Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

The Middle East, specially the Arabian Gulf, has experienced a notable upsurge in foreign direct investment. Check out the risks that businesses might encounter.

Working on adjusting to local culture is essential not enough for successful integration. Integration is a loosely defined concept involving many things, such as for instance appreciating local values, comprehending decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence company practices. In GCC countries, effective business affairs are more than just transactional interactions. What influences employee motivation and job satisfaction vary greatly across cultures. Thus, to truly integrate your business in the Middle East a couple of things are essential. Firstly, a corporate mind-set shift in risk management beyond economic risk management tools, as professionals and attorneys 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 strategy into practice.

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 area. For example, a study involving several major worldwide businesses within the GCC countries revealed some interesting findings. It suggested 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 risks according to survey data . Furthermore, the research unearthed that while aspects of Arab culture strongly influence the business environment, many foreign firms find it difficult to adjust to local customs and routines. This trouble in adapting is really a risk dimension that requires further investigation and a big change in just how multinational corporations operate in the region.

Although governmental uncertainty seems to take over news coverage on the Middle East, in recent times, the region—and specially the Arabian Gulf—has seen a steady increase in international direct investment (FDI). The Middle East and Arab Gulf markets have become more and more attractive for FDI. Nonetheless, the present research on how multinational corporations perceive area specific risks is scarce and usually lacks depth, a well known fact attorneys and risk consultants like Louise Flanagan in Ras Al Khaimah may likely be familiar with. Studies on risks connected with FDI in the region tend to overstate and mostly focus on political dangers, such as government uncertainty or policy changes that could influence investments. But recent research has begun to shed a light on a a critical yet often overlooked factor, namely the consequences of cultural facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams considerably underestimate the effect of cultural differences, mainly due to too little understanding of these social variables.