islamic economic renaissance 383How much of these problems still exist after more than two decades
of the analysis of these writers, is not very difficult to ascertain.
Although the Islamic Development Bank is playing a commendable
role in providing the much needed finance and capital to the OIC
(Organisation of Islamic Conference) countries, much more is still
needed. The application of technology is increasing, skilled labour is
more available than before, and infra structure has improved tremen-
dously in the last two decades or so, but there are still many short-
comings in the area of strategic planning and coordination among
Muslim countries.
Yet intra regional trade among the OIC countries is still very lim-
ited. For example while between half and four fifths of the trade of
Euro Zone countries is with other members of the Zone, intra trade
between the OIC countries in 2001, as shown in Table 9.1 below,
was about 11 per cent of exports and 14 per cent of imports.
Moreover, given the substantial disparities in economic develop-
ment and differing economic structure in the Muslim world, there
does not seem to be a possibility for Muslim countries to meet the
conditions for aligning their currencies with the ultimate aim of estab-
lishing a currency union (Wilson, 2004). The three main conditions
suggested by Mundell (1961) and McKinnon (1963) for optimum
currency unions to be successful are firstly that resources, notably
labour and capital, should be mobile amongst member states; sec-
ondly, the economic structures should be similar, and thirdly, there
should a willingness to closely co-ordinate monetary, fiscal and other
economic policies. Mundell and McKinnon also postulate that free
mobility of capital and indeed a degree of financial market integra-
tion is also a pre-requisite for a successful monetary union. These
conditions do not seem to be met across the OIC countries. There
are restrictions on movement of labour between all OIC countries
with increasingly restrictive conditions governing work permits in
order to encourage the employment of local citizens rather than for-
eign workers (Wilson, 2004). Also, in reality there are few capital
flows between Muslim economies, partly reflecting the limited degree
of stock market development and the restricted scope for portfolio
investment flows. The exception is only in Saudi Arabia and Malaysia
where stock market capitalisations exceed $400 billion and where
there is significant trading in government bonds, including Islamic
sukuk certificates in Malaysia.