June 17, 2024

Corporate Nex Hub

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The UAE As The Nexus Of Global Family Business

4 min read

CEO of Smartlink Communications. Global analyst, consultant and trainer, passionate about leadership, global communications and competition.

Whether it’s the “Alt-Asia” phenomenon, the friend-shoring trend, the revamped push toward in-sourcing, or slowbalization, it’s somewhat self-evident that global trade is being rewired. Often, at the forefront of that rewiring stand family business that can have the operational flexibility to make highly consequential decisions with limited board approval. For example, Samsung today produces about half its smartphones in Vietnam.

Likewise, at the forefront of that rewiring stand a few nodes in global supply chains that have the right geography and foresight to use it by creating the legal, economic and financial conditions that enable them to act as intermediaries and facilitators for business, family business and non-family business alike.

One of those nodes is the UAE. Increasingly, it is becoming a central node—one that business leaders globally can learn from. Business leaders should take note, in no small part, because it not only represents a part of the rewiring of the global financial and trade system but it is the success or failure of such central nodes which determines whether the rewiring itself will be successful. Ultimately, it is in places such as the UAE that decide how the global business world will look like in five years’ time.

The Role Of The UAE

The UAE is geographically positioned at the crossroads of the Atlantic-centric world’s East and West—and has emerged not only as a thriving economic hub in itself but also as a key player in reorganizing and shaping the future of global trade. Situated at the heart of the Middle East, the UAE occupies a strategic position connecting Europe, Asia and Africa. UAE leadership used its strategic location to turn it into a global trade and logistics hub by focusing on the best-in-class infrastructure—including some of the best seaports or airports around as well as its free zones.

Adding to its geographic position is its role in global finance. As a global financial hub, the UAE offers a fully fledged financial services sector backed by minimal taxation and what may be called a commitment to privacy, making it an attractive destination for investment and capital flows. These two factors, in unison, make it a central node for global trade flows as well as financial flows.

It also makes it a notable hub for a particular actor in the global business community, namely global family businesses.

The UAE And Family Business

The UAE is itself a family-run enterprise and is thus hardly surprising that it would have a particular relation with family businesses. About 60% (registration required) of the country’s GDP comes from family businesses, and it boasts 21 of the Middle East’s most powerful family businesses, with Al Futtaim, Al Ghurair and Al Majid being only a few household names.

In addition to a favorable business climate for family businesses—with stock-exchange listings recently being approved for family businesses—the Emirates focus on tax planning and succession planning. The Dubai Chamber of Commerce specifically tries to highlight all of the above in its report “The Future of UAE Family Business”; worth a read to any family business considering the Emirates in general. Additionally, the DIFC Family Wealth Centre offers succession and tax planning opportunities in line with the new Family Arrangements Regulations, applicable to both family businesses and family offices.

I believe what the UAE presumably hopes to achieve is to use the force of family businesses, particularly the global family businesses that power so many of the world’s economies, to move to the next phase of its transformation into a global trade hub. With the logistical and financial wiring more or less complete, it aims to hold itself to be a central nexus to global family businesses, which can not only conduct trade through the UAE but be residents of the trade hub as well.

Self-evidently, while the first phase had the advantage of both geography as well as not insignificant amounts of public investment, the second phase focuses on providing the legal and institutional stability of other hubs such as Switzerland. That said, if the UAE does succeed, it stands to create something quite amazing: a global nexus that brings together Guangzhou and Zurich in an off-the-shelf package.

Takeaway

Business families that aim to be part of that transformation should consider spending some time understanding the legal and regulatory landscape for businesses entering the UAE. First, it should be duly understood that the country operates under a civil law system influenced by Sharia principles. Familiarize yourself with the specific regulations governing your industry and adhere to local laws to avoid legal complications. For example, it might be preferable to work with legal experts who can provide guidance on licensing requirements, permits and compliance matters. Furthermore, cultural awareness is key when conducting business in the UAE. The local culture values personal relationships and trust. Building strong connections with local partners, clients and stakeholders is often as important as the business itself. Respect for Islamic traditions and customs should be demonstrated in business interactions, from dress code to communication styles, to ensure your business is successful.

The United Arab Emirates’ physical transformation is just one stage in its long-term goal to position itself as the nexus of global business and global family business in particular. The second phase seems to involve capitalizing on its role in trade and financial flows to become a premier destination for global family businesses and family businesses with a look toward the future.


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