Exactly what are common risks associated with FDI in the MENA region

Exactly what are common risks associated with FDI in the MENA region

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As the Middle East turns into a more desirable destination for FDI, understanding the investment risks is increasingly important.

Pioneering scientific studies on risks associated with international direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge concerning the risk perceptions and management methods of Western multinational corporations active widely in the area. For instance, research project involving several major international businesses within the GCC countries revealed some interesting data. It suggested that the risks associated with foreign investments are a lot more complicated than simply political or exchange rate risks. Cultural risks are perceived as more crucial than governmental, monetary, or economic risks based on survey data . Additionally, the study found that while aspects of Arab culture strongly influence the business environment, numerous foreign organisations struggle to adapt to local customs and routines. This trouble in adapting is really a danger dimension that will require further investigation and a change in how multinational corporations operate in the region.

Working on adjusting to local traditions is important not sufficient for successful integration. Integration is a loosely defined concept involving several things, such as for example appreciating local values, learning about decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, effective business affairs are far more than just transactional interactions. What influences employee motivation and job satisfaction vary greatly across cultures. Thus, to truly integrate your business in the Middle East a couple of things are essential. Firstly, a corporate mindset shift in risk management beyond economic risk management tools, as professionals and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably recommend. Next, methods which can be effortlessly implemented on the ground to convert this new strategy into practice.

Although political instability seems to dominate media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a stable boost in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming more and more attractive for FDI. Nevertheless, the existing research on how multinational corporations perceive area specific risks is scarce and usually does not have insights, an undeniable fact attorneys and risk consultants like Louise Flanagan in Ras Al Khaimah would likely be aware of. Studies on dangers connected with FDI in the area tend to overstate and predominantly concentrate on governmental dangers, such as for instance government instability or policy changes that may influence investments. But lately research has started to illuminate a crucial yet often overlooked factor, specifically the effects of social facets in the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies reveal that many businesses and their administration teams dramatically disregard the impact of cultural differences, mainly due to too little knowledge of these cultural variables.