Dubai seeks to unlock a new phase of growth for its family business sector
- Series of initiatives seek to help family businesses navigate the challenges and opportunities brought by a global economy in transition
- Dubai’s strengths make it an ideal global base for family businesses seeking to tap high-growth markets
- Expansion of financial wealth in the UAE, projected to surge at a compound annual rate of 6.7% to reach $1 trillion in 2026, will spur the family business sector’s growth
- Dubai set to emerge as the epicentre of a profound global shift in the family-owned wealth landscape
Government of Dubai Media Office – 23 July 2023: In Dubai’s awe-inspiring economic growth story, family businesses stand tall as catalysts of growth and innovation and architects of value creation. Generating over 40% of the emirate’s GDP, the sector represents the very essence of Dubai's spirit of enterprise.
Now, as the emirate seeks to unlock a new phase of high-powered growth for its economy, the government is introducing a spate of initiatives designed to future-proof family businesses and bolster their competitiveness and growth capabilities in a rapidly evolving global environment. Over the last year, Dubai has introduced new legislative and support measures aimed at helping them navigate the challenges and opportunities brought by a global economy in transition.
Backbone of the economy
Family businesses are the mainstay of the UAE’s economy. A staggering 90 per cent of private companies in the country are family-owned, according to a report of the UAE Ministry of Economy. They are also major employers with more than 70 per cent of the private sector workforce earning their livelihoods from them.
Family businesses have also been at the forefront of Dubai’s economic diversification with a significant presence in a diverse range of vital sectors including real estate and construction, retail and wholesale trade, hospitality and tourism, manufacturing, financial services, healthcare, education and technology.
A global family business hub
Dubai’s strategic geographical location and its growing status as one of the world’s most hyper-connected cities make it an ideal global base for family businesses seeking to tap high-growth markets. With its business-friendly environment and pro-growth infrastructure, Dubai offers one of the most nurturing ecosystems for family businesses. Furthermore, its high levels of safety, world-class healthcare and education, and unbeatable leisure and lifestyle offerings make it an attractive location for family-owned enterprises.
With the Dubai Economic Agenda D33 launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, outlining ambitious economic targets over the next decade, the outlook for family businesses in the emirate is exceptionally promising. The swift expansion of financial wealth in the UAE, which is projected to surge at a compound annual rate of 6.7% to reach $1 trillion in 2026, up from $700 billion in 2021, will spur significant growth in the family business sector.
However, to achieve new levels of growth and thrive for generations to come, the sector needs to address several issues brought by an evolving economy including digitisation, cultural issues, governance and succession planning. A series of initiatives launched recently by Dubai seek to empower family businesses to lay the groundwork for sustained prosperity.
His Excellency Abdulaziz Al Ghurair, Chairman of the Board of Directors of Dubai Chambers, one of the institutions at the forefront of helping family-owned businesses explore new frontiers of growth, said: “Dubai's visionary leadership is committed to creating the ideal conditions for family-owned businesses to thrive and prosper. Recognising the significant role that family businesses play in driving the emirate’s sustainable development, the leadership understands the unique challenges and opportunities that they face. They firmly believe that nurturing these businesses is crucial to achieving Dubai’s ambitious economic objectives for the next decade. By fostering a dynamic and supportive ecosystem, the leadership seeks to enable family-owned enterprises to navigate the changing economic environment with ease and confidence.”
A new global centre for family businesses
In March this year, Dubai International Financial Centre (DIFC), the leading global financial hub in the Middle East, Africa and South Asia (MEASA) region, launched the DIFC Family Wealth Centre, the first in the world to create such a unique offering. The DIFC Family Wealth Centre offer advisory and concierge services, certification, advisor accreditation, and education. Additionally, the Centre supports with outreach and high-end networking, conducting research and issuing publications, as well as offering assistance with dispute resolution.
The DIFC Family Wealth Centre brings together global family-owned businesses and ultra-high net worth individuals (UHNWIs) to help preserve and grow the sector. By providing a range of support services, the Centre is set to not only accelerate the growth of local family businesses but also attract family businesses and UHNWIs from across the world. At a time when an estimated AED3.67 trillion in assets will be transferred to the next generation in the Middle East over the next decade, the initiative is set to play an instrumental role in delivering Dubai’s commitment to supporting family businesses.
DIFC is continuously innovating and advancing its ecosystem to help families manage their wealth including implementation of new legislative and regulatory measures to attract family businesses to Dubai. One such key framework is the DIFC Family Arrangements Regulations, specifically tailored to foster a conducive environment for family businesses, to drive transparency, accountability, and stability, and offer the highest levels of protection and support.
His Excellency Essa Kazim, Governor of DIFC, said: “By harnessing DIFC's wealth of experience and expertise, family businesses in Dubai can take their growth and succession planning to the next level. We understand the critical role family businesses play in the global economy, and the DIFC Family Wealth Centre’s end-to-end service offering is designed to empower them to thrive, innovate, and preserve their legacies for generations to come.”
DIFC’s new initiatives add to the series of legislative reforms that Dubai and the UAE have introduced over the past decade to promote the smooth transfer of wealth and ownership of family-owned assets and businesses, which include the issuance of trust and foundation legislation, and the implementation of clear inheritance procedures for non-Muslims.
Raising family business capabilities
Earlier this year, Dubai Chambers announced the launch of the Dubai Centre for Family Businesses to educate family-owned firms on leadership transition, planning and growth. Forming part of a comprehensive plan approved by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, at the Dubai Council’s fifth meeting, the new Centre aims to support the growth of family firms, with diverse initiatives that include a centre for settling family business-related disputes.
In the second week of this month, the Centre introduced a new set of governance guidelines designed to assist family-owned companies in establishing effective governance frameworks that can facilitate a smooth succession process and ensure the continuity of family businesses. Based on the local adaptation of international best practices, the guidelines offer detailed advice on developing a family constitution together with practical tips, tools and insights to support business-owning families in establishing effective governance structures.
The Centre has also launched a series of programmes to raise the global competitiveness of local family businesses including the Dubai Family Businesses Leadership Programme, developed in partnership with the Mohammed bin Rashid Centre for Leadership Development; the Next Generation Training Programme; the Governance Series; and the Advisors’ Certification Programme. The programmes are aimed at preparing new leaders, educating family members on vital issues, raising awareness of governance, developing certified advisors, and fostering the growth and success of family enterprises.
Over the coming years, many experts believe that Dubai’s increasingly attractive value proposition for global businesses is set to accelerate a significant migration of family businesses from other popular hubs like the US, UK, Luxembourg, Switzerland, France, Italy, Singapore and Hong Kong to the emirate. With visionary strategies, unmatched infrastructure, and an environment that nourishes growth, Dubai could well emerge as the epicentre of a profound global shift in the family-owned wealth landscape.