Recent research shows the significant role that cultural differences play in the success or of foreign investments in the Arab Gulf.
Although political instability generally seems to take over media coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a stable upsurge in foreign direct investment (FDI). The Middle East and Arab Gulf markets are becoming rapidly attractive for FDI. However, the prevailing research on what multinational corporations perceive area specific risks is scarce and usually lacks insights, an undeniable fact lawyers and danger professionals like Louise Flanagan in Ras Al Khaimah would likely know about. Studies on risks associated with FDI in the area tend to overstate and mostly focus on political dangers, 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 reveal that numerous companies and their administration teams dramatically undervalue the effect of cultural differences, mainly due to too little knowledge of these social variables.
Focusing on adjusting to local traditions is necessary yet not sufficient for successful integration. Integration is a loosely defined concept involving numerous things, such as for instance appreciating regional values, comprehending decision-making styles beyond a restricted transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business affairs are more than just transactional interactions. What impacts employee motivation and job satisfaction vary greatly across countries. Thus, to seriously integrate your business in the Middle East a couple of things are needed. Firstly, a corporate mind-set shift in risk management beyond economic risk management tools, as specialists and lawyers such as for instance Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, techniques that can be effectively implemented on the ground to convert this new mindset into practice.
Pioneering scientific studies on risks associated with foreign direct investments in the MENA region offer fresh insights, trying to bridge the gap in empirical knowledge about the danger perceptions and administration strategies of Western multinational corporations active extensively in the region. As an example, a study involving several major worldwide companies within the GCC countries unveiled some fascinating findings. It contended that the risks connected with foreign investments are more complicated than just political or exchange rate risks. Cultural risks are regarded as more essential than political, economic, or financial dangers based on survey data . Also, the research found that while aspects of Arab culture strongly influence the business environment, many foreign organisations find it difficult 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 run in the area.