SINGAPORE - Family-owned businesses in Singapore are among the least prepared in Southeast Asia for what will happen after the current business leader retires or steps down, according to a study by The Economist Intelligence Unit (EIU) released on Tuesday (Jan 27).
Only 58 per cent of Singapore business families have prepared for succession while just 35 per cent have established formal wealth management structures such as private foundations and 41 per cent have trusts to manage inter-generational wealth transfer, EIU found.
Its research report, entitled "Building Legacies: Family Business Succession in Southeast Asia" was commissioned by Labuan International Business and Financial Centre (Labuan IBFC).
The study found that Indonesian family-run businesses, in contrast, reported the largest share of companies with formal succession plans. The survey found that 78 per cent have formal succession plans, with 57 per cent saying they have established private foundations and 53 per cent saying they have trusts to manage wealth and succession.
Said Kevin Plumberg, the editor of the EIU report: "Our research shows somewhat surprisingly that business families in Singapore, a financial hub for the region, lag in their use of foundations, trusts and external advisors when it comes to succession issues, whereas family-run companies in Indonesia are leaders."
"It is representative of the region's diversity as well as its uneven progress in addressing questions about succession," he added.
The report, based on a survey of 250 majority family-owned businesses from Indonesia, Malaysia, Singapore, Thailand and the Philippines also found that customers and investors have more trust in a family-owned business with a succession plan than those without, with 71 per cent of regional family business leaders acknowledging it is easier to attract investment with a succession plan in place.
Said Saiful Bahari Baharom, chief executive officer of Labuan IBFC: "Family-run businesses account for more than 60 per cent of all publicly-listed companies in ASEAN, making them an essential part of the region's growth."
"Considering the significance of these businesses to the region, this research has shown that there is an over reliance on informal structures such as family councils to manage succession issues, which are neither legally binding nor necessarily permanent structures."