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 upsurge in international direct investment. Learn 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 concerning the danger perceptions and management techniques of Western multinational corporations active widely in the area. For instance, research project involving several major worldwide businesses in the GCC countries revealed some fascinating data. It argued that the risks related to foreign investments are much more complex than simply political or exchange price risks. Cultural risks are perceived as more important than governmental, monetary, or economic risks based on survey data . Additionally, the study found that while elements of Arab culture strongly influence the business environment, numerous foreign firms struggle to adapt to regional traditions and routines. This difficulty in adapting constitutes a risk dimension that needs further investigation and a big change in how multinational corporations run in the region.

Working on adjusting to local traditions is important but not sufficient for successful integration. Integration is a loosely defined concept involving several things, such as for example appreciating regional values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, successful business connections are far more than just transactional interactions. What affects employee motivation and job satisfaction differ significantly across countries. Thus, to genuinely incorporate your business in the Middle East two things are essential. Firstly, a corporate mind-set shift in risk management beyond monetary risk management tools, as specialists and lawyers such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest. Secondly, strategies that may be efficiently implemented on the ground to convert this new mindset into practice.

Although political instability appears to dominate news coverage regarding the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable boost in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming extremely appealing for FDI. But, the existing research on how multinational corporations perceive area specific risks is scarce and often lacks depth, a fact lawyers and risk experts like Louise Flanagan in Ras Al Khaimah may likely be familiar with. Studies on risks related to FDI in the region tend to overstate and predominantly focus on political risks, such as government instability or policy changes that could affect investments. But lately research has begun to shed a light on a a crucial yet often overlooked factor, 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 notably brush aside the effect of cultural differences, due mainly to deficiencies in knowledge of these cultural variables.