The Truth Behind Exchange Rate Trap : Ringgit Vs Singapore’s Dollar

Malaysians have the conviction that Singaporeans are doing far better than Malaysians do. In many specialized areas, indeed, the level of superiority of Singapore seems to be light years away compared to Malaysia. However when all things are smoothened out, and the data is generalized over the entire country (Malaysia is much bigger and populous than its neighbor, by as much as 1,400 times and 6 times respectively), we can see that the overly emphasized achievements of Singapore (or the lack of achievements on the part of Malaysia) will fall apart.

The most overarching example is the comparison of the exchange rate between the two countries.

Figure 1: The graph shows ever more Ringgit to buy One Singapore Dollar

The simple comparison between the Ringgit and the Singapore Dollar exchange rate shows how the perception of Malaysians towards their own country and towards their own economic performance, vis-à-vis that of Singapore, can be described generally in one word— downbeat.

This is despite Malaysia’s superb economic performance in the last few decades, uplifting millions of its population into the middle class and the upper income brackets, and by almost eliminating the fully hardcore poor. Comparing a smaller country such as Singapore, to a bigger country such as Malaysia can be a difficult feat, since no two countries can be easily compared on an even basis. Because of the prevailing perception that Singapore is better, Malaysians continue to strive harder to catch up, without knowing how they actually performed. The graph of Figure 1 above can be very misleading without the proper context and other additional data. If we compare both currencies to the US Dollar the result will be different.

Figure 2: How many Ringgit is required to buy one US Dollar since 1989

Compared to the US Dollar, the Malaysian Ringgit has not lose ground that much. Since 1989, the loss is about 20%. But if we extend the timeline much further to the past, the conclusion is again, quite different.

Figure 3: How many Ringgit is required to buy one US Dollar since 1970

Basically, there was no change in the forty something years between the two currencies (Ringgit and United States Dollar). It is clear that the Ringgit has not lost ground compare to the world’s reserve currency.

Singapore Dollar on the other hand, has appreciated steadily, especially in the last decade or so.

Figure 4: How many Singapore Dollar for buying one US Dollar since 1989

It is clear that relative to the United States Dollar, the Ringgit has not lost any ground while the Singapore Dollar has gained ground, on both currencies. So the conclusion is that it is not that the Malaysian Ringgit devalued against Sing Dollar, but on the contrary, it is Sing Dollar that has appreciated against not just the Ringgit, but other currencies as well, including the US Dollar.

In the simple example of declining exchange rate between Singapore Dollar and the Malaysian Ringgit, many people were ‘duped’ by exchange rate mirage. A low exchange rate has never meant a country is poor, or not “rich enough”. For example a country such as Japan, considered one of the richest in the world, is having a much lower exchange rate compared to the Ringgit; Each Ringgit could buy as many as 30 Yens.

Therefore, despite a nation’s currency going lower in terms of exchange rate, a country could still be growing wealthier at the same time, leaving no impact whatsoever other than increased wealth. The exchange rate of a currency in circulation is also determined by the number of outstanding ‘units’ in circulation. It is no different compared to the issued and traded stock of a corporation in the stock market. A company’s stock that is priced around twenty dollars is by no mean is having a lower profit compared to another company’s stock that is priced at 80 dollars.

Both could be earning the same amount of profit; but because the number of outstanding shares issued into circulation differed by perhaps a multiple of four, then these two companies are essentially similar in performance and value. Their only difference is the number of shares in circulation.

Figure 5: Although Company A share price is higher, in reality their value is the same as for every dollar invested into each stock, the return is identical to each other

Similarly for the case of Malaysia and Singapore, the number of currency in circulation could determine the exchange rate between them (higher or lower), despite the countries having the same economic performance. [It is not true that a high priced stock has a lot of way to go when it is going down compared to a lower priced stock, when shown mathematically]

When we compare two different companies, we compare their “profit generation”, their assets and their debts, and most importantly, their future prospect. We do not compare companies based on the stock prices between them. So for the case of Malaysia and Singapore, we should try to compare both countries using better metrics. Everyone should discard a direct comparison of the exchange rate, because it is meaningless over a longer term.

Currency in Circulation

The amount of currency in circulation would directly influence the value of the currency. In this instance, if Malaysia printed and circulated more Ringgit into its economy (than naturally demanded), its value would naturally be lower, or going down. Despite the resulting inflation, there is hardly much impact on the general population related to this overprinting because each of the citizens would be receiving more Ringgit in his or her hands which is used to pay for the increase in services and products prices. [Only economists and statisticians would be screaming because of their ‘data’]

Let’s compare the number of “outstanding” currency in circulation in Singapore and also that of in Malaysia. Perhaps this should shed some light on the “profit generation” and other metrics mentioned earlier.

Figure 6: Rate of increase of Singapore Dollar in circulation relative to the population (including expatriates)

Figure 7: Rate of increase of the Ringgit in circulation relative to the population (including expatriates)

Figure 8: In percentage terms, the rate of increase of the Malaysian Ringgit is almost double than that of the Singaporean Dollar

[Data obtained from the Monetary Authority of Singapore and Bank Negara Malaysia as well as from the statistics department of both countries]

Further analysis of broad quasi money between the two nations revealed that Malaysia’s rate is considerably faster than that of Singapore’s rate. It grew by 400% in Singapore and 760% in Malaysia. For demand deposit, Singapore grew by 870% while Malaysia grew by 1,050%.

From the data, it is clear that Malaysia’s central bank (BNM) is printing Ringgit more aggressively than its Singapore counterpart, the Monetary Authority of Singapore (MAS). Or perhaps, BNM was printing appropriately, that it was MAS that was underprinting all the while, causing the exchange rate of the Singapore Dollar to go up. Or it could be a little bit of both. Central banks need to be mindful on the amount of money they are printing. It is best if they only print according to actual monetary demand, but with a slight buffer. As shown in 259 Trillion Vs 5 Trillion book series, central banks always backed the printed currency with new wealth. If too much overprinting occurs, the value of the currency would naturally go down.

Now for Fixed Deposits, the difference between Malaysia and Singapore is even larger as shown below.

Figure 9: Fixed Deposits in Singapore increased considerably since 1989

Figure 10: Tremendous increase in Fixed Deposits in Malaysia since 1989 which is twice the rate as in Singapore

It seems that despite the devaluation of the Ringgit, Malaysians saved more of their income to compensate. The increase in fixed deposits is one but of many ways for showing the creation of wealth in a particular country.


Every year, both countries added new wealth into their economies. But who added more? And who added more, per capita?
The answer is quite surprisingly, it’s Malaysia.

Not just Malaysia added more wealth yearly compared to Singapore, Malaysia also added more wealth for each of its citizen. This is pretty contrarian, but many people were caught by the illusions created by the high concentration of Singapore’s wealth within a very small area, and certainly of small population. No doubt Singaporeans are richer in absolute numbers, but our focus was, who did better in the last few years, and who is catching up to whom, during the period in focus.

The charts below show the level of net wealth of Malaysia compared to Singapore, in absolute numbers and also in percentage change. During the comparison period, Malaysia added wealth at a faster pace than Singapore, exceeding 220% to Singapore’s 140% since 2002. Net wealth is derived by deducting gross wealth with outstanding debt.

Figure 11: A double chart showing the net wealth of each country and the percentage increase, in their respective currencies.

Figure 12: Another double chart showing the net wealth of each country and the percentage increase, this time presented in US Dollar.

Figure 13: A double chart showing the percentage increase of per capita net wealth for Malaysia and Singapore, expressed in US Dollar.

In every respect, Malaysia is clearly charging ahead faster than Singapore, by adding more wealth per capita, for each of its citizen, catching up to Singapore and narrowing the wealth gap. This statistic is however lost when one portray the larger Malaysia by concentrating on its number of the poor or the unfortunate, compared to a smaller Singapore.

For example, the bottom 10% of the population in Malaysia will yield far too many people, compared to a similar 10% in Singapore in absolute terms. Malaysia’s wealth is also more widely dispersed throughout the country which is a good thing. For Singapore, it is not possible to make such a comparison, because it is just a city state. Should the inhabitants of Kuala Lumpur collects its own tax and used it all for themselves and within their border only, they would probably match or even exceed the city of Singapore in many respects, including income and wealth.

The average salary of Kuala Lumpur city dwellers is easily doubled or even tripled than the rest of Malaysia (data from Statistics Department, Malaysia). Currently taxes are centralized and redistributed throughout Malaysia in many ways that poorer states may receive far higher money than their actual tax contribution. If Sarawak was to use all of its oil and gas proceeds for its own use, it could be another Brunei by now.

When we look at the prospect and the achievement of Malaysia’s economy, we will realize that size, geography, governance and other factors matter greatly. These factors enable Malaysia to be on a very nice and sweet place within high economic growth nations. But then, so is Singapore.

Both countries enjoy similar level of pluses, and the biggest plus these days, is the further economic links between the two due to their proximity and openness. While competing, they also can cooperate. The message is clear; by combining their best and brightest, both countries can improve their standard of living better and faster. Such are the benefits of open capitalism.
The notion that elevated exchange rate for a currency means a country is performing better is not necessarily a correct one, especially over the long term where other factors such as the amount of currency in circulation will yield higher influence.

Cost of Living and Purchasing Power

After calculating all the money and wealth of both countries, one may still be unsure about the ‘capabilities’ of the numbers to ‘perform’. Indeed, we need to know how much of such wealth can actually be used to purchase products and services in the economy. This is an important question to be answered. We need to check the purchasing power of the currency of each of the country, and see what can be bought and how much is required for such purchases.

To present them in an equal manner, we will need to buy the same kind of product, or services, in equal size, quality and other parameters. One such measurement we can use is the Big Mac Index, championed by “The Economist Magazine” to show just how much the famous McDonald’s Big Mac in many countries. It is a convenient and simple index, because the Big Mac retained most of its specific parameters in each of the countries. As a global company, McDonalds went the extra mile in making the burger’s taste as similar as possible, to meet buyer’s expectation, where ever they are.

According to the index, the Big Mac burger is certainly cheaper in Malaysia than in Singapore. Just a few kilometers away from the border between Malaysia and Singapore, the price of the Big Mac will drop like a brick, from 3.75 US Dollars to only 2.34 US Dollars (-38%). Although Malaysians earns less in income, they can afford to buy the same burger Singaporeans could, at only 62% of the price.

Back in 2003, the Big Mac is cheaper in Malaysia by only 28%. Now it is even cheaper, essentially meaning that Singaporeans higher incomes are largely used to pay more for living expenses. Based on the Big Mac Index, with roughly just 40% more incomes, Singaporeans must pay 330% more in rents, 220% more for a simple meal in a restaurant, 120% for a bottle of water, 264% for basic utilities and finally, 450% more for buying apartments, compared to Malaysians.

The big incomes Singaporeans have will become not so big when all of these are taken into account (data obtained from In 2014, Singapore was finally voted as the most expensive city in the world, more than New York or even Tokyo. A million dollars in Singapore may not go far compare to other cities.

Of course the Big Mac Index has its limitations, and if we compare each and every item in a consumer expenses list, we will realize that some items could be cheaper in the other country when corrected for the disposable income. According to, the cost of living index is 50 in Kuala Lumpur, and 105 in Singapore which is almost identical with the differential average income of Malaysians and Singaporeans (slightly more than double).

Singaporeans are always considered to be rich by Malaysian standard. Many are considered ‘millionaires’, so how many millionaires are there in Singapore? Based on Credit Suisse’s study, there are 174,000 millionaires in Singapore. In Malaysia, there are 38,000. These millionaires are based on US Dollars millionaire, so in local Ringgit currency, one must have 3 plus million in order to be one. However we already knew that such an amount of money goes a very long way in Malaysia, so compared to Singapore, there are actually far many more real millionaires in Malaysia (when corrected for their actual purchasing powers).

Credit Suisse predicts that within five years, the number of Malaysia’s millionaire will jump by 76% while that of Singapore, by ‘only’ 35%. Even the United States will add millionaires faster than Singapore, adding a total of 5.5 million (this is the entire population of Singapore by the way), to its already world’s largest millionaire population (imagine for instance the entire peninsular is made of millionaires).

The symbiosis between Malaysia and Singapore goes very far and very deep. It is a great engine of wealth creation. Already in 2013, both Malaysia and Singapore combined has more real millionaires than South Korea, despite having only half of the population. This great engine must be allowed to continue and expand, so that the whole world would benefit.
Collectively, Malaysian companies currently outnumber Singapore in terms of their market value as shown in the chart below.

Figure 14: Chart showing the market capitalization of large cap companies in both countries [data obtained from the World Bank].

The market value of Malaysian companies is growing faster than their Singaporean counterpart, collectively. However looking from another angle, one can also see the might of the Singapore’s economy in creating wealth.

As a conclusion, it is not so bad to stay and live in Malaysia. Despite having lower incomes, Malaysian enjoys good purchasing power, in many ways, exceeding other countries including its closest neighbour. Malaysians are growing richer much faster than their neighbor, and the great wealth engine will not be able to do it without the symbiosis in the two economies.

To Malaysians, don’t take the economic freedom and wealth for granted. There are many rent seekers waiting to exploit your complacency. They can be politicians, religionists and many more. Don’t give up your freedom for them. You created the wealth, they don’t. Yet, they want to take it from you. And remember, higher exchange rate can mean nothing between two currencies, but the actual purchasing power does. And to Singaporeans, just travel a few kilometers over the border and stretch your incomes by several magnitude. This is how the symbiosis works and this is how it will be for a long time, therefore we should treat each other with open arms.

This article was contributed by Sharif Rahman. The author can be contacted at his email address of

About The Author


personal finance author and trainer


  • Romura

    Reply Reply August 6, 2014

    The charts can be portrayed better by subjecting the vertical axes to the same values for both Malaysian and Singaporean data. As an example, take Fig. 9 and Fig. 10. Set the primary axis between 0 to 1,000 Billions and the secondary axis between 0 to 1,000% you will see very clearly the progress made by both countries. This also applies to Fig. 11, 12 and 13 as well.
    This basic is taught in Form 1 Science.
    Better yet combined both Malaysian and Singaporean data in one chart and you will see a more profound and deeper comparison that will make your analysis much easier.

    • Sharif Rahman

      Reply Reply August 12, 2014

      I have thought about that. However we can’t compare a short child and a very tall person in the same graph. What is important is the rate of growth for each of them, portrayed in percentage of the respective original value. Since Singapore is a thousand times smaller than Malaysia, we cannot portrayed both easily in the same chart. There is only one way we can do it, remove all references to the “billions” and only leave behind “percentages”. Then the data may lose some other valuable info which the readers would find important. Remember that the focus of the article is how the two performs comparing to themselves in their earlier years.

  • Kuhan

    Reply Reply August 16, 2014

    Hi KC. An interesting article that puts some perspective that I would have just missed. Just a question I have pondering after reading this article (not sure if it is directly related to the article), I have at least heard of many Malaysians who continue to put some of their wealth away in Singapore instead of leaving it in Malaysia. They claim that Singapore is still a safer haven and therefore move some of their wealth there. Would you be able to shed some light behind this reason.

    Thank You

    • Sharif Rahman

      Reply Reply August 18, 2014

      Diversification is the key here. Just how much of your wealth, is located in Malaysia? Your house? Your bank accounts? Your EPF? If everything you have is based in Malaysia, then you are taking a big risk, especially if you have a lot of wealth. In this instance, you should park some overseas, by buying stocks of foreign companies. Buying properties in general is not the best way. However, after analyzing Singapore in general, my view is that it is not a safe place to keep your hard earned money due to size limitation. In my view, Singapore is vulnerable to external or internal shocks because of very large financial markets/wealth and very small ‘footprint’. To use Singapore as a conduit is fine though.

  • Haruki

    Reply Reply September 7, 2014

    This is the opinion of my investor friend who has headed south to seek a better life for himself. I sent him this article and this is what he wrote back to me:

    “When author said Malaysians have the conviction that Singapore (SG) is doing better than Malaysia (MY) – I think it is a true fact having lived in SG for the past 2 months.

    The author also takes into account at an single parameter/factor at times to prove his point rather than looking at the overall macro economics.

    The true fact – strength of a currency has a direct correlation to the economy (dependent on how strong or weak the economy). When the country has high debts, naturally, the country would be forced to print more money, just like USA during the last downturn – this in turn will weaken the currency. So I think when author compared RM to the USD (I don’t think that’s very smart) as the USD has slipped against all major currencies in the world over the last few years. Just take AUD, you saw how much they have surged vs USD last few years.
    When a country has a weaker currency, naturally/eventually the population will have a lower purchasing power especially on imported goods.

    When you compare purchasing power, you compare on what you can purchase with the X amount money you have (disposable income). Very simple observation having been in SG for 2 months, generally you will see everything is relatively cheaper vs Msia except house and car (forget about the Big Mac Index!). When RM is weaker, imported goods are relatively more expensive. Mass locals in MY are not able to afford branded imported goods like Prada etc. as opposed to a secretary in HK/Korea/even SG who could afford to purchase branded goods with their salary vs in Malaysia where perhaps only someone at middle management could afford.
    *You may be earning lesser in SGD but without realizing you have a much more disposable income.
    Another example, generally any Singaporean can just travel abroad yearly without feeling the pain (due to their strong exchange rate), unlike Malaysians, confine to local trips – like me last 10 years:)
    Also, don’t quite understand why the author wants to talk about Japan having a lower exchange rate – not relevant in my opinion in the context of purchasing power! Because the Japanese salary is so much higher vs MY.

    The author also said Malaysia companies outnumber SG companies in terms of market capitalization – Of course la when you have a population of 4-5 times more. Why not compare Indonesia vs MY (though we know Indonesia is poorer than MY on a whole).

    Wealth per capita – MY charging ahead vs SG (honestly, I don’t understand what the author is talking about). Maybe in absolute number, MY has more vs SG but that is because MY has higher population vs SG. The same if author take Indonesia/China/HK to compare vs MY, he will be saying that Indonesia, China and HK are charging ahead vs MY. Purely, this is attributed to the size of the country.

    In short, I can’t deny Msia grew over the last few decades (Indonesia/Myammar also grew) but in comparison to SG they somehow lag. In my opinion growth is a relative word. An advanced country like US, Japan with a high base (income etc), 1-2% growth is significant in comparison to an emerging economy at 5%). In this context China is the only super exception!! Though China is the 2nd largest economy in the world today but still growing strong at 7%.

    I don’t know if the above make sense – anyway just realized I have developed the kiasu culture in me.”

  • Daniel

    Reply Reply November 22, 2014

    One point (amongst many) the author ignored: GDP growth is not really equivalent to income growth for the general public.
    Uni graduates in SG mostly earning >3000. Some can be more than 4000. What about in Malaysia? And I am talking about in KL and Selangor, not some less developed states. And what’s the conclusion you could draw from this alone? Restaurant waiters and waitresses earning 1500 SGD is not uncommon. That’s for some lowest rank one. In Malaysia? Many still earning <1000 MYR.
    There are probably another 10 issues I could raise but that's for another day.

  • Sharif Rahman

    Reply Reply January 5, 2015

    Haruki, thank you for your friend’s comment.
    Regarding a single parameter at a point in time, this is certainly isn’t true. The article calculates the overall wealth, which is accumulated over time, be it from waitresses or other individuals. In fact the many trend charts is a testimony to the extended time period of the analysis.
    The true fact on a strength of a currency has a direct correlation is probably true in many instances, but it is not always a true fact. There are countries such as Japan, when they enter recession, their Yen went up in value. The same was true for the Euro as well during the crisis. Currency’s value is linked directly to the number of units in circulation, the overall level of the economy as well the future expectation, much like a stock price (but certainly they aren’t the same).
    When a country is high in debt, it is not “natural” for it to simply print money. This is just a baseless argument. America’s debt has been high for decades, yet they still print money in a normal way. Borrowing money and issuing bonds are not the same as printing money. This fact need to be understood clearly.
    Australia cannot be used because it is really a minor trading partner of Malaysia, as well as Singapore. Comparison to USD will still be the best. In fact, it is very likely that the trade conducted with Australia is performed using USD, not even AUD. In any way, ask your friend to conduct this calculation and let us see, perhaps he will reach the same conclusion as us. However, regardless to this, a direct comparison between Ringgit and the SGD was done in the article, so this issue is a mute issue.
    Everything is cheaper, is really a misstatement. When housing and car is included, surely it is worst off for Singaporeans and expats. And when housing and cars are excluded from Malaysian’s calculation, certainly Malaysian’s would have so much disposable income. Perhaps, your friend is in the group of daily commuters from Malaysia, who work in SG but live in Johor. Again, their economics will be different and looks favorable, because they are living in both countries at the same time.
    Of course the Big Mac index is relevant. It is very relevant in fact. It shows what is the cost to produce something of exact same spec in each country.
    Now the statement on Japan, in my view, is conflicting with what your friend is saying. It matters because Japan’s exchange rate is pretty bad, and getting worse in the last few years.
    Market capitalization is a display of overall wealth. Nothing more to it. The real data is the wealth per capita. This data showed Malaysia is growing faster than Singapore and is already corrected for the number of people in each country.
    The relative growth comparison, between developed and non developed, yes this is a good statement and understanding of economics.

  • Sharif Rahman

    Reply Reply January 5, 2015

    Daniel, GDP is not a real measure of wealth. GDP is well, GDP. I can’t possibly not ignore every single point, so it is natural for some points to be left out, perhaps they are not relevant at all.
    Regarding salary of new grads, it is much linked to their capacity to generate wealth for the employers, and the cost of living. In KL, the minimum salary is more than RM1000 since last year. But a waiter in a kampung in a remote place, a thousand ringgit is too much, they will be paid lower, but their costs of living will be lower too. Of course there are waiters in Malaysia who earn much more than 1,500. The situation whether it is in Singapore or Malaysia, is rather the same.
    The article is not even focusing on GDP. Now to answer your statement on “GDP growth is not really equivalent to income growth for the general public”, this is pretty obvious. But in many cases, it is. There are many examples when GDP fails to show higher standard of living for the people, therefore wealth. For example, a new discovery shrinks the costs of hard disks by 1000 times, making the price cheaper by 99%, but this is reflected negatively in the GDP numbers, as if the economy weakens. This is an issue I explained in one of the books I co-authored. Hope this answers your comment.

  • Chee Chung

    Reply Reply February 17, 2017

    I agree with the author that the exchange rate comparison between Singapore and Malaysia as a measurement of economic progress does not make sense. To further shed light to this, we should take note that unlike Malaysia which has a large domestic market, Singapore is unable to make effective use of interest rate as a monetary policy tool. The SGD (which is on a managed float regime) serves as such a tool for Singapore. For a country that can make effective use of interest rates as a monetary policy tool, when the economy is overheating (inflationary pressures) BNM can increase the interest rate to reduce consumption, while decreasing the interest rate will do the exact opposite. This does not apply to Singapore. The SGD is being used instead. In an inflationary scenario, SGD will gradually be appreciated against Singapore’s major trading partners (thus reducing export demands), while in a deflationary environment, SGD would depreciate (to increase export demands)

    The gradual appreciation of SGD against MYR can also be seen as a way Singapore prevents importing price inflations in Malaysia into Singapore, especially for perishables and daily used goods. Even as Malaysia imposes a 6% GST which would cause a precipitous hike in domestic prices, the appreciation in SGD would easily offset such a price inflation. Thus in general Singapore would prefer to be a stronger currency against acountries in which they import their raw materials, while maintaining a relatively weaker currency against those which they export against. Of course, there is a limit to how strong they can be against one currency or how weak they can be against the other given that all currencies are interrelated.

  • Chee Chung

    Reply Reply February 17, 2017

    However, I do have a query about the way Net Wealth is calculated for this article. What are the components that goes into it? What constitutes gross wealth and debt?

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