employment, wealth and welfare is enormous”.
Ernst & Young’s report “Family Business in the Middle East / Facts and figures - 2014” gives further facts on the importance of family business in the region as follows:
•90% of the companies are family owned businesses
•Generates 80% of region’s GDP
•Contributes 75% of private sector’s activity
•Employs 70% of labour workforce
•Controls 98% of the oil producing companies operating in the Gulf Region
•The top ten generated approximately US$588.5 billion to MENA’s region $1.51 trillion GDP in 2012 and employ nearly 221740 people
2.3. Features of FOBs in the Middle East
•They represent the majority of companies in any MENA country, as they do in the rest of the world.
•The relevant laws and regulations under which these companies are governed are unclear or insufficient. The regulatory control and monitoring of their operations are weak or in some instances non-existent. Hence, it’s difficult to measure the performance of these companies in a clear and certain way and assess the impact of their performance on the overall economy of the country.
•The regulatory bodies need to exert every effort to update existing laws and develop new ones to cater for the needs of these companies to assist them to play the right role in the economy. Introducing corporate governance regulations applicable to these companies is long overdue.
2.4. Family Owned Businesses in GCC
a.Advantage Consulting in Kuwait, in its Market Insights Division report entitled “Family Owned Businesses in GCC – A Reality Check” defines a family-owned business as “A firm where ownership is controlled by a single family, at least through control of the board and usually also through involvement in senior management.”
b.In its Newsletter – First Edition – November 2008, the Bahrain Family Business Association gave the following facts about FOBs in the Kingdom of Saudi Arabia:
•The total Saudi FOB investments within Saudi Arabia are estimated at 250 billion Saudi Riyals.
•They comprise 45 companies among the largest 100 companies in KSA.
•Total companies operating in KSA (2002) is estimated at 11,622 with a total capital of 141.4 billion riyals.
•The total revenue of those companies exceeded 120 billion riyals in 2003.
•They employ close to 200,000 persons
•Most of the Saudi FOBs have extended commercial activities
•The third generation of the original founders runs 10% of total businesses, the second generation 20% and the balance is still run by the founders.
•Most of the companies are successful and profitable but not organized.
c.Al Sharaqia Chamber of Commerce, in the Kingdom of Saudi Arabia, in its newsletter issued in April 2014 quoted the following statistics:
-FOBs in GCC offer 65% of employment in the region
-FOBs represent 85% of total registered companies worldwide
-90% of the FOBs are situated in KSA, Italy and USA
-SR66 Billion is the value of investments of FOBs in KSA
-54 FOBs of KSA are among the top 100 companies in the world
d.“The family businesses contribute 25% of GDP in Saudi Arabia”Arab News issue dated 27 July 2012.
e.Federation of GCC Chambers’ publication “Encyclopedia of Gulf Family Companies – 2012” gives detailed accounts of FOBs, in GCC and states the following about the family businesses in the MENA region. “The MENA region is relatively a young region when it comes to family businesses when compared with the western family businesses where several businesses have been run by 9th and 10th generations…”
It then gives some of the key challenges facing many businesses in the MENA region which include:
•Successions issues and transferring effective control and knowledge from one generation to the next.
•Attracting outside talents. Recruitment needs to reflect specific competency requirements of FOB.
•The need to shift from purely operational to thinking in more strategic terms.
•Proper separation of management and ownership.
•The need to re-evaluate and restructure existing portfolios.
•Diversification into multiple businesses than can lead to over expansion beyond the group’s knowledge and competencies.
•Balancing risks and growth potential.
•Tax issues as the family business operates outside its borders
f.Bahrain Family Business Association, in its publication “An Insight into Family Business Enterprises in the Kingdom of Bahrain” 2011, had detailed outcome of a study conducted by Ernst & Young. The purpose of the study was to provide a perspective on family businesses and their insights into this type of institution in Bahrain. 59% of FOBs surveyed were established in 1980s and later and 41% established operations in 1970s and before. Recommendations on opportunities for improving management and sustainability practices to establish clear lines between governance, management and family was another purpose for the study. The study involved a survey of 100 family businesses leaders operating in the Kingdom of Bahrain.
| Years in Operations | Percentage % |
| 0-10 Years | 21 |
| 11-20 Years | 19 |
| 21-30 Years | 19 |
| 31-40 Years | 14 |
| 41-50 Years | 7 |
| 51-60 Years | 10 |
| 61-80 Years | 7 |
| 80-100 Years | 2 |
| More than 100 Years | 1 |
| Total | 100 |
Sectors in Which Surveyed FOBs operate include:
•52% in Real Estate and Constructions
•35% in Retail
