UK and Saudi Arabia: motivations and barriers for British direct investment

UK/Saudi

Direct investment for British companies in Saudi Arabia - Motivations and Barriers

As the global economy begins to settle following its recent shakeup, growth strategies can and should become increasingly aggressive in order to take advantage of new opportunities. International investment and growth strategies have long been ubiquitous in many industries, and even more so as communication technologies and the emergence of newly developing economies have increased the globalization of both the supply chain and consumer markets. The twentieth century witnessed this emergence and global interconnectedness perhaps nowhere as much as in the Middle East, where oil-rich nations translated their natural resources into major wealth generators and economy drivers.

There is a long history of British involvement in the Middle East, both during the imperial era coming to a final close in the first half of the twentieth century, and in the modern era since. Much of this relationship has heretofore been built on the natural resources, primarily oil, that many Middle Eastern countries have in abundance; the successful exploitation and exportation of oil from the Middle East has been the foundation for many more complex trade agreements and relationships between governments and private business (Rizvi 1993). Countries like Saudi Arabia have developed full producing and consuming economies from their oil wealth, and are becoming increasingly Westernized through the cultural effects of globalization, creating enormous opportunities for innovative British firms with a willingness to directly invest in Saudi Arabia.

Britain and Saudi Arabia already have a long-standing and well-established trade relationship. The United Kingdom actually overtook the United States as the world's largest arms exporter, largely due to Saudi Arabian orders of equipment such as Typhoon fighter jets and other vehicles and weapons (Professional Engineering 2008, pp. 4). In 2005, a Saudi prince bought the historic Savoy hotel in London, with some public outcry due to foreign ownership over what many consider to be a British/London landmark but in a generally peaceable and agreeable sale (Lavery 2005, pp. 6). In short, there is a long history of mutual benefit in the trade relationship between Britain and Saudi Arabia, and the high profile of both foreign powers in each other's countries will only serve as a further advantage to any British companies that establish operations within Saudi Arabia's borders.

There are also many joint ventures and direct investment projects already underway, with over thirty-thousand British citizens living and working in Saudi Arabia as of several years ago (MOFA 2003). Exports to Saudi Arabia still make up a large portion of the business done by companies with an established operational presence in the country, however, and the consumer economy in the country has not yet been fully exploited by foreign direct investment (MOFA 2003). The manufacturing, construction, and engineering sectors have also received a large boost from British direct investment, however -- as have the companies that have so invested -- strengthening the British-Saudi Arabian relationship still further and creating a greater long-term presence in the country that serves as a solid foundation to any new enterprises seeking entrance in the market (Rai 2000).

Research Aims and Objectives

The proposed qualitative research and analysis would attempt to determine specific attitudes in both Saudi Arabia and the United Kingdom regarding British direct investment and increased trade presence in the country of Saudi Arabia. The identification of motivations for increased direct investment as well as current and expected barriers to this investment would be attempted, and suggestions for fully exploiting motivations and opportunities while surmounting perceived barriers would also be primary objectives of the research. Developing an understanding of the psychological inertia -- both the resistance to and momentum towards increased direct investment of British firms in Saudi Arabia -- is the overarching aim of the proposed research.

Research Methods

Qualitative research is perhaps not the first thing thought of when conducting a trade analysis, but its importance to a proper understanding of the trade relationship cannot be overstated. Such research and analysis requires that the situation be examined in its human terms in addition to the numeric values and inferences drawn from quantitative research and analysis. In determining the perceived motivations and barriers to direct investment, this research will essentially be attempting to analyze and predict responses to changing business situations, and such research almost necessarily takes on a qualitative form (Bavdaz 2009). The predictive value of the proposed qualitative research is, in this instance, much greater than the predictive value of related quantitative research, as the motivations and barriers to direct investment are primarily human in nature (Bavdaz 2009).

Interviews will be the primary instrument utilized for the collection of data in the proposed research. Properly structured interviews have been shown to yield highly relevant and valid data across cultures, and this is an essential aspect of the research at hand (Wong & Goodwin 2009). The accuracy of cultural comparison through closed-form questionnaires and surveys is far more dubious, whereas a semi-structured interview allows for some mediation and negotiation of responses in a way that is both culturally adjustable and empirically relevant (Wong & Goodwin 2009). There is some question as to the specific reliability of semi-structured interviews in a case study scenario, but the larger sample size desired for this research should mitigate such problems (Diefenbach 2009).

Interviews will be conducted online via the video-audio software, Skype. The free service offered by this software will greatly reduce the cost of conducting research and presents a more personal and face-to-face feel than a telephone interview. Though in-person interviews with some subjects could very likely be arranged, these will be reserved for any follow-up interviews deemed necessary. For the sake of consistency and as little variation in the methodology as possible, all initial interviews will be conducted via the same medium, i.e. Skype. Interviews will be conducted at a time that is convenient for the subject, to be determined individually after establishing initial contact with each respondent. Researchers will make themselves available regardless of time-zone differences, presenting a professional appearance and demeanor during the recorded interviews.

Expected Conclusion

It is expected that one of the major barriers to British foreign investment will be a perceived cultural resistance on both sides, which it is also expected will be demonstrably shown to be a false perception. Purely economic incentives as well as a desire to built intercultural connections and global networks are expected to be cited as strong motivational factors in the development of increased direct investment endeavors. Various market forces will also likely be cited as both barriers and motivations, but the interview will attempt to focus on less quantifiable and more human-based factors, so the exact emergence and trajectory of more market-based analyses remains a matter of some question.