On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

The Middle East is attracting global investment, especially the Gulf region. Discover more about risk management within the gulf.

This cultural dimension of risk management demands a change in how MNCs run. Conforming to local traditions is not just about being familiar with company etiquette; it also involves much deeper social integration, such as for instance appreciating local values, decision-making styles, and the societal norms that affect company practices and employee behaviour. In GCC countries, successful company relationships are made on trust and individual connections instead of just being transactional. Additionally, MNEs can take advantage of adjusting their human resource management to mirror the cultural profiles of regional employees, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a shift in mind-set and strategy from developing robust monetary risk management tools to investing in cultural intelligence and regional expertise as experts and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

A lot of the prevailing literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, a lot of research in the worldwide management field has centered on the handling of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger factors for which hedging or insurance coverage instruments can be developed to mitigate or transfer a company's danger exposure. Nonetheless, present studies have brought some fresh and interesting insights. They have sought to fill area of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their management methods on the firm level in the Middle East. In one research after gathering and analysing data from 49 major international businesses which are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is clearly far more multifaceted compared to usually cited factors of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, financial risk, and economic danger. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to local routines and customs.

Regardless of the political uncertainty and unfavourable economic climates in certain parts of the Middle East, foreign direct investment (FDI) in the area and, specially, into the Arabian Gulf has been gradually increasing over the past 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk is apparently essential. Yet, research regarding the risk perception of multinationals in the area is limited in volume and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. Nevertheless, a brand new focus has appeared in current research, shining a limelight on an often-neglected aspect particularly cultural facets. In these pioneering studies, the authors pointed out that companies and their management often seriously take too lightly the impact of cultural factors because of a lack of knowledge regarding cultural variables. In fact, some empirical studies have found that cultural differences lower the performance of international enterprises.