On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, especially the Gulf area. Discover more about risk management within the gulf.

Regardless of the political uncertainty and unfavourable economic conditions in a few elements of the Middle East, international direct investment (FDI) in the region and, particularly, within the Arabian Gulf has been considerably increasing over the past two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is lacking in amount and quality, as specialists and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. However, a brand new focus has come forth in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these groundbreaking studies, the writers noticed that companies and their management often seriously neglect the impact of cultural factors as a result of not enough knowledge regarding social factors. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.

This social dimension of risk management demands a change in how MNCs work. Adapting to local customs is not only about being familiar with company etiquette; it also involves much deeper cultural integration, such as understanding regional values, decision-making designs, and the societal norms that impact business practices and employee conduct. In GCC countries, successful company relationships are made on trust and personal connections rather than just being transactional. Additionally, MNEs can reap the benefits of adjusting their human resource management to mirror the social profiles of regional workers, as variables affecting employee motivation and job satisfaction differ widely across cultures. This involves a shift in mindset and strategy from developing robust financial risk management tools to investing in cultural intelligence and regional expertise as specialists and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Much of the prevailing academic work on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are tough to quantify. Certainly, plenty of research within the worldwide administration field has centered on the management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger variables which is why hedging or insurance coverage instruments could be developed to mitigate or transfer a firm's danger visibility. Nevertheless, recent 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 management strategies on the company level in the Middle East. In one research 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 associated with foreign investments is clearly even more multifaceted compared to the often examined variables of political risk and exchange rate exposure. Cultural risk is regarded as more crucial than political risk, financial danger, and economic danger. Secondly, despite the fact that elements of Arab culture are reported to have a strong impact on the business environment, most firms find it difficult to adapt to local routines and traditions.