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 international direct investment. Find out about the risks that businesses might encounter.

Working on adjusting to local culture is essential however enough for effective integration. Integration is a loosely defined concept involving many things, such as appreciating local values, understanding decision-making styles beyond a limited transactional business perspective, and looking into societal norms that influence business practices. In GCC countries, successful business interactions tend to be more than just transactional interactions. What affects employee motivation and job satisfaction vary greatly across cultures. Therefore, to genuinely integrate your business in the Middle East a couple of things are essential. Firstly, a corporate mindset shift in risk management beyond financial risk management tools, as experts and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Secondly, strategies that can be effectively implemented on the ground to convert this new mindset into action.

Pioneering 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 extensively in the area. For example, research project involving a few major worldwide companies in the GCC countries revealed some fascinating data. It contended that the risks related to foreign investments are more complex than just political or exchange price risks. Cultural risks are regarded as more crucial than political, monetary, or financial dangers 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 traditions and routines. This trouble in adapting constitutes a risk dimension that will require further investigation and a big change in how multinational corporations run in the area.

Although political instability generally seems to take over media coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a stable upsurge in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming rapidly appealing for FDI. However, the prevailing research on what multinational corporations perceive area specific risks is scarce and usually does not have depth, a well known fact attorneys and risk specialists like Louise Flanagan in Ras Al Khaimah would probably be familiar with. Studies on risks connected with FDI in the region have a tendency to overstate and mostly focus on political risks, such as for example government instability or policy changes that could impact investments. But lately research has started to illuminate a crucial yet often overlooked factor, specifically the effects of social factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many businesses and their management teams significantly underestimate the effect of cultural differences, mainly due to too little knowledge of these cultural factors.