
Why IKEA Is Fed Up with Russia - cellis
http://www.businessweek.com/magazine/content/09_28/b4139033326721.htm
======
Confusion
There was an article in one of our national newspapers this weekend that shows
how deep the corruption goes. A huge investment company, with 4 billion in
assets, was unwilling to pay up and was driven out of business. Several
government officials committed fraud to the extent of 290 million dollars
(seizing taxes the company paid to the Russian government) and despite sending
different parts of the government piles of evidence, no one did a thing.

One thing was clear from that article that should be clear to everyone here:
Russia is not a good place to do business these days. Your competitors are the
government are the criminals.

~~~
ilyak
Well, you know why they still do business here? The answer is M O N E Y.

So, they bribe to make it happen, thus feeding the corruption loop, and don't
see any problem with that! Until they do. Then, they brag the "ikea
generation" crap in newspapers.

~~~
Confusion
If you need to pay bribes, you need to raise your prices to still make a
profit. Your customers, i.e. _you_ , need to pay more. Corruption hurts the
population of a country, as every cent comes directly out of their pockets.
That is partly why people in properly democratic countries have, _and keep_ ,
a higher standard of living.

~~~
radu_floricica
It's much worse. The cost of bribes is bigger then the actual sum, and
incomparable for the economy as a whole.

A bribe-based economy has very high barriers of entry, especially when the
main client in your industry is the state. Which means low competition which
means... lots of bad things.

~~~
stcredzero
_low competition which means... lots of bad things._

Example: Cell Phone service in the US. Actually, that's not the worst
possible, but we are lagging the rest of the world.

~~~
aarongough
Luckily you're still getting better service than us poor Canadians!

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tallanvor
Problems like this seem to be endemic to Russia. Not only is corruption
extremely common, but outside investors also have to worry about the
government basically taking their shares and selling them to Russian
companies, leaving them with nothing to show for the money they invested.

------
steveblgh
The article makes the implicit claim that IKEA does a favor to Russians by
selling them stuff and not Russians do by buying the stuff. I'm not saying the
opposite just that this is not as obvious as the article makes it sound. It
says that they invested x billions of dollars. Obviously they are planning to
make a profit, so on the net money will leave the country due to their
presence. If I understand correctly they want to open retail stores not
manufacturing plants. Did I miss some finer point ?

~~~
Retric
In theory, trade only happens when it benefits both parties. I might hate the
local Exxon selling soda for 2$ a bottle, but I can still buy it at other
stores. The only reason you complain is they are charging you for the amount
of effort they save you and not their costs.

So, opening a store is a net gain, as is investing 4 billion in the economy.
_In theory._

~~~
steveblgh
Of course state protectionism might help local furniture manufacturers to
catch up and grow their own business and that might actually benefit the
Russian economy even more. Perhaps the legal, administrative burdens are there
with a purpose, or maybe I'm reading too much into it...

~~~
laut
Protectionism is bad. It doesn't benefit an economy. It can benefit the
protected industries short term as well as the people they bribe to get the
protection. But overall it is bad.

See <http://en.wikipedia.org/wiki/Comparative_advantage> for instance.

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froo
I'd just like to take the time (and the modding down this comment will
probably get) to thank HN, simply because this article has been posted for
more than 4 hours and nobody has yet made an "in soviet russia" joke.

Thank you all for the continuing maturity.

~~~
coconutrandom
In Hacker News, Soviet Russia thanks YOU!

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ilyak
Ну и пусть пиздуют со своим китайским барахлом ломающимся.

Seriously: you want to have a business in the country, a profitable and fast-
growing one, yet you have complaints about the process. I guess, either shove
it or leave.

In Moscow, there was an accident when an aquapark full of people collapsed due
to bad engineering and construction, too. So, maybe those delays aren't just
corruption? Also: In South Korea, there's a history of mall collapsing under
its weight due to poor engineering and exploitation;

The bottom line is: If it would be corruption alone, they'd bribe and move on;
they're huge. So, it's not just corruption. And as of stopping investments,
maybe they're just out of money in their Sweden?

"The retailer has become such an icon of Russia's boom that today's yuppies
are called "the Ikea Generation."" This is crap, never heard anything remotely
like that. Perhaps stop making things up?

~~~
presto10
Why does one have to accept the practise of corruption, to have a profitable
and fast-growing business, as you seem to suggest?

With your reasoning, we could put forward that maybe the Moscow accident was
caused by corruption: the builders paid off the inspectors to save on building
costs.

The bottom line is: Ikea and Ingvar Kamprad has stated several times that they
will not accept the Russian business practise of corruption. This is one of
the reasons why some of Ikea's new locations have stood unopened for years,
while waiting for permits from local governments (read: while refusing to pay
bribes).

Может тебе сам перестать придумывать вещи, и посмотреть в зеркало?

~~~
ilyak
Well, you can either accept "practice of corruption" or circumnavigate around
in some way, or not have a business.

About the Moscow accident; I'm sure it was, partly. But I don't see how is
this fact going to help if their mall in Samara has safety problems, indeed.
If it doesn't, as I've told, they have their three choices.

In short: I DO think there's a problem with corruption in Russia; I just DON'T
see a problem with IKEA packing its bags and leaving.

~~~
berntb
You might like IKEA, or not.

There is an easy argument to make that they are a net destroyer of taste and
destroy culture. I am not certain, personally.

But as a business, IKEA is as serious as a heart attack and is a competitor
that seems unbeatable; an inspiration for all.

IKEA builds and manage an incredible amount of stores everywhere -- without
any serious security problem. I've never read any article that IKEA complain
about bribes in other countries.

Be grateful that the company risks billions of dollars by becoming unpopular
among violent criminals like Russian politicians. It is bettering your
country; economists claims that corruption destroys a country.

You don't help your suffering country by defending your politician-thieves,
which even makes the politicians of my home country seem mild.

(Sorry for wasting space by beating a dead horse.)

~~~
ilyak
I don't think it would have any noticeable consequences for anyone except IKEA
itself.

~~~
ks
I think it will have noticable consequences when IKEA has to go, because this
is not an isolated case. What kind of a signal does that send to other
investors?

------
known
Russia is Fed Up with IKEA.

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ciudilo
It is an interesting article, but why is it posted on HN?

~~~
shiranaihito
Might it be because it's an interesting article?

~~~
ciudilo
I am new here, was just curious.... Thanks

