Exactly what are common risks associated with FDI in the MENA region

Exactly what are common risks associated with FDI in the MENA region

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Recent research highlights the significant part that cultural differences play within the success or of foreign investments in the Arab Gulf.

Pioneering studies on dangers linked to foreign direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge regarding the risk perceptions and administration strategies of Western multinational corporations active extensively in the region. For example, a study involving a few major worldwide companies in the GCC countries unveiled some interesting findings. It contended that the risks connected with foreign investments are more complicated than simply political or exchange rate risks. Cultural risks are perceived as more crucial than governmental, monetary, or economic risks based on survey data . Furthermore, the study discovered that while elements of Arab culture strongly influence the business environment, numerous foreign companies find it difficult to adapt to local traditions and routines. This difficulty in adapting is really a risk dimension that needs further investigation and a change in exactly how multinational corporations operate in the region.

Focusing on adjusting to regional culture is essential not sufficient for successful integration. Integration is a loosely defined concept involving several things, such as for example appreciating local values, comprehending decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence business practices. In GCC countries, successful business connections are far more than just transactional interactions. What influences employee motivation and job satisfaction vary significantly across countries. Hence, to truly integrate your business in the Middle East a couple of things are essential. Firstly, a business mind-set change in risk management beyond financial risk management tools, as experts and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Secondly, techniques that may be efficiently implemented on the ground to convert this new mindset into action.

Although governmental uncertainty seems to dominate media coverage on the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a steady boost in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become extremely attractive for FDI. Nevertheless, the present research on how multinational corporations perceive area specific risks is scarce and often does not have insights, a well known fact attorneys and risk experts like Louise Flanagan in Ras Al Khaimah may likely be aware of. Studies on risks connected with FDI in the area have a tendency to overstate and predominantly concentrate on political dangers, such as for example government uncertainty or policy changes that could affect investments. But lately research has begun to shed a light on a a vital yet often overlooked aspect, namely the consequences of social factors on the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that numerous companies and their management teams significantly underestimate the effect of cultural differences, due primarily to deficiencies in understanding of these social factors.