MUMBAI Wal-Marts 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 on Friday.
It is the latest in a series of setbacks for the retail giants international operations and comes at a particularly sensitive time here because Indian policy makers just recently allowed foreign retailers like Wal-Mart to open stores in the country. The companys investigation seems to have emboldened opposition lawmakers in New Delhi who are trying to overturn the governments decision on foreign retailers.
In a statement, Bharti Walmart, 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 Economic Times newspaper reported that the suspended employees included its chief financial officer and its legal team but the company would not confirm that.
Earlier this month, Wal-Mart reported that it had expanded a bribery investigation to India, China and Brazil that was initially focused on Mexico. In April, The New York Times reported that executives at the companys Arkansas headquarters had suppressed an internal investigation that found credible evidence that its Mexican subsidiary had paid bribes in an effort to open more stores in that country.
Bharti Walmart 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 worlds most vibrant economies.
Wal-Marts Indian joint venture also supplies about 200 supermarkets that are wholly owned by its partners 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 that they did not violate Indian investment regulations.
In September, Indian policy makers 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 amid 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 that the government allow a debate and vote on the change in its retail policy, a demand that was turned down.
The latest developments in Wal-Marts internal investigation could strengthen the hand of the opposition because Indian policy makers are already struggling to recover from allegations of corruption involving industries like telecommunications, energy and mining.
It showcases that these are Wal-Marts practices worldwide, Prakash Javadekar, a lawmaker for the countrys largest opposition Bharatiya Janata Party, said in a telephone interview. This will sharpen the debate.
Though it is unclear exactly what Wal-Marts investigators are looking at, 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. Often the regulatory requirements are holdovers from a distant era. Stores that want to sell thermometers, for instance, often have to obtain approval from a department in charge of weights and measures, Mr. Singhal said.
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.
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