80% of family businesses risk failure

Up to 80% of family businesses suffer acute risk of failing unless adequate succession planning and corporate governance initiatives are implemented, an economist said yesterday.

Dr Nasser Saidi, chief economist at Dubai International Financial Centre said the family business sector is of critical importance to the region as it looks to maintain its strong growth rate into the next decade and beyond and transfer smoothly from an “oil based economy” to an “asset based one.”

Saidi told Arabian Business “Family businesses need to ensure their wealth survives into the future. At the moment 80% of the businesses don’t survive into the 3rd generation,”

“Addressing corporate governance is a major step towards ensuring family businesses sustain themselves,” he added.

The GCC is flush with petrodollar liquidity, currently running between 15-20% account surpluses and experiencing double-digit growth rates. In particular, the private sector is seen as the largest contributor to future labor production.

“We know that for the future, over the next 15 years or so, we need to create something like 110 million jobs. That’s as many jobs as we’ve created in this region since 1950,” Saidi said.

“Where are those jobs going to be created? Not public sector. The private sector; family businesses.”

Saidi will be speaking at the DIFC Week conference which runs from November 17 – 23. The event has also drawn Larry Summers, former chief economist of the World Bank Steven Levitt, author of Freakonomics and His Excellency Dr Omar Bin Sulaiman, the Governor of the DIFC.