When Oleg Deripaska, a prominent Russian business tycoon, complained to President Medvedev of the endemic corruption plaguing Russia’s judicial system in which “one cannot receive a fair ruling,” Medvedev responded by faulting the businesses for paying the bribes in the first place. Can a business thrive in a corrupt system if it doesn’t “play by the rules?”
IKEA knows firsthand. It’s unlike any other furniture store in the world, and yet, IKEA is no different than any business trying to penetrate a new market.
Though the Swedish franchise first set up its flagship store just north of Moscow back in March 2000, a recent book by an IKEA representative who headed the venture recounts the behind-the-scenes struggles the company faced with Russian authorities to establish a market presence. For a society whose middle-class was eager to rid itself of its clunky Soviet-era furniture, IKEA’s arrival would be embraced. At least that’s what they thought.
In his book, Despite Absurdity: How I Conquered Russia While it Conquered Me, former head of IKEA local operations in Russia, Lennart Dahlgren, recounts the endless obstacles IKEA encountered for not playing by the “rules” and being blackmailed for bribes by corrupt officials who were blocking the opening of a new overpass that IKEA wanted to build to connect the store to a nearby highway. And the list goes on: from being fined for not removing the snow on its store’s roof in time to not ensuring the windows were hurricane-proof–yes, hurricane-proof! Even when IKEA sought legal advice, lawyers stopped short of just telling the Swedish company to “just pay.”
Unfortunately, this sort of practice is the norm for small and large businesses in Russia, even for companies with a squeaky-clean image like IKEA. Some talk about Russia as a missionary would about a wayward parish. Still, all hope is not gone. Just as rampant as corruption is in Russia, resources to fight it are growing. In 2006, as part of the Anti-Corruption and Small Business Protection Program of the Chamber of Commerce and Industry of the Russian Federation, CIPE and the Novorossiysk Chamber of Commerce and Industry published an anti-bribery booklet that graphically describes the Russian laws and regulations that govern the relationship between government agencies and small businesses, and how to deal with audits by enforcement agencies.
Corruption feeds ongoing political and economic failures in many countries by impeding market development, driving away investment, increasing the cost of doing business, and eroding the legitimacy of the law. If Russia wants to be a serious contender for the 2018 World Cup, it will have to learn to reverse a culture in which legal structures are vague and the rule of law is not strictly enforced.
Published Date: August 19, 2010