Family-owned businesses play a significant role in Middle Eastern economies. And not by accident: family members are carefully educated and trained with a view to their future role.
Young Ali was perplexed. He had just flown in to Hong Kong airport from Riad. In his pocket, he carried a passport, several business cards, some money - and a 12 kilo gold bar meant for a business partner of his family's. "But when I arrived, I realized no one had booked a hotel room for me in Hong Kong - where the world's largest diamond fair was in full swing." Ali Al-Othaim searched for and found a room. He dropped off the bar of gold, as previously arranged. Quite a feat for a 14-year-old, Al-Othaim remembers, and quite a risk for his family. There were certainly less risky ways to transport gold in the mid-1990s.
But that was not the point, Al-Othaim, now in his mid-30s, says. "It was about putting obstacles in my way so I could learn to remove them. It was part of my training," Ali told DW at the recent Arab-German Business Forum in Berlin. He graduated from King Saud University in Riad, completed a traineeship at Merrill Lynch investment bank and today is a successful businessman as well as the head of Saudi Arabia's National Young Businessmen Committee.
Al-Othaim is thankful for his roots in a Saudi family of entrepreneurs. A family business offers young people quite different opportunities to acquire leadership qualities, he says. "The training is better than that of people who do not grow up in such families."
In comparison to European dynasties, Arab family-owned businesses are still quite young. Commerce traditions go back hundreds of years, but only the last few generations have gotten a foothold in more recent sectors including banking, energy and mobility. The first modern businesses developed in the wake of the arrival of western colonialists in the late 19th and early 20th centuries. Families had little experience to fall back on and had to make up that deficit as quickly and efficiently as possible.
To hold their own on global markets, family-owned Arab enterprises consistently train their members. Family membership facilitates opportunities to join the business - and nothing more. The rules are strict for youngsters in his family, Khalid Rashid Al Zayani says. "If they wish to join the family business and are guided in that direction, then most probably they will be educated in England or the United States," the honorary chairman of the Bahrain-based Al Zayani Investment Group told DW. "After they get their Master's degree, they will work for two years in a local firm." Only then, he says, will they come back to join the family business.
Empathy and discipline
The next generation is trained up with an eye on expertise and experience of western business etiquette and culture. The young businessmen are expected to develop a sense of their future business partners' view of the world - the best opportunity being a long stay abroad.
They are also expected to develop appropriate business ethics, Al-Zayani says. "The young people face new challenges," he says, adding there is no danger of them becoming spoiled rich kids. "Instead, we pose challenges. They know they are responsible, so they voluntarily come to the office. They know this is their own business. "
The post-oil era
Training the young for the future comes at a time of increased challenges for Arab family-owned businesses. An such businesses are of immense importance for the economies in their native countries: apart from the oil and gas sectors, family-owned businesses contribute about 90 percent of GDP in the Arab region. They create jobs and open up new business sectors.
That is particularly crucial for a country like Saudi Arabia, Ali Al-Othaim says. With the end of the oil boom in sight, it is imperative to think ahead, the Saudi government is in the process of creating new investment opportunities. The government has instituted comprehensive training programs costing up to 25 percent of the state budget, he says. The project aims to "put the next generation in a highly competitive position so they can master the challenges of economic globalization."
Opportunities for German businesses
Arab entrepreneurs establish contacts worldwide, which opens opportunities for German firms, too, says Peter Brock of the Ernst & Young consultancy. "It's all about the industrialization of the Gulf States," he told DW. German companies offer Arab states access to emerging markets, so that they can divert their focus away from oil and instead secure industrialization in the long run, he says: "Family-owned businesses in the region already are highly diversified. But there is certainly potential to boost industrialization in Arab states even more strongly."
To secure the growth of their enterprises, family-owned businesses do not resort only to family members. Many managers are employed staff. The offspring of the Zayani family must also prove themselves as managers but once they have done so, they'll be offered positions on the company board. Their job is to find ways to generate new business. "Every year, there are at least three or four subsidiaries that grow up in our company," Khalid Rashid Al Zayani says.