Abstract

The ultimate objective of this study to empirically investigate the import relations between Malaysia and OIC countries. The annual time series data from 1995 to 2012 have been utilized. The results of gravity model shows that real exchange rate of Malaysia and other OIC countries has a positive and significant effect on Malaysia-OIC import. Whereas, CPI of Malaysia and per capita GDP of other OIC countries shows a negative relationship with import volumes of Malaysia from -OIC countries. We also found the evidence of the role of quality of institutions in enhancing Malaysia-OIC import relationship. These findings are important especially for policy makers in crafting policies to improve Malaysia-OIC import relationship in the future. In line with the empirical findings, it is crucial for Malaysian government to focus on accelerating the efforts to establish the Islamic Common Market (ICM), liberalizing the economy, further improving the strategic sectors such as the Islamic Banking and Finance, and intensify endeavors in curbing corrupt practice.

 

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