31 March 2014, 14:09

Western businesses sceptic about Ukarine's ability to overcome corruption

Western businesses sceptic about Ukarine's ability to overcome corruption

In the last 20 years, the issue of corruption has entered the agendas of all major political actors in Ukraine. It became a prominent factor in international development and democracy assistance to the region, too. 

Ukraine is the third major aid-receiving country in Europe. Almost half of Ukrainians say they desire Ikea products more than any other global brand, yet the largest home-furnishings retailer hasn’t been able to crack the market in a decade of trying. The reason: it won’t pay a bribe.

Stuck between the European Union and Russia, Ukraine has emerged as the most corrupt country on the continent, according to Transparency International. That and "incompetent" leadership are the reason a nation endowed with most of the ingredients needed to create a vibrant economy fell so far behind its peers, according to analysts.

"Even before this latest crisis, Ukraine was a mess beyond description," Nielsen, chief global economist at UniCredit SpA (UCG) in London, said. Successive governments "must take collective responsibility for what has been one of the worst-managed countries in modern history," Nielsen said, adding that many officials and their family members "became immensely wealthy along the way."

Compared with Ukraine, Russia "is whiter than snow," Lennart Dahlgren, the retired Ikea executive who spearheaded the company’s entry into Russia, said in an interview with Russkiy Reporter magazine in 2010.

Swedish furniture maker IKEA plans to invest 2 billion euros ($2.8 billion) in Russian retail centers, manufacturing and logistic chains through 2020, the company's Russia chief Walter Kadnar said.

By 2020, IKEA hopes to double the 76.4 billon rubles ($2.1 billion) revenues it generated in the 2012-13 financial year, Itar-Tass reported Monday.

IKEA currently operates 14 retail stores in Russia and plans to open 5 to 6 more sites, including several in the Moscow region. The company is considering 25 cities for possible future expansion.

The poorest EU states, Bulgaria and Romania, and even authoritarian Belarus are all now twice as rich as Ukraine, where total output is about the same as New Zealand, a country of 4.4 million people.

Whoever wins the presidency in Ukraine in May will face longer-term challenges such as cleaning up the courts and putting in place checks and balances that will help eradicate corruption and attract the likes of Ikea, according to Lilit Gevorgyan, senior analyst at IHS Global Insight in London.

The country has yet to recover from 2009, when output in current dollars plunged a record 35 percent from its $180 billion peak the year before, World Bank data show. The government expects GDP to shrink another 3 percent this year in real terms, as it cuts spending.

Voice of Russia, bloomberg.com, businessweek.com

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