Wal-Mart looks into India bribery
The investigation seems to have emboldened opposition lawmakers in New Delhi who are trying to overturn the government’s decision on foreign retailers.
The New York Times
MUMBAI, India — Wal-Mart’s Indian joint venture has suspended several senior executives and delayed the opening of some stores in the country as part of an internal bribery investigation, the company said Friday.
It is the latest in a series of setbacks for the retail giant’s international operations. It comes at a particularly sensitive time here because Indian policymakers recently allowed foreign retailers like Wal-Mart to open stores in the country. The investigation seems to have emboldened opposition lawmakers in New Delhi who are trying to overturn the government’s decision on foreign retailers.
In a statement, Bharti Wal-Mart, a 50-50 joint venture between the Indian conglomerate Bharti Enterprises and Wal-Mart, said it had suspended “a few associates” to ensure “a complete and thorough investigation.” The newspaper The Economic Times reported the suspended employees included its chief financial officer and its legal team, but the company would not confirm that.
This month, Wal-Mart disclosed it had expanded a bribery investigation that was initially focused on Mexico to India, China and Brazil. In April, The New York Times reported that executives at the company’s Arkansas headquarters had suppressed an internal investigation that found credible evidence its Mexican subsidiary had paid bribes in an effort to open more stores in that country.
Bharti Wal-Mart operates 18 wholesale stores in India that are allowed to sell goods to other businesses like retailers, hotels and restaurants. Most of its stores are in northern India, but it had planned to expand in the coming months in the south and west. Those plans have now been delayed, but the company said in a statement that “we remain excited about the opportunity to grow our business in one of the world’s most vibrant economies.”
Wal-Mart’s Indian joint venture also supplies about 200 supermarkets that are wholly owned by its partner’s Bharti Retail and which operate under the brand Easyday.
In a separate inquiry, Indian authorities are looking into whether Wal-Mart violated foreign investment rules by giving Bharti Retail an interest-free loan of $100 million that would later convert into a controlling stake in that company. Both companies have maintained they did not violate Indian investment regulations.
In September, Indian policymakers said foreign companies like Wal-Mart could directly enter the retail business with a local partner as long as they did not own more than 51 percent of the business. The long-delayed move came with significant political opposition — one important regional political party withdrew its support from the governing coalition in New Delhi that is led by the Indian National Congress Party as a result. Days after that change, Wal-Mart officials said they would open retail stores in the country in as little as 18 months.
On Thursday and Friday, opposition lawmakers disrupted the first days of the winter session of Parliament, demanding the government allow a debate and vote on the change in its retail policy. The demand was turned down.
The latest developments in Wal-Mart’s internal investigation could strengthen the opposition’s hand because Indian policymakers are struggling to recover from accusations of corruption involving industries like telecommunications, energy and mining.
“It showcases that these are Wal-Mart’s practices worldwide,” Prakash Javadekar, a lawmaker for the country’s largest opposition party, the Bharatiya Janata Party, said in a telephone interview. “This will sharpen the debate.”
Although it is unclear exactly what Wal-Mart’s investigators are examining, Indian analysts say it is common to encounter corruption in industries like retailing that are governed by numerous overlapping federal, state and local rules.
In some Indian states, retail chains have to secure 50 to 60 regulatory approvals before they can open a store, a process that can take months and provides numerous opportunities for bribery, said Arvind Singhal, chairman of Technopak Advisors, a consulting firm that specializes in the retail business.
“To me, much beyond the Wal-Mart example, I sincerely hope that there is a serious debate about why is it so difficult to do business in India,” he said. “All of these conditions have only made India a poorer country.”