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The swift expansion of financial wealth in the UAE, which is projected to surge at a compound annual rate of 6.7 per cent to reach $1 trillion in 2026, up from $700 billion in 2021, will spur significant growth in the family business sector. Image Credit: Bloomberg

Family businesses in Dubai, which generate over 40 per cent of the emirate’s GDP, are set to get a further boost.

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, and 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.

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Bright outlook

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 promising. The swift expansion of financial wealth in the UAE, which is projected to surge at a compound annual rate of 6.7 per cent 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.

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, succession planning and growth. The centre aims to support the growth of family firms through diverse initiatives that include a centre for settling family business-related disputes.

Earlier 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.

Abdulaziz Abdulla Al Ghurair, Chairman of Dubai Chambers, commented: “The significant contribution of family businesses to the emirate’s economy underlines their key role as an engine for economic growth. This impact will be further enhanced through legislation designed to develop a favourable business ecosystem, together with specialised training aimed at helping family businesses to overcome challenges, elevate governance standards, and ensure a smooth transition of leadership between generations.”

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 businesses.

A new international centre for family businesses

In March, Dubai International Financial Centre (DIFC) launched the DIFC Family Wealth Centre, the first in the world to create such a unique offering. The 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.

It brings together global family-owned businesses and ultra-high net worth individuals (UHNWIs) to help preserve and grow the sector. At a time when an estimated Dh3.67 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.

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.

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.