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Friday, September 21, 2007

Ikea Inches Closer To Land Deal For Store In Ukraine

Hot topic today: IKEA. There is another article from Kiev Post.

Ikea inches closer to land deal for store in Ukraine
By John Marone, Kyiv Post.

A multinational furniture retail giant intent on expanding its presence in Ukraine looks set to finally get land to build a store after years of delay.

IKEA, a Swedish conglomerate registered in the Netherlands, has been trying for more than three years to acquire a plot on Kyiv's left bank, where it wants to put up a $400 million shopping mall, but a dispute over the land has delayed the vast shopping mall project.

Now, IKEA is close to clinching retail space in Odessa. "Yes, it looks like we are on our way," Director of IKEA's Ukrainian office Frida Malmqvist told the Post on Sept. 12.

She said negotiations are still in progress for land in six different Ukrainian regions, but "we are currently most hopeful about Odessa." Malmqvist said the company is prepared to invest around $2 billion in these projects, but first has to get land.

IKEA had originally set its sights on launching Ukrainian retail operations at a wooded site on the edge of Kyiv, but the city has stalled approval, citing environmental concerns.

The plans for Kyiv's left bank include a family shopping center with up to 150 different retail and entertainment facilities.

The main problem in acquiring land in Ukraine, according to Malmqvist, is a shortage of adequate plots. IKEA seeks green areas on the outskirts of urban areas but close to main transportation arteries.

The task is complicated by Ukraine's moratorium of the sale of agricultural or forest land, which necessitates getting a waver from top officials.

Amidst the country's continuing political chaos, the question becomes: Who do you ask?

In July 2004, IKEA founder Ingvar Kamprad first met with now former President Leonid Kuchma to discuss the company's investment plans. In March 2005, Kamprad returned to Ukraine to meet with newly elected President Viktor Yushchenko.

It was during this visit, according to IKEA spokespeople, that Kamprad received "verbal approval" for the company's $1.2 billion investment plans.

But negotiations were stalled, as environmental groups, such as Ukraine's Greens Party, protested against developing the wooded area that same year. The city offered IKEA an alternative plot of land in another part of the city, but IKEA continued to pursue the left-bank plot.

Six years earlier, in March 2000, the furniture giant had opened its first store in Moscow, where it has pumped hundreds of millions of euros into building retail outlets surrounded by modern shopping malls replete with restaurants and recreational facilities.

"We are always looking for new places," Malmqvist said. "But we have still not given up hope of opening our first store in Kyiv," she added.

In the meantime, IKEA Ukraine is involved in another segment of the company's operations - buying and exporting locally made furniture. "We don't just open stores, we trade furniture as well to widen our income base," Malmqvist said.

Currently, IKEA Ukraine has around 20 employees in Ukraine involved in seeking out Ukrainian furniture makers that meet the international company's standards. The furniture is exported and sold abroad under the IKEA brand name.

IKEA launched its Ukrainian trading operations in 2005. "They are still very small compared to Russia," Malmqvist said.

IKEA has also operated a saw mill and furniture plant in western Ukraine's Transcarpathia Region for more than a decade, but is better known for its furniture outlets and the shopping centers it builds around them.

The Swedish company sells low-priced products, including furniture, accessories, bathrooms and kitchens at retail stores around the world.