IKEA Wins MinistryТs Help Resolving Investment Snags
IKEA could reverse its decision to freeze Russian expansion after the Economic Development Ministry promised to help solve several key issues, including the completion of its Mega complex in the Samara region, ministry and company officials said.
The Swedish retailer had two serious violations keeping it from getting permits, said Deputy Economic Development Minister Stanislav Voskresensky.
IKEA’s product labeling did not comply with Federal Consumer Protection Service requirements, which resulted in problems obtaining sanitary clearances, he said. Voskresensky said the issue has been solved, and the products cleared by customs officials.
The second problem, he said, is the way IKEA has been treated in court.
In June, IKEA founder Ingvar Kamprad said regional energy providers cheated the company out of 135 million euros ($189 million) by inflating prices for electricity and gas, an IKEA representative said.
The company filed several lawsuits, some of which were thrown out because the courts said they did not comply with legal procedures, the representative said.
The federal government is stepping in to solve this problem as well, said Ismail Dzharashtiyev, adviser to IKEA’s general director in Russia and the CIS.
It will also help the company complete the construction of its retail complex in Samara — a move that could lead IKEA to consider unfreezing investments, Dzharashtiyev said.
The company put its Russian expansion plans on hold last month after it was not able to finish the construction of a Mega complex in the Samara region because local officials refused to provide the necessary permits, a company spokesman said. During the three years that IKEA tried to obtain the permits, the cost of the project doubled to 8 billion rubles, the spokesman said.
Officials in Samara, however, are not ready to compromise. The IKEA project does not comply with city planning laws or safety and reliability requirements, said Vladimir Nikitin, head of the inspectors’ office for construction.