Demonetization; demonization

AS EASY AS ABC - The Philippine Star

If you noticed a blue stripe beside Franklin’s head on the 100 US dollar bill, that’s the new dollar bill. For all who keep dollars in their safes or drawers instead of an FCDU account (or Foreign Currency Deposit Unit account), which is common household practice, those old dollar bills are demonetized – NOT. Maybe never, because the US doesn’t demonetize their old bills even if the new ones have more security features. There is even a law in the US prohibiting demonetization.

Not so in the Philippines where peso bills and coins are demonetized and changed, with old versions no longer becoming legal tender. From a civil law perspective, the peso bill has a status of a government debt to the holder. The government puts its entire weight behind that promise that it has value as stated, and it will be honored. Can the government demonetize and not honor its debts? The twin personalities of debtor and regulator put the government in a unique situation that allows it to say that it will honor its bills subject to certain conditions, one of which is to use up the old bills until Dec. 31, 2015. After the end of the year, you cannot compel anyone to accept those bills anymore except your favorite bank where you can change the old bills for new bills not later than Dec. 31, 2016. If you don’t do that, your old bills are memorabilia.

One welcome change the next time our new bills get replaced and demonetized is for a new batch in the future with water-resistant material, like the dollar bills of Australia and Singapore. It’s quite apt in the Philippines where rain and storms are constant, and beach activities are in between.

Demonetization is a good example of out with the old and in with the new as the year ends. An equivalent process is not so simple though with old public utility vehicles. Fifteen-year-old public utility jeepneys are being sought to be removed from service. Not yet implemented though, the idea is being tested. This initiative is very political in nature. It requires a lot of balancing of interests – the need of not being killed softly by old diesel engine pollution, and the public deserving of better transport services, versus the right to property, occupation or business of the vehicle owners and operators.

These 15-year-old PUJs could have parts older than 15 years, like its surplus engine. This makes the 15-year age limit appear to be a reasonable number. At that old age, a history of extra care and special maintenance is required to avoid the emission of deadly smoke: a luxury not available to the ordinary PUJ owners/drivers. The questions though of where the jeepney driver will get the money to buy a new jeep, and where he can get an alternative employment are not the only issues.

The other side of the issue is: Can the government provide a viable public service alternative to disenfranchised commuters? How we wish Uber and company could be a simple solution for everyone’s transport needs. But even if every commuter has a cellphone, many of the commuters have no credit cards to allow them to avail of this app, not to mention the unaffordable costs of this mode of transport for them. With mass transport systems and infrastructure still sorely lacking in the country, there is one program that is viable and that warrants full speed acceleration: the so-called Filipino magic: electric Filipino jeepney.

A wholistic public-private partnership program to replace every diesel-run jeepney with an electric PUV would appease all stakeholders. It is aspirational and doable. Manufacturers and operators are not the only ones in need of incentives and financing. To make this work, all individual Filipino owners of old diesel jeepneys should have access to financing. Faced with the prospect of losing franchise and livelihood if their diesel-powered old jeepneys are disenfranchised, it would certainly be very acceptable to them to have a new work tool or equipment that they can pay off slowly while their earnings continue. The electric jeepney itself is the collateral, while government subsidy, guarantee, or incentive can help make the credit terms lighter.

We are all for it: remove these old PUJs, demonize these symbols of the country’s backwardness, such wicked reminders of our poor inheritance, as soon as possible! That is just the thing, isn’t it? Is it now possible to care for the environment, to have modern transport systems, to have better public service? Banning without ushering in at the same time the viable alternative, without ensuring continuity of employment and lives for those affected, and without considering the commuting public, is just plain lack of accountability and one-sided governance.

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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. Email your comments and questions to aseasyasABC@ph.pwc.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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