Despite being one of the smallest nations in the world, Singapore managed to become the economic powerhouse in the Southeast Asia region and its currency is by far the best performing currency in Southeast Asia.
Speaking of the strength of Singapore’s currency, it has always been the envy of Malaysians and a peek at the currency exchange rate pretty much tells us why.
Over the years, the RM had depreciated against the SGD and the value of the Singapore currency had tripled the worth of RM in the recent years, with the exchange rate being SGD1=RM3.09 as of 20 March 2022.
However, what if we tell you that the Malaysian currency could have the same value as the Singapore currency?
Before 1973, Malaysia, Singapore, and Brunei had an agreement that makes their currencies interchangeable. Called the Currency Interchangeability Agreement (CIA) 1967, the agreement even made both currencies ‘customary tender’ with each other, making it possible for the citizens of the 3 countries to purchase items without converting their currencies.
Under this agreement, the Malaysia Ringgit, Singapore Dollar and Brunei Dollar will remain the same value as RM1.
Unfortunately, the Malaysian Federal Government decided to terminate the agreement way back in 1973 due to several reasons.
According to Monetary Authority of Singapore (MAS), the termination by Malaysia was partly made due to the several international events that shook the global economy as well as the international monetary system during the 1970s.
One of them being the US President Richard 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.
The situation became more in 1973 and post-Vietnam War when the Bretton Woods system of fixed exchange rates broke down. All the major currencies then decided to float against the US Dollar.
Due to these external factors, the Malaysian Government decided that it was best to focus on domestic development imperatives. With this, Malaysia terminated its agreement with Singapore on 8 May 1973. Two weeks later, the interchangeability agreement between Brunei and Malaysia was also cancelled.
Some 49 years later, Malaysia, Singapore and Brunei have gone their own paths economically and also currency-wise. Singapore has even established itself as an economic powerhouse in Asia, hence why Singaporeans have been pulling the “1 SGD= 3 MYR” card whenever they find themselves in an argument with us Malaysians.
Looking back, it may be a sound decision for Malaysia to terminate the CIA 1967, but Malaysians can help but wonder what would have happened if the agreement is still in place today.