Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

Recent research shows the significant role that cultural differences play in the success or of foreign investments in the Arab Gulf.

Although governmental instability appears to take over news coverage regarding the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a steady boost in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming more and more appealing for FDI. But, the existing research on what multinational corporations perceive area specific dangers is scarce and usually does not have insights, a fact attorneys and danger experts like Louise Flanagan in Ras Al Khaimah would probably be aware of. Studies on risks related to FDI in the area have a tendency to overstate and predominantly concentrate on political risks, such as government instability or policy changes which could impact investments. But lately research has started to shed a light on a a vital yet often overlooked factor, specifically the consequences of social facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of businesses and their administration teams considerably neglect the effect of cultural differences, due mainly to deficiencies in knowledge of these social variables.

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 methods of Western multinational corporations active widely in the area. For instance, a study involving several major worldwide businesses within the GCC countries revealed some interesting findings. It argued that the risks connected with foreign investments are a great deal more complicated than simply political or exchange rate risks. Cultural risks are perceived as more important than governmental, monetary, or financial dangers based on survey data . Moreover, the study unearthed that while elements of Arab culture strongly influence the business environment, many foreign companies struggle to adjust to regional customs and routines. This difficulty in adapting is really a danger dimension that needs further investigation and a change in exactly how multinational corporations run in the region.

Working on adjusting to regional traditions is essential although not sufficient for effective integration. Integration is a loosely defined concept involving several things, such as for instance appreciating local values, learning about decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business affairs are far more than just transactional interactions. What impacts employee motivation and job satisfaction vary significantly across cultures. Thus, to seriously incorporate your business in the Middle East two things are expected. Firstly, a business mindset shift in risk management beyond monetary risk management tools, as experts and solicitors such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, strategies which can be efficiently implemented on the ground to convert the new approach into action.