Recent research highlights the significant role that cultural differences play within 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 times, the region—and specially the Arabian Gulf—has seen a stable boost in foreign direct investment (FDI). The Middle East and Arab Gulf markets have become more and more appealing for FDI. Nevertheless, the prevailing research on what multinational corporations perceive area specific dangers is scarce and frequently does not have insights, a fact solicitors and danger experts like Louise Flanagan in Ras Al Khaimah would likely know about. Studies on risks connected with FDI in the area tend to overstate and mostly concentrate on governmental risks, such as for example government uncertainty or policy changes that may affect investments. But lately research has started to shed a light on a a vital yet often overlooked factor, specifically 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 notably neglect the impact of cultural differences, due primarily to deficiencies in comprehension of these cultural factors.
Focusing on adjusting to regional culture is important yet not sufficient for effective integration. Integration is a loosely defined concept involving many things, such as for instance appreciating local values, comprehending decision-making styles beyond a limited transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, effective business connections are more than just transactional interactions. What impacts employee motivation and job satisfaction differ greatly across countries. Thus, to seriously integrate your business in the Middle East a couple of things are expected. Firstly, a corporate mind-set change 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 would probably suggest. Secondly, methods that can be efficiently implemented on the ground to translate the new mindset into practice.
Pioneering studies on dangers linked to international direct investments in the MENA region offer fresh insights, attempting to bridge the research gap in empirical knowledge concerning the risk perceptions and management techniques of Western multinational corporations active widely in the area. For instance, a study involving several major worldwide businesses within the GCC countries revealed some interesting data. It contended that the risks connected with foreign investments are even more complex than simply political or exchange price risks. Cultural risks are regarded as more important than political, economic, or financial dangers based on survey data . Additionally, the study found that while aspects of Arab culture strongly influence the business environment, many foreign businesses struggle to adjust to regional customs and routines. This difficulty in adapting constitutes a risk dimension that will require further investigation and a big change in exactly how multinational corporations run in the area.