Family businesses in the Middle East are important drivers of growth in the region, and often considered the lifelines of the economy today. According to an Ernst & Young report published in 2013, 80% of the companies in the Middle East are family-owned with assets amounting to an excess of $500 billion. Such businesses, therefore, have a significant role to play in the region’s economies, investment environment and job market.
Family firms in our region are unusual in comparison to the rest of the world, with diversification being the major differentiating factor. Although most companies started out as trading enterprises, they later diversified into sectors such as retail, automotive, construction, import and export, shipping, insurance, agriculture, financial services, real estate and manufacturing.
Business fabric
But it has not always been a smooth ride. While family firms have been in an advantageous position with regard to building businesses and ideas from scratch, they have been confronted with numerous challenges in other areas. Some of these include the need for progression, managing business transition to the next generation, lack of effective governance and coping with expansion.
Family offices have always been an integral part of Dubai’s business fabric due to a high level of security, local expertise and the emirate’s transparent legal framework.
Moreover, today, Dubai and the wider United Arab Emirates (UAE) have proven to be economically resilient and politically robust, even amidst regional uncertainties. The emirate is strategically located and accessible to major regional markets, and serves as a gateway between international and Middle East markets. With well-developed infrastructure and a stable working environment, family businesses now find it easier to thrive than ever before.
Local sophistication
In 2008, the Dubai International Financial Centre (DIFC) announced new regulations to encourage family businesses to establish Single Family Offices (SFOs) within its premises in consultation with Dubai Financial Services Authority. Since then, the development of local expertise to service family-based firms has been a major tool in empowering these companies and driving their business growth.
The DIFC provides all the resources required by family businesses under one roof. This includes access to wealth and asset managers, private bankers, lawyers, accountants, corporate governance experts, international tax advisors, succession planning advisors, experts on Islamic finance as well as access to capital markets and corporate finances.
The regulations at DIFC also offer distinct benefits to SFOs, including comprehensive infrastructure solutions, support services, and a robust legal and regulatory framework that enables them to operate their businesses successfully.
Next level
Given the dynamic business landscape in the UAE at present, businesses in the country are required to leverage the rapid growth of technologies, to meet the increasing expectations from employees, suppliers and stakeholders. At the same time, they are also expected to introduce more socially responsible initiatives as part of the requirements of corporate social responsibility agendas, and beat off fierce international competition.
While family businesses, founders of such businesses will need to prioritise succession planning as an integral element in ensuring the success and sustainability of their enterprises. By doing so, such businesses can aim to move to the next level and capitalise on the advanced infrastructure and opportunities that are opening up as Dubai fast-tracks to become a leading global economy.
