Singapore is like Malaysia’s little brother who despite its small stature, turned out to be more successful than its older siblings.
Sure, they can’t really cook and sometimes even claimed their big brother’s cooking as their own, but one thing is definitely true; they are worth approximately three times more than us.
We are of course, talking about the Singapore Dollar which has been equivalent to around RM3 for almost half a decade now.
However, did you know that prior to 1973, this wasn’t the case? In fact, Malaysia and Singapore used to have an agreement whereby:
- RM1 will always be the same amount as SGD1.
- You don’t need to exchange currency for MYR to be used in Singapore and vice versa.
Moreover, Singapore and Brunei are still using the same agreement to this day, hence Bruneians can use their Brunei Ringgits to purchase stuffs in Singapore without converting!
We are of course talking about the Currency Interchangeability Agreement (CIA) 1967 which would still be in place if Malaysia didn’t pull out in 1973.
Here’s everything you need to know:
1. Currency Interchangeability Agreement (CIA) 1967
According to the Monetary Authority of Singapore (MAS), the agreement was made on 12 June 1967 between these three countries who after independence have issued their own currencies:
- Malaysia with the Malaysian Dollar.
- Singapore with the Singapore Dollar.
- Brunei with the Brunei Dollar.
Previously, Singapore and Malaysia used the same currency which is the Malaya Dollar and Brunei used the British Borneo Dollar.
When the change happened, all three countries signed an Interchangeability Agreement which dictates that:
- All must accept each other’s currencies.
- All must exchange them at par, without charge, into its own currency.
In technical terms, the three currencies would not be legal tender when circulating in the other participating countries but they would be “customary tender” and would be repatriated to the issuing country periodically.
This agreement has its roots to the historical Straits Dollarisation to Malayan Currency Area from 1897 to 1967 and the establishment of the Board of Commissioners of Currency for the Straits Settlements (comprising Singapore, Penang and Malacca) in 1897.
The agreement still remains to this day between Singapore and Brunei despite significant changes in economic policies between the two.
2. Why did Malaysia pulled out of the agreement?
All was fine and dandy between the countries in regards to the agreement until the 1970s. As mentioned by MAS, several tumultuous events shook the global economy and the international monetary system during that decade.
In August 1971, US President Nixon closed the gold window and devalued the US dollar against gold. This had significant effect to Malaysian monetary system and others whereby all currencies automatically revaluated against the US dollar.
Furthermore, in 1973 and post-Vietnam War, the Bretton Woods system of fixed exchange rates broke down when all the major currencies decided to float against the US dollar.
Due to these external circumstances and the focus of the Malaysian government then to focus on domestic development imperatives, Malaysia terminated its agreement with Singapore on 8 May 1973. Two weeks later, the interchangeability agreement between Brunei and Malaysia was also cancelled.
Some 47 years later, Malaysia, Singapore and Brunei have gone their own paths economically and also currency-wise. Of course, we all know that Singapore has been doing a bit better than us hence why Singaporeans have been pulling the “1 SGD= 3 MYR” card whenever they find themselves in an argument with us Malaysians.
Well, as the old saying goes, “sesal dahulu pendapatan, sesal kemudian Singapore Dollar lagi tinggi nilainya.”
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