Friday, August 28, 2009

Possibilities of Economic Integration of Islamic Countries

The population of Islamic Countries of the world is 17% of the world’s population and the area at their disposal is 22% of the world’s area. The number of Islamic countries which are the member of OIC is 56. The share of Islamic countries in world trade is 9 to 10%. The share of Islamic countries in world’s GNP is not more than 5%. The half of the 56 countries are extremely backward. The mine are oil exporting countries which are relatively prosperous. The 76% of imports of Islamic countries are consisted of chemicals, machinery, means of transportation and communication etc. As a result they have to import them from developed countries. The share of manufactured goods in the world’s imports is 58% while the share of Islamic countries in the imports of manufactured goods is 76%. This shows that Islamic countries are backward industrially. No doubt 2/3 of world’s energy resources is owned by Islamic countries of the Middle East, where as Pakistan, Bangladesh, Yaman have abundance of man power. Pakistan Iraq and Yaman are striving hard to develop their agriculture sector. Egypt, Pakistan, Morocco, Tunis, Indonesia, Malaysia and Bangladesh have industrial base. Again Indonesia and Malaysia have rubber which is 70% of world’s resources. Islamic countries have 40% of world’s tin reserves. Bangladesh ahs tea and jute, Pakistan had cotton textile, vegetables, carpets, cement and sugar.

Now the question arises if the Islamic countries unify their economics or establish common market will they be able to utilize their resources in a best way-whether the effects of such customs union will be trade creating or trade diverting? Let us have look at the following points and try to search for the answers of these queries.

1. It is said that the countries formulating customs union should have political, cultural and ideological uniformity. Though the Islamic countries do not have political identity, yet they have common religious relationship. Therefore on the basis of religious identity the ideological equation can be established between them. Therefore the possibilities of trade and economic cooperation between Islamic countries are far more than what are existing in European Union (EU). The EU countries will hardly agree upon uniformity of taxation structure and common monetary policy. Particularly because of the reason that each country will have to lose its sovereignty. While the Islamic countries have the same taxation system of Zakat, Khairat Riba etc and they have belief that Almighty Allah is sovereign and the man is his deputy.

2. The countries forming customs union must be linked with each other on the territorial basis, as the transport costs are like “natural tarrif”. The major part of Islamic world lies in Asia, Africa and Europe. Most of there countries are linked with each other and they have common and adjacent borders, as the case of all Gulf states, Pakistan, Iran, Turkey and Afghanistan, Central Asian states etc.

3. There are many Islamic countries which lack industrial as well as agricultural base. With oil revenues they are constructing their infra-structures consequently they have greater demand for labour. This is the reason that manpower from Pakistan, Egypt, Malaysia and African Muslim countries is already working in the oil rich countries. But day by day such manpower is being replaced by the cheaper non-Muslim labour from India, Philippine and Korea etc. Therefore if Islamic customs union is established the countries of Gulf States can be developed with the help of manpower exports from Pakistan, Turkey, Bangladesh, Yamen, Morocco, Syria and Jordan etc. Moreover the capital of Baronai, Kuwait and Saudi Arabia can be used to construct industrial set up in Islamic Common Market.

4. The oil exporting countries have a shortage of natural resources, cultivable lands and water resources. In this respect the experiences of Pakistan, Iraq and Yamen can be helpful for agricultural development. As Arab Shaik’s should invest in Agriculture sector of Pakistan if they invest in fertilizers and agricultural machinery, the production of wheat, rice, cotton, vegetables and fruits can be enhanced to greater what it has been attained by EU under CAP. Accordingly if food stuff is made available to the members of Islamic common market from the internal cheaper source it will be case of trade creation.

5. Pakistan, Iran, Turkey and Egypt where manufactured and semi manufactured goods are produced the industrial base can be made stronger with the help of ‘Petro-dollars’. In this way the industrial production will increase. The economies of scale can be attained. The employment opportunities will increase and in the light of Prof. Viner’s analysis the substitution in production could take place. In this way the trade creating effects will rise. In addition to static effects the dynamic effects will also come into being when competition will rise amongst different member producers. The research and development will be encouraged. The forward and backward linkage effects will rise. Pakistan can learn from experience of Iraq, Iran, Abu Dhabi and Saudi Arabia in the fields of oil and gas exploitation.

In the above discussion we proved that there exist the chances of forming a customs union between Islamic countries. But if the history of EU is seen by us, we find that they started from coal and steel production. As far as Islamic countries are concerned they have neither steel nor coal. They neither produce chemicals, nor the automobiles. Our social and political structures are different. The countries which are poor they are poor like Chad and Bangladesh. The countries which are rich, they are very rich like Baronai, Kuwait and Saudi Arabia. The Islamic countries are dissimilar in all respects, they are neither competitive nor complementary. If even after formation of customs union the member countries go on importing industrial raw material, air crafts, spare parts, machinery, automobiles, thermal units generators and military hardware, the formation of custom union the member countries will have to impose a common external tarrif. Whether 56 countries will agree upon a uniform rate of tarrif? Would the Islamic countries be agreed upon free mobility of labour and capital in addition to goods? How they would settle the issue of uniformity of fiscal and monetary policies?

In this regard reply is that all the conditions of customs union can not be met once for all. All steps will be taken gradually.


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