes tend to handle these conditions better. You can see from this slide that the notes are inserted into a sliced section of bamboo trunk, and it will then be buried.

The majority of people live in rural and remote locations, involved in agricultural, mining and fishing industries. The notes are therefore subject to heavy soiling and wear and tear. The paper K2 notes tended to be short-lived in these conditions. They soiled quickly and were less resilient to the humid conditions.

Polymer notes circulate much longer because of the physical strength of and properties of polymer and because they stay cleaner and remain intact. They also tend to stay in circulation rather than return to the banks. As a result of this prolonged circulation life, we sometimes find that the ink wears more than the note. For example we still have some 1991 South Pacific Games overprint notes circulating due to the sheer strength of the note, but the abrasion of inks has lightened the note. Some of these notes are only just returning to the Bank, and will now be destroyed. There is therefore a tendency with polymer notes in Papua New Guinea to extend their circulation life beyond 2 years despite a loss in ink colour because the notes retain their integrity and strength. This extended circulation means that the Bank orders notes far less frequently than before.

Security

The see-through clear window of the note is one of the most effective deterrents against counterfeiting by high technology scanners and colour copiers because unlike a paper note, the clear plastic window cannot be reproduced by photocopying. It will just produce an impression in the shape of the window spot on the copy. The impression will take the colour of the lid of the copier. With a white lid the Bank logo will not reproduce, and the whole window will be white. A dark lid will cause the surrounding window to go black. These very significant differences are easily recognisable with the naked eyes.

Additionally, a shadow image of the Bank logo has a similar effect to a watermark, and the public can readily see this when the note is put up to the light. There have been no counterfeits of the K2 polymer to date, but there have been attempts to counterfeit the K2 paper note in the past.

Counterfeits on paper were relatively easy due to the availability of paper and colour copiers. They ranged from black and white photocopies coloured in with a green highlighter pen, to scanned images printed on inkjet printers.

Cleanliness

One of the major challenges for the paper notes in Papua New Guinea is the harsh circulating conditions in the primary industries have already described. Notes tend to soil more quickly than in a modern city environment. The polymer notes remain cleaner than paper notes because they do not absorb moisture and dirt. The public also recognises that polymer notes do not absorb smells as can occur with paper notes over time.

Handling

The polymer note was initially noted to be more resistant to folding than paper notes and this is obviously due to the difference between paper and polymer. As wallets are not commonly used in Papua New Guinea, this feature of the polymer notes should be more actively communicated to the public so that they can better use the bank notes.

Manual processing and cancelling

Polymer notes are processed in much the same way as paper notes. The Bank of Papua New Guinea has instructed all the commercial banks to sort the notes when they receive deposits from the public. All banks in PNG manually sort and determine the quality of the notes into those fit for reissue and those which are unacceptable and need to be withdrawn. Al1 notes that are identified as torn, heavily soiled or repaired, are stapled together in sections of 100 notes and delivered by security van and lodged with the Bank of PNG.

The quantities of notes are verified by the Bank of PNG counting tellers and then cancelled with three holes drilled in the section of notes. They are then destroyed in the incinerator.

Cost effectiveness

In terms of cost, the K2 polymer note is slightly dearer than the K2 paper note because of the type of materials used to produce the note. However, from the Central Bank's point of view, the frequency of ordering new K2 notes has reduced markedly in the last 7 years. This has generated significant savings whilst providing a note with greater utility.

Conclusion

We are pleased with the security and durability of the polymer notes in Papua New Guinea. We were impressed with the new security innovations and will consider polymer for other denominations in the future.