On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

Studies claim that the prosperity of multinational corporations within the Middle East hinges not only on economic acumen, but additionally on understanding and integrating into local cultures.

This social dimension of risk management calls for a shift in how MNCs do business. Adapting to regional traditions is not just about understanding company etiquette; it also involves much deeper cultural integration, such as for instance understanding regional values, decision-making styles, and the societal norms that impact company practices and worker conduct. In GCC countries, successful business relationships are built on trust and personal connections instead of just being transactional. Additionally, MNEs can benefit from adapting their human resource management to mirror the social profiles of regional workers, as variables influencing employee motivation and job satisfaction vary widely across cultures. This involves a change in mind-set and strategy from developing robust monetary risk management tools to investing in social intelligence and regional expertise as consultants and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest.

In spite of the political uncertainty and unfavourable economic conditions in some parts of the Middle East, foreign direct investment (FDI) in the region and, especially, within the Arabian Gulf has been considerably 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 important. Yet, research on the risk perception of multinationals in the region is limited in quantity and quality, as consultants and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical studies have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has materialised in present research, shining a limelight on an often-disregarded aspect particularly cultural facets. In these groundbreaking studies, the writers noticed that companies and their management often seriously underestimate the effect of social facets due to a lack of knowledge regarding cultural variables. In reality, some empirical research reports have discovered that cultural differences lower the performance of multinational enterprises.

Much of the existing academic work on risk management strategies for multinational corporations emphasises particular uncertainties but omits uncertainties that are tough to quantify. Certainly, lots of research in the international administration field has been dedicated to the management of either political risk or foreign exchange uncertainties. Finance and insurance literature emphasises the danger variables for which hedging or insurance instruments are developed to mitigate or move a firm's risk visibility. Nonetheless, current studies have brought some fresh and interesting insights. They have sought to fill part of the research gaps by giving empirical understanding of the risk perception of Western multinational corporations and their management strategies on the firm level in the Middle East. In one research after gathering and analysing data from 49 major international companies which are active in the GCC countries, the authors found the following. Firstly, the risk related to foreign investments is actually more multifaceted than the usually cited factors of political risk and exchange rate exposure. Cultural danger is perceived as more essential than political risk, economic risk, and financial risk. Secondly, despite the fact that elements of Arab culture are reported to have a strong impact on the business environment, most firms struggle to adapt to regional routines and customs.