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 area. Discover more about risk management within the gulf.

This social dimension of risk management calls for a shift in how MNCs work. Adapting to regional traditions is not just about understanding business etiquette; it also involves much deeper cultural integration, such as for example understanding regional values, decision-making designs, and the societal norms that influence business practices and employee behaviour. In GCC countries, successful business relationships are built on trust and individual connections instead of just being transactional. Moreover, MNEs can take advantage of adjusting their human resource management to reflect the cultural profiles of local employees, as variables affecting employee motivation and job satisfaction vary widely across countries. This requires a change in mind-set and strategy from developing robust financial risk management tools to investing in social intelligence and regional expertise as professionals and solicitors such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest.

Despite the political instability and unfavourable fiscal conditions in a few areas of the Middle East, international direct investment (FDI) in the area and, particularly, in the Arabian Gulf has been progressively increasing within the last 20 years. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk appears to be crucial. Yet, research on the risk perception of multinationals in the region is limited in amount and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have investigated the effect of risk on FDI, most analyses have largely been on political risk. Nonetheless, a fresh focus has come forth in current research, shining a limelight on an often-ignored aspect namely cultural variables. In these revolutionary studies, the writers remarked that businesses and their administration frequently seriously brush aside the impact of social factors due to a lack of knowledge regarding social variables. In reality, some empirical studies have unearthed that cultural differences lower the performance of international enterprises.

Much of the existing academic work on risk management strategies for multinational corporations demonstrates particular uncertainties but omits uncertainties that are hard to quantify. Indeed, plenty of research in the worldwide administration field has been dedicated to the management of either political risk or foreign currency exchange uncertainties. Finance and insurance coverage literature emphasises the risk variables for which hedging or insurance coverage instruments can be developed to mitigate or move a company's risk visibility. But, recent research reports have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their management methods on the company level in the Middle East. In one research after gathering and analysing data from 49 major worldwide companies which are active in the GCC countries, the authors discovered the following. Firstly, the risk associated with foreign investments is obviously more multifaceted compared to the often cited factors of political risk and exchange rate exposure. Cultural danger is regarded as more important than political risk, economic danger, and financial danger. Secondly, despite the fact that aspects of Arab culture are reported to have a strong impact on the business environment, most firms struggle to adapt to regional routines and traditions.