Retail trade is divided between major retailers and the state

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April 22, 2016 18:25

On February 8th, at the meeting to hear reports of the Belarusian Cooperative Union (Belkoopsoyuz), privatization of consumer cooperatives was declared inadmissible.

Belkoopsoyuz remains the last major state-owned retailer. The state does not allow private retailers in the rural areas not to lose its monopoly and high incomes. Retail market will be further consolidated and other means will be used to increase government revenues from retail sales. 

Retail sales in Belarus are one of the most dynamic economic sectors. In 2012 the largest private Belarusian retailer Evroopt alone increased the number of shops from 68 to 120. Large chain retailers are actively buying smaller chains and shops. The reasons behind the active retail market expansion are increased incomes and insufficient number of shops. The state is a passive observer in the confrontation between the small and large private businesses, not preventing the disappearance of private entrepreneurs-retailers. 

Belkoopsoyz is the largest state-owned retail chain. It counts over 10 000 retail shops, most of which are in the rural areas. Despite the desire of large private retail chains to increase their presence in the rural areas, the state declares inadmissibility of Belkoopsoyuz shops privatization in order to maintain the monopoly on retail sales in rural areas. The reason is high financial performance of Belkoopsoyuz enterprises. Belkoopsoyz net revenues in 2012 were BYR 459 billion, significantly exceeding net revenues of the largest private retailer. The state will not abandon its significant profits in favour of private business.

Small business, represented by business associations, came out with a proposal to limit the expansion by large retail chains by law. Private entrepreneurs cannot compete with large retailers and will be forced to cease operations. The state has proposed to limit the share of large retailers in certain markets within 30%. This will not stop chain retailers from taking over small businesses. It is easier for the state to control a dozen major networks, rather than thousands of entrepreneurs. Therefore, if Trade Ministry takes no action, in a few years the share of private entrepreneurs in the retail market will be reduced to the minimum.

Thus, on the one hand, the state makes things easier for itself by allowing large chain retailers to have a lions’ share of the retail market, and on the other hand, sets expansion limits, keeping control over retail sales in villages and small towns for both, social and economic reasons. In the future, taking into account the attitudes about private property in Belarus, it is possible that the control over the retailers will grow in order to increase financial returns and to continue the retail market’s consolidation.

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