P1 coin worth more abroad than at home

With a face value of less than two US cents, the humble Philippine one peso coin may be worth next to nothing at home, but in metal-hungry China it spells big bucks.

So much so that smuggling of the coins has become something of a growth industry in the Philippines and a major headache for the Central Bank.

According to local media reports, the coins are sold in China for P1,000 per kilogram (2.21 pounds) and the metal derived from melting them down is used in the manufacture of electronics goods like mobile phones.

Ironically, while rising metal prices have made Philippine coins more valuable abroad, inflation has diminished their value locally. Indeed, many Filipinos no longer bother to carry them.

With the copper and nickel content worth more than the face value of the coin, the central bank has realized that minting them is no longer cost effective, bank director Fe de la Cruz told AFP.

To address this problem the bank has issued a new one peso coin which looks identical to the old version but is made from a cheaper steel alloy, she said.

The National Bureau of Investigation (NBI) and customs officials have this year seized tonnes of coins ready for shipment to feed the hungry furnaces of China and elsewhere in Asia.

The most recent case involved the arrest in mid-November of two Taiwanese who were trying to smuggle seven tonnes of one peso coins to China.

The NBI learned that the pair had already smuggled out some 45 tonnes of flattened coins to China, according to NBI regional chief Ruel Lasala.

Customs seizures so far this year include 97,716 coins in February, 167,000 coins in April and a third shipment in July totaling 2.5 million coins.

The first two shipments were intended for China while the third was earmarked for Japan. The coins are generally hidden under other metal objects and labeled as scrap metal.

All the coins were seized under laws prohibiting the movement of large amounts of local currency abroad without a permit. The two Taiwanese men also face other charges of currency mutilation.

In the three earlier cases the masterminds behind the smuggling attempts remained unknown as the shipments were merely in consignment. The only people questioned were the truck drivers who transported the shipments and they had no information.

No coins to be found, but billions in circulation

The central bank says there is no shortage of coins, despite all the smuggling, because there are an estimated 11 billion in circulation.

The problem is they are no longer being used.

"To some people, it’s a nuisance. With a one peso coin, what can you buy? Or one centavo, 25 centavos? They have very few uses," said Leonilo Coronel, executive director of the Bankers’ Association of the Philippines.

"Most of us, we pay in bills and if we are given change, we just put it aside at home. There is really no shortage," he said.

While the number of coins in circulation might mean there is no actual shortage, the fact that people don’t carry them means they are not available for use where needed, like at the till.

As a result, many retail establishments suffer from a shortage of coins to give correct change to their customers.

Large shopping mall chains, for instance, need about a million pesos in coins each day so the many individual shops they contain can provide correct change, said de la Cruz.

Lin Olivo of the Philippine Retailers’ Association said: "In retail operations, naturally you have to give change and sometimes, you run out of it.

"Sometimes, they give candy instead."

But even retailers have observed that "some people think the lower denominated coins have no value. Even those who need the money, if you pay them with coins, they don’t want to accept it," said Olivo.

Minting new coins has not been economical for the central bank but the law requires continued production of both the one peso coin and the tiny one centavo, which is worth about 0.02 cents, regardless of demand.

The central bank also continues to mint the five centavo, 10 centavo and 25 centavo coins.

There is virtually nothing that can be bought with these coins and de la Cruz says that even beggars are turning them down. – AFP