The Foreign Investment Promotion Board (FIPB) on Monday approved Swedish furniture maker Ikeas R10,500-crore proposal to set up 25 stores in the country on the lines of its global model.
This means the multinational will be free to sell products apart from furniture in its store and also run its signature restaurants and cafes.
However, the proposal still needs to be cleared by the Cabinet Committee on Economic Affairs (CCEA) as required for all foreign investments over R1,200 crore.
Welcoming the FIPB approval, commerce and industry minister Anand Sharma said: The decision of FIPB to recommend the Ikea case for investment was cleared, which is a positive development. The government is committed to play a constructive role in encouraging FDI especially in areas which create jobs and provide technological advancement. Globally, Ikea has a business model which integrates in its embrace SMEs and domestic industry, making them the part of global value chain.
Sources said Sharma was keen that the FIPB cleared the proposal before he left for the World Economic Forum in Davos on Tuesday to send out a positive signal to investors.
In fact, it was Sharma who told the Express Groups Idea Exchange programme for the first time that the government would clear Ikeas proposal to set up stores on its global model. Sharma had said that he had approved the proposal and the matter would be officially cleared by the FIPB once Ikea provided the clarifications sought by the government. Ikeas proposal based on its global model, which includes cafeterias, will be approved. The company simply needs to clarify what its global model is because we had sought a clarification on why it was not there in their earlier proposal, Sharma had explained on January 16.
Ikea, which reported revenues of 26 billion euros in 2011 and has 338 stores had sought a review of the decision that was taken by the FIPB in November wherein while approving its first tranche of investment worth R4,200 crore, the board had struck off 18 product categories of the 30 proposed and refused permission to the company for opening its signature cafes and restaurants in the stores.
The board had said it could not sell items such as home and
office-use products, textiles, apparel and fabric, electronic items, leather products, toys, books, and lifestyle and travel-related items. Ikea then approached the industry department, which forwarded the request to the FIPB seeking a review