Sonex spies opportunities in Belarus

  • 2003-08-28
  • Michael West
VILNIUS - Hoping to build on its recent successes in the Baltic market, Sonex Grupe,
the Baltics' largest IT company, is registering an assembly plant in the
Minsk Free Economic Zone to cater to the potentially lucrative Belarusian
Despite the common perception that Belarus' stifling political climate has
extinguished economic activity, Sonex CEO Arunas Bartusevicius aims to make
Belarus his group's largest market. His target: annual sales of 30,000 PCs
by the end of 2004 - as many as are sold by the group in the Baltics.
Despite the bleak portrayal of the Belarusian economy, whose true picture is
made opaque by the quality of official statistics, Bartsevicius is confident
of the country's potential.
"The country isn't standing still. You would find it difficult to recognize
the place after two months, there is so much building work," he said.
In the Baltic dimension, the Belarusian market is considerable. It is
expected that up to 200,000 personal computers will be sold there this year.
And if in six years' time living standards in Belarus were to reach those of
Lithuania's today, the size of the market could double.
With this in mind, long-term investors are positioning themselves to grab a
chunk of the market early on.
Bartusevicius, who began building Sonex Grupe immediately after Lithuania
regained its independence, said he saw striking parallels between Belarus
today and Lithuania then.
"The country is short of cash, short of management skills, short of
everything," he said.
Though Sonex's strategy of supplying quality merchandize at low prices isn't
novel, in a fractured marketplace where companies often spread themselves
too thinly and try to cover a wide mixture of services, such simplicity can
"If you are focused you can be successful," said Bartusevicius.
What's more, Sonex isn't just thinking of Belarus. Russia and Belarus share
a common economic zone, the option to export to the enormous Russian market
also played a key factor in the IT company's decision.
Currently, exporting goods into Russia incur a 40 percent premium. Duties on
exports from Belarus, by comparison, would amount to 10 percent ­ the
maximum tax rate allowed in the zone.
Bartusevicius said the company had considered some of the larger Russian
cities for setting up operations but found them already saturated with
established firms that would be difficult to compete against.
Geography, he explained, also formed a major issue. Minsk is only 180
kilometers from Vilnius, while Moscow ­ some 1,000 kilometers away ­ is far
away enough that it would be significantly more difficult to manage.
Before expanding east, Sonex plans to test the waters in Minsk, which could
include acquisitions should things progress well.
Still, not everyone shares Bartusevicius' optimism. While openings may exist
in the home computing sector, business sales may be difficult to achieve
Alexandr Brovka of Belsoft, a Belarussian IT systems company, said in an
interview with the daily Verslo Zinios that the largest companies there
currently sold only 3,000 ­ 4,000 computers per year, far less than Sonex's
ambitious target.
Brovka also said that his business clients maintained high standards and
would only use companies that were truly familiar with the local market and
had a wide servicing network.
Sonex, however, is undeterred by such arguments. Bartusevicius said that
throughout much of Eastern Europe and Russia there had been little movement
away from the low-cost PC option over the past 5 years, with Western brands
remaining outside the average price range.
Thus the advantage of being the major low-cost producer would be
considerable, he stressed, adding that Sonex is also considering plans to
expand into Poland.
Indeed, the situation in Central and Eastern Europe poses some interesting
options for Sonex, said Bartusevicius. Many producers in the region,
squeezed between the big three worldwide producers - Dell, Hewlett-Packard
and Compaq - and the niche low-cost producers further east, simply cannot
>From 1997 to 2002, Sonex's annual sales of PCs grew nearly tenfold ­ from
2,000 to just over 20,000.