On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

According to recent research, a major challenge for companies within the GCC is adjusting to regional customs and business practices. Learn more about this here.

In spite of the political uncertainty and unfavourable fiscal conditions in some elements of the Middle East, international direct investment (FDI) in the region and, particularly, into the Arabian Gulf has been considerably increasing in the last two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the connected risk seems to be important. Yet, research regarding the risk perception of multinationals in the region is lacking in amount and quality, as experts and lawyers like Louise Flanagan in Ras Al Khaimah would probably attest. Although various empirical research reports have examined the effect of risk on FDI, most analyses have largely been on political risk. However, a brand new focus has emerged in present research, shining a spotlight on an often-overlooked aspect specifically cultural factors. In these revolutionary studies, the writers pointed out that businesses and their management usually really disregard the impact of social facets due to a lack of knowledge regarding social variables. In reality, some empirical research reports have found that cultural differences lower the performance of international enterprises.

A lot of the existing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, lots of research in the international management field has centered on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger factors which is why hedging or insurance instruments are developed to mitigate or transfer a company's risk visibility. Nevertheless, present studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their management techniques at the firm level within the Middle East. In one investigation after gathering and analysing data from 49 major worldwide businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly more multifaceted compared to the frequently cited variables of political risk and exchange rate exposure. Cultural danger is perceived as more crucial than political risk, monetary danger, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to regional routines and customs.

This cultural dimension of risk management requires a change in how MNCs run. Conforming to regional customs is not just about being familiar with company etiquette; it also involves much deeper cultural integration, such as for instance understanding regional values, decision-making styles, and the societal norms that impact company practices and worker conduct. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adapting their human resource administration to mirror the cultural profiles of local employees, as variables affecting employee motivation and job satisfaction differ widely across countries. This requires a shift in mindset and strategy from developing robust economic risk management tools to investing in social intelligence and regional expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.