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COMMENT | Ringgit weakness is symptom of a larger illness
COMMENT | The temporary fluctuations in the value of the ringgit caused by factors such as rising interest rates in the United States as the country tightens monetary policy to rein in inflation is really to be expected and is of no major consequence. After all, the US dollar is strengthening against most currencies.

However, if the ringgit exhibits a longer-term trend of continuing weakness that it has over the last 40 years or so, then it is extremely concerning and reflects continuing relative weakness of the economy compared to that of the US and other developed countries.

That is a rather worrisome trend caused by major structural weaknesses of the economy which erode both its competitiveness and its ability to bring in net foreign exchange into the country and to maintain investors' confidence - both foreign and local.

In practice, a weakened currency reduces the quality of life of all residents because the relative salaries of wage earners go down while the prices they pay in ringgit for goods and services go up, both of which impoverish the rakyat.

Those who benefit are the exporters because their ringgit-denominated wage costs remain stagnant while their export earnings increase inversely to the fall in value of the ringgit, giving them windfall gains. Thus, most business people who export want a lower value of the ringgit and often governments pay heed to them.

Conversely, if salaries are high relative to production per person then it is not possible to maintain competitiveness in international markets unless the currency is depreciated. Which highlights the importance of having a productive workforce through better education and training and moving production up the value chain.

Our neighbours down south, Singapore, have done tremendously well in this respect. They have improved incomes and quality of life to make the republic among the most developed of nations through successful transitions of the economy.

This increased prosperity is reflected in the increased value of its currency. It is instructive to follow the movement of the Singapore dollar relative to the ringgit. The chart shows...

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