Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

While the Middle East becomes a more attractive destination for FDI, understanding the investment risks is increasingly important.

Although political instability seems to take over media coverage regarding the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a stable increase in international direct investment (FDI). The Middle East and Arab Gulf markets have become more and more appealing for FDI. However, the present research on how multinational corporations perceive area specific risks is scarce and often lacks insights, an undeniable fact lawyers and risk consultants like Louise Flanagan in Ras Al Khaimah may likely know about. Studies on dangers connected with FDI in the area tend to overstate and mostly focus on political risks, such as for instance government instability or policy changes that may influence investments. But lately research has started to shed a light on a a vital yet often overlooked factor, particularly the effects of cultural factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams dramatically underestimate the effect of cultural differences, due primarily to deficiencies in knowledge of these social factors.

Recent scientific studies on risks associated with foreign direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the risk perceptions and management strategies of Western multinational corporations active widely in the region. As an example, research project involving several major international companies within the GCC countries unveiled some fascinating data. It contended that the risks related to foreign investments are a lot more complicated than just political or exchange rate risks. Cultural risks are perceived as more essential than governmental, economic, or economic risks according to survey data . Furthermore, the research unearthed that while aspects of Arab culture strongly influence the business environment, many foreign organisations struggle to adapt to regional traditions and routines. This difficulty in adapting constitutes a danger dimension that will require further investigation and a change in how multinational corporations operate in the region.

Focusing on adjusting to regional traditions is important however adequate for successful integration. Integration is a loosely defined concept involving numerous things, such as for example appreciating local values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence company practices. In GCC countries, effective business interactions are more than just transactional interactions. What influences employee motivation and job satisfaction vary significantly across countries. Therefore, to seriously incorporate your business in the Middle East a few things are needed. Firstly, a business mind-set shift in risk management beyond monetary risk management tools, as professionals and lawyers such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, methods that may be effectively implemented on the ground to convert this new approach into action.