The Landmark Group of the UAE has trimmed its retail expansion plans for Iraqi Kurdistan due to the failure of civil servants working in the region to receive salaries for more than seven months because of a dispute between the Kurdistan Regional Government and Iraq’s central government, the MEED Kurdistan Projects conference was told this afternoon.
“We started our business in Erbil in February 2013 and we chose to invest in Kurdistan because of its stable security situation, positive financial outlook and rising living standards,” Landmark Group’s Iraq country head Bhupash Malhotra said.
But the difficulties the company has faced have proven to be greater than expected.
“Our plan was to have 100 stores in five years and we should have 25 stores in Iraqi Kurdistan by now but we only have four,” Malhotra said. Two are in Erbil and two are in Sulaimaniyah. Landmark now plans to have opened a total of 23 stores in Iraqi Kurdistan by the end of the year. Its five-year plan calls for Landmark retail outlets to have total floor area of 1 million square feet.
The suspension of civil servant salaries due to a dispute with central government has dealt a heavy blow to sales in Landmark stores in Iraqi Kurdistan.
“We initially saw a 130 per cent annualised growth rate but in the last seven-eight months, the growth has dropped to 25-30 per cent. That is a significant concern and we are proceeding with extreme caution. If this issue doesn’t resolve itself, we shall further slow down our plans.”
Malhotra said that Landmark’s plans could be also jeopardised by further serious issues.
“There are concerns about structural integrity of building work and two buildings we planned to lease have collapsed,” Malhotra said.
“There are not a lot of malls and the malls that are coming up are not run by mall operators,” Malhotra said. “They are owned by family businesses who don’t know how to manage malls. There is no proper leasing policy and the game is always short-term.”
“We have set a goal to have 23 stores in dedicated malls with proper leasing arrangements,” Malhotra said.
“The expectations on short-term leases are unacceptable,” Malhotra said. “Minimum ten-year leases are what we ask for but owners tend to shy away from that in favour of short-term leases.”
“Customs duty is erratic,” Malhotra said. “Finding the right transport system is a key to our business at this point.“
“Bringing skilled labour into the country is the biggest challenge so far,” Malhotra said. “The rules change from month to month and developing skills in Kurdish is a challenge.”
“Our next big issue is banking,” Malhotra said. “Remitting funds back to the home country is challenging. We are struggling with it on a regular basis. Banks close in the afternoon and we’ve never had to pay money to deposit money in a bank before…We are looking to an international bank to come into this market with their practices.
Malhotra said that retailers face additional risks because owners don’t insure their buildings. “To continue to invest, we need to have this regulated or stipulated,” Malhotra said.
The Landmark Group is present in 20 countries and has 45,000 employees. Its brands include Centrepoint, Babyshop, Splash, Shoe Mark, Lifestyle and Beautybay.
MEED’s Kurdistan Projects 2014 Conference was organised in collaboration with the Kurdistan Regional Government, the KDBC and the UKTI. Taqa is strategic event partner. Conference sponsors are Drake & Scull, Falcon Group and Hill International. Jotun is exhibitor and Parsons is networking programme sponsor.