Impact of behavioural economics on foreign investment
Published: 05:06 PM,Jun 02,2021 | EDITED : 10:06 PM,Jun 02,2021
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Foreign investment is often seen as an economic development stimulant known to create employment opportunities and bring in technology know-how amongst many other benefits such as human resources development and exchange rate stability.
In Oman, FDI could be one of the main tools for diversifying the economy, which is a major focus of Oman Vision 2040.
However, foreign investment has had its challenges. It has been the focus of a study by the Behavioural Economics Unit at the Ministry of National Economy. According to Mariam al Shihi, a Global Political Scientist, their recently conducted research with the Ministry of Commerce, Industry and Investment on why some people hesitate to invest in Oman indicated the challenges faced by foreign investment.
“We did a study of comparison on how Chinese became China and how we can learn from them as well identify our problems to find out is it behavioural, policy or is it different struggles? We found out, first of all, it is the policy itself, such as not knowing where to go once they arrive in Oman, the second reason was the global pandemic – Covid-19 and its impact on the economy and the third reason that some people do not accept the concept of globalisation here in Oman.
Some of them do not like the ideas that come from outside of Oman. So we aim to change this behaviour, not the investors themselves,” explained Al Shihi.
Their study is proving to be important for potential foreign investors. The team was formed in 2020, and they provide free consultancy to government organisations as well as private sector companies. The Behavioural Economics Unit is a combination of different sciences – policy, economy and psychology, and part of sociology.
“While attitude cannot be changed we can work on the behavioural changes. People can leave their old behaviour. It is just a matter of the environment and how they learnt that behaviour in the first place. As has been proven in the study of electricity consumption in the US, there are many choices, which gave an analysis through a chart on each individual consumption rate from month to month as well as a comparison to the whole neighbourhood as in who saved the most. It did have an impact,” she explained.
The Behavioural Economy Unit is currently working on water consumption.
“People take a step back when they hear about behavioural economics and say we do not want anyone to change our economy. But in reality, behavioural economics is about choices. We do not force you to take up a certain behavior but give you choices that are simple and easy to be implemented,” explained Arwa Zaabi, Psychologist, Behavioural Economics Unit adding that there are many factors that can influence human behavior such as immediate environment, emotions and forms of irrationality. “So we are basically studying all of these factors and how it can affect people’s decision-making,” noted Al Zaabi.
The Unit is also studying employment and education, throwing light on the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals and institutions. These decisions, it has been proven, are different from the traditional economic theories.
In Oman, FDI could be one of the main tools for diversifying the economy, which is a major focus of Oman Vision 2040.
However, foreign investment has had its challenges. It has been the focus of a study by the Behavioural Economics Unit at the Ministry of National Economy. According to Mariam al Shihi, a Global Political Scientist, their recently conducted research with the Ministry of Commerce, Industry and Investment on why some people hesitate to invest in Oman indicated the challenges faced by foreign investment.
“We did a study of comparison on how Chinese became China and how we can learn from them as well identify our problems to find out is it behavioural, policy or is it different struggles? We found out, first of all, it is the policy itself, such as not knowing where to go once they arrive in Oman, the second reason was the global pandemic – Covid-19 and its impact on the economy and the third reason that some people do not accept the concept of globalisation here in Oman.
Some of them do not like the ideas that come from outside of Oman. So we aim to change this behaviour, not the investors themselves,” explained Al Shihi.
Their study is proving to be important for potential foreign investors. The team was formed in 2020, and they provide free consultancy to government organisations as well as private sector companies. The Behavioural Economics Unit is a combination of different sciences – policy, economy and psychology, and part of sociology.
“While attitude cannot be changed we can work on the behavioural changes. People can leave their old behaviour. It is just a matter of the environment and how they learnt that behaviour in the first place. As has been proven in the study of electricity consumption in the US, there are many choices, which gave an analysis through a chart on each individual consumption rate from month to month as well as a comparison to the whole neighbourhood as in who saved the most. It did have an impact,” she explained.
The Behavioural Economy Unit is currently working on water consumption.
“People take a step back when they hear about behavioural economics and say we do not want anyone to change our economy. But in reality, behavioural economics is about choices. We do not force you to take up a certain behavior but give you choices that are simple and easy to be implemented,” explained Arwa Zaabi, Psychologist, Behavioural Economics Unit adding that there are many factors that can influence human behavior such as immediate environment, emotions and forms of irrationality. “So we are basically studying all of these factors and how it can affect people’s decision-making,” noted Al Zaabi.
The Unit is also studying employment and education, throwing light on the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals and institutions. These decisions, it has been proven, are different from the traditional economic theories.