On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

Studies claim that the success of international businesses in the Middle East hinges not just on financial acumen, but in addition on understanding and integrating into regional cultures.

Regardless of the political instability and unfavourable fiscal conditions in some parts of the Middle East, international direct investment (FDI) in the area and, specially, in the Arabian Gulf has been gradually increasing over the past 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the connected risk seems to be essential. Yet, research regarding the risk perception of multinationals in the region is limited in volume and quality, as specialists and solicitors like Louise Flanagan in Ras Al Khaimah may likely attest. Although various empirical research reports have examined the effect of risk on FDI, most analyses have been on political risk. Nonetheless, a brand new focus has surfaced in present research, shining a limelight on an often-ignored aspect namely cultural facets. In these groundbreaking studies, the authors remarked that companies and their management usually seriously take too lightly the effect of social factors as a result of not enough knowledge regarding cultural factors. In fact, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

Much of the prevailing literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are tough to quantify. Indeed, a lot of research in the worldwide management field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger factors which is why hedging or insurance coverage instruments can be developed to mitigate or transfer a company's risk exposure. Nonetheless, recent research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration strategies on the company level in the Middle East. In one research after collecting and analysing information from 49 major international companies that are active in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is clearly far more multifaceted than the often examined factors of political risk and exchange rate visibility. Cultural danger is perceived as more essential than political risk, financial danger, and financial danger. Secondly, even though elements of Arab culture are reported to have a strong impact on the business environment, most firms battle to adapt to local routines and traditions.

This cultural dimension of risk management requires a shift in how MNCs do business. Conforming to regional traditions is not only about being familiar with company etiquette; it also involves much deeper social integration, such as understanding regional values, decision-making styles, and the societal norms that affect business practices and employee conduct. In GCC countries, successful company relationships are made on trust and personal connections rather than just being transactional. Moreover, MNEs can take advantage of adjusting their human resource administration to mirror the social profiles of regional employees, as factors influencing employee motivation and job satisfaction vary widely across cultures. This involves a change in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as specialists and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.