Recent research highlights the significant part that cultural differences play within the success or of foreign investments in the Arab Gulf.
Although political uncertainty generally seems to dominate news coverage regarding the Middle East, in recent years, the region—and particularly the Arabian Gulf—has seen a steady boost in international direct investment (FDI). The Middle East and Arab Gulf markets are becoming more and more attractive for FDI. But, the existing research on how multinational corporations perceive area specific risks is scarce and frequently does not have insights, a fact lawyers and risk professionals like Louise Flanagan in Ras Al Khaimah would probably know about. Studies on dangers associated with FDI in the region tend to overstate and predominantly focus on political dangers, such as government uncertainty or policy modifications that may affect investments. But recent research has started to illuminate a critical yet often overlooked aspect, namely the consequences of social facets regarding the sustainability of foreign investments in the Arab Gulf. Indeed, a number of studies expose that numerous businesses and their administration teams significantly brush aside the effect of cultural differences, due primarily to too little comprehension of these social factors.
Pioneering scientific studies on risks associated with foreign direct investments in the MENA region offer fresh insights, attempting to bridge the gap in empirical knowledge regarding the risk perceptions and management methods of Western multinational corporations active widely in the region. For instance, research project involving several major international companies within the GCC countries unveiled some fascinating findings. It contended that the risks associated with foreign investments are far more complex than simply political or exchange price risks. Cultural risks are regarded as more crucial than political, financial, or economic dangers based on survey data . Moreover, the study found that while elements of Arab culture strongly influence the business environment, numerous foreign businesses struggle to adapt to regional traditions and routines. This difficulty in adapting constitutes a danger dimension that needs further investigation and a big change in just how multinational corporations operate in the region.
Focusing on adjusting to regional culture is necessary but not sufficient for effective integration. Integration is a loosely defined concept involving several things, such as for instance appreciating local values, learning about decision-making styles beyond a restricted transactional business perspective, and looking at societal norms that influence company practices. In GCC countries, successful business relationships are far more than just transactional interactions. What impacts employee motivation and job satisfaction vary significantly across cultures. Thus, to seriously incorporate your business in the Middle East a couple of things are expected. Firstly, a business mindset change in risk management beyond economic risk management tools, as consultants and attorneys such as Salem Al Kait and Ammar Haykal in Ras Al Khaimah may likely recommend. Secondly, methods that can be effortlessly implemented on the ground to translate this new mindset into practice.