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Interview with Khalid A. Al Zamil, Zamil Group

In the 1930s, a Saudi Arabian entrepreneur named Sheikh Abdullah Al-Hamad Al Zamil, founded what was to become one of Saudi Arabia’s largest private enterprises; the Zamil Group. Owned and managed by the family, the group is active in over 55 countries and employs around 10,000 employees. Sheikh Abdullah Al-Hamad Al Zamil at the time established a trade entity selling food and textiles and later expanded into real estate investment. Today, the Al Zamil family has a strong reputation in industrial investment and commercial interests. The family’s activities include air-conditioning manufacturing, food processing, steel fabrication and travel services. Moreover, Al Zamil group holds 25 percent stake in the Energy Central Company in Bahrain, went public with Saudi International Petrochemicals in 2006, and owns 50 percent of the National Power Company in Saudi Arabia.

Tharawat magazine spoke to Khalid A. Al Zamil, Managing Director, Strategic Planning and Business Development, Zamil Group, who spoke about the future of Arab economies, expansion strategies during the crisis, and the crucial ingredient of family business success.

What are the three chief characteristics a family business needs to have in order to make it to the third generation and beyond?

I think the chief characteristic a family business needs in order to be sustainable, is the separation of ownership and management. Secondly, you need a very good governance system. Thirdly, there is a great imperative for professionalism, meaning that it is necessary that the second and third generation prove their aptitude and skills to do the job properly. The next generation should not obtain their positions just because they happen to be the sons of the owners.

From which generation on wards do you believe instating corporate governance system makes sense?

I believe at the latest when the second generation becomes active a family business has to start proper corporate governance, an organisational structure, and instate systems that will sustain the growth and viability of the business.

What do you believe is the crucial ingredient that makes the Al Zamil family so successful?

I believe that the legacy of our father was crucial in our case. Today, the leadership of our oldest brother maintains this legacy and has a great impact on the way things run. Those two factors influence the family to be modest, honest and hard working. Also somewhat risk taking; we are a very entrepreneurial family. The legacy of our father and our upbringing in general made us feel very close to each other, I mean as brothers and sisters. We learned through our mothers that the younger generation ought to respect the elderly and the elderly will show understanding and empathy for the younger ones.

Also, one of our ways of taking decision is by consensus. If we fail to come to a consensus, we take a vote. Fortunately so far, we almost never have had to do this.

Is finding consensus becoming more difficult now that the family is growing?

The voting happens mostly on the board of directors’ level, but the voting system will remain even when the young generation will take over. On the company board and committees it works the same way.

In view of the recent developments in the global economy should Arab family businesses consider a makeover of their strategies?

This depends on their strategy so far. If their strategies are such that they can take the difficult times and absorb the impact of the slowdown then they should continue in the same way. However, they should have strategies that are adjustable to different environments and fast changing circumstances. This is a very crucial ingredient in my opinion. Nowadays you need to be flexible and able to move quickly.

Is expansion still a topic in these troubled times or should one lay low?

That is a very good question. I think troubled times are an opportunity for the successful and the strong companies; they can take advantage of the situation through mergers and acquisitions, especially if they themselves are healthy. But sometimes it’s more advisable to lay low and reflect and re-think your strategy; asset-wise and cash flow-wise. It will depend on the mentality of each family. It’s an observing period: one has to be careful but at the same time not be afraid of taking advantage of the right opportunities.

Your family has a long history of industrial investments with Zamil Industrial. Do you believe that there are inherent advantages to industrial investment as opposed to trade or real estate?

I believe in any successful economy you need trade, industry, real estate and services. We have been strong in industries and services. We are currently expanding and diversifying in a cautious way into the real estate sector. We proceed at the same speed as we did with industries and services. As the Arab world is growing its populations and economies, each family has to solidify their core businesses. Also, there are still growth opportunities; to excel at what they do and develop their services and industries as well as real estate are good opportunities for family business growth. Some may need some business development and new strategies to look into the future and to discover the promising sectors.

What do you believe is the importance of strategic alliances for Arab family businesses?

As a businessman I always think strategic alliances are positive moves that might eventually lead to joint ventures. I think the Arab world does not have enough strategic alliances. That is because of the attachment of the families to their businesses. Sometimes they are even shy towards selling and diversification. But I think, alliances and mergers are important and defensive moves that help you remain competitive.

How do you see the future of family businesses in the Arab World?

I see a very good future for family businesses in the region. It all lies with our deep-rooted drive toward entrepreneurship. Arabs will always remain entrepreneurs. Arab governments are encouraging entrepreneurship and I think therefore there is a big future for it in the region.

I believe family businesses represent at least 70-80 percent of the businesses. This provides the right climate to prosper and grow our economies.

Will regional collaborations between Arab countries become more likely?

I believe there has been a good move towards an interconnected and common Arab market. From my own experience I can say that I have been able to shift many of our products without having to pay customs. This is going to be more and more important to drive trade. I believe Arab governments and businesses are seeing more and more the importance of having such a common market even one extending to all Muslim countries. I believe this is an essential development; it will be the cornerstone of the success of the Arabic economies in the future. The bigger the market, the bigger the companies and the better the possibilities to attract technologies and to develop. This movement has to continue.

Can family businesses contribute to the regional recovery?

Definitely. Family businesses are the main pillars of the economy. As the private businesses thrive and succeed, we can see the economic engine moving. As you have the local ability of the population and society to be a significant consumer power, you are able to see self-sustaining powers leading to growth. Business growth in general, happens on many different levels. Their growth becomes a driver for the national economic engine. We need to have self-sustainable economies and growth in order to attract investors. And the main drivers will be Arab family business. Therefore it is important that we make sure that families adopt open attitudes and communicate core messages to the economy. It always seems to come back to the one crucial ingredient: professional corporate governances.

Tharawat Magazine, Issue 3, 2009