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 area. Learn more about risk management within the gulf.

Regardless of the political instability and unfavourable economic conditions in some elements of the Middle East, international direct investment (FDI) in the area and, especially, in the Arabian Gulf has been continuously increasing in the last two decades. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk is apparently essential. Yet, research regarding the risk perception of multinationals in the region is limited in volume and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah would probably attest. Although different empirical studies have examined the effect of risk on FDI, many analyses have been on political risk. Nonetheless, a fresh focus has come forth in current research, shining a spotlight on an often-overlooked aspect specifically cultural factors. In these revolutionary studies, the researchers noticed that companies and their administration usually seriously take too lightly the effect of cultural facets due to a not enough knowledge regarding cultural factors. In reality, some empirical studies have discovered that cultural differences lower the performance of multinational enterprises.

A lot of the existing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide management field has focused on the handling of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the risk variables which is why hedging or insurance instruments can be developed to mitigate or transfer a company's danger exposure. But, present research reports have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their administration techniques on the firm level within the Middle East. In one investigation after collecting and analysing information from 49 major international businesses which are active in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is actually a great deal more multifaceted compared to frequently analyzed variables of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, monetary risk, and economic danger. Secondly, despite the fact that 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.

This social dimension of risk management demands a shift in how MNCs function. Conforming to local customs is not only about being familiar with business etiquette; it also involves much deeper cultural integration, such as for example appreciating local values, decision-making styles, and the societal norms that impact company practices and worker behaviour. In GCC countries, successful business relationships are made on trust and individual connections instead of just being transactional. Furthermore, MNEs can take advantage of adjusting their human resource administration to mirror the cultural profiles of local employees, as factors 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.