CRITICAL REVIEW : Are There Prospects for Future Economic Integration among Muslim Countries? Evidence from Selected OIC Countries

In this review, I will discuss the study "Are There Prospects for Future Economic Integration among Muslim Countries? Evidence from Selected OIC Countries" (2011) written by Ruzita Mohd. Amin, Zarinah Hamid and Norma Md. Saad from International Journal of Economics and Management 5(1): 179 – 215 (2011). I shall agree with the author that OIC Countries need to undertake much greater efforts to prepare themselves for the establishment of an Islamic Common Market. The argument will be developed through discussing in turn its conceptual bases, research methods, main findings, and practical implications. The theme of this well researched is that the development of economic integration and that the prospects for future economic integration among OIC members are need to tended. This paper is of great interest to member countries because its findings provide an indication as to whether the existing trade structure and trade potentials would facilitate intra-trade among OIC
members, so they can formulate strategies that would foster closer trade relations among themselves.

As he makes clear in his focus, the main aim of this study is to examine the degree of intra-trade activities among six OIC members, namely Egypt, Jordan, Malaysia, Saudi arabia, Syria and oman. Specifically, it examines the extent to which countries’ dynamic exports are represented in intra-OIC trade as well as the extent of trade concentration/ trade diversification between the years 1990 and 2005. The study utilized “revealed comparative advantage” indices, “trade concentration”, and “trade competition” profiles to analyze the trade structure of selected OIC members mentioned before. Ruzita et al’s research findings show only small potentials for higher intra-OIC trade, generally in chemicals and materials, food and live animals, manufactured goods, and machinery and transport equipment. 

The OIC is an inter-governmental grouping of fifty-seven countries. Established in Rabat, Kingdom of Morocco, on 25 September 1969, it has the objective of strengthening the solidarity and cooperation among Muslim countries in the political, economic, cultural, scientific and social fields. The story told by Ruzita et al is set decades later when OIC established an Islamic Common Market.
International Economics  2014 M./1436 H.

According to Ruzita et al, OIC Countries has been developed their integration among members as the response of an increasing emphasis on economic integration among various group of countries in the world. It is well credence that the larger market as a result of trade integration reduces risk and uncertainty for producers while foreign investors become more inclined to invest in productive capacity in a member country as a way to avoid being excluded by trade restrictions and a high common external tariff (appleyard, 1995). The “natural trading partners” hypothesis introduced by Lipsey (1960) presents one of the early works that deal with the idea of regional integration. The hypothesis suggests that the higher the proportion of intra-trade within the region, the more likely a regional agreement would result in an increase in welfare effects. He argues that the OIC member’s region has established a mutual dependency in basic foods & agricultural products. In general, there appears to be a significant divergence between products that are exported to the region and to the rest of the world. Primary products seem to dominate intra-regional trade while minerals & fuels dominate exports to the rest of the world.

His contention is support by a reliable data and bright analysis. Trade divergence estimates suggest that only Jordan shows the likelihood for greater intra-trade with 26.91% of its dynamic exports being represented in intra-OIC exports. The prospects for all the countries except for Jordan do not appear to be encouraging. The revealed comparative advantage indices also do not seem to indicate a very bright prospect for higher intra-OIC trade.

The other empirical studies indicate that the volume of intra-trade among Muslim countries is low and the size of economic cooperation is limited at the present time. The study reveals that inter OIC member countries trade is positively affected by the size of their economies, the extent of IDB trade financing, their joint participation in regional integration schemes, particularly the Asian and the GCC blocks. It is negatively affected by transportation and communication costs as proxy by the distance factor, which constitutes a significant barrier to trade between the OIC member countries (Bendjilali, IRTI research paper No. 55).

The same thing found by Savas Alpay, Murat Atlamaz and Esat Bakimli (2011) that intra-OIC trade is still far from the target level of 20 percent set to be reached by 2015. Even though the share of intra-OIC trade in total trade of the OIC countries has increased continuously since 2000, moving up from 11.8 percent in 2000 to 16.8 percent in 2009, the OIC countries should stay committed to reaching the target by exerting even more efforts in the next five years. A brilliant findings made by Noor Aini Khalifah (1993) that analyze the structure of intra-Muslim countries trade among the 50 countries of the muslim  world for the years 19861991based on geographical groups of Muslim countries as well as different income groups of  Muslim countries. The result shows that the Muslim countries located in the Middle East dominates the exports, imports and trade of the Muslim countries as well as intra-Muslim countries trade. Where income groups are concerned, trade contribution of the high-income Muslim countries toward intra-Muslim countries trade is dominant followed by the lower and upper middle-income Muslim countries.

To conclude, in this review I have discussed Ruzita Mohd. Amin, Zarinah Hamid and Norma Md. Saad study “Are There Prospects for Future Economic Integration among Muslim Countries? Evidence from Selected OIC Countries” (2011). Ruzita et al’s study covers several points, the introduction, literature review, methodology and data, also the analysis and discussion of the findings. I have argued that OIC countries need much more effort to develop their integration, and that OIC countries is still far from the optimum integration. This does not mean that the prospects of OIC Countries do not appear to be encouraging and do not seem to indicate a very bright prospect for higher intra-OIC trade. Further development and discussion of this issue especially in the area of sample by including more OIC member is needed to advance research on these matters.


Bibliography
Appleyard, D.R. (1995) International Economics. 2nd ed. Irwin: Chicago.

Zurita, et al (2011). Are There Prospects for Future Economic Integration among Muslim Countries? Evidence from Selected OIC Countries. International Journal of Economics and Management 5(1): 179 – 215 (2011) 

Khalifah, Noor Aini (1993). The Structure of Intra-Muslim Countries Trade. Jurnal Ekonomi Malaysia 27 (1993) 57 – 84 

Savas Alpay, Murat Atlamaz and Esat Bakimli (2011). Trade among OIC Countries: Limits of Islamic Solidarity. Insight Turkey Vol 13 No 12, 2011. 

Bendjilali, Boualem (tanpa tahun). An Intra-Trade Conometric Model For OIC Member Countries: A Cross-Country Analysis. IRTI Research Paper No. 55