concerning Middle East FDI trends and developments

concerning Middle East FDI trends and developments

Blog Article

Find out more about how exactly Western multinational corporations perceive and handle dangers in the Middle East.

Despite the political uncertainty and unfavourable economic conditions in a few elements of the Middle East, foreign direct investment (FDI) in the area and, specially, in the Arabian Gulf has been steadily increasing in the last two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the associated risk appears to be essential. Yet, research regarding the risk perception of multinationals in the area is limited in amount and quality, as specialists and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nevertheless, a new focus has emerged in current research, shining a limelight on an often-overlooked aspect specifically cultural variables. In these groundbreaking studies, the researchers remarked that companies and their management frequently really take too lightly the impact of social facets as a result of lack of knowledge regarding cultural factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.

This social dimension of risk management requires a change in how MNCs operate. Adjusting to local customs is not only about understanding company etiquette; it also requires much deeper social integration, such as for example appreciating regional values, decision-making designs, and the societal norms that affect company practices and worker conduct. In GCC countries, successful business relationships are made on trust and personal connections instead of just being transactional. Furthermore, MNEs can benefit from adapting their human resource administration to reflect the social profiles of local employees, as variables influencing employee motivation and job satisfaction vary widely across cultures. This requires a shift in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and local expertise as professionals and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Much of the present literature on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are hard to quantify. Certainly, a lot of research within the international management field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk factors for which hedging or insurance coverage instruments are developed to mitigate or move a firm's danger exposure. Nonetheless, present research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical knowledge about the risk perception of Western multinational corporations and their administration techniques at the company level in the Middle East. In one research after collecting and analysing data from 49 major worldwide companies that are have extensive operations in the GCC countries, the authors discovered the following. Firstly, the risk related to foreign investments is obviously far more multifaceted compared to the frequently cited factors of political risk and exchange rate visibility. Cultural risk is regarded as more crucial than political risk, financial risk, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms battle to adapt to local routines and customs.