Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

While the Middle East turns into a more attractive location for FDI, understanding the investment risks is increasingly important.

Although political instability appears to dominate media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming extremely appealing for FDI. But, the existing research on how multinational corporations perceive area specific risks is scarce and frequently does not have insights, a well known fact solicitors and risk consultants like Louise Flanagan in Ras Al Khaimah may likely be familiar with. Studies on risks related to FDI in the area have a tendency to overstate and mostly pay attention to governmental dangers, such as for example government uncertainty or policy modifications that could affect investments. But recent research has started to illuminate a critical yet often overlooked aspect, namely the effects of cultural factors on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that many companies and their management teams dramatically undervalue the impact of cultural differences, due mainly to deficiencies in understanding of these cultural variables.

Recent scientific studies on dangers connected to international direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge regarding the danger perceptions and administration methods of Western multinational corporations active widely in the region. For instance, a study involving several major international companies in the GCC countries unveiled some fascinating data. It contended that the risks related to foreign investments are much more complex than simply political or exchange price risks. Cultural risks are perceived as more important than governmental, monetary, or economic dangers based on survey data . Furthermore, the study unearthed that while elements of Arab culture strongly influence the business environment, numerous foreign businesses find it difficult to adapt to local traditions and routines. This trouble in adapting is really a risk dimension that requires further investigation and a big change in just how multinational corporations run in the region.

Working on adjusting to local traditions is important however adequate for effective integration. Integration is a loosely defined concept involving several things, such as appreciating local values, learning about decision-making styles beyond a restricted transactional business perspective, and looking at societal norms that influence business practices. In GCC countries, effective business connections tend to be more than just transactional interactions. What influences employee motivation and job satisfaction vary significantly across cultures. Hence, to seriously incorporate your business in the Middle East a few things are needed. Firstly, a business mind-set shift 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 suggest. Secondly, methods that may be efficiently implemented on the ground to convert this new strategy into practice.