The Middle East, specially the Arabian Gulf, has experienced a notable increase in foreign direct investment. Check out the potential risks that businesses might encounter.
Although political uncertainty appears to dominate news coverage on the Middle East, in recent times, the region—and specially the Arabian Gulf—has seen a steady upsurge in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming extremely appealing for FDI. However, the prevailing research on what multinational corporations perceive area specific risks is scarce and usually lacks insights, an undeniable fact solicitors and danger experts like Louise Flanagan in Ras Al Khaimah would probably be familiar with. Studies on risks related to FDI in the region have a tendency to overstate and mostly concentrate on governmental dangers, such as government uncertainty or policy changes that may impact investments. But lately research has begun to illuminate a crucial yet often overlooked aspect, particularly the effects of social factors in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that numerous companies and their administration teams significantly disregard the impact of cultural differences, due primarily to deficiencies in comprehension of these cultural factors.
Working on adjusting to local traditions is necessary however sufficient for effective integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating regional values, understanding decision-making styles beyond a limited transactional business viewpoint, and looking at societal norms that influence business practices. In GCC countries, successful business affairs are more than just transactional interactions. What impacts employee motivation and job satisfaction differ greatly across cultures. Therefore, to genuinely incorporate your business in the Middle East two things are essential. Firstly, a business mind-set shift in risk management beyond economic risk management tools, as specialists and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Secondly, techniques which can be effectively implemented on the ground to translate the new mindset into action.
Recent studies on dangers linked to foreign direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge concerning the danger perceptions and management strategies of Western multinational corporations active extensively in the region. As an example, research project involving several major international companies in the GCC countries revealed some fascinating data. It argued that the risks associated with foreign investments are a lot more complicated than simply political or exchange price risks. Cultural risks are perceived as more important than political, economic, or financial dangers in accordance with survey data . Additionally, the research unearthed that while elements of Arab culture strongly influence the business environment, many foreign firms struggle to adapt to local customs and routines. This difficulty in adapting constitutes a risk dimension that needs further investigation and a big change in just how multinational corporations run in the area.