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

Working on adjusting to regional traditions is essential although not sufficient for successful integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating local values, understanding decision-making styles beyond a limited transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, effective business affairs tend to be more than just transactional interactions. What affects employee motivation and job satisfaction vary significantly across countries. Thus, to truly incorporate your business in the Middle East a couple of 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 recommend. Secondly, methods that may be effectively implemented on the ground to convert this new approach into action.

Although political instability generally seems to dominate news coverage regarding 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 are becoming rapidly attractive for FDI. However, the prevailing research on how multinational corporations perceive area specific dangers is scarce and often does not have depth, a well known fact attorneys and risk professionals like Louise Flanagan in Ras Al Khaimah would likely know about. Studies on risks associated with FDI in the area tend to overstate and mostly concentrate on governmental risks, such as for example government instability or policy changes that may impact investments. But recent research has begun to shed a light on a a vital yet often overlooked factor, specifically the consequences of cultural facets on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many companies and their administration teams dramatically underestimate the impact of cultural differences, due primarily to deficiencies in comprehension of these cultural factors.

Pioneering studies on dangers linked to international direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the risk perceptions and management methods of Western multinational corporations active extensively in the area. As an example, a study involving several major worldwide companies in the GCC countries unveiled some interesting findings. It contended that the risks associated with foreign investments are a lot more complicated than just political or exchange rate risks. Cultural risks are regarded as more essential than political, economic, or financial dangers according to survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign organisations struggle to adapt to local traditions and routines. This trouble in adapting constitutes a risk dimension that needs further investigation and a big change in exactly how multinational corporations operate in the region.