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Anatoli Takun: Agricultural sector in Belarus is in search of investors

21 September 2018

Belarusian agricultural production has undergone structural changes after the collapse of the Soviet Union. Today, the sector is characterized by a dualistic structure with both large and small farms being important players on the market. However, the importance of different farmtypes differs greatly by the type of agricultural production. Large agricultural enterprises, which originated from former Soviet collective farms, dominate in grain production and animal husbandry. Small farms are predominant in vegetable production. Dr. Anatoli Takun, Senior Researcher at the Institute of System Research in Agroindustrial Complex at the National Academy of Sciences of Belarus, told about recent developments in the agriculture of Belarus.

What is the role of large agricultural enterprises in Belarus?

Today there are about 1,500 large agricultural enterprises in Belarus. Their share in the structure of the total agricultural output is about 80 %. The average size of a large agricultural enterprise has been rising over time. In 2000, it was around 3,000 ha; in 2007, it was about 4,000 ha; and today it is some 5,000 ha. So the trend toward consolidation in the sector is clearly observable. Part of these large farms is generally grouped under the term "agricultural holdings". They are often vertically integrated with manufacturing companies and form the so-called financial-agricultural-industrial units characterized by a holding-type structure. The major producers often have their own retail outlets or long-term supply contracts with retailers.

Are large agricultural enterprises on average more productive than their small counterparts?

The average productivity of large agricultural enterprises is at highest in dairy and grain production sectors – 4,855 kg per cow and year and 31.6 dt/ha, respectively. However, small farms are more productive in vegetable production. By the way, the average size of small farms is 66.5 ha.

What about farm profitability?

According to official statistics, small farms have a higher profitability than large enterprises. Besides, large enterprises receive more state financial support per unit of farmland, but they still face the problem of low efficiency of production.

What farm ownership types are there in Belarus?

There are three groups of large agricultural enterprises in Belarus:
(i) fully state-owned enterprises,
(ii) enterprises with a share of the state in the authorized capital, and
(iii) enterprises without the state share in the authorized capital.

The second group is the biggest among large agricultural enterprises and accounts for 44.7% of the total number of large farms. The first and the third group comprise 23,9% and 31,4% of all large agricultural enterprises, respectively.

Do privately owned enterprises compete with state enterprises?

In fact, they cooperate rather than compete. If private enterprises, mostly large ones, are asked to sell specific products to the state, they do not resist.

Is there a special policy behind these requests from the state or are they rather ad hoc?

Yes, there is a state policy behind them. In the dairy sector, there is a fixed price which is set up by the government and which does not depend on the market price. The goal is to ensure profitability of all participants in the supply chain, particularly profitability of the processing enterprises. The milk processing industry is highly export-oriented in Belarus.

Do you think that it is necessary to transfer state enterprises into a private form of property? If yes, isn't it against the state policy?

Now our policies are slightly changing. Because funding of state enterprises may overburden the state budget, the state is in search for private investors for its enterprises, be this an investor from abroad or from Belarus.

In your opinion, how capable is Belarus to diversify the exports of its dairy and meat products?

The geographical structure of Belarusian exports is not diversified. Russia is the main consumer of our milk and meat products with a current share of 80-90% depending on a category of products. A quick reorientation to the EU market looks utopian today, as it is a highly competitive market, where it is very difficult to find and retain your own niche.The strong one-sided dependence puts Belarus at risk. Therefore, we have to look for export opportunities, for example, in China and Middle East countries.

How do you see the further development of agroholdings in Belarus?

We have 15-20 % of large agricultural enterprises, the performance of which is good and stable. They will be able to keep up. The rest of the enterprises have to improve if they want to survive. One option for them would be to look for some kind of a big investor. Such an investor can come, for example, from China, a country that is very interested in Belarus. Another point is that  the corporate governance of agricultural enterprises has to be substantially improved. This would make agricultural enterprises both, more attractive for investors and more efficient.