From Third World to First The Singapore Story pdfdrive com

part of Bank Negara Malaysia and ultimately the Malaysian government itself.
Singapore, he said, was afraid Malaysia might not honour its undertaking to
transfer the whole of Singapore’s assets and liabilities as shown in the books of
the central bank, but this was merely a technical, not a fundamental, reason for
the break. He implied that we lacked trust in their integrity. Indeed, Singapore’s
reserves could not be protected simply by relying on trust.
We decided against setting up a central bank and continued with a currency
board with 100 per cent backing in foreign exchange reserves for every dollar
we issued. Lim Kim San, as finance minister, expressed confidence in the
strength and stability of Singapore’s currency, which called for the tightest
economic and social discipline. In Parliament Kim San explained that “a central
bank is an easy way out for a finance minister who likes to juggle [his figures]
when he has a deficit in his budget. I do not think we should put such a
temptation before the finance minister in Singapore.” Tan Siew Sin responded,
“If the central bank system is an inferior system, then it is clear that it is a
mistake made by every industrialised country of the Western world and by every
developing country. … Every independent country in the world has a central
bank, or is in the process of establishing a central bank.” Later, in Parliament,
Tan said that the currency split was for the best, because unlike the old days, a
nation’s central bank was a powerful weapon for a finance minister in his
monetary and fiscal policies.
Both finance ministers announced that they would keep their currencies
pegged at two shillings and four pence to the dollar, or 0.290299 grammes of
gold. They agreed on the “interchangeability” of the two currencies: accepting
each other’s currency as customary tender and repatriating the currency in
exchange for an equivalent amount in a convertible currency. Our two currencies
continued with interchangeability from 1967 until May 1973, when it was
terminated at Malaysia’s request. In January 1975 the Malaysian dollar, the
ringgit, dropped marginally to S$0.9998. By 1980, it had depreciated sharply by
five cents against the Singapore dollar, and by 1997 it was worth less than 50
Singapore cents. Malaysian finance ministers and central bankers had run looser
fiscal and monetary policies than Singapore. Not spending more than we collect
in revenue has been a guiding principle from which no Singapore finance
minister has departed except in a recession.
After Singapore left Malaysia in 1965, the UMNO-controlled federal

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government pressed ahead with Malay as the sole national and official language,
and changed its education policies to bring this about. Non-Malay resentment
against these changes had been increasing, and the strident communal tones of
UMNO leaders did not help to assuage such feelings. In 1968 a Malaysian
government White Paper stated that communist subversion was being carried out
in independent Chinese secondary schools. This added to the fears that they
would be closed.
During their election campaign in April–May 1969, Alliance leaders made
wild and groundless allegations that Singapore leaders had interfered in their
politics. Tan Siew Sin, who was also the Malaysian Chinese Association (MCA)
president, said he had “definite evidence” that the Democratic Action Party
(DAP), formerly the PAP in Malaysia, was being financed by the PAP, if not the
Singapore government. Raja, our foreign minister, registered Singapore’s
concern with the Malaysian high commissioner, who agreed that these remarks
were counterproductive. But two days later he reported that the Tunku supported
Tan’s charges, claiming that, on the evidence available, they were true. The
Tunku himself then pitched in at an election rally to say that Singapore’s PAP
leaders were hoping to win over the government in Malaysia, and “knowing that
they have no chance of winning the Chinese votes, they have no alternative but
to split the Malays. So they are using the Pan Malaysian Islamic Party (PMIP) as
their agent.” He said that the man who had provided the PMIP with funds had
now been forbidden to re-enter Malaysia, but refused to disclose his identity.
I was away in London when these wild allegations were made. I wrote to
Lim Kim San, our defence minister: “I am a little bewildered by the crazy
allegations of the Tunku and Siew Sin about our supposed interference in their
elections. I also wonder when all this will explode into racial strife and guerrilla
warfare. We had better build up as fast as we can. I am sure the troubles will
spill over to Singapore. By the time thousands of people are prepared to openly
demonstrate against them in KL, and march through the streets in a funeral
procession, then the future is grim indeed.” I was referring to the funeral of a
Chinese youth shot and killed by police a few days earlier while he was in a
group painting anti-government election slogans.
On polling day in Malaysia, 10 May, UMNO lost 8 out of the 59 seats they
held. The DAP won 14 seats in urban constituencies including Kuala Lumpur,
defeating the MCA, UMNO’s partner, in 13 of them. The DAP and Gerakan
(another non-communal party) held a parade in Kuala Lumpur to celebrate their
victory – they had won half the seats in the Selangor state assembly. The UMNO

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Malay Ultras’ response to this was to have a bigger parade organised by the
Selangor