Family businesses should look overseas for new markets

JEDDAH — Family businesses in Saudi Arabia which now rely mostly on the local market for the bulk of their business, should look overseas for new markets, according to Fawaz Al Alami, Undersecretary at the Ministry of Industry and Commerce and chief Saudi WTO negotiator.

By From Our Correspondent

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Published: Sun 19 Mar 2006, 10:09 AM

Last updated: Sat 4 Apr 2015, 3:36 PM

Addressing the first forum on family businesses in Saudi Arabia in the light of the Kingdom's accession to the World Trade Organisation which concluded here recently, he said that out of 14,762 companies in the Kingdom, more than 45 per cent were family-owned and managed businesses, with SR250 billion in fixed assets and a combined annual turnover worth SR120 billion.

The forum was organised by the Middle East Centre for Legal and Strategic Studies (MECLSS). Al Alami lamented that out of some 6,000 family businesses, only three companies attended the gathering.

He said that some 77 per cent of family businesses rely on representation of foreign brands in the Kingdom, with 65 per cent of family businesses showing no interest in separation between management and ownership, 43 per cent had no intention of transforming themselves into a public stock holding company, and 21 per cent relied on competition in Gulf Cooperation Council markets.

"Capturing the largest market share figured high amongst 99 per cent of family businesses, with 23 per cent of family businesses saying that they gave importance to investing in the global stock market," he said.

Al Alami said that companies that relied on representation should now look further ahead and search out for alliances and cartels. As for importers, he adviced them to find ways of exporting their services abroad.

He put stress on separation between ownership and management in family businesses.

Explaining the objective of the forum, Saud bin Abdul Aziz Nassir Al Akeel, authorised chief of the event's management and chairman of Marbelife, told Khaleej Times that many in business were not aware "whether WTO would hit us or help us."

The forum was meant to make them realise what the drawbacks and benefits were for the third world countries.

Asked why family businesses were chosen, he explained: "Because Saudi Arabia is born with family business. Most of the businesses are family businesses not company. Now they realise they have to change over to company because children grow up and differences crop up which create problems and affect the economy. Big names had problems and they converted to companies."

"We are trying to make them understand that it is very import to readjust," he added.

He said he was sure if most family businesses would readjust because in old days they were successful but now there was a climate of change and challenge. "Even in the United States and Europe, many family businesses have adapted to change," he stressed.

"Women in business is not new but our media was not open like now. You will see in the near future more women in business and I hope they will take good positions in the government and the private sector. "They are my mother, my sisters, and my grandmother. We cannot live without them so they are with us in the business," he said.

Dr. Anwar Ashqi, President of MECLSS said WTO accession would affect the family businesses because the family businesses were a pillar of Saudi and Gulf economy.

"We have to show them what they have to do to face the challenge when huge companies come to Saudi Arabia," he added.

He said that Saudi women were entering the business profession in increasing numbers. In the future they would become stronger. The climate, reforms, environment were all getting conducive for them to do business.

Al Alami said that Saudi Arabia's non-petroleum exports were expected to grow by more than 13 per cent due to the Kingdom's joining the World Trade Organisation.

He added that Saudi Arabia had progressed from 76th place to 38th — the highest amongst Arab countries on the World Bank's Doing Business Report.

He said the Saudi WTO negotiation team had visited 64 countries to sign 38 bilateral trade agreements. It took the Kingdom some 10 years to finish negotiations on joining the WTO due to the significant size of the Saudi economy, an economy, which he said, imported 95 per cent of its consumable goods from abroad with local production barely accounting for 10 per cent of all consumable products.

He said Saudi Arabia now faced three major challenges — reducing the Kingdom's reliance on oil as a major source of income, Saudisation of jobs and capacity building, and increasing economic growth to outpace the growth of the population.

He said such challenges could be overcome by reducing the number of obstacles facing foreign direct investments (FDIs), privatisation of government agencies to increase their efficiency and increase their competitive edge, increasing Saudi exports to again lessen the reliance of the Kingdom on income from oil, and restructuring of the government's executive branch.

Al Alami said the WTO's current membership base of some 150 countries controlled 90 per cent of the flow of investments around the world, 92 per cent of the volume of financial services, and 93 per cent of the information and communications technology market. They held 97pc of all patents and intellectual property rights and had cornered 92 per cent of the financial and insurance services market.

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