Why the Singapore and Brunei dollars are worth the same, and why Malaysia left

In an article in The Patriots on 24 May 2023, writer Ahmad Faezal answers a question many people have wondered about: why are the Singapore dollar and the Brunei dollar worth the same? And did you know the Malaysian ringgit was once part of the same arrangement?

The agreement that made three currencies equal

The answer is the Currency Interchangeability Agreement (CIA). According to Ahmad Faezal, the monetary authorities of the member countries recognise each other's currencies and must exchange them at par. That is why Brunei money should be accepted in Singapore, and the other way round, although some traders refuse it because they do not know.

It goes back to before independence. On 1 January 1952, representatives of Malaya, Singapore, Sarawak, North Borneo and Brunei agreed to use one common currency, The Malaya and British Borneo Dollar. After Singapore separated in 1965, the three countries that shared that currency, Malaysia, Singapore and Brunei, carried it on through the CIA from 1967. At the time, RM1 was worth SGD1.

Why Malaysia left in 1973

Malaysia left the agreement in 1973. Ahmad Faezal puts forward two arguments: the wish for economic independence, and political factors.

According to him, Malaysia and Singapore had begun to go their separate ways. He compares the approach of Tun Abdul Razak, who stressed equal outcome, with that of Lee Kuan Yew, who stressed equal opportunities. Under the CIA, there were fears that Singapore's monetary decisions would affect Malaysia.

He also mentions newspaper reports that the Finance Minister at the time, Tun Tan Siew Sin, first gave assurances that Malaysia would not leave, but a week later announced that the Malaysia-Singapore stock exchange would be split. Many people then changed their Singapore dollars into ringgit, because after 19 May the currency could no longer be used in Malaysia.

The ringgit after that

How Brunei stays on par with Singapore

Brunei and Singapore never changed the arrangement. According to Ahmad Faezal, Brunei only needs enough foreign exchange reserves to defend its dollar, while the Singapore dollar's strength comes from a well-run economy, stable politics and a transparent investment climate. Singapore, for its part, gets a wider market for its currency. In short, both sides win, and Malaysia is comfortable going its own way.

Ahmad Faezal's full article, with more details, is on The Patriots.