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IKEA fed up with Russia's Bureaucracy

Companies / Russia Jun 24, 2009 - 06:31 AM GMT

By: Pravda

Companies Sweden’s Ikea intends to freeze new investment projects in Russia over bureaucratic problems. The problems with the opening of the huge Mega Mall in the city of Samara became the last straw: the company has not been able to open the complex for two years already, The Vedomosti newspaper wrote.


“We will suspend our expansion in Russia until the unpredictable bureaucratic system shows clear vestiges of improvement,” Ikea’s President Anders Dahlvig said in an interview with Sweden’s Dagens Industri newspaper.

The General Director for Ikea Russia, Pyotr Kaufman, said that Dahlvig’s statement to suspend the investments in Russia was based on the unpredictable character of administrative procedures in a number of Russian regions. Ikea has been waiting for years to receive the complete package of enabling documents to open Ikea and Mega Mall in the city of Samara. Furthermore, Ikea’s primary owner, Ingvar Kamprad accused Russia’s energy companies of fraud (135 million EUR) after they supposedly issued overestimated electricity and gas invoices.

Ikea originally planned to complete the 130,000-square-meter Mega-Samara trade complex in November of 2007. The opening of the complex has been delayed eight times since then. Samara’s State Inspection for Construction Control would not deliver the enabling documentation for the construction of Mega-Samara over countless reasons.

“All of a sudden it turned out that our complex was not resistant to hurricanes,” Pyotr Kaufman said.

The cost of the Mega-Samara project doubled over the stagnation period from 4 to 8 billion rubles. However, Ikea is not hopeless. The company will finish the complexes, the funding of which has already been started in the cities of Samara, Omsk, Ufa and in the Moscow region. Ikea’s store in Omsk is to open in July, although the opening was originally scheduled for the spring of 2009. Ikea will continue the talks about the realization of its other projects that have already been launched in Russia, although the company will not be investing anything in them so far.

The withdrawal of such a large foreign investor from the Russian market may cause considerable damage to the image of the country.

“Ikea is known for its determination to work despite any bureaucratic obstacles. Now the company suddenly decided to decrease its investment activity in the country,” a governmental official said on conditions of anonymity.

Ikea, founded in 1943, has 296 stores in 36 countries worldwide, including eleven stores in Russia. Ikea Group also owns eleven Mega Malls in Russia. The company plans to receive $29.8 billion of profit in 2009, The Kommersant wrote.

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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