Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

As the Middle East becomes a more appealing location for FDI, comprehending the investment dangers is increasingly important.

Pioneering scientific studies on dangers connected to international direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge about the risk perceptions and management strategies of Western multinational corporations active extensively in the region. As an example, research project involving a few major worldwide businesses in the GCC countries revealed some interesting findings. It suggested that the risks connected with foreign investments are much more complicated than simply political or exchange price risks. Cultural risks are regarded as more crucial than political, economic, or economic risks according to survey data . Also, the research discovered that while aspects of Arab culture strongly influence the business environment, many foreign firms find it difficult to adjust to local customs and routines. This trouble in adapting is really a risk dimension that requires further investigation and a big change in exactly how multinational corporations run in the region.

Although governmental uncertainty appears to dominate news coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a steady increase in international direct investment (FDI). The Middle East and Arab Gulf markets have become extremely attractive for FDI. However, the prevailing research on what multinational corporations perceive area specific risks is scarce and often does not have depth, a fact solicitors and danger experts like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on dangers related to FDI in the region have a tendency to overstate and mostly concentrate on political dangers, such as for instance government instability or policy modifications that may impact investments. But lately research has begun to illuminate a critical yet often overlooked aspect, namely the consequences of cultural facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams dramatically disregard the effect of cultural differences, due mainly to a lack of knowledge of these cultural factors.

Working on adjusting to regional culture is important although not enough for successful integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating local values, comprehending decision-making styles beyond a limited transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, effective business interactions are far more than just transactional interactions. What impacts employee motivation and job satisfaction differ greatly across countries. Thus, to seriously integrate your business in the Middle East a couple of things are needed. Firstly, a corporate mind-set shift in risk management beyond economic risk management tools, as consultants and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest. Next, strategies that may be effortlessly implemented on the ground to translate this new mindset into practice.