Understanding the risks of FDI in the Middle East and Asia

Understanding the risks of FDI in the Middle East and Asia

Blog Article

Risk studies have primarily concentrated on governmental risks, frequently overlooking the critical effect of social factors on investment sustainability.

Pioneering 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 widely in the region. For example, research project involving a few major international companies within the GCC countries revealed some interesting data. It argued that the risks related to foreign investments are far more complicated than simply political or exchange price risks. Cultural risks are perceived as more crucial than governmental, financial, or economic dangers according to survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, numerous foreign firms find it difficult to adapt to regional traditions and routines. This trouble in adapting constitutes a danger dimension that will require further investigation and a change in how multinational corporations operate in the region.

Working on adjusting to regional traditions is important but not adequate for effective integration. Integration is a loosely defined concept involving several things, such as for example appreciating regional values, understanding decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, effective business affairs are far more than just transactional interactions. What influences employee motivation and job satisfaction vary greatly across cultures. Therefore, to genuinely incorporate your business in the Middle East a couple of things are expected. Firstly, a business mind-set change in risk management beyond monetary risk management tools, as consultants and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest. Secondly, techniques that may be efficiently implemented on the ground to translate the new approach into practice.

Although political instability seems to dominate media coverage regarding the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets have become extremely appealing for FDI. Nonetheless, the present research on what multinational corporations perceive area specific risks is scarce and frequently lacks depth, a fact lawyers and danger specialists like Louise Flanagan in Ras Al Khaimah would probably know about. Studies on dangers related to FDI in the area tend to overstate and predominantly concentrate on governmental dangers, such as for instance government instability or policy changes that could influence investments. But lately research has begun to illuminate a critical yet often overlooked factor, particularly the consequences 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 management teams somewhat overlook the effect of cultural differences, due primarily to deficiencies in knowledge of these cultural variables.