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Statistics unkind to family businesses.

... AMMAN (Star)--Family businesses account for 95 percent of operating companies in the region and represent 62 percent of the total trade activities in the Arab world. Statistics suggest that fewer than 6 percent of family businesses survive beyond the third generation. "Due to the strong influence that family businesses have on economic growth rate in Jordan and the region, the Family Business Conference assumes a high degree of importance as it sets forth to examine family business challenges and present models of success from around the world", explained Samar Shawareb Ashqar, managing director, Events UnLimited.Nearly 200 business families and experts in Family Business from all over the world attended the two-day conference which opened on Saturday under the theme "Success and Succession of Family Business". The event was organized by Events Unlimited in partnership with Jordan Enterprise Development Corporation, Institute of Family and Entrepreneurial Business of the Lebanese American University and the Business Development Center, and supported by the USAID-funded SABEQ program. Prime Minister Marouf Bakhit who patronized the event said during his opening speech that the government had specified its developmental strategy for the current decade, which included achieving a growth rate of 6-7 percent.The Jordanian economy, he said, has succeeded in achieving this goal over the last three years with all indicators showing that this rate will be maintained this year.Bakhit said family businesses in the Arab world achieved a major growth over the past few decades in all economic sectors, pointing to their impact on the economies of many countries."Family relationships in family businesses have a major impact on the performance of these businesses and their sustainability," he added, noting disputes that emerge in these companies are difficult to solve in many cases. Minister of Industry & Trade Salem Khazaa'leh said family businesses, which are usually initiated by one family member and later joined by other members contribute to serving the national economy and the local community.On addressing challenges facing such companies, he said all options are open for such companies like turning into public limited companies with members of the family maintaining part of its ownership, and increasing the efficiency of monitoring through restructuring. Amin Nasser, partner and leader of the Family business Forum, Middle East, spoke on the challenges faced by family businesses. "Separation of ownership from management, creating family councils and shareholders' Assemblies, agreeing protocols or constitutions for the Family, creating good governance and communication between the owners and Mmanagement, are the main mechanisms to a successful family business," said Nasser."Family Business Firms are not just regular firms. They are huge companies. Sometimes they are a group of companies owned by one or more families. Such firms support the national economy in different ways," said Ghassan Nuqul who presented Nuqul Group as a case study. The group, which was established in 1952, consists of 27 companies, with a wide range of products including: Raw material, converted hygienic tissue paper, non-woven fabrics, processed meat, aluminum profiles, ready-mix concrete, synthetic sponge/foam, plastic pipes, stationery, and printed packaging materials. "The first generation founded the business, the second generation is running it now, and future generations will come up and take the business forward. Due to these transitions, many problems can appear, we need to put up more foundations that can help in directing and providing the main keys for successful companies," he said.Overcoming these problems and challenges could be done through a process that entails "forming a board that includes family and professional members; separating business finances from family finances; clarifying duties, responsibilities and authorities of family members; defining clear strategy for future investments and the role of family members; comprehensive family protocol; family council; exit strategy; devoting time for family and enjoying it," Nuqul detailed. General Manager of Petra Travel Tours Co., Awni Kawar, spoke on family businesses in the Middle East. He highlighted the importance of the family business firm and its role in the economy. "Statistics appear unkind to family businesses, suggesting 30 percent move to the second generation, 14 percent to the third and only 3 percent survive beyond; I prefer to see it from the ground up," said Kawar. He reiterated that there are many family businesses in the Arab world, that are successful, thriving and moving to 2nd, 3rd, and 4th generations. "If others go under, this is a natural economic process to do with the survival of the fittest and does not necessarily reflect on family businesses, some of whom have become global empires," he added. "Effective Governance: Legal Structures, Agreements and Codes of Conduct" was the issue covered by Omar Hudhud who laid out what a successful family business would do to ensure prosperity. "Formal governance structure, processes, plans, policies, rules and agreement. These entail building family governance structures, namely the family assembly and family council; developing the family constitution, or family protocols, which include statement of family mission and values, policies for family members, and shareholder agreements," he explained. nStatistics unkind to family businesses

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Publication:The Star (Amman, Jordan)
Date:Jun 18, 2007
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