February 17th, 2010

Russian Investments: IKEA Update

IKEA, the global furniture giant, recently fired their two executives who turned a blind eye on government bribes, but only to move their expansion project forward. Mikael Ohlsson, the chief executive and president for the Ikea Group, Ikea’s largest franchisee, which includes the Russian operation, said in a statement, “Corruption is totally unacceptable for Ikea.”

Corruption is a serious issue in Russia and it is routinely discussed by President Medvedev as a top priority for his government, however, not much as changed. The investment environment in Russia remains toxic and Russia is now falling behind economically and academically its BRIC rivals Brazil, India and China. In a recent Financial Times article, a large pension fund manager asked this question,

Russia defaulted in ’91, restructured in ’95, defaulted in ’98, took assets away from Yukos, from Shell from BP. If you cmplain, you get expelled from the country and then if you continue to complain you may die in London from polonium poisoning, or die in pre-trial detention in Russia. Now tell me why I should invest in Russia?

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