the structure of intra-muslim countries trade · 2019. 7. 5. · kertas ini mcneliti struhur...

Jurnal Ekonomi Malaysia 27 (1993) 57 - 84

The Structure of Intra-Muslim Countries Trade

Noor Aini Khalifah

ABSTRAK

Kertas ini mcneliti struhur perdagangan antara 50 buah negara Islam bagitahun I 986- 1 99 L Analisis dibuat berdnsarkan kedudukan geografi dan jugatinglrnt pendapatan negara Ishm tersebut. Hubungan perdngangan antaranegara Islam dan negara bukan.Islam juga dikaji. Indeks intensitiperdagangan diganl

58 Jumal Ekonomi Malaysia 27

INTRODUCTION

The international trade field has always acknowledged the superiority offree trade compared to managed trade. The former idea of free tradehas helped shaped several rounds of multilateral negotiations under theauspices of the General Agreement on Tariffs and Trade (cATr) althoughthe latest Uruguay Round was born way past its due date. The latteridea of managed ffade has led to the cunent fashion of bilateral or regionalarrangements. Regional efforts to mention a few include the Associationof South-East Asian Nations (ASEAN), the East Asian Economic Caucus(EAEC), the South Asian Association for Regional Cooperation (SAARC),the Western AfricanEconomic Community (ECowAS), the Arab CommonMarket (acu) and the European Community (ec).

Social, political and military considerations can act as triggermechanisms for bilateral or regional arrangements. But the usual economicarguments for bilateral or regional arrangements include economies of scalerenderd possible due to the extension of markets, enhancement of efficiencyand productivity and better allocation of resources through the removalof trade barriers and the speeding up of the process of economic growththrough collective self-reliance (Balassa 1962; Krause 1972:Pazos 1972).

The Muslim countries are no exception in seeking to format somekind of unity or collective effort among themselves. Discussions of theIslamic Common Market (rcru) in academic circles are on the increase.rThis paper.examines the structural pattern of the international trade ofthe Muslim2 countries among themselves. The strength of past and currenttrading relationships anrong the Muslim countries will hopefully providerough clues as to the future direction of trade relationships among Muslimcountries. This will help Muslim countries like Malaysia that are tryingto become developed and industrialized countries in the near future toplan the forums or trade arrangements that should be given priority.

In Section I, the cNr/capita of the Muslim countries will be examinedto provide broad measures of the prevailing socio-economic conditionsof the Muslim countries. Countries will be divided into groups basedon geographical factors as well as cNP/capita to denote various incomegroups. In Section II, the direction of trade of the various geographicalgroups of Muslim countries will be examined. This will be followed byan examination of intra-Muslim countries trade based on geographicalgroups. Section III discusses the Muslim countries trade based on incomegroups of Muslim countries. Again, the international trade of the differentincome groups will be examined and the trade among themselves analyzed.

7

The Structure of Intra-Muslim Countries Trade 59

The trade of the Muslim countries with non-Muslim countries will bethe subject of analysis in Section IV. The trade intensity index will thenbe used to evaluate the intensity of trade of the Muslim countries amongthemselves based on geographical and income groups in Section V. Theintensity of trade among Muslim and non-Muslim countries will also beexamined using the trade intensity index. The conclusion of the studyas well as some policy issues will be highlighted in Section VI.

BASIC ECONOMIC AND TRADE INDICATORS

The analysis of the trade pattern of the Muslim countries is based on50 Muslim countries. The majority, of Muslim countries, that is 27 ofthem are located in Africa although the size of each of these countriesis relatively small in terms of population and Gross National Product (cNr).Of the remaining 23 countries, 15 of them are located in the MiddleEast, 7 of them are lcoated in Asia while Turkey is the sole Muslimcountry located in Europe. Actually, all the countries in the Middle Eastare Muslim countries except for Israel. Table I shows the geographicallocation of the Muslim countries studied.

The 50 Muslim countries studied have also been divided into four incomegroups, namely, the Muslim countries that belong to the high income group,the upper middle income, the lower middle income and the low incomegroup of Muslim countries. This, division of countries according to thevarious income groups is based on the World Development Report forthe years 1986-1990. Although the classification ofcountries accordingto income groups vary from year to year for some countries, the majorityof times a country has been designated in a certain group will determinewhich income group it belongs to in this study. Six countries, five ofwhich are located in the Middle East with Brunei being located in Asia,belong to the high income group. The upper middle income groupof Muslim countries consists of Algeria and Gabon situated in Africa,while Iran, Iraq, Libya and Oman are situated in the Middle East. Thelower middle income group of countries includes the African countriesof Cameroon, Djibouti, Morocco, Senegal and Tunisia; the Middle Eastemcountries of Egypt, Jordan, Lebanon, Syria and North Yemen; the Asiancountry of Malaysia and the European country of Turkey. The remaining20 muslim countries located in Africa; Afghanistan, Indonesia, Maldive,Pakistan, Bangladesh and South Yemen are all designated low incomecountries. Thus, 26 Muslim countries belong to the low income group

TABLE l. Basic Economic and Trade Indicators of the Muslim countries

CountryIncome

Group

Popula-

tion,(million)

GNP/

capita

1990

Exports1991

million

Imports1991

million

Trade

percent

l,ocation

Trade Rankins

l99l r99t 1990 1988 1986

Saudi

Malaysia

Indonesia

U.A.E.

kan

Turkey

Algeria

Nigeria

Libya

Pakistan

Morocco

Egypt

Oman

Tunisia

Bahrain

Syna

Bangladesh

high

lowmid

low

high

upmid

lowmid

upmid

low

upmid

low

lowmid

lowmid

upmid

lowmid

high

lowmid

low

14.90217.752181 .581.592

56.92556.27725.056Lt7.514.564

113.68725.09152.061

1.5548.1750.504

12.533I r3.188

6020*2340560

19860245016302060270

53 10*380950600

5220*14206380*990200

Mid-EastAsiaAsiaMid-EastMid-EastEuropeAfricaAfricaMid-EastAsiaAfricaMid-EastMid-EastAfricaMd-EastMid-EastAsia

517t93440529r422426r1591613335123141271010775

@94.25148.83838.27236.23826.73160.93699.8r687.5

34587367492586916049216882257691047781600r

8431.57458.28226.73309.75444.63992.82857.33381.4

16.7 I13.77 2r0.6s 37.80 4't.28 56.95 64 . r5 73.97 83.25 92.89 102.44 112.33 t22.04 131.79 141.38 151.27 160.98 r7

1 1 12 2 2J J J

5 5 46 8 64 4 57 7 78 1 0 1 3

t 0 1 l 1 ll l 1 2 t 21.4 14 t413 13 1018 15 1516 16 t7t7 t7 1618 20 t818 18 t9

./

(continued next page)

Table 1 (Continueil

QatarBrunei

Kuwait

lrbanon

Gabon

Jordan

Cameroon

Yemen, N

Afghanistan

Senegal

Sudan

Tanzania

Ethiopia

Mozambique

Guinea

Togo

Malawi

Mauritania

Mali

Benin

Burkina F

highhishhigh

lowmid

upmid

lowmid

lowmid

lowmid

low

lowmid

low

low

low

low

low

low

low

low

low

low

low

0.4390.2562.141

1 .1353.r54

tt.94ltt.612

7.42825.r9r24.5t85 l . 18316.7845 .7183.6388.504r.9698.4614.7419.016

3197.82597.4

422490.2

2573.2879.2

1909.5I110 .4932.77736.79358. r385.3

307.26389.61637.78302.r2443.38515.r7293.95tzt.2

197.28

1862.11780.7

38823748.496r.9

2512.r1345

1951.3r669.s81358.91l4t9.r1089.6

tt14.32899.07604.6

863.68544.&471.71569.63836.55552.45

15860 Md-Eastb Asia

16160* Mid-Eastd Mid-East

3220 Africa1240 Mid-East940 Africa

a Md-Easta Asia

710 Africaa Africa

120 Africa120 Africa80 Africa

480 Africa410 Africa2n Africa500 Africa270 Africa360 Africa330 Africa

0.98 18 20 21 2r0.85 19 21 24 230.83 20 12 9 90.82 21 25 22 220.68 22 24 25 250.66 23 23 19 200.63 2,1 22 23 '2A

0.59 25 26 26 300,50 26 27 27 270.41 27 28 28 260.34 28 29 29 290.29 29 30 32 3l0.28 30 3t 30 280.25 31 32 31 370.24 32 33 35 330.23 33 34 33 390.19 34 36 38 420.19 35 37 34 350.17 36 36 41 360.15 37 4t 40 400.15 38 38 42 4r

(continucd next page)

Table I (ContinueA

Yemen, S

Niger

Uganda

kaq

Gambia

Djibouti

Sierralrone

Somalia

Chad

Maldives

GuineaBissau

Comoros

Md-East 94.77Africa 240.67Africa 171.45Mid-East 297Africa 166.22Africa 54.5Africa 145.39Africa 106.46Africa 89.82Africa 53.73Africa 19.665Africa 27.8

0.r4 390.13 40o. l2 4r0.11 420.09 430.08 440.08 4s0.06 460.05 470.04 480.03 490.03 50

low

low

low

upmid

low

lowmid

low

low

low

low

low

low

7.666r7.35818.9140.8750.427+ . L 5 I

6.2845.6790.2180.9810.475

603.23407.17464.09

284287.39

376246.05196.91158. l9r6t.22

133.963r 19.6

36 3438 385 t J Z

6 8M 4 646 4545 4443 4347 4748 4849 5050 49

310220

d260

c240150190440180480

3540429

4446454347484950

Notes: a. GNP/capita estimated to be $6000 in 1989

c. GNP/capita estirnated to be in the $5m-$1499 range in 1989

d GNP/capita astimated to be in the $1500-$3499 range in 1989* Figures for population and GNP/capita are for the years 1989

Source: World Development Report (various issues), World Bank and The World Bank Atlas, World Bank, 1991


of countries; 12 Muslim countries belong to the lower middle income groupof countries; 6 Muslim countries each are designated upper middle incomeand high income Muslim countries.

The 50 Muslim countries (for which data are available) shown in TableI are all members of the Organization of Islamic Conference (olc) withthe exception of Ethiopia, Malawi, Mozambique, Nigeria, Tanzania andTogo. Based on available data for 1990, the combined cNp of the Muslimworld is almost one trillion U.S. dollars which is equivalent to about one-third of Japan's cNIP or one-fifth of US's cNP. Roughly, the average cNVcapita of the Muslim world is about $850 for 1990. The Muslim countrieswith high per capita incomes are those that are endowed with huge petroleumsupplies and mainly located in the Middle East with the exception ofBrunei.

Table I provides data on basic economic and tradea indicatorsof the Muslim countries. The volume of exports and imports of the 50Muslim countries shows the vast disparity among Muslim countries whereintemational trade is concerned. For example, in 1991, Saudi Arabia whichis the largest trader contributed 16.7 percent towards the Muslim countriestrade while Comoros, the smallest trader contributed only 0.03 percent.Malaysia is the largest importer among the Muslim countries imponingover $36 billion worth of merchandise in 1991. Where total trade isconcerned, Saudi Arabia is the largest trader followed by Malaysia,Indonesia, United Arab Emirate, kan and Turkey.

The Muslim countries in Table I have been ranked according to theirtrade contribution to the Muslim countries as a whole for the years 1986,1988, 1990 and 1991. The relative trade ranking of the Muslim countriesfor the above mentioned years stayed roughly the same with the exceptionof the ranking for Iraq and Kuwait. Iraq ranked as the eight, sixth andninth largest trader among the Muslim countries for the years 1986, 1988and 1 990 respectively. But in I 99 I , Iraq's rank fell to forty second wherethe Muslim countries trade is concerned. Kuwait ranked ninth. ninth andtwelveth respectively for the years 1986, 1988 and 1990. Kuwait's ranksimilarly fell to twentieh in 1991. The Gulf War did affect the traderanking of both Iraq and Kuwait although the negative effect on Iraq ismuch sreater than on Kuwait.

TABLE 2. Relative Contribution of Different Geographical Groups of Muslim Countriestowards Export, Import and Trade (million $)

Export1986

Import Trade Export1988

h.rport Trade

African

Asian

Turkey

Mid-East

AllMuslim

African

Asian

Turkey

Mid-East

All Muslim

23576.3016.72

3s392.0225.09

7455.95.29

746t7.1752.9

t4104r.4100

43852.5st7 .17

65478.1525.64

12959.35.07

r33t02.952.r2

255392.9100

30258.8820.21

3r3r2.0320.92r1027

7.3777r08.26

51 .51149706.1

100.0143714.81

19.365636.32

28.9822302.3

9.8594841.71

4t.8722&95.r

100

53835.1918.52

66704.0522.94

18482.96.36

151725.452.r8

290747.6100

87567.3518 .17

t3trt4.427.21

3526t.67.32

227944.647.3

481888.0100

29800.8616.98

48713.7r27.7611753

6.785 1 87.s6

48.55175455.1

99.9944t92.11

t775312.6

28.9713334.9

5 .13127097.4

48.9259937.0

100

34s2r.3719.87

41838.924.08

14694.78.46

82672.5447.59

173727.5100

44608.32l7.37

78042.430.39

22576.48.79

111554.643.44

25678r.799.99

9322.2418.42

90552.6125.93

2647.77.57

167860.148.W

349182.699.99

88800.43t7 . r9

1s335529.68

35911.36.95

2386s2.r46.19

5r6718.8r00.01

Sozrce: Computations based on Direction of Trade Statistics Yearboolc IMF, 1992


DIRECTION OF TRADE AMONG MUSLIM COUNTRIESBASED ON GEOGRAPHICAL GROUPS

The Muslim countries located in the Middle East dominates the exports,imports and trade of the Muslim countries as shown in Table 2. Thetrade of the Middle Eastern Muslim countries represent roughly 52,48,47 and 46 percent of the Muslim countries trade for the years I 986, 1 988,1990 and 1991 respectively. Between the years 1988 and 1990, exportsof the Middle Eastern countries increased 7.3 percent but imports fell12 percent during the same period. The direction ofchange ofexportsand imports for the remaining years that were studied has been the samefor the Middle Eastern countries.

The seven Asian Muslim countries trade has consistently increasedbetween 1985 and 1991 representingbetween22.9 percent and 29.7 prcentrespectively of the Muslim countries trade. Imports of the Asian Muslimcountries have consistently increased but the direction of change of exportshas sometimes been positive and at other times negative between 1986and 1991.

The frade of the 27 African Muslim countries represent 17 to I 8 percentof the Muslim countries trade over the years studied. Exports of theAfrican Muslim countries represent 16 to 17 percent of the Muslim countriesexports while the share of imports consistently declined from a 20 percentshare in 1986 to a 17 percent share in 1991. The trade ofTurkey represent6 to 7 percent of the Muslim countries trade. Turkey's imports represent7.37 to 10 percent of the Muslim countries imports and always outpacingexports that represent between 5 to 6.7 percent of the Muslim countriesexports between 1986 and 1991.

Table 3 potrays the Muslim countries trade among themselves in termsof percentages for each of the group of Muslim countries. Looking atthe lower right portion of Table 3, it can easily be gleaned that overall,the Middle Eastern countries absorb between 60 and 65 percent of theexports, imports and total trade of the Muslim countries over the years1986 to 1991. The domination of the Middle Eastern countries in theoverall picture of intra-Muslim countries trade is obvious. The Muslimcountries' trade with Asian Muslim countries increased from 11.39 to 19.17percent between 1986 and 1991 although it took a slight fall from 14.43to 13.86 percent between 1988 and 1990.

Where the trade among groups of Muslim countries are concerned,the trade of Turkey with the Middle Eastern countries is prominent. In

TABLE 3. Direction of Trade among Muslim Countries (percent)

African Muslim countries Asian Muslim countries

1986 1988 r990l99l19901988

African XAfrican MAfrican TAsian XAsian MAsian TTurkey XTurkey MTurkey TMid East XMid East MMid East TMuslim XMuslim MMuslim T

47.5237.4141 .1815.472.968.518.246.517.457.625.556.66

11.749.47

t0.62

45.5633,0037.9610.s85.587.85

10.57t . t I

9.218.384.836.75

12.079.05

10.59

45.38J+.3+

38.747.00+ . 2 I

5.5011 .59l l . l 811.349.946.658.61

12.7410,91I 1.87

47.9035.9540.807.014.205.61

14.599.56

11.909.7r6.978.49

13.0610.81tt.97

7.2213.1210.9230.7724.3527.200.994.382.54

10.518.899.75

tt.4l11 .38I1 .39

10.2014.6912.9237.6634.1735;152.794.203.46

11.631r.4611.5513.9414.9414.43

7.9r 8.279. l l 12.238.@ 10.62

34.17 34.8828.63 36.0131.13 35.442.94 3.693.21 7.283.r4 5.61

t2.91 15.8611.66 19.6412.40 17.5514.5t 17.80t3.14 20.6513.86 r9.r7


\

African XAfrican MAfrican TAsian XAsian MAsian TTurkey XTurkey MTurkey TMid East XMid East MMid East TMuslim XMuslim MMuslim T

12.38r0.7811.373.25

I2000

1s.8323.2719.28I1.6915 .1113.37

I1 .3112.2711 .893.592.573.03

000

16.323.4419.5711.74l5. l

13.39

13.897.73

10 .185.331.563.26

000

14.6413.65t4.2412.1 88.66

r0.52

9.48.8

9.053.9r2.8s3.38

000

10.1 3t2.1411.038.028.498.24

32.8838.6936.5250.5171.6962.2990.7789.r290.o266.0562.3

&.3165.r6&.0564.61

32.9340.M37.2348.1757.6853.3686.6388.0987.3363.6960.2762.r262.2460.9161.59

32.8t 34.4348.81 43.0142.44 39.5353.5 s4.2r

6s.54 56.9460.1 s5.57

85.48 8r.7285.55 83.1685.52 82.4962.5 64.29

68.04 6t.25&.74 62.9460.57 61.1367.3 60.06

63.75 60.61

Table 3 (Continued\

Source: Computations based on Direction of Trad.e Statistics Yearbook,IMF, 1992

68 Jurnal Ekonomi Malaysia 27

1986,90.8 percentof theexports of Turkey toMuslimcountries, 89.1 percentof the imports of Turkey from the Muslim countries and 90 percent oftrade with the Muslim countries were carried out with the Middle Easterncountries. Among the Muslim countries trade relationships, Turkey'strading relationship with Middle Eastern countries is the strongest. Overthe years studied, this relationship has gradually and continously declinedbut still in 1991; 81.7,83.2 and 82.5 percent of Turkey's exports, importsand trade respectively with the Muslim countries is predominated by theMiddle East countries. Although this relationship is most prominent amongthe groups of Muslim countries studied, we must still bear in mind thatTurkey's volume of trade represent only 6 to 7 percent of the Muslimcountries trade as shown in Table 2.

The trade relationship among the Middle Eastern Muslim countriesthemselves is also important. The exports of the Middle Eastern countriesto themselves as a proportion of exports to Muslim countries has variedbetween 62.5 and 66 percent over the years 1986 and 1991. Similarly,the imports of the Middle Eastern countries among themselves as aproportion of imports from Muslim countries has fluctuated between 60and 68 percent over the years 1986 to 1991 without any definite trend.

The Asian Muslim countries trade with Middle Eastem Muslimcountries ranked third where strength of trading relationships amonggeographical groups of Muslims countries is concemed. The Asian Muslimcountries exports to the Middle Eastern countries represent about 50.5percent of its exports to the Muslim countries in 1986 although in l99lthis figure has increased to 54 percent. The imports of the Asian Muslimcountries from the Middle East as a proportion of imports from Muslimcountries has fluctuated between a low of 57 percent in 1991 to a highof T2percentin 1986. Overall, the trade of the Asian Muslim countrieswith the Middle Eastern countries as a proportion of Asian Muslimcountries trade with Muslim countries fell between 1986 and 1988 froma high of 62 percent to a low of 53 percent and then increased to 60percent in 1990 before falling again to 55.6 percent in 1991.

The African Muslim countries export more to themselves than theyimport from themselves. On average, about 46 percent of the exportsof Africa that is destined for the Muslim world end up in Muslim Africaitself. Where imports are concerned, about 35 percent of the imports ofthe African Muslim countries originate from Muslim Africa itself. Whereintra-Muslim country trade is concerned, the trade relationship of AfricanMuslim countries among themselves is about as important as the trade


relationship with the Middle Eastern countries. The African Muslimcountries export more to themselves compared to importing from them-selves. This contrasts with the African Muslim countries relationshipwith Middle East where import flows from the Middle East are moreimportant than export flows to the Middle East.

The trade flows among the Asian Muslim countries themselves arealso important. Over the period studied, between 30.8 and 37.7 percentof the exports of the Asian Muslim countries that are destined for Muslimcountries end up in Muslim Asia itself. In the case of imports, between24.4 and 36 percent of the imports of the Asian Muslim countries fromMuslim countries are from itself.

The six trade flows identified above, that is between Turkey and theMiddle East, the Middle Eastern countries among themselves, the AsianMuslim countries and the Middle East, the African Muslim countries :rmongthemselves and also with the Middle Eastern countries and the AsianMuslim countries among themselves represent the most significant traderelationships in intra-Muslim countries trade based on geographical groups.The prominence of the Middle Eastem countries in terms of its contributionto the volume of Muslim countries trade and significance of traderelationships of the Middle eastern countries among themselves and othergeographical groups of Muslim countries automatically bestows anyleadership capacity to these countries in trying to shape the ICM.

DIRECTION OF TRADE AMONG MUSLIM COUNTRIESBASED ON INCOME GROUPS

As explained in Section I, the Muslim countries have been divided intovarious income classes that is, high, upper middle, lower middle and lowbased on their cNe/capita between 1986 and 1990. Table 4 shows therelative contribution of the various income groups towards exports, importsand trades of the Muslim countries. The trade contribution of the highincome Muslim countries towards Muslim countries trade has fluctuatedbetween 26.8 and 28.6 percent over the years 1986 and 1991 without anyparticular fiend. Similarly, the trade contribution of the low income Muslimcountries has fluctuated between 20.6 and 22.4 percent.

The trade contribution of the upper middle income Muslim countriestowards Muslim countries trade has continuously declined from a 23.6percent share in 1986 to a 2O.4 percent share in 1988, 20.3 percentshare in 1990 and later in 1991 to a 17.5 percent share.6 The trade share

TABLE 4. Relative Contribution of Groups of Muslim Countries Based on their GNP/Capita towards Exports (X),Imports (M) and Trade (T) of the Muslim World (million $ and percentages)

1986 1988

GNP/capita Expod Import Trade Export Import Trade

Hish

Up Mid

Low Mid

low

All Muslim

46t7032.74

33860.524.Or3199422.68

29016.8920.5',1

141041.3100

35582.823.77

34',753.823.2r

48490.7232.39

30878.8520.63

149706.1100

81752.828.r2

68614.323.6

80484.'1227.68

59895.7520.6

290747.5100

52172.529.74

38196.12t.77

46702.8926.62

38383.6421.88

175455.r100.01

41252.423.75330s4r9.03

59703.9534.37

39717.1622.86

173727.5100.01

93424.926.76

71250.120.4

106406.830.47

78100.8122.37

349r82.6100

1990 1991

High

Up Mid

Low Mid

lnw

All Muslim

8451l 833.09

56187.322

62872.3824.62

51821.4220.29

255392.9100

46844.620.68

41819.318.46

85549.9437.77

52281.2923.08

226495.199.99

131356.427.26

98006.620.34

148422.330.8

104102;t21.6

481888.0100

85358.132.84

49ltl.418.89

69433.9926.71

56033.5921.56

259937.0100

62153.624.2

41348.616 .1

94603.9r36.84

5867s.6422.85

256',t81.799.99

t47511.728.559046017.51

164037.931.75

114709.222.2

516718.8100.01

Source: Compttations based on Direction of Trade Statistics Yearbook, IMF, 1992 and World Development Report (various issues),WorldBank.

The Structure of Inta-Muslim Countries Trade 71

of the upper middle income Muslim countires among the different incomegroups of Muslim countries is lowest in 1988, 1990 and 1991.

On the other hand, the trade contribution of the lower middle incomeMuslim countries towards Muslim countries trade has continuouslyincreased over the years studied, that is, from27.7 percent in 1986 to31.8 percent in 1991. The lower middle income Muslim countriescontribution towards the Muslim world's trade is highest for the years1988, 1990 and 1991 although in 1986 it was the second highest tradecontributor next to the high income countries. Thus, on average thelower middle income Muslim countries contributes the most to Muslimcountries trade followed by the high income Muslim countries, the lowincome and lastly the upper middle income Muslim countries.

Table 5 shows the percentage of intra-Muslim countries trade amongthe different income groups of Muslim countries. Overall, the tradecontribution of the six high income Muslim countries is dominant as shownby the last row of Table 5. Over the years examined, between 36 and38.2 percent of intra-Muslim countries trade is contributed by the highincome countries. This is followed by the twelve lower middle incomeMuslim countries' contribution of 29 to 30.8 percent. The upper middleincome Muslim countries rank third in terms of overall contribution tointra-Muslim countries trade for the years 1986, 1988 and 1990 but itsrank fell to fourth in 1991 exchanging positions with the low income Muslimcountries.T The upper middle income Muslim countries share ofintra-Muslim countries trade was roughly 19 percent between 1986 andI 990 but in 1 99 I , it was 1 4 percent. The low income countries contributionto intra-Muslim world's trade consistently increased and was between 13.3and 18.9 percent over the period examined.

The specific percentages for particular trade flows irmong the differentincome groups of Muslim countries changed somewhat over the yearsexamined. In some cases, the trade relation is strong for the earlieryears examined and progressively weakens for the subsequent years andin other cases the reverse occurs. In order to facilitate analysis, theaverage of the percentages over the years examined will be used todetermine the strength of the trade flows.

During the earlier years studied, the trade between the upper middleand lower middle income Muslim countries was significant with about5 3 percent of the trade of the upper middle income Muslim countries beingdirected to the lower middle income countries but this flow decreasedto about 40 percent in the latter years. The second most significant trade

TABLE 5. Exports (X), Imports (M) and Trade (T) of Various Income Groups of

Hieh Income Muslim countries Upper Middle Income

Mean86-91 199019881986199019881986

Mean86-91

High XHigh MHigh TUp Mid XUp Mid MUp Mid TLow Mid XLow Mid MLow Mid TLow XLow MLow TMuslim XMuslim MMuslim T

35.9151.8942.1740.6738.1939.4324.0529.8527.r940.1361.4352.7934.2042.9838.53

39.2r47.7343.0343.2529.2'.137.2824.2325.rr24.6834.8649.2543.8435.2636.7836.00

35.0851.0640.9238.6642.5440.2925.5826.8926.2834.7044.664t.2133.6240.0936.67

34.3143.9338.1255.8937.2946.6514 )1

33.0128.4837.8549.5545.0035.8540.7638.21

36. l348.6841.0644.6236.8240.9r24.5328.7226.6636.8951.2245.71J + . t t

40.1537.35

19.955.32

14.222.091.29t.69

40.1240.7540.4612.'t44.Ol7.55

20.6316.1218.41

16.947.21

12.58r.451.701.5540.7

44.8742.839.735.737.24

19.1418 .1018.63

18.636.79

14.334.496.935 .51

29.974r.2936.071 1 .3921.3217.8917.032 t .1718.98

16.61 18.033.91 5.81

11..57 13.184.78 3.205.39 3.835.09 3.46

26.86 34.4120.39 36.8323.75 35.78t2.64 11.6310.68 10.4411.44 I1.0316.88 18.42to.1 16.5213.9 t'1.48

Muslim Countries among Themselves (percentages)


Table 5 (Continueil

From

Lower Middle Income

1986 1988 1990

Low Income

1986 1988 1990Mean

1991 86-91

27.61 22.344.43 16.2226.35 19.87rr.37 9.0811.03 8.05rr.20 8.7119.31 16.2715.40 12.2117.43 14.1721.21 2'W12.95 15.1216.16 18.882r.23 17.8116.35 12.9218.88 15.45

High XHigh MHigh TUp Mid XUp Mid MUp Mid TLow Mid XLow Mid MLow Mid TLow XLow MLow TMuslim XMuslim MMuslim T

24.6629_2326.4552.5152.5252.5223.15t9.4121.1321.3818.2019.4930.2029.3329.77

21.653r.3826.O249.9962.8655.4918.5218.1218.3226_5527.2927.0128.8832.7930.80

26.2128.8427.t64r.9643.5442.62n.9220.2623.7929.4120.5623.6231.0427.3r29.28

2r.4827.7423.9627.9646.2937.U29.563r.2030.3428.3026.8227.3926.M32.1929.00

Mean

86-91

23.5029.3025.9043.1151 .3046.9324;1922.2523.4026.4123.2224.3829.M30.4129.71

19.48t3.5717.164.738.006.36

12.689.99

11.2225.7616.3620.1714.9711.57t3.29

22.1913.6818.375 .316 .175.68

16.55I1 .8914.1828.87t7.7221..9r16.7212.3314.57

20.0813.21r7.5914.897.00

11 .5816.54I1 .5613.8524.5

13.4617.2818.32tt.4415.07

Source.' Computations based on Direction of Trade Statistics Yearboolg IMF, 1992 and Wo rldDevelopmentReport (various issues), World Bank.


flow, where trade among the different income groups of Muslims countriesis concerned, is the trade between the low income and high income Muslimcountries which averaged about 45 percent of the trade of the latter groupof Muslim countries. The trade of the high income Muslim countriesamong themselves averaged about 4l percent of the high income Muslimcountries trade with the Muslim world. Similarly, the upper middle incomeMuslim countries trade with the high income Muslim countries averagedabout 41 percent of the former's trade with the Muslim world. Thevolume of trade between the lower middle and the upper middle incomeMuslim countries which averaged 35.8 percent of the trade of the formergroup of Muslim countries with the Muslim world ranks fifth comparedto the other flows of trade. The five trade flows cited above averagebetween 35 and 47 percent of the respective income groups trade withthe Muslim countries.

The following four trade flows averaged between 23 and 27 percentof the respective income groups trade with the Muslim world. The sixthmost significant trade flow is between the lower middle income and highincome Muslim countries which fluctuated between 24 .7 and28.5 percentof the former countries trade with the Muslim world. The remaining tradeflows which are significant is the trade of the high income, low incomeand lower middle income Muslim countries with the lower middle incomeMuslim countries which respectively averuged 25.9, 24.4 and 23.4 percentof the former countries trade with the Muslim countries.

Overall, for intra-Muslim countries trade as a whole, trade with thehigh income Muslim countries is dominant, followed by trade with thelower middle income Muslim countries, the upper middle income Muslimcountries and lastly the low income Muslim countries.

DIRECTION OF TRADE OF THE MUSLIM COUNTRIES WITHNON-MUSLIMCOUNTRIES

The Muslim countries trade among themselves represent between 9.8 and12.4 percent of their total trade. This implies that the Muslim countriestade with the non-Muslim countries represent between 87.6 and 90.2 percentof their total trade. The share of trade of the Muslim countries amongthemselves increased from 11.85 percent to 12.42 percent between 1986and 1988. Between 1988 and 1990, the volume of intra-Muslim countriestrade fell from12.42to 11.31 percent and further dropped to 9.8 percentin 1991.

The Structure of Intra-Muslim Countries Trade

Table 6 shows the proponion of trade between Muslim and non-Muslimcountries based on geographical groups of Muslim countries. Turkey'spercantage of trade with the Muslim countries is the highest althoughthis percentage declined over the period examined from25.2 in 1986 to13.3 in 1991. The Middle Eastern countries rank second where trade withother Muslim countries relative to non-Muslim countries is concerned.The percentage of the Middle Eastern countries trade with the Muslimcountries fluctuated between 12.6 and 15.4 percent with no definite trend.

The African and Asian Muslim countries switched positions whererelative trade with Muslim and non-Muslim countries is concerned overthe years studied. In 1986 and 1988, the Asian Muslim countries shareof trade with other Muslim countries slightly exceeded that of the AfricanMuslim countries. In 1990 and 1991, the reverse occured where the AfricanMuslim countries share of trade with the Muslim countries exceeded thatof the Asian countries. Thus, the Asian Muslim countries trades the leastwith other Muslim countries in the early 1990s.

The trade profile of the different income groups of Muslim countrieswith other Muslim and non-Muslim countries is shown in Table 7. Itis obvious that the low income Muslim countries proportion of trade withthe Muslim countries relative to the non-Muslim countries is the lowestfor all the years sfudied. For the other income groups, that is high income,upper and lower middle income, the percentage of trade with the Muslimcountries is lowest for the year l99l with percentages of 11.1, 10.7 and9.1 respectively. The high income group of Muslim countries volume oftrade with otherMuslim countries was roughly 13 percent of its total tradefor the years 1986, 1988 and 1990. The upper middle income group ofMuslim countries trade with the Muslim countries fluctuated between 1 1.6andl4.6percent for the years 1986 to 1990. On ayerage, the high incomeMuslim countries trade percentage with the Muslim countries was slightlyhigher at 12.78 percent compared with the similar measure for the uppermiddle income countries of 12.49. The lower middle income Muslimcountries trade with the Muslim countries averaged 11.4 percent over theyears studied and gradually declined from a high of 13 .2 percent in 1986to a low of 9.1 percent in 1991.

The raw trade figures in Table 7 can be recomputed to show the absolutetrade contribution of the different income groups. Overall, the tradecontribution of the high income Muslim countries towards Muslim countriestrade is greatest; followed by the lower middle income countries, the uppermiddle income countries and lastly the low income countries.

75

TABLE 6. Trade of Geographical Groups of Muslim Countries among Themselves and withNon-Muslim Countries (million $ and percentages)

Muslim countries Non-Muslim countries

1986 1988 r990 t99l 1986 19901988 t99L

AfricanVoAsianVoTurkeyVoMid-EastVoMuslimVo

3586.536.66

4923.237.38

4665.625.24

21277.514.02

34452.9I1.85

4619.t57 .18

6918.5 r7.64

6043.322.85

25785.6r5.36

43366.612.42

62ffi.167 . t5

8490.316.48

5993.4t7

34023.214.93

54767.l11.37

5856.546.6

10048.16.55

4769.913.28

30016.r12.58

50690.79.81

50248.693.34

61780.892.62

13817.374.76

130447.85.98

256294.88.15

59703.092.82

83634.192.36

20404.477.15

142074.84.64

305816.87.58

81307.1 82943.892.85 93.4

122624. 143306.93.52 93.45

29268.2 3tt4t.483 86.72

19392t. 208635.85.07 87.42

427120. 466028.88.63 90.19

,lource: Computations based on Direction of Trade Statistics Yearbook, IMF, 1992

-/

TABLE 7. Trade of Different Groups of Muslim Countries Based on their GNP/Capitawith Muslim and Non-Muslim Countries (million $)


IncomeGroup 1986 r986 1988 1990 199rr988 1990 l99t

Hieh

Vo

Up Mid

Vo

Low Mid

Vo

Low

Vo

All

Vo

10693.313.08

7947.8r 1.58

10613.413.19

sr98.428.68

34452.91 1.85

12563.s13.45

10373.514.56

136s3.012.83

6776.628.68

43366.612.42

17693.613.471286713 .13

15516.710.45

8689.818.35

54767.211.37

16393.7l l . l t967410.69

14962.99. r2

9660.0s8.42

50690.79.81

710s9.586.92

60666.588.42

6987r.286.81

54697.39r.32

2s6294.88. l5

80861.486.55

60876.685.44

927s3.887.r7

7t324.191.32

3058r6.87.58

113662. 13111886.53 88.89

85139.6 8078686.87 89.31

132905. t4907489.55 90.88

95412.9 [email protected] 91.58

427120. [email protected] 90.19

,Source: Computations based on Direction of Trade Statistics Yearbook, IMF, 1992 and World Development Report (various issues), World Bank.


INTENSITY OF TRADE AMONG MUSLIM ANDNON-MUSLIM COUNTRIES

Systematic studies of the determinants of bilateral trade flows hasproceeded using the gravity model approach or the intensity approach. Inthis paper, the latter approach is followed. Brown (1949) and Kojima(1964) developed the trade intensity index which was later synthesizedby Drysdale and Garnaut (1982). This index provides a useful means ofgauging the relative importance of bilateral trading relationships of theMuslim countries with each other and with third countries. The tradeintensity index (I,,) is defined as follows:

I,, = (XulX ) (M/(M*- Mi))

where

I- is the intensity of exports of country i to j

X- is exports from country i to country j

X is totalI

M. is total

M. is total

exports of country i

imports of country j

imports of country i

M* is total world imports

This index measures variations in bilateral trade levels that result fromdifferential resistances by abstracting from the effects ofthe size ofexportsand imports. The value of the intensity index greater (lesser) than unityindicates that a country is exporting more (or less) to another countrycompared to the latter country's share in world trade. The intensity oftrade index above measures relative resistances roughly because it failsto account for the countries varying commodity composition of foreigntrade. The degree of complementarity in the commodity composition ofone country's exports and the other's imports will limit opportunities forbilateral trade where commodities are not substitutable for each other.


Tables 8 and 9 respectively shows the intensity of trade index amongthe Muslim countries based on geographical and income groups. FromTable 8, it can be gleaned that among geographical groups of Muslimcountries, the exports of Turkey to the Middle East assumes the highestintensity of trade index of 8.2 in 1986 which then continuously declinedto 4.3 in 1991. The second most intense trade flow is from the MiddleEast to Turkey with an index of 4.4 in 1986 which increases to 4.9 in1988 and then falls to 3.3 in 1990 and then falls again to 2.0 in 1991.The third most intense trading relationship is that of Turkey and Africawith an index that fluctuated between 1.6 and 1.9. The trade intensityindex for the remaining ffade flows among the different geographical groupsof Muslim countries is not signifrcantly different from unity. Where overallexports of the Muslim countries to the different geographical groups of

TABLE 8. Export Intensity of Geographical Groups of Muslim Countriesamong Themselves

AfricaAsia 0.641Turkey 1.901Mid-East 0.765Muslim 0.92

0.266 0.409 0.232 0.2010.54 0.316 0.368

2.279 1.598 1.935 0.222 0.497 0.27 0.281.07 1.158 0.988 1.02 1.226 1.001 0.923

t.145 1.058 0.983 0.864 1.091 0.802 0.766

Africa 1.295 1.29Asia 0.369 0.43TurkeyMid-East 4.363 4.892Muslim 2.515 2.616

1.2 0.792 0.4920.472 0.406 0.822

8.2223.342 2.0371.983 1.193 2.004

0.668 0.666 0.5871.026 l . l13 r . r397.796 5.435 4.333

2.465 2.318 1.84

Source: Computations based on Direction of Trade Statistics Yearbook, lMF, 1992


TABLE 9. Export Intensity of Different Income Groups of

Muslim Countries among Themselves

Exportdfrom

HiehUp Mid 2.733 4.465Low Mid 2.074 2.282Low 1.665 1.534Muslim 2.279 2.798

High 1.453 1.31sUp Mid 2.59 3.565Low MidLow 0.651 0.807Muslim 1.477 1.584

High Income

1986 1988 1990

Upper Middle Income

1986 1988 1990

t.64 1.858 2.01 1.637

2.73 2.530.53 0.72rr.48 1.37 |

2.026 1.73 1.9180.569 r.29 0.6791.6t9 t.2l r.28r

1.378 1.27 1.215

To

3.73 3.1522.08 1.521 3.543 4.'186r.45 r.437 0.541 0.5342.6 r.93't 1.407 1.896

1.38 0.925 1.8022.2r 1.036 0.366

1.260.67 0.706r.32 0.924 1.15

Source: Compited from the models.

Muslim countries is concerned, the exports of the Muslim countries tothe Middle East countries is characterizedby consistently high indices.The intensity of exports of the Muslim countries to Turkey was high duringthe earlier years examined, but in 1991, the trade intensity index wasnot significantly different from unity.

The trade of the middle income group of Muslim countries with thehigh income group of Muslim countries as shown in the upper left quarterofTable 9 is characterizedby high trade intensity indices. In this case,all the indices increased between 1986 and 1988 but fell between 1988and 1990 and fell again between 1990 and 1991. The trade ofthe lowermiddle income and upper middle income group of Muslim countries isalso characterized by high trade intensity indices with the same trendof an increasing index between 1986 and 1988 and a decreasing indexthereafter. The high income Muslim countries also trade intensively withthe low income Muslim countries.

The Structure of Intra-Muslim Countries Trade 8I

TABLE 10. Export Intensity of Different Geographical Groups of Muslim

Countries with Muslim and Non-Muslim Countries


1986 1988 1990 r99r 1986 1988 1990 1991

AfricaAsiaTurkeyMid-EastMuslim

0.77 0.965 0.85r0.838 1.014 0.8714.665 4.282 2.6632.03 2.539 2.247

0.74 1.0020.913 0.9962303 0.7081.768 0.879

0.876

0.989 0.997 r.0070.983 0.989 0.9830.775 0.876 0.8920.865 0.882 0.9070.874 0.887 0.899

Muslim countries

1986 1988 1990 r99r

Non-Muslim countries

1986 1988 1990 t99l

High

Up Mid

Low Mid

[ow

Muslim

1.909 2.087 1.9931.597 2.451 1.9932.05 2.237 1.6820.986 1.045 0.866

1.587 0.911.365 0.9351.5t7 0.8930.919 0.985

0.876

0.911 0.915 0.9360.89 0.917 0.9590.894 0.925 0.9320.982 0.993 0.9890.874 0.887 0.899

Source: Computed from the models.

Overall, the Muslim countries as a group trades intensively with thehigh income Muslim countries. Most of the trade intensity indices exhibitincreasing values between 1986 and 1988 and decreasing values thereafter.Thus, the intensity of trade indices for trade among Muslim countries arerelatively low in 199 I whether ffade is viewed between geographical groupsof Muslim countries or between different income groups of Muslimcountries.

Table 10 shows the intensity of trade indices fortrade between groupsof Muslim and non-Muslim countries. The most striking observation isthat the trade intensity indices for trade between groups of Muslim andnon-Muslim countries are all less than or equal to unity. The trade ofthe high income and lower middle income Muslim countries with theMuslim countries averaged around 2.0 for 1986 and then slightly increasesin 1988 before falling to around 1.5 in 1991. Turkey and Middle East's

i;i


trade with the Muslim countries are characterized by high indices whichdecreased in the later years.

High trade intensity may be broadly explained by two sets of factors(Drysdale and Garnaut 1982). The first set of factors relate to the degreeof trade complementarity or the "matching" between export commoditycomposition of the exporting country and the corresponding commoditycomposition of the importing country. The second set of factors relateto "special country bias". These factors relate to resistances to tradewhich include transportation costs and other costs related to overcominggeographical distance and official barriers to trade, the importance ofhistorical connections and ease of communication between countries. Inthe case of intra-Muslim countries trade, it appears that the trade of theMiddle Eastern Muslim countries among themselves and Turkey can beattributed to "special country bias" factor.

This "special country bias" factors also can help explain the high tradeintensity indices among the Muslim countries trade compared to tradewith non-Muslim countries. The relatively high intensity of trade indicesbetrveen the high income and low income Muslim countries can be attributedto complementarity factors. The high income Muslim countries havecomparative advantage mainly in fuels whereas the low income Muslimcountries comparative advantage rests primarily in commodities other thanfuels.

CONCLUSION AND POLICY IMPLICATIONS

When Muslim countries are viewed as geographical groups of Muslimcountries, the trade of the Middle East countries is dominant followedby the trade of the Asian Muslim countries and Turkey. When viewedin terms of income groups of Muslim countries, the trade contributionof the high income Muslim countries followed by the lower and uppermiddle income countries are dominant. Any form of trade integrationamong the Muslim countries must incorporate the Middle Eastern countries.

But the Middle Eastern countries have their own political problemsand uniting them is no easy task. Iran which embraced the Islamic politicalideology in the early 1980s posed a threat to the Middle Eastern countriesalthough Iran was the cornerstone of military strength in the Middle Eastprior to 1980. The threat of kan at that time speeded up the formationof the Gulf Cooperation Council. Attention then shifted to Iraq with thehope that Iraq would fill the leadership vacuum in the area. The Gulf

The Structure of Intra-Muslim Countries Trade 8-l

War in 1990 shattered hopes of Iraq becoming a dominant political andmilitary force in the Middle East. The Muslim countries trade volumein 1990 was $483 billion which roughly is the same amount of moneythat the Arab countries put forth ($440 billion) to free Kuwait from kaqduring the Gulf War.

If the Islamic Common Market (ICM) is to materialize, selected Muslimcountries which are major players in the trade arena may get togetherto promote trade integration. The success of the ICM ultimately dependson the political will of the major players but at least Middle Easternunity will not be a prerequisite to the formation of the IcM.

The current declining trend in the trade intensity indices should notdiscourage any efforts towards Muslim trade integration. The intensityindices for trade among Muslim countries are much higher than for tradewith non-Muslim countries which are less than or not significantly differentfrom unity. The Muslim countries share in world trade is about 7 percentin 1990. But all of the trade flows among groups of Muslim countriesas shown in Table 7 is greater than this 7 percent share. The "specialcountry bias" factors does seem to point to some form of positive biasin intra-Muslim countries trade. The Muslim countries are all developingcountries with a lot of potential to develop in the future. Economicdevelopment and industrialization of the Muslim countries will tend tofoster international trade especially intra-industry trade in manufacturesin the future.

Developing Muslim countries like Malaysia, Indonesia and Bruneiwhich are members of RseAN had better concentrate on forums likeASEAN which are further ahead in their integration efforts both at thepolitical and economic level. Efforts to promote AsEAN can simultaneouslyoccur with efforts to promote the IcM although the former forum shouldbe given priority. The industrialized or developed countries continue todominate in trade, in financing, in political clout, in wealth and indetermining the "rules of the game" in world affairs. The appropriatecourse of action for the Muslim countries is to simultaneously continuebuilding relationships among themselves, among other non-Muslim devel-oping nations and also the industrialized world.

NOTES

See Sadeq (1990), p.133 for discussions on the Islamic Common Market.The definition of Muslim countries is based on Faruqi and Faruqi (1992)and orc reports.

84 Jumal Ekonomi Malaysia 27

3. All dollars in this paper refer to the us dollar.4. The trade data for the study was gathered from various issues of the

Direction of Trade Statistic Yearbook. rur.5. Trade here includes trade of the Muslim countries amons themselves and

also trade with non-Muslim countries.6. Iraq which belongs to the upper middle income Muslim countries may

have played a role in contributing to the bigger decline in trade sharebetween 1990 and l99l as a result of the Gulf War.

7. Again this may be due to the effect of the Gulf War on Iraq. Kuwaitwhich belongs to the high income Muslim countries did not seem to haveaffected the trade of the hieh income Muslim countries in a sienificantway.

REFERENCES

Balassa, B. 1962. The Theory of Economic Integration. London: George Allenand Unwin.

Brown, A.J. 1949. Applied Economics: Aspect of World Economy in War andPeace. London: George Allen and Unwin.

Drysdale, P. & Garnaut, R. 1982. Trade Intensities and the Analysis of BilateralTrade Flows in a Many-Country World: A Survey. Hitotsubashi Joumalof Economics 22(2) Feb.

Faruqi, I. and Faruqi, L.L. 1992. The Cuhural Atlas of Islam. Herndon Virginia:International Institute of Islamic Thought.

Intemational Monetary Fund. Direction ofTrade Statistics Yearbook. Washington.Kojima, K. 1964. The Pattern of Intemational Trade among advanced countries.

Hitotsubashi Journal of Economics 5(l)June.Krause, M.B. 1972. Recent Developments in Customs Union Theory: An

Interpretive Survey. Journal of Economic Literature,10(2) June.Pazos, F. I 972. Regional Integration of Trade among Less Developed Countries.

World Development I0(7) IuIy.Sadeq, A.H.M. 1990. Economic Development in Islam. Pelanduk Publications

(M) Sdn. Bhd.World Bank. 1991. The World Bank Atlas. Washington.World Bank. The World Development Report (various issues). Washington.

Fakulti EkonomiUniversiti Kebangsaan Malaysia43600 UKM BangiSelangor D.E.

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