Academic journal article Academy of Accounting and Financial Studies Journal

Malaysia-Gcc Bilateral Trade, Macroeconomic Indicators and Islamic Finance Linkages: A Gravity Model Approach

Academic journal article Academy of Accounting and Financial Studies Journal

Malaysia-Gcc Bilateral Trade, Macroeconomic Indicators and Islamic Finance Linkages: A Gravity Model Approach

Article excerpt


Bilateral Trade between Malaysia and Gulf Cooperation Council (GCC) Countries

In terms of trade in international market, Malaysia is a reknown nation in the world. The economic development of Malaysian economy greatly depends on the external trade. The countries trade partners in 2016 include United States of America, Japan, Europe and Singapore. Being a neutral, modern and prominent advancing Muslim state, Malaysia has been contributing vigorously in the advancement of its trade by encouraging collaborations with numerous Gulf Cooperation Council Countries (GCC).

In addition to it, Malaysia also urge to seek the progressive strategic options in order to raise the standards of its trade practices. The country is taking active participation in motivating intra-OIC to attain the objective of trade development. Among the strategies adopted is the expansion of trade partners. The country has also entered Middle Eastern economies for the fulfilment of its purpose. Also in the Organization of Islamic Conference (OIC) countries, Gulf Cooperation Council (GCC), is famous for being the affluent countries in Middle East region and is involved in bilateral trade with Malaysia since 1990s. The common aspect of both regions is their similar practices regarding the modernization and neutral cultural environment for the people of the states. This has benefit both partners and enable them to emerge as developed Muslim countries in the world. The Malaysian emphasis on the development of its trade is reflected from the fact that expansion of its export is one the vital factor of their government policy especially to the West Asian markets (BNM, 2010; NEAC, 2010a). The country has launched its new agenda of economic development under the name of Malaysian New Economic Model (NEM) in 2010. Following the strategies articulated in NEM is the diversion from industrial nation to the service centred country.

Bilateral Trade and Islamic Finance in Malaysia and GCC Countries

The importance of cross country trade is evident in the field of Islamic finance. Islamic finance has the potential to augments the level of country's inter related trade activities by offering numerous impartial solutions in compare to the traditional corporate practices. In day to day common practices, Islamic finance has provided tools to bring general prosperity in the country. The instrument of Zakat for instance motivates people of the society to help those who are poor and resulted in motivating micro-finance, micro-SMEs and micro-insurance in many Muslim countries. The mechanisms of Islamic finance resulted in risk diversification and allow risk sharing that ultimately supports the individuals to alleviate their eccentric risks. Levies mandated or suggested like Zakah, Sadaqat and Qard-al-Hassan, allow these eccentric risks of the poor to be burdened mutually among the rich, thus serving to lessen the poor's income consumption correlation, rise the general saving and corporate opportunities. To put it in simple words, it will limit poor people to completely dependent of their low level of income and help them to live in a better setting not only for them but also help them to raise their families in a decent environment. It is probable that at some point even these levies can be instrumentalized to be involved in the full spectrum menu of Islamic financial instruments for risk sharing. In that event, Islamic finance would become a risk manager for society (Askari, Iqbal & Mirakhor, 2014).

Islamic Banking Growth and Opportunities in Malaysia and GCC Countries

Rapid liberalization in the Islamic finance industry, coupled with facilitative business environment has encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business. "This has created a diverse and growing community of local and international financial institutions. Currently, Malaysia has a significant number of full-fledged Islamic banks including several foreign owned entities; conventional institutions who have established Islamic subsidiaries and also entities who are conducting foreign currency business. …

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