Abstract
The abrupt separation of Singapore and Malaysia in 1965 set these two states on separate political trajectories, but the economic ties proved more difficult to untangle. This article explores the nine years of transition required to complete the separation of the monetary systems of the two territories based on new archival evidence. It argues that, while socio-political hostility raged between the two partners, common economic interests prolonged an intimate monetary relationship that extended the interdependence of the two states for many years beyond their formal separation.
Highlights
Background to Monetary UnionSingapore and Malaya operated with a single currency issued by the Straits Settlements Currency Commissioners from 1899.16 From 1953, the Malayan dollar was issued on behalf of the British Protectorate of Borneo by the Board of Commissioners of Currency of Malaya and British North Borneo
This board would determine the currency backing and exchange rate, essentially giving Singapore their desired veto on these two crucial issues.22. These proposals were waylaid by the complex negotiations for political union, but they attest to the flexible attitude in Kuala Lumpur before unification over Singapore’s right to control the exchange rate and currency backing of any joint currency
After ‘some discussion of the memorandum’ the board of governors agreed to advise the Malaysian government that negotiations with Singapore on banking and currency matters should be based on a proposal that the Bank Negara Malaya (BNM) would operate in Singapore under the provision in the Central Bank of Malaysia Ordinance 1958 (Section 56) that allowed for the BNM to extend its jurisdiction to other territories
Summary
Singapore and Malaya operated with a single currency issued by the Straits Settlements Currency Commissioners from 1899.16 From 1953, the Malayan dollar was issued on behalf of the British Protectorate of Borneo by the Board of Commissioners of Currency of Malaya and British North Borneo. In July 1961, the Bank Negara prepared a plan for the Malaysian Treasury to transfer note issue powers to the central bank with a ‘currency issue advisory board’ on which Singapore would be represented This board would determine the currency backing and exchange rate, essentially giving Singapore their desired veto on these two crucial issues.. Malaysia’s trade distribution was more stable during these years; Japan increased from 16 per cent to 19 per cent of total trade due to increased imports, compensating for slight declines in the share of trade with the UK and USA These trends suggest that Singapore was initially more reliant on its trade links to Malaysia than was the case vice versa, and that, over the course of the separation of the currencies, the trade intensity between. This enhanced nationalism did not affect monetary relations with Singapore until mid1973 when instability in the global monetary system offered an opportunity to reform relations with Singapore
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