On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

According to present research, an important challenge for businesses within the GCC is adapting to local customs and business practices. Learn more about this here.

This cultural dimension of risk management demands a shift in how MNCs operate. Conforming to local traditions is not just about understanding company etiquette; it also involves much deeper social integration, such as understanding local values, decision-making designs, and the societal norms that impact company practices and worker behaviour. In GCC countries, successful company relationships are made on trust and personal connections instead of just being transactional. Furthermore, MNEs can reap the benefits of adapting their human resource administration to reflect the social profiles of local workers, as factors affecting employee motivation and job satisfaction vary widely across countries. This requires a change in mind-set and strategy from developing robust economic risk management tools to investing in social intelligence and local expertise as specialists and attorneys such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

A lot of the existing academic work on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are tough to quantify. Indeed, lots of research within the international administration field has focused on the management of either political risk or foreign currency exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance coverage instruments are developed to mitigate or transfer a company's danger exposure. Nonetheless, recent studies have brought some fresh and interesting insights. They have sought to fill an element of the research gaps by providing empirical understanding of the risk perception of Western multinational corporations and their administration strategies at the company level within the Middle East. In one investigation after collecting and analysing information from 49 major worldwide businesses that are active in the GCC countries, the authors discovered the following. Firstly, the risk connected with foreign investments is obviously more multifaceted compared to the frequently examined factors of political risk and exchange rate visibility. Cultural danger is regarded as more essential than political risk, financial risk, and financial danger. Secondly, despite the fact that elements of Arab culture are reported to have a strong influence on the business environment, most firms find it difficult to adapt to local routines and traditions.

In spite of the political uncertainty and unfavourable economic conditions in certain parts of the Middle East, foreign direct investment (FDI) in the region and, especially, into the Arabian Gulf has been steadily increasing within the last 20 years. The relevance of the Middle East and Gulf areas is growing for FDI, and the associated risk seems to be crucial. Yet, research on the risk perception of multinationals in the area is lacking in volume and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have investigated the effect of risk on FDI, most analyses have been on political risk. However, a fresh focus has materialised in present research, shining a spotlight on an often-ignored aspect specifically cultural variables. In these groundbreaking studies, the writers noticed that businesses and their administration frequently really overlook the effect of social facets as a result of not enough knowledge regarding social factors. In reality, some empirical research reports have discovered that cultural differences lower the performance of international enterprises.