The Middle East, particularly the Arabian Gulf, has experienced a notable boost in international direct investment. Learn about the risks that companies might encounter.
Although governmental uncertainty generally seems to dominate media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable increase in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming extremely appealing for FDI. However, the existing research on what multinational corporations perceive area specific risks is scarce and frequently does not have depth, a fact attorneys and danger professionals like Louise Flanagan in Ras Al Khaimah would probably be aware of. Studies on risks associated with FDI in the region tend to overstate and predominantly concentrate on political risks, such as for instance government uncertainty or policy modifications that may influence investments. But lately research has begun to illuminate a critical yet often overlooked aspect, namely the effects of cultural factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that lots of companies and their administration teams somewhat neglect the effect of cultural differences, due primarily to deficiencies in comprehension of these social factors.
Pioneering scientific studies on dangers connected to international direct investments in the MENA region offer fresh insights, trying to bridge the research gap in empirical knowledge about the danger perceptions and administration techniques of Western multinational corporations active extensively in the area. For example, a study involving several major international companies within the GCC countries unveiled some fascinating data. It suggested that the risks connected with foreign investments are much more complex than just political or exchange price risks. Cultural risks are regarded as more essential than political, financial, or economic risks according to survey data . Furthermore, the research unearthed that while elements of Arab culture strongly influence the business environment, numerous foreign companies struggle to adapt to regional traditions and routines. This trouble in adapting constitutes a risk dimension that requires further investigation and a change in just how multinational corporations operate in the region.
Focusing on adjusting to regional culture is necessary but not adequate for effective integration. Integration is a loosely defined concept involving several things, such as appreciating local values, understanding decision-making styles beyond a restricted transactional business viewpoint, and looking into societal norms that influence business practices. In GCC countries, effective business affairs tend to be more than just transactional interactions. What influences employee motivation and job satisfaction differ greatly across countries. Therefore, to seriously integrate your business in the Middle East two things are essential. Firstly, a business mind-set shift in risk management beyond monetary risk management tools, as specialists and solicitors such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would likely suggest. Next, techniques that can be effortlessly implemented on the ground to translate the new strategy into practice.