In the previous article (August 09, FE, Page-6), we documented that today’s global trade occurs within trading blocs and that no single bloc represents the Muslim world despite our size, natural resources, and collective goals. We also introduced SEACO (South East Asian cooperation), a privately funded, 30-year-old initiative to establish a framework for cooperation among Bangladesh, Brunei, Indonesia, Malaysia, and the Maldives. SEACO is now developing the institutional structures needed to function. This final article tries to answer the key question: if a five-country bloc can work, what does it have to do with the grand fifty-year dream of a common market spanning the Ummah? The answer lies in the most critical point in this series: a common market is not created overnight. It is built from individual blocks.
How smallness can be strength: Before addressing the key question, let’s first answer another question: If 57 countries cannot integrate economically, why should anyone expect five to?
It is because five governments can negotiate agreements among themselves. While having more countries in an economic club has advantages, it also brings disadvantages, especially higher negotiating costs and coordination challenges. There are fewer obstacles when dealing with only five countries compared to 57. Geographically close countries with compatible economies and aligned governance are more likely to achieve meaningful economic integration. Rather than a cumbersome inter-governmental bureaucracy, SEACO is planned as a private sector-driven forum promoting trade among its countries. It is a track-1.5/track-2 structure allowing chambers of commerce, universities, and business coalitions to work together with governmental backing or policy protection, not direct control.
Finally, SEACO has an ideal flagship sector for immediate benefits from member cooperation: the halal economy. The global halal economy is projected to exceed $2 trillion annually and grow faster than global GDP. Since all five SEACO countries produce halal goods and services, they are likely to gain competitive advantages over non-halal producers if they mutually recognise halal certification standards. Currently, differing certification requirements cause re-certification delays for halal products imported into multiple SEACO countries. Implementing a mutual recognition agreement (MRA) on halal standards would provide immediate economic benefits and prove that SEACO can deliver real outcomes before seeking further commitments.
Why now: Three factors are making this moment appropriate rather than simply marking another milestone anniversary of an older concept.
The current global trade order is fragmenting. Rising tariffs and supply chain disruptions have increased premiums for trusted regional trading partners, which these five countries have due to shared faith and geographical proximity. 30 years of foundational work leading up to the establishment of a SEACO platform are now complete.
Lastly, as this opportunity space rapidly grows into a multi-trillion-dollar Islamic economy-based growth market that none of the five member countries could capture individually but all five could capture collectively, the prize has become increasingly attractive.
There is a vital historical lesson just across the water. ASEAN began as a modest, widely doubted group of only five member states. Over the decades, it evolved into one of the world’s most consequential economic communities. It achieved this not through a single dramatic treaty but by starting small, focusing on concrete goals, and letting success naturally expand the circle. SEACO is built to follow that path.
A staircase of integration: For decades, economists have known that countries do not suddenly become part of a deeply integrated economy. Instead, they climb a staircase of increasing levels of economic integration. Each level, or ‘step’, represents a formally recognised category of increasing integration.
The first step is a free trade area (FTA). Members eliminate tariffs on each other’s products but keep tariffs on non-members. The second step is a customs union (CU), in which members apply the same external tariff to all non-member imports and negotiate collectively with the rest of the world. At this stage, members are treated as a single entity in negotiations. The third step is a common market (CM), where members eliminate tariffs and restrictions on services, capital, and labour. Later stages may include further integration, like monetary or economic unions.
While this description presents the progression of integration as theoretical constructs applied from the outside, in reality, it reflects the path the European Union (EU) has taken over four decades. Beginning with six countries cooperating in two sectors, EU member countries have worked their way up this staircase of integration over time. Similarly, ASEAN has pursued a similar path. Further, while the EU and ASEAN represent examples of Western-style economic integration efforts, it is worth noting that the OIC has explicitly identified a similar approach as the means to achieve an Islamic common market. Specifically, in 2000, OIC foreign ministers decided to establish an Islamic common market “through gradual steps,” using regional building blocks rather than declaring it to exist outright.
Thus, SEACO is intended to serve as one such building block and has its own defined integration staircase. According to its proponents, SEACO will follow six distinct stages of development over approximately two decades: (1) confidence-building stage - trade facilitation agreements and shared statistics; (2) preferential trade agreement - several hundred product lines; (3) full free trade agreement; (4) liberalisation of services and investment, including mutual recognition of halal standards; (5) digital trade and halal supply chain integration; and (6) establishment of a SEACO common economic area - coordinated standards and collective voice in wider trade forums.
Noticeably, this represents a scaled-down version of the longer-term objective. SEACO represents an example of an Islamic common market at the scale of an individual block. It is sufficiently sized to begin immediately, yet sufficiently structured to achieve completion.
How does one small block become part of a larger trading market? Interlinking existing regional blocks is a simple way to advance from individual blocks to an expanded common market. As noted, there are many building blocks in the Muslim world. The GCC is an advanced sub-regional group in economic integration. ECOWAS is similar to West Africa. ECO serves Central Asia. SEACO would provide the last link for South and Southeast Asia. The goal is not for these groups to remain isolated but to integrate internally and come together under the OIC umbrella. This will happen through mechanisms such as preferential trade agreements linking blocs, standardising regulations, and evolving OIC trade preferences into a full multilateral framework. An architecture based on regional common market parts is envisioned.
SEACO occupies a particularly strategic location due to its position along major commercial routes linking South Asia’s population base of over one billion and Southeast Asia’s ASEAN population base of over 600 million. A functioning SEACO, therefore, represents not merely a trading bloc comprising 400-plus million people but also serves as an institutional link between two of the world’s fastest-growing economic regions. Thus, it represents both a building block and an intersection.
A realistic accounting of obstacles: Fragmentation along national lines is an obstacle. Member states have had conflicting interests and competing foreign policies, and nationalist sentiments often cause regional projects to quietly fail. Divergent regulations are an obstacle. Legal systems, banking rules, and industrial standards vary widely and need technical effort to resolve. Gaps in physical infrastructure are an obstacle. Much of the Muslim world lacks adequate ports, transport networks, and digital communication to support low-cost trade. Weak data is an obstacle. You cannot manage what you cannot measure, and intra-OIC trade statistics have been spotty and slow.
However, there are reasons for optimism.
Firstly, the building block methodology is designed to address these obstacles. By pursuing cooperation among relatively compatible economies (five) rather than integrating 57 disparate economies, SEACO minimises fragmentation challenges. By structuring development in manageable phases, SEACO addresses regulatory differences incrementally. Moreover, SEACO’s framework allows variable geometry, letting some members proceed at different rates without slowing others (e.g., the Maldives need not wait for Indonesia).
Secondly, the financial resources to fund SEACO exist. Established international organisations like IsDB (Islamic Development Bank), ITC (International Islamic Trade Finance Corporation), and ICIEC (insurance arm) offer funding for cross-border infrastructure through sukuk (Sharia-compliant bonds). Additionally, halal logistics corridors and digital trade systems can be funded through blended Islamic finance models instead of relying solely on limited public-sector funding.
Finally, by providing visible successes early in the development process — such as mutually recognised certifications for halal products — tangible evidence builds momentum, leading to additional integration activities.
The choice on the table: It may be helpful to clarify what the building block methodology is not. It is not a guarantee that an Islamic common market will materialise by the next decade. While the OIC’s long-range planning identifies achievement of an Islamic common market by circa 2050 as feasible, subject to consistent governmental commitment, SEACO alone will not bring it about.
What SEACO represents is more practical than promises; it is proof that incremental building-block development can occur.
Thus, the choice confronting OIC leaders—government, business, or academia—has never truly been between a maximum-scope 57-nation union and maintaining the status quo. This false dichotomy has caused delays. The real choice is between postponing action and taking incremental steps to establish demonstrative building-block processes.
To date, SEACO has developed into the first viable building block offered to the OIC, with functional foundations, a university network, a phasing plan, and governmental endorsement already in place. Since 1992, sufficient preparatory work has occurred. The tools required for implementation exist. Funding can be secured to execute it. What remains is leadership decision-making authority.
Therefore, the upcoming OIC summit, plus various business and academic leaders in the region, can consider SEACO for what it actually represents — namely: not another statement paper filed away, but instead an operational prototype — small, real, and ready-to-go — demonstrating how the Muslim world can convert 50-years-worth-of-communiqué language into actual exchanges of goods/capital/personnel across its own borders.
The common market begins not with a treaty for everyone. It begins with a building block that works.
[Concluded]
Salahuddin Kasem Khan is associated with the SEACO Foundation, Dhaka. [email protected]. M Kabir Hassan is Professor of Finance and Moffett Chair at the University of New Orleans; he serves on the AAOIFI Ethics and Governance Committee and chairs the AAOIFI Education Board, which oversees AAOIFI’s professional certifications. [email protected]. This is the last of the two-part series on trade integration in the Muslim world.
