Learning about the risks of FDI in the Middle East and beyond

Learning about the risks of FDI in the Middle East and beyond

Blog Article

While the Middle East becomes a more attractive destination for FDI, comprehending the investment dangers is increasingly important.

Recent studies on risks linked to foreign direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge concerning the danger perceptions and administration techniques of Western multinational corporations active widely in the region. As an example, research project involving a few major worldwide companies in the GCC countries revealed some interesting data. It suggested that the risks connected with foreign investments are more complex than just political or exchange rate risks. Cultural risks are perceived as more important than political, financial, or financial dangers in accordance with survey data . Moreover, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign organisations find it difficult to adapt to local traditions and routines. This difficulty in adapting is really a danger dimension that requires further investigation and a change in exactly how multinational corporations run in the region.

Although political uncertainty seems to dominate media coverage on the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a stable upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming more and more attractive for FDI. But, the present research on what multinational corporations perceive area specific risks is scarce and usually lacks depth, a fact attorneys and risk consultants like Louise Flanagan in Ras Al Khaimah would probably be familiar with. Studies on risks associated with FDI in the region tend to overstate and predominantly pay attention to political dangers, such as for example government instability or policy changes that may impact investments. But lately research has begun to illuminate a critical yet often overlooked factor, specifically the effects of social factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams notably undervalue the effect of cultural differences, mainly due to too little knowledge of these cultural factors.

Working on adjusting to regional culture is necessary not adequate for successful integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating regional values, comprehending decision-making styles beyond a limited transactional business viewpoint, and looking into societal norms that influence company practices. In GCC countries, successful business affairs are more than just transactional interactions. What impacts employee motivation and job satisfaction vary significantly across cultures. Thus, to truly incorporate your business in the Middle East a few things are expected. Firstly, a corporate mind-set change in risk management beyond monetary risk management tools, as specialists and lawyers such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Next, strategies that may be effectively implemented on the ground to translate the new strategy into action.