Bribe-taking forces Ikea to halt investment in Russia
(MOSCOW) Ikea said on Tuesday that it was suspending further investment in Russia, apparently because of pervasive corruption and demands for bribes.
The announcement came after a rare statement by Ikea’s 83-year-old founder in a radio interview that Ikea had decided not to solve problems by slipping money under the table.
Russia’s president, Dmitri A Medvedev, has acknowledged that corruption is a national problem, and curbing official corruption is one of the goals of his tenure.
Mr. Medvedev has signed a law prohibiting surprise inspections from fire and health authorities of the type often used to extort companies, and has required bureaucrats to disclose not only their own income and assets but their spouses’, a once common conduit for bribes.
Beyond embarrassing Mr. Medvedev’s administration, the Swedish retailer’s public stance could mark an economic turning point if it leads to more Western businesses speaking out against corruption here.
The decision is particularly damning for Russia because Ikea runs outlets in dozens of countries around the world and is hardly thin-skinned when it comes to dealing with bureaucracies.
‘We all support the anti-corruption policies of President Medvedev,’ Elena A Panfilova, Russian director of Transparency International, the anti-corruption group, said in a telephone interview. ‘But people need to see real results. And if companies like Ikea don’t see results in their daily business practices, it’s sad news for Russia.’
In a statement, Ikea’s Russia director cited the ‘unpredictability of administrative processes’ in Russia as the basis for the decision.
Outside experts said that was the company’s way of describing a pattern of bribe-taking and shakedowns by Russian officials that had become intolerable.
‘Ikea as a major shopping centre developer wishes to invest in Russia to serve our customers and bring jobs and growth,’ the director, Per Kaufmann, said in the statement. ‘Yet, as long as the principal issues being crucial for Ikea development in Russia remain pending, we have to put all new investment plans on hold.’
Ikea’s announcement came after a series of public complaints, including from the company’s founder, the secretive billionaire Ingvar Kamprad, who went on Swedish radio to complain that Russian authorities had cheated the company out of millions of dollars by overcharging for electricity. Mr. Kamprad linked the problems to Ikea’s decision not to pay bribes in Russia.
Western business executives have complained privately for decades that bribery is an integral part of Russian business culture, often tolerated or silently rebuffed. In fact, foreign companies retain legions of lawyers so they can adhere scrupulously to regulations in hopes of avoiding providing an opening for bribe-seeking officials.
Russia has fared badly on the group’s corruption perception index, tying with Bangladesh, Kenya and Syria for 147th place, out of 180 countries.
The traffic police routinely take cash bribes, and in popular lore, their large motorcycle gloves are especially designed to store wads of bills.
However, it is the next level of official venality, so-called administrative corruption, that is most harmful to business as fire, sanitary, tax, customs and other authorities with the power to halt business activity demand bribes.
‘It becomes a choice of businesses either to pay or get involved in years and years of paperwork exchange,’ Ms Panfilova said\. \-- NYT
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Bribe-taking forces Ikea to halt investment in Russia
(MOSCOW) Ikea said on Tuesday that it was suspending further investment in Russia, apparently because of pervasive corruption and demands for bribes.
The announcement came after a rare statement by Ikea’s 83-year-old founder in a radio interview that Ikea had decided not to solve problems by slipping money under the table.
Russia’s president, Dmitri A Medvedev, has acknowledged that corruption is a national problem, and curbing official corruption is one of the goals of his tenure.
Mr. Medvedev has signed a law prohibiting surprise inspections from fire and health authorities of the type often used to extort companies, and has required bureaucrats to disclose not only their own income and assets but their spouses’, a once common conduit for bribes.
Beyond embarrassing Mr. Medvedev’s administration, the Swedish retailer’s public stance could mark an economic turning point if it leads to more Western businesses speaking out against corruption here.
The decision is particularly damning for Russia because Ikea runs outlets in dozens of countries around the world and is hardly thin-skinned when it comes to dealing with bureaucracies.
‘We all support the anti-corruption policies of President Medvedev,’ Elena A Panfilova, Russian director of Transparency International, the anti-corruption group, said in a telephone interview. ‘But people need to see real results. And if companies like Ikea don’t see results in their daily business practices, it’s sad news for Russia.’
In a statement, Ikea’s Russia director cited the ‘unpredictability of administrative processes’ in Russia as the basis for the decision.
Outside experts said that was the company’s way of describing a pattern of bribe-taking and shakedowns by Russian officials that had become intolerable.
‘Ikea as a major shopping centre developer wishes to invest in Russia to serve our customers and bring jobs and growth,’ the director, Per Kaufmann, said in the statement. ‘Yet, as long as the principal issues being crucial for Ikea development in Russia remain pending, we have to put all new investment plans on hold.’
Ikea’s announcement came after a series of public complaints, including from the company’s founder, the secretive billionaire Ingvar Kamprad, who went on Swedish radio to complain that Russian authorities had cheated the company out of millions of dollars by overcharging for electricity. Mr. Kamprad linked the problems to Ikea’s decision not to pay bribes in Russia.
Western business executives have complained privately for decades that bribery is an integral part of Russian business culture, often tolerated or silently rebuffed. In fact, foreign companies retain legions of lawyers so they can adhere scrupulously to regulations in hopes of avoiding providing an opening for bribe-seeking officials.
Russia has fared badly on the group’s corruption perception index, tying with Bangladesh, Kenya and Syria for 147th place, out of 180 countries.
The traffic police routinely take cash bribes, and in popular lore, their large motorcycle gloves are especially designed to store wads of bills.
However, it is the next level of official venality, so-called administrative corruption, that is most harmful to business as fire, sanitary, tax, customs and other authorities with the power to halt business activity demand bribes.
‘It becomes a choice of businesses either to pay or get involved in years and years of paperwork exchange,’ Ms Panfilova said\. \-- NYT
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