On Middle East FDI trends and changes

On Middle East FDI trends and changes

Blog Article

Find out more about how precisely Western multinational corporations perceive and manage risks within the Middle East.

A lot of the present literature on risk management strategies for multinational corporations features particular uncertainties but omits uncertainties that are difficult to quantify. Certainly, plenty of research within the international management field has been dedicated to the handling 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 an element of the research gaps by giving empirical information about the risk perception of Western multinational corporations and their administration strategies on the firm level in the Middle East. In one investigation after collecting and analysing data from 49 major worldwide businesses that are have extensive operations in the GCC countries, the authors found the following. Firstly, the risk connected with foreign investments is clearly more multifaceted compared to the frequently analyzed variables of political risk and exchange rate exposure. Cultural risk is regarded as more essential than political risk, financial 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 battle to adapt to regional routines and traditions.

This social dimension of risk management demands a shift in how MNCs function. Conforming to local traditions is not only about being familiar with business etiquette; it also involves much deeper cultural integration, such as for example appreciating regional values, decision-making styles, and the societal norms that impact company practices and employee conduct. In GCC countries, successful business relationships are made on trust and personal connections instead of just being transactional. Additionally, MNEs can take advantage of adjusting their human resource management to mirror the social profiles of local employees, as variables influencing employee motivation and job satisfaction differ widely across countries. This calls for a change in mindset and strategy from developing robust economic risk management tools to investing in cultural intelligence and local expertise as specialists and lawyers such Salem Al Kait and Ammar Haykal in Ras Al Khaimah would probably suggest.

In spite of the political instability and unfavourable fiscal conditions in certain elements of the Middle East, international direct investment (FDI) in the area and, specially, in the Arabian Gulf has been continuously increasing within the last two decades. The relevance of the Middle East and Gulf markets is growing for FDI, and the connected risk appears to be crucial. Yet, research regarding the risk perception of multinationals in the area is limited in amount and quality, as professionals and lawyers like Louise Flanagan in Ras Al Khaimah would likely attest. Although various empirical research reports have examined the effect of risk on FDI, many analyses have largely been on political risk. Nonetheless, a fresh focus has surfaced in current research, shining a spotlight on an often-disregarded aspect namely cultural factors. In these pioneering studies, the authors noticed that companies and their management frequently really underestimate the effect of cultural factors because of a not enough knowledge regarding cultural variables. In reality, some empirical studies have unearthed that cultural differences lower the performance of multinational enterprises.