Exactly what are common risks associated with FDI in the Arab world

Exactly what are common risks associated with FDI in the Arab world

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Risk studies have primarily focused on governmental dangers, usually overlooking the critical effect of social factors on investment sustainability.

Working on adjusting to local culture is necessary although not sufficient for successful integration. Integration is a loosely defined concept involving numerous things, such as for example appreciating regional values, learning about decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business interactions are more than just transactional interactions. What impacts employee motivation and job satisfaction vary greatly across countries. Hence, to genuinely integrate your business in the Middle East two things are expected. Firstly, a corporate mind-set shift in risk management beyond monetary risk management tools, as professionals and attorneys such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely suggest. Next, techniques that can be effortlessly implemented on the ground to translate this new strategy into practice.

Although governmental instability seems to take over media coverage on the Middle East, in recent years, the region—and specially the Arabian Gulf—has seen a steady upsurge in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming rapidly attractive for FDI. But, the present research on what multinational corporations perceive area specific risks is scarce and often does not have depth, a well known fact attorneys and risk specialists like Louise Flanagan in Ras Al Khaimah may likely be aware of. Studies on dangers associated with FDI in the area tend to overstate and mostly focus on governmental risks, such as government uncertainty or policy changes that may impact investments. But lately research has started to illuminate a vital yet often overlooked aspect, particularly the effects of social factors regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that many businesses and their management teams considerably overlook the effect of cultural differences, due mainly to deficiencies in understanding of these social factors.

Recent scientific studies on dangers linked to international direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the danger perceptions and management techniques 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 argued that the risks related to foreign investments are a great deal more complex than just political or exchange price risks. Cultural risks are regarded as more important than political, economic, or financial risks based on survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, many foreign organisations struggle to adjust to regional customs and routines. This difficulty in adapting constitutes a risk dimension that requires further investigation and a change in just how multinational corporations operate in the region.