What are common risks associated with FDI in the Arab world

What are common risks associated with FDI in the Arab world

Blog Article

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

Although governmental instability seems to dominate news coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a steady increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become rapidly appealing for FDI. However, the existing research on what multinational corporations perceive area specific risks is scarce and usually lacks depth, a fact attorneys and danger professionals like Louise Flanagan in Ras Al Khaimah would probably know about. Studies on risks associated with FDI in the region tend to overstate and predominantly concentrate on political risks, such as for instance government instability or policy changes which could impact investments. But recent research has started to illuminate a vital yet often overlooked aspect, specifically the effects of cultural factors in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that lots of companies and their management teams dramatically brush aside the effect of cultural differences, due mainly to deficiencies in knowledge of these social factors.

Recent studies on risks linked to foreign direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge concerning the danger perceptions and administration techniques of Western multinational corporations active extensively in the area. For example, research project involving a few major worldwide businesses in the GCC countries revealed some interesting data. It suggested that the risks related to foreign investments are even more complicated than just political or exchange rate risks. Cultural risks are perceived as more essential than governmental, economic, or economic risks in accordance with survey data . Additionally, the research discovered 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 trouble in adapting constitutes a risk dimension that requires further investigation and a big change in just how multinational corporations operate in the region.

Focusing on adjusting to local culture is important not adequate for successful integration. Integration is a loosely defined concept involving many things, such as for example appreciating regional values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence company practices. In GCC countries, effective business interactions are more than just transactional interactions. What shapes employee motivation and job satisfaction vary greatly across countries. Therefore, to truly incorporate your business in the Middle East a couple of things are expected. Firstly, a business mindset change in risk management beyond financial risk management tools, as specialists and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Secondly, methods that can be effortlessly implemented on the ground to convert the new strategy into practice.