JEDDAH, 22 April 2006 — Dubai will host a major forum on June 6-8 to discuss the challenges facing Gulf family businesses that have a combined investment of $2.5 trillion including $2 trillion outside the Gulf countries. Experts say that family companies have to become much more performance-driven in order to survive long-term.
Sheikha Lubna Al-Qassimi, minister of economy and planning in the United Arab Emirates, will inaugurate the three-day conference, which will be attended by more than 300 businessmen, economists and officials.
Majed Muhammad Garoub, head of the consultative committee for the first forum of Gulf family businesses, said experts would discuss legal and organizational challenges faced by family businesses at national and international levels. “Family businesses account for 75 percent of non-public Gulf economy,” Garoub said in a statement, adding that they employ nearly 15 million people including expatriates.
He emphasized the need for restructuring family businesses in order to improve their performance. “At present about 70 percent of managers running these businesses are from the generation of founders,” Garoub said.
Spelling out the challenges facing these vital businesses, he said they included conflicts among family members and challenges posed by globalization. “It is time for companies run by families to get rid of bureaucracy and corruption as well as social customs and traditions to achieve greater successes,” he said.
In a recent statement, Al-Qassimi had urged family businesses in the Gulf to transform into public joint stock companies and list themselves on local stock exchanges. “None of the family businesses in the UAE has become joint stock firms because of a law that insists that they should float 55 percent of their shares for public subscription and that has been rejected by their owners,” she said in a speech to the first IPO and asset management conference in Dubai organized by the magazine, MEED last month.
“The owners believe that such a sell-off would result in losing the grip on their companies, which they created after years of hard work,” she said. Al-Qassimi indicated that her ministry was in the process of issuing a new law to allow family businesses to hold 70 percent of shares while going public since the businesses would need to float only 30 percent.
Osama Al-Zamil, business development manager at Zamil Holding Group, also spoke about the poor response of family businesses in Saudi Arabia and other Gulf countries to IPOs.
“There are 2,300 family businesses in Saudi Arabia. Only three of them have become joint stock firms. The reason is that owners of these companies do not want to publish their financial statements in newspapers as they want to keep them secret, although such a policy is no longer acceptable under new economic developments at both local and international levels.”
The Dubai family business forum is organized by the Saudi Law Training Center (SLTC) in collaboration with the Federation of the GCC Chambers of Commerce and Industry and the Dubai Chamber of Commerce and Industry. According to Garoub, who is also chairman of SLTC, there are 5,000 family businesses throughout the Gulf Cooperation Council.
There will be six sessions divided equally on the first and second day to discuss issues affecting family businesses such as globalization, the role of financial markets, the influence of banks, governance, the role of women and the younger generation and the role of specialized institutions.
The third day of the forum shall be devoted for a workshop discussing turning family businesses into public joint stock companies and their commitments thereafter, according to the organizers.