Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

The Middle East, specially the Arabian Gulf, has experienced a notable escalation in foreign direct investment. Find out about the risks that companies might encounter.

Recent scientific studies on dangers linked to international direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the danger perceptions and management techniques of Western multinational corporations active widely in the area. For example, research project involving a few major international companies within the GCC countries unveiled some interesting data. It suggested that the risks related to foreign investments are a great deal more complex than just political or exchange price risks. Cultural risks are regarded as more important than political, economic, or financial dangers according to survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, many foreign businesses find it difficult to adjust to local customs and routines. This difficulty in adapting is really a danger dimension that will require further investigation and a change in how multinational corporations operate in the area.

Focusing on adjusting to regional culture is necessary yet not adequate for effective integration. Integration is a loosely defined concept involving many things, such as appreciating local values, comprehending decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence company practices. In GCC countries, effective business relationships are more than just transactional interactions. What affects employee motivation and job satisfaction vary greatly across countries. Therefore, to seriously incorporate your business in the Middle East a few things are expected. Firstly, a corporate mindset shift in risk management beyond financial risk management tools, as experts and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Next, methods which can be effortlessly implemented on the ground to convert this new mindset into action.

Although governmental uncertainty appears to dominate media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable upsurge in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become extremely appealing for FDI. But, the existing research on how multinational corporations perceive area specific risks is scarce and usually does not have depth, a fact attorneys and risk professionals like Louise Flanagan in Ras Al Khaimah would probably be aware of. Studies on risks related to FDI in the area have a tendency to overstate and mostly pay attention to governmental dangers, such as for example government uncertainty or policy modifications which could impact investments. But lately research has started to illuminate a critical yet often overlooked aspect, specifically the effects of cultural factors on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that numerous businesses and their administration teams significantly undervalue the impact of cultural differences, mainly due to a lack of understanding of these social factors.