Exactly what are common risks associated with FDI in the MENA region

Exactly what are common risks associated with FDI in the MENA region

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Recent research highlights the significant role that cultural differences play in the success or of foreign investments in the Arab Gulf.

Focusing on adjusting to local traditions is important however adequate for successful integration. Integration is a loosely defined concept involving a lot of things, such as appreciating regional values, learning about decision-making styles beyond a restricted transactional business perspective, and looking into societal norms that influence company practices. In GCC countries, effective business interactions are more than just transactional interactions. What shapes employee motivation and job satisfaction differ greatly across cultures. Hence, to seriously integrate your business in the Middle East two things are expected. Firstly, a business mindset change 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 suggest. Next, techniques that can be effortlessly implemented on the ground to translate the new mindset into practice.

Although governmental uncertainty 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 are becoming increasingly appealing for FDI. Nevertheless, the prevailing research on what multinational corporations perceive area specific dangers is scarce and frequently lacks insights, a fact solicitors and risk specialists like Louise Flanagan in Ras Al Khaimah may likely know about. Studies on risks connected with FDI in the region have a tendency to overstate and predominantly pay attention to political dangers, such as for instance government uncertainty or policy changes that may impact investments. But lately research has started to shed a light on a a critical yet often overlooked factor, namely the consequences of social factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that numerous companies and their administration teams significantly brush aside the impact of cultural differences, due mainly to a lack of knowledge of these social variables.

Pioneering scientific studies on risks connected to foreign direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge regarding the risk perceptions and administration strategies of Western multinational corporations active extensively in the region. For example, a study involving a few major international companies within the GCC countries unveiled some interesting data. It suggested that the risks associated with foreign investments are even more complex than just political or exchange price risks. Cultural risks are regarded as more important than political, monetary, or financial risks based on survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign organisations struggle to adapt to regional traditions and routines. This trouble in adapting constitutes a risk dimension that needs further investigation and a big change in exactly how multinational corporations operate in the region.