Large family businesses is the answer to our FDI shortfall

 

6 November 2002. Leading accounting and business advisory firm Shamsir Jasani Grant Thornton says that owner-managed businesses form the backbone of Malaysia's economy, and the larger ones are the answer to Malaysia's shortfall in Foreign Direct Investments (FDI).

“Large family businesses have always formed a significant segment of our Corporate Sector and with incentives, finance availability and direction, these companies can now fill the investment gap in this critical time for our nation,” said Dato' N K Jasani, Managing Partner of Shamsir Jasani Grant Thornton, at the pre-launch press briefing of their PRIMA (People and Relationship Issues in ManAgement) global research report and website on family business issues.

The PRIMA global research report is an international research study carried out among owner-managers of independent and family businesses in 26 countries around the world to explore the contemporary issues facing family-run and owner-managed businesses today. The report is being launched simultaneously on 6 November 2002 by Grant Thornton firms around the world, together with its new website dedicated to various family business issues. Malaysia is one of the 26 participating countries and completed the research in January this year, teaming up with the Malaysian Institute of Management (MIM) and surveyed a total of 225 companies. The research is known as “The Family & The Business” survey in Malaysia.

According to Dato' Jasani, family businesses make up roughly 80 per cent of the companies in Malaysia and have the high potential in filling up the investment gap. The Foreign Direct Investments (FDI) into Malaysia have seen a substantial drop over the last few years. In the year 2000, the FDI amounted to RM14 billion whilst for 2001, it was only RM2.1 billion. Dato' Jasani reiterated his point with the recent Budget speech by Datuk Seri Dr Mahathir Mohamad who highlighted his concern over the sharp decline in FDI. In his speech, Dr Mahathir has also stated that more efforts should be made to increase domestic investment.

“This is where large family businesses can make up the major portion of the domestic investment,” added Dato' Jasani who is also Chairman of the Family Business Advisory Panel in Malaysia. “Our large family businesses range from large privately held Groups to public listed companies which include YTL Corporation, Genting, Sapura, MTD, Muda, Boon Siew and Kamdar.”

Whilst multinational companies may move to other countries like China for the slightest advantage, Malaysian family businesses have more long-term relationship with the nation.

The PRIMA research conducted in Malaysia earlier found that a large extent of family businesses here place a heavy reliance on family funds, thus posing a hindrance to those who do not have access to such resources. Financing has been cited as one of the most pressing issues by business owners in Malaysia. This concern is also echoed by family businesses around the world who are facing increasing pressure, with more and more worries about financing the firm and succession planning.

“It should be the Government's objective therefore to provide greater incentives for them to increase their domestic investment and strategise their local operations with their overseas ventures,” said Dato' Jasani. “Banks should also be aware that large family businesses are lower risks than businesses whose significant equity is not owned by a family or group. Their personal stake and strong drive to succeed are good ingredients for strong financial management and long term input to Malaysia's economy”.

70 per cent of the world's privately owned businesses are family-run, and they contribute greatly to the world's economy. However, many family businesses are faced with complex situations which arise when family or personal values come into conflict with the needs of the business. Grant Thornton's unique PRIMA Service identified twelve factors which can promote growth and develop the future potential of the business. Known as the Conceptual Framework , it identifies the overlaps and potential conflicts between family, ownership and management goals, and helps find solutions tailored to the owner-manager's overall needs and circumstances.

Conceptual Framework – Addressing the issues facing family businesses

The purpose of this framework is to enable problems to be seen from different perspectives and to ensure that they are not tackled in isolation. It provides a comprehensive review of practical management issues especially where there is close involvement of the family in running the business. The PRIMA approach is unique in the way that it looks at the needs of the business, the family, and the individuals who own and manage it, as a whole.

Dato' Jasani stated that the double launch of the PRIMA global research report and website comes in timely and is aimed at bringing family businesses around the world together in what is thought to be Grant Thornton's first dedicated online forum. Those interested are urged to log on to this website at www.familybizz.net . The site includes a discussion forum for owners and managers of family businesses, direct expert advice, a voting poll to find out people's views on topics of interest and regular “60-second” interviews with successful entrepreneurs.