The Middle East, specially the Arabian Gulf, has experienced a notable increase in foreign direct investment. Check out the potential risks that businesses might encounter.
Although political instability appears to take over news coverage regarding the Middle East, in recent times, the region—and particularly the Arabian Gulf—has seen a steady boost in international direct investment (FDI). The Middle East and Arab Gulf markets have become rapidly attractive for FDI. Nevertheless, the present research on what multinational corporations perceive area specific dangers is scarce and often lacks depth, an undeniable fact attorneys and danger specialists like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on risks related to FDI in the area have a tendency to overstate and mostly pay attention to governmental dangers, such as for example government uncertainty or policy modifications that could affect investments. But lately research has begun to illuminate a vital yet often overlooked aspect, specifically the effects of cultural factors in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that lots of companies and their management teams notably overlook the effect of cultural differences, due primarily to a lack of understanding of these cultural variables.
Recent studies on risks linked to foreign direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge regarding the danger perceptions and administration methods of Western multinational corporations active widely in the region. For instance, a study involving several major international businesses within the GCC countries unveiled some interesting findings. It argued that the risks connected with foreign investments are much more complicated than simply political or exchange price risks. Cultural risks are perceived as more important than governmental, monetary, or financial risks according to survey data . Furthermore, the research unearthed that while aspects of Arab culture strongly influence the business environment, many foreign firms find it difficult to adjust to local customs and routines. This trouble in adapting is really a risk dimension that requires further investigation and a big change in just how multinational corporations operate in the region.
Focusing on adjusting to regional culture is essential yet not sufficient for effective integration. Integration is a loosely defined concept involving several things, such as for instance appreciating local values, learning about decision-making styles beyond a restricted transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business relationships are far more than just transactional interactions. What impacts employee motivation and job satisfaction vary significantly across countries. Thus, to seriously incorporate your business in the Middle East two things are expected. Firstly, a business mindset change in risk management beyond economic risk management tools, as consultants and solicitors such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Secondly, methods that may be effortlessly implemented on the ground to convert the new strategy into practice.