Saudi Arabia’s efforts to sustain the existence of family businesses 
A report issued by the National Center for Family Business in Saudi Arabia has emphasized the importance of family businesses to any economy. Family businesses are the backbone of the world economy, constituting a crucial source of wealth and employment in developed and developing countries.
The report indicated that family businesses account for two-thirds of all organizations globally and contribute significantly to the gross domestic product of many nations. They are also a primary driver of job creation.
According to Forbes, about 90 percent of all US businesses are family-owned or controlled by a family, and generate over 50 percent of the US GDP.
Family businesses in the EU make up between 65 to 80 percent of all European companies and account, on average, for more than 40 to 50 percent of all jobs.
Similarly, family businesses in Saudi Arabia constitute a substantial part of all businesses, as they account for more than 60 percent of the private sector and are responsible for employing 7.4 million individuals.
Additionally, they contribute more than 30 percent of total GDP and more than 63 percent of private sector GDP.
Saudi Arabia has recognized the importance of healthy businesses in the Kingdom, especially family-owned ones, due to their significant contribution to the economy and their ability to create job opportunities for Saudi nationals. Since the announcement of Saudi Vision 2030 in April 2016, family businesses have seen unprecedented growth in several economic sectors and listings on the stock market.
To help ensure both the survival of the company and family harmony, it is important not to ignore the role of women in management.
The Privatization Program, launched under Saudi Vision 2030 in 2018, aims to support the growth of the national economy and enhance the role of the private sector. The main objective is to improve the quality of services offered to private businesses and increase their contribution to the Kingdom’s GDP from 40 to 65 percent by 2030. This will be achieved by unlocking business opportunities in several sectors of the economy.
The Shareek program was launched in 2021 to support Saudi companies, enabling them to grow and bolster private sector investments in Saudi Arabia, thereby enhancing their contribution to the national economy. Shareek also aims to unlock SR5 trillion ($1.3 trillion) in domestic private sector investments, which will contribute to achieving the Vision 2030 goal of increasing the private sector’s GDP contribution to 65 percent.
The National Center for Family Business, in collaboration with the Jeddah Chamber, hosted a forum in March focused on addressing the sustainability of family businesses. The forum emphasized the importance of applying best practices and standards to achieve this goal.
I believe that the sustainability of family businesses requires strict compliance with corporate governance, the application of a family charter, and a proper management structure that facilitates smooth succession between different generations, thus avoiding potential disputes and conflicts that could destroy the business. It is important, at a certain stage of the family business's life, to consider listing the company on the stock market.
Additionally, to help ensure both the survival of the company and family harmony, it is important not to ignore the role of women in management, especially on the board of directors and in executive management.
Finally, in case disputes arise between family members, it is highly recommended to seek the help of the Musalaha Center, an affiliate of the Ministry of Justice, which has served more than 2.4 million beneficiaries, conducted over 800,000 reconciliation sessions remotely, and issued 500 reconciliation documents per day (50 percent related to personal matters and 50 percent related to financial and commercial cases) up to 2022.
• Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
