On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, particularly the Gulf region. Learn more about risk management in the gulf.

This cultural dimension of risk management demands a shift in how MNCs do business. Adapting to local traditions is not just about being familiar with business etiquette; it also involves much deeper cultural integration, such as for instance appreciating regional values, decision-making styles, and the societal norms that affect business practices and worker behaviour. In GCC countries, successful company relationships are made on trust and individual connections instead of just being transactional. Furthermore, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as variables influencing employee motivation and job satisfaction differ widely across countries. This involves a change in mindset and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

A lot of the existing academic work on risk management strategies for multinational corporations highlights particular uncertainties but omits uncertainties that are hard to quantify. Certainly, lots of research within the international management field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk exposure. But, recent research reports have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical information about the risk perception of Western multinational corporations and their management techniques on the company level in the Middle East. In one investigation after gathering and analysing information from 49 major international companies which are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is actually far more multifaceted compared to usually examined factors of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, economic risk, and financial danger. Secondly, even though aspects of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to local routines and customs.

Regardless of the political uncertainty and unfavourable economic climates in some parts of the Middle East, foreign direct investment (FDI) in the region and, especially, into the Arabian Gulf has been steadily increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk appears to be essential. Yet, research regarding the risk perception of multinationals in the area is lacking in quantity and quality, as consultants and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical studies have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a new focus has appeared in present research, shining a limelight on an often-overlooked aspect specifically cultural factors. In these pioneering studies, the authors pointed out that companies and their administration usually really underestimate the impact of social facets as a result of not enough knowledge regarding social factors. In fact, some empirical studies have found that cultural differences lower the performance of multinational enterprises.