Thursday, May 14, 2015

Malaysia currency history from 1900-1971

I found an article in an old newspaper which share a history of Malaysia currency from 1900 until Malaysia open its own Mint in Shah Alam. There is no name given for the original author of the article but in my opinion, it is something worth to share with my blog readers.

new currency exchange

Here are the article:

In the nineteenth century, the currency circulating in the Malay Peninsula was the Silver Mexican Dollar. The exchange value of the dollar in terms of sterling and other gold based currencies used to fluctuate to changes in the prices of silver.

The marked fluctuations and the expansion of trade with countries whose currencies were not tied to silver became highly inconvenient to traders, and this led to establishment of the Straits Settlements Committee to study the appropriate currency system for the country. The committee completed its report in 1903, in which it recommended the adoption of the gold standard. Accordingly, in 1906 a new dollar, officially pegged to a gold or a sterling value of 2s.4d, per dollar, was issued for use in the Straits Settlements.

During the First World War, the obligation to exchange gold for the dollar was suspended. In 1923, the Straits Settlements abandoned the obligation to exchange sterling for the dollar. In 1938, the responsibility for currency issue was taken over by a Board of Commissioners of Currency.

During the Second World War, the responsibility for currency issue was taken over by the Japanese Administration. Following the end of the Japanese occupation in 1946, the Board of Commissioners of Currency Malaya was reconstituted and a return was made to the all-Malaya currency which was first issued i 1940 in the Straits Settlements and Malay States. This currency was also used in British North Borneo (now Sabah) and Sarawak after the war.

However, the changed constitutional status of some of the territories led to the negotiation of a news Currency Agreement in 1950. A new Board of Commissioners of Currency, Malaya and British Borneo was constituted under the 1950 Currency Agreement, with power to issue currency in the Federation of Malaya, Singapore, Sarawak, North Borneo and Brunei.

The 1950 Currency Agreement was subsequently revised in 1960, and the 1960 Currency Agreement governed the operations of the Board of Commissioners of Currency, which was the sole currency issuing authority until the assumption of currency issuing powers by separate monetary institutions in Brunei, Malaysia and Singapore in 1967.

By the mid-1950s and in particular, after independence of the Federation of Malaya in 1957, there was a growing feeling that the Currency Board System was no longer appropriate to the new conditions, arising from the rapid economic development of the country and the need for more active monetary management.

An expert group, consisting of Mr. G. M. Watson of the bank of England and Sir Sydney Caine of the University of Malaya, was set up to enquire into the problems of central banking in the country and to advise on the appropriate legislation to establish a Central Bank.

The Central Bank of Malaysia Ordinance 1958, grants Bank Negara Malaysia (the Central Bank of Malaysia) the sole right of issuing currency in Malaysia. This power was held in abeyance for eight and a half years to enable the member countries of the Currency Board to investigate the possibilities of some form of common currency arrangement when the Board ceased to issue currency.

After the establishment of Malaysia in September 1963, which brought into a political federation all the participating countries of the Currency Board except Brunei, The Malaysian Government lodged with the Currency Board on December 12, 1964, and notice of its intention to replace the Board by Bank Negara as the sole currency issuing authority in Malaysia.

Under the provisions of the 1960 Currency Agreement, the lodgment of such a notice involved the relinquishment by the Currency Board of its authority to issue currency notes not later than December 1966, and coin twelve months later.

By mid-1965, preparations by Bank Negara to assume currency issuing powers had reached an advanced stage, but these arrangements had to be reviewed when Singapore was separated from Malaysia in August 1965. The authority of the Currency Board to continue issuing currency was subsequently extended for a further six months. When agreement could not be reached with Singapore on a common currency and with Brunei having opted for a currency of its own, the Malaysian Government decided that Bank Negara should proceed without further delay to issue currency for Malaysia alone.

It was indeed an historic landmark for Bank Negara when the currency issuing functions, which had been suspended since the Bank's establishment in 1959, were finally taken over by the Bank on June 12, 1967.

Part III of the Central bank of Malaysia Ordinance, 1958, empowering Bank Negara to assume currency issuing powers, was brought into force with effect from June 1967, by a Government Gazette dated that May. Since then, the Bank has been issuing the new Malaysian currency and withdrawing the old Malayan currency issued by the Currency Board. The old Malayan currency was redeemed at par with the Malaysian dollar until the devaluation of sterling in November 1967, after which the rate was 1.18 Malayan Dollar to one Malaysian Dollar.

Under the provisions of Section 29 of the Central Bank of Malaysia Ordinance, the aggregate value of external assets which the Bank is required to maintain cannot be less than such percentage of the Central Bank's notes and coin in circulation as the Minister of Finance may declare to correspond to the minimum external assets which the Currency Board would have been required to maintain against notes and coin issued by the Board under the Currency Act of 1960.

Since a fiduciary element of not more than $300 million was permitted under the Currency Act, the minimum external assets which the Currency Board was required to maintain on June 10, 1967, (the last business day immediately preceding the assumption of currency issuing functions by Bank Negara) based on the currency in circulation shown in the books of accounts of the Board, was 80.59 per cent. the Minister of Finance by Government Gazette published in June 1967, accordingly declared that the minimum external assets which the Bank is required to maintain against its currency liabilities would be 80.59 per cent.

The parity of the present Malaysian dollar is provided for in Section 19 of the Central Bank of Malaysia Ordinance: "The parity of the Malaysian dollar shall be equivalent to o.290299 grammes of fine gold."

press release

Coins and Banknotes Designs

The unit of the currency is the Malaysian dollar, divided into one hundred cents. The first issue of Malaysian notes comprised the following denominations:
The basic design of the notes is the same for all five denominations. the front of the notes bears a portrait of the first Yang di-Pertuan Agong, together with the name of the issuing authority and a statement, over the signature of the Governor of Bank Negara, that the note is legal tender for its face value.

The back bears the crest of Bank Negara against a geometrical patterned background. the Bank's crest is derived from the motif of old gold coins, or "mas dinar" in the Malay language, and is thought to represent a "Kijang" or barking deer. I wonder now if a Bank, now that it has its new home will incorporate a picture of its fortress styled building on its notes in future issues.

A $1,000 denomination note was issued later, in September 1968. The front of the note bears the same portrait and details as the other five denominations of notes. The back depicts Parliament House in Kuala Lumpur. Symbolizing Malaysia's faith in democracy. This note is grey/green in colour and 6 1/2 x 4 1/2 in size. The notes are printed on high quality bank note paper bearing a tiger's head watermark and containing a single vertical metallized security thread. Malaysian notes are legal tender at their face value for the payment of any amount.

The first issue of Malaysian coinage comprised the following five denominations:
As with the notes, the same design has been used for all five denominations, The obverse shows Parliament House in Kuala Lumpur and a cresent and star adapted from the national flag. The principal feature of the reverse is a numeral indicating the value of each coin supported by "Malaysia," the year of minting, and a design in the form of stylized hibiscus, the national flower.

To mark the tenth anniversary of Bank Negara Malaysia, 1959-1969, the Bank issued a commemorative $1 coin on January 24, 1969. The obverse bears the profile of the Fourth Yang di-Pertuan Agong of Malaysia with the words "DYMM.SPB. Tuanku Ismail Nasiruddin Shah" (His Majesty Tuanku Ismail Nasiruddin Shah) as a surround.

The reverse has "Bank Negara Malaysia 1959-1969" along the periphery, the denomination "$1" in the centre surrounded by a floral border of hibiscus, and a cresent and star at the top. This coin is made of nickel-silver and is 1.313 inches in diameter, with a milled edge.

In a view of the very favourable response from the public for the commemorative $1 coin, the Bank issue a new coin of this denomination for normal circulation as part of the standard currency issue on May 1, 1971.

The coin is round, having a diameter of 3.335 centimetres and is made of cupro-nickel. the obverse of the coin features Parliament House in Kuala Lumpur and a cresent and star. the reverse features the denomination, the year of minting, the word "Malaysia" and a stylized design representing a hibiscus. The coin has a news type of edge, an incuse lettered edge with the inscription, Bank Negara Malaysia, repeated twice around the periphery of the coin.

Malaysian coins are legal tender at face value up to an amount not exceeding ten dollars for the $1 and 50 cents pieces, and for an amount not exceeding two dollars for the 20, 10, 5 and 1 cent pieces.

System of free interchangeability

In furtherance of the objective of maintaining close regional co-operation, a system of free interchangeability of the three currencies of Malaysia, Singapore and Brunei was adopted from June 1967, by an exchange of letters among the monetary authorities of Malaysia, Singapore and Brunei. The arrangement provides for each of the currency issuing authorities:

a) to accept from banks, notes and coins issued by the other issuing authorities at par and without charge and to exchange such notes and coins into the currency of the country concern;
b) to arrange for repatriation at the expense of the respective currency issuing authorities, the notes and coins issued by the other currency authorities and to receive at par the equivalent in an agreed convertible currency.

Essentially, these interchangeability arrangements provide that residents of Malaysia going to Singapore or Brunei will be able to use Malaysian Currency which will be accepted at par in each of the two territories and, similarly, people from Singapore and Brunei will be able to use Singapore and Brunei currencies in Malaysia without the inconvenience f first exchanging them for Malaysian currency.

Malaysia Mint

The move to the Head office vaults of the currency stock from the Batu Tiga Currency Office was completed in the early part of 1971. The Batu Tiga Currency Office, which was completed in March 1967 and has over 6,000 square feet of vaults space, now operates as the Bank Negara Malaysia Mint.

old minting press

A number of the Mint staff, including the Mint Manager, were sent for training in minting processes and other related aspects of minting work to the Hamburg Mint, Germany, the Royal mint, London and Llantrisant, and the firm of Bradbury, Wilkinson of England. The Bank Negara Malaysia mint will initially mint the country's own requirements of coins. Perhaps there's export potential in this.

Source: Solid backing for money in Malaysia, The Straits Times, 15 May 1971.