LETTER TO THE EDITOR | Philippine banknote printing: a highly-secure industry

Matthew McDonovan

In a long overdue manoeuvre, the Philippines has launched a call for tenders to determine which originator will print its newest generation of banknotes. Fiduciary printing of a state currency is a process of continuous security-minded reinvention.

It requires the adoption of the latest anti-counterfeiting techniques and technology so as to stay one step ahead of criminals each and every time currency is created. The longer a generation of banknotes has been in circulation the higher the likelihood that individuals will encounter fakes, as criminals develop fresh ways to fool people.

Like everything today, printing money is a business in and of itself. Central banks will usually contract out the printing processes to specialised companies called originators who are responsible for developing the original metal plates and the dyes used in printing banknotes. These originators will competitively bid to secure contracts as with many of the types of business that operate at a state level, such as infrastructure, defence, or security documents manufacturing. This process will usually take place every 5 to 10 years to ensure that banknotes are not compromised by counterfeiters.
The Philippines is one of the countries in the world with an independent capacity for fiduciary printing. The BangkoSentral ng Pilipinas (BSP), the central bank of The Philippines, has its Security Plant Complex (SPC) in Quezon City, a highly-secure facility for the production of state resources such as banknotes. It is also responsible for the production of presidential medals and security documents, minting coins, refining locally-sourced gold, and a host of other specialised items manufacture.

The BSP’s approach is to have the successful bidder-originator printing the first batches of the new currency outside of the country, after which point the SPC in Quezon City will continue with subsequent production. There are a number of reasons that the BSP takes this approach.
It makes good sense, for a start, because such companies are hyper-specialised. They possess unrivalled fiduciary printing industry knowledge, anti-counterfeiting techniques, expensive technology and equipment, and generally have established long-standing credibility when it comes to issues of security and discretion.

Fiduciary printing is also an activity in which scale makes for affordability. The printing machinery required to overhaul an entire generation of banknotes is costly. Such capacity for printing is usually going to be more than what is necessary for the country to maintain the ongoing decent condition of banknotes in circulation. To replace some of the same generation of banknotes in the years after initial release is a significantly smaller task, and it therefore requires less printing capacity.

Corruption has also been an issue in The Philippines and so outsourcing production is one way of mitigating the risk of financial misconduct. And with the arrival of the new Governor of the Central Bank Benjamin Diokno last March, this is likely to be an increasingly important area of focus.
Indeed, in a recent interview he reiterated his commitment to ethics and compliance issues by stating: " We will do what the law says. In my entire life in public service, I've been known for transparency and integrity."

In addition, printing a part of the banknotes abroad also reduces the risk in the event of a national disaster. The 5.9 magnitude earthquake that struck the centre of the country on July 1st is proof that this kind of situation is quite plausible. Such an eventuality would put the country's economy at risk if all sources of banknotes production were in the same place.

As with many other nations, currency is a symbol of national pride in the Philippines. We look daily at the images of landmarks and famous countrymen on our money, and these go some way towards defining and expressing the national identity.

In the Philippines, it is required by law that banknotes are 80 percent cotton and 20 percent abaca, Manila hemp, a material produced only in The Philippines from a local variety of plant. People take pride in controls like this, and for the same reason they appreciate having currency that is produced locally. Printing currency within the country gives a nation a sense of independence that must not be overlooked, both symbolically and pragmatically.

The BSP’s two-pronged strategy allows the nation to tap into the industry knowledge of global operators in fiduciary printing, ensuring the quality of banknotes and the efficacy of the anti-counterfeiting techniques while reducing major risks of banknote shortage in case of national disaster.

At the same time printing currency internally allows citizens to take pride in knowing that their countrymen are responsible for printing the money that they use in their day-to-day transactions. Printing both internally and externally balances the benefits and drawbacks of available options so that The Philippines enjoys the best of both worlds.