A dispute over sourcing regulations is clouding plans by Sweden’s IKEA to open 25 of its trademark blue-and-yellow stores in India as it seeks new markets for its flat-pack furnishings.
IKEA last month asked India for permission to launch retail operations in India, promising to invest US$1.9 billion over the coming years — part of a broader push into emerging markets including China and Russia.
IKEA’s request gave a vital boost to the Indian government, which hailed it as a sign that global investor confidence “is still intact” despite a sharply slowing economy, a slew of corruption scandals and suffocating red tape.
Photo: AFP
However, now New Delhi’s insistence that the world’s biggest furniture retailer source 30 percent of its supplies from small Indian manufacturers has become a sticking point.
India defines “small business” as any firm whose plant investment does not exceed US$1 million. IKEA says small firms would fast outgrow the cap after they started supplying the Swedish giant and become much bigger players.
“Small industries need to be allowed to grow and develop,” IKEA spokeswoman Josefin Thorell said in an e-mail late last week, adding it was important that the definition of small industry provide “flexibility.” IKEA says suppliers should continue to qualify as small businesses even after they exceed the investment ceiling. It has also asked that its compliance with the sourcing target be calculated over a 10-year span rather than one year, saying it would be “impossible for the IKEA Group to meet this requirement from day one.”
Indian media at the weekend reported government divisions over IKEA’s bid for relaxation of the sourcing rules that critics say discourage overseas investment.
The sourcing stipulation is part of efforts by the center-left government to defuse populist opposition to the entry of big foreign retailers in a country where small mom-and-pop stores dominate as well as to boost local industry.
India’s Business Standard newspaper said the government body responsible for industrial development had agreed to tweak the rules to suit IKEA.
However, the Times of India said the small business ministry opposed any dilution of the regulations on grounds it would hurt small enterprises.
Given IKEA’s high-profile and Indian Prime Minister Manmohan Singh’s statement on Friday that he wants to make the country a “more business-friendly place,” most analysts believe a compromise will be found.
IKEA, which in 2009 scrapped plans to enter the market due to regulatory concerns, says it has a “long-term vision” for India.
“Keeping in mind IKEA’s stature, I’m sure the government will work out something,” said Saloni Nangia, president of retail consultancy Technopak.
“Meeting the 30 percent sourcing target will take time — IKEA just wants some latitude,” she added.
Privately held IKEA says it is “eager” to open stores in the country of 1.2 billion people, but has set no target date.
It made its investment announcement after India allowed foreign retailers selling one brand to own 100 percent of their Indian businesses, instead of 51 percent, as part of moves to liberalize the sector.
IKEA sees huge potential in India’s burgeoning middle class whose “wallet is still thin,” but who want “inexpensive but nice home furnishings,” IKEA chief executive Mikael Ohlsson said on a scouting mission to India two years ago.
“It will be good for IKEA to have such a large market. Even with the economy slowing, the retail market has a strong future,” Nangia said.
Technopak estimates the retail market is generating sales of US$470 billion a year — of which only US$27 billion comes from “organized retail” or chain stores.
Retail sales are seen hitting US$675 billion over the next five years — out of which US$85 billion will come from chain stores.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last