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August 28, 2009
Why Russians don’t Like Money?
(or Why Kremlin doesn’t Want Good PR?)

IKEA-Rostov.jpg
Entrance to an IKEA store in Rostov, Russia.

As economy is sliding down, and even the construction of the Moscow City is up in the air, one would think that Russians, and Kremlin especially, would want as much foreign investment as possible. It is well-known that Russians have had highest levels of disposable income comparing to other nations, and retail has made many Western companies wealthy. Among such companies was IKEA that has three stores in Moscow alone. IKEA built factories, streamlined supply chains, employed thousands of Russians, brought its products to the nation, and has helped Kremlin to look Western more than pictures of shirtless Putin did.

Nine years after the opening of the first IKEA store in Russia, and in the midst of the worst global financial crisis, one would think Russian regions, and especially Kremlin, would want more foreign money and positive PR abroad. IKEA had originally planned to open its new 1,400,000 square feet complex in November 2007 in Samara. But a year and a half later, the store remained closed. The Samara’s store’s opening was reportedly delayed on eight separate occasions, with local officials refusing each time to supply the necessary documents. The latest objection, according to IKEA, has been that the store is insufficiently resistant to hurricanes. That’s a highly unusual requirement, in a region not previously noted for its high-power winds, reported the BusinessWeek. While its sales in Russia have been growing beyond expectation, problems seemed to have been piling up even faster; IKEA has publicly raged again against “blackmail, sabotage and pressure for bribes” from Russian officials. If Kremlin’s latest slogan have been “fight with corruption” and “attract foreign investment,” can someone help me understand if it’s really that hard to imprison the gangsters with government titles who are not only killing the foreign investment (which fell by 45% in 2009), but alsoare hurting Russia’s employment, economic development, and image abroad.



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Comments

Pls keep up with the news:

IKEA has now suddenly decided they DON'T have any problems in Russia and plan to continue their expansion apace:

IKEA to Resume Russia Expansion, Says Officials Obeying the Law
http://www.bloomberg.com/apps/news?pid=20601085&sid=aEmJUtaRYwbA


IKEA Upbeat After 10 Years of Problems
http://www.moscowtimes.ru/article/1009/42/381398.htm

etc.

IKEA are a relentlessly aggressive multinational retailer and property developer. They were playing hard-ball, via the media, with the Russian bureaucracy, hoping to steamroll over them, or get special treatment.

One shouldn't automatically assume IKEA has the right to do whatever they want. Some of the objections they have faced could have been possibly legitimate local government concerns about IKEA's developments.

In any western country even a cafe has to meet a daunting list of local regulations. Is is a surpise that a IKEA mega mall should have to face a pile of paperwork ANYWHERE to get approved.

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Russia Blog presents up-to-date news, facts and commentary on the state of events in Russia and the former Soviet Union. The blog is managed by Yuri Mamchur, Director of Discovery Institute's Real Russia Project, a member of MBA class 2011 at Vanderbilt University's Owen Graduate School of Management, and a composer in his spare time.


 






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