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Indonesia has the Largest Share of Companies with Succession Plans.


JAKARTA, 29 January 2015 – A new report commissioned by Labuan International Business and Financial Centre (Labuan IBFC) shows that family businesses in Indonesia are among the best prepared in Southeast Asia for what will happen after the current business leader retires or steps down.

The research report entitled Building Legacies: Family Business Succession in Southeast Asia, by The Economist Intelligence Unit (EIU), finds that 78% of Indonesian business families have prepared for succession, with 57% saying they have established formal wealth management structures such foundations and 53% saying they have trusts to manage succession and inter-generational wealth transfer.

In contrast, Singaporean family-run businesses reported the lowest share of companies with formal succession plans. The survey found that only 58% of family businesses in Singapore have formal succession plans while just 35% of business leaders in Singapore have a private foundation to manage succession issues and ensure wealth preservation.

Kevin Plumberg, the editor of the report, said: “Our research shows that family-run companies in Indonesia are leaders when it comes to succession planning, and somewhat surprisingly 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. It is representative of the region’s diversity as well as its uneven progress in addressing questions about succession.”

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% of regional family business leaders acknowledging it is easier to attract investment with a succession plan in place.

Despite Indonesia’s market leading position, the majority of family businesses still heavily rely on informal governance structures such as family councils to deal with family conflict and succession issues. More than 70% of business families in Indonesia use family councils to discuss and implement succession plans.

Saiful Bahari Baharom, Chief Executive Officer of Labuan IBFC, said: “Family-run businesses account for more than 60% 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.”

The full report is available online: http://bit.ly/1wBsDo9

About Labuan International Business and Financial Centre

Labuan International Business and Financial Centre (Labuan IBFC) has a wide range of business and investment structures facilitating cross-border transactions, business dealings and wealth management needs.

As Asia Pacific’s premier midshore international business and financial centre, Labuan IBFC provides a wide spectrum of financial products and services for corporations and individuals, both in the conventional and Islamic space. The jurisdiction has moved beyond banking, capital markets, leasing and insurance to also include protected cell companies, partnerships, trusts, foundations and an international shipping registry, among others.

We work closely with intermediaries such as tax advisors, accountants, legal firms, trust companies, registration agents and investment banks representing businesses looking to tap into Asia’s economic growth facilitated by a robust yet business-friendly legal framework.

For more information, please visit www.labuanibfc.com.

 

About The Economist Intelligence Unit

The Economist Intelligence Unit is the world leader in global business intelligence. It is the business-to-business arm of The Economist Group, which publishes The Economist newspaper. The Economist Intelligence Unit helps executives make better decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies. More information can be found at www.eiu.com or www.twitter.com/theeiu.

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