concerning Middle East FDI trends and developments

concerning Middle East FDI trends and developments

Blog Article

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

Regardless of the political uncertainty and unfavourable economic climates in certain parts of the Middle East, foreign direct investment (FDI) in the region and, specially, within the Arabian Gulf has been progressively increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the linked risk seems to be important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as experts and attorneys like Louise Flanagan in Ras Al Khaimah may likely attest. Although different empirical research reports have examined the effect of risk on FDI, most analyses have been on political risk. However, a brand new focus has appeared in current research, shining a limelight on an often-neglected aspect specifically cultural variables. In these groundbreaking studies, the writers pointed out that companies and their management usually really underestimate the impact of social facets due to a not enough knowledge regarding cultural variables. In fact, some empirical research reports have unearthed that cultural differences lower the performance of international enterprises.

This cultural dimension of risk management requires a shift in how MNCs operate. Adjusting to local traditions is not only about being familiar with company etiquette; it also requires 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 designed on trust and individual connections rather than just being transactional. Furthermore, MNEs can benefit from adjusting their human resource administration to reflect the cultural profiles of regional employees, as factors affecting employee motivation and job satisfaction differ widely across cultures. This requires a change in mindset and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as experts and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

Much of the prevailing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, lots of research in the worldwide management field has focused on the handling of either political risk or foreign exchange uncertainties. Finance and insurance coverage literature emphasises the danger factors which is why hedging or insurance instruments are developed to mitigate or move a firm's danger exposure. However, present studies 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 information from 49 major international businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is actually much more multifaceted compared to often examined variables of political risk and exchange rate visibility. Cultural risk is regarded as more crucial than political risk, monetary danger, and economic danger. Secondly, even though elements of Arab culture are reported to really have a strong influence on the business environment, most firms battle to adapt to local routines and traditions.