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.

Recent scientific studies on dangers linked to international direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge regarding the danger perceptions and management strategies of Western multinational corporations active widely in the area. For instance, a study involving a few major international businesses in the GCC countries revealed some interesting findings. It contended that the risks related to foreign investments are much more complex than simply political or exchange price risks. Cultural risks are regarded as more crucial than governmental, financial, or economic dangers according to survey data . Moreover, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign firms find it difficult to adapt to local traditions and routines. This difficulty in adapting is really a risk dimension that needs further investigation and a change in how multinational corporations operate in the region.

Working on adjusting to regional traditions is important although not adequate for effective integration. Integration is a loosely defined concept involving several things, such as appreciating regional values, learning about decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, successful business interactions tend to be more than just transactional interactions. What impacts employee motivation and job satisfaction differ significantly across countries. Hence, to truly integrate your business in the Middle East two things are needed. Firstly, a corporate mindset shift in risk management beyond economic risk management tools, as professionals and solicitors such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Next, methods which can be effortlessly implemented on the ground to convert this new mindset into action.

Although governmental uncertainty generally seems to take over news coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a steady boost in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming increasingly attractive for FDI. However, the existing research on how multinational corporations perceive area specific dangers is scarce and usually does not have insights, an undeniable fact attorneys and risk consultants like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on dangers connected with FDI in the area have a tendency to overstate and mostly focus on governmental dangers, such as for instance government instability or policy changes which could impact investments. But recent research has started to illuminate a critical yet often overlooked aspect, namely the consequences of social facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their management teams considerably disregard the impact of cultural differences, mainly due to too little comprehension of these social factors.