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 risks connected to foreign direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the risk perceptions and management methods of Western multinational corporations active extensively in the region. For example, research project involving a few major international businesses in the GCC countries revealed some fascinating findings. It contended that the risks connected with foreign investments are even more complex than just political or exchange price risks. Cultural risks are perceived as more crucial than governmental, financial, or economic dangers in accordance with survey data . Moreover, the study discovered that while elements of Arab culture strongly influence the business environment, numerous foreign companies struggle to adjust to regional traditions and routines. This difficulty in adapting constitutes a risk dimension that needs further investigation and a big change in exactly how multinational corporations operate in the region.

Working on adjusting to local culture is essential not sufficient for successful integration. Integration is a loosely defined concept involving a lot of things, such as for instance appreciating regional values, learning about decision-making styles beyond a restricted transactional business viewpoint, and looking into 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 financial risk management tools, as experts and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, techniques that may be efficiently implemented on the ground to translate the new approach into practice.

Although political instability appears to take over news coverage regarding the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets have become rapidly appealing for FDI. However, the existing research on how multinational corporations perceive area specific risks is scarce and frequently lacks depth, an undeniable fact attorneys and risk professionals like Louise Flanagan in Ras Al Khaimah may likely be familiar with. Studies on dangers related to FDI in the region have a tendency to overstate and mostly pay attention to governmental dangers, such as for example government uncertainty or policy modifications which could impact investments. But recent research has started to illuminate a critical yet often overlooked aspect, particularly the consequences of social facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that many companies and their administration teams significantly underestimate the effect of cultural differences, due primarily to too little knowledge of these cultural variables.