On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

According to recent research, a major challenge for businesses within the GCC is adapting to local customs and business practices. Discover more about this right here.

Much of the existing academic work on risk management strategies for multinational corporations illustrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide management field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables for which hedging or insurance coverage instruments can be developed to mitigate or move a firm's risk visibility. Nevertheless, present studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management techniques on the firm level within the Middle East. In one investigation after gathering and analysing data from 49 major worldwide companies which are active in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is obviously a great deal more multifaceted compared to usually analyzed factors of political risk and exchange rate visibility. Cultural risk is regarded as more important than political risk, economic risk, and economic danger. Secondly, even though elements of Arab culture are reported to have a strong impact on the business environment, most firms struggle to adapt to local routines and traditions.

Despite the political uncertainty and unfavourable economic conditions in a few parts of the Middle East, foreign direct investment (FDI) in the area and, particularly, within the Arabian Gulf has been gradually increasing in the last 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the linked risk seems to be crucial. Yet, research regarding the risk perception of multinationals in the region is limited in amount and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a fresh focus has surfaced in current research, shining a limelight on an often-disregarded aspect namely cultural variables. In these groundbreaking studies, the researchers noticed that businesses and their management often seriously brush aside the effect of social factors because of a lack of knowledge regarding social factors. In fact, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

This cultural dimension of risk management calls for a shift in how MNCs work. Adapting to regional traditions is not just about being familiar with company etiquette; it also requires much deeper social integration, such as for example understanding regional values, decision-making designs, and the societal norms that influence business practices and employee behaviour. In GCC countries, successful business relationships are built on trust and personal connections rather than just being transactional. Moreover, MNEs can take advantage of adapting their human resource management to reflect the cultural profiles of local employees, as factors affecting employee motivation and job satisfaction differ widely across countries. This calls for a change in mind-set and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as experts and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.