Mongolian Economy Aims to Diversify
The Mongolian Government is emphasising its plans to diversify from reliance on mining-related revenues and investment in the hope that the development of manufacturing and agricultural sectors will create a more advanced industrial base.
With the Oyu Tolgoi copper mine alone set to account for one-third of Mongolia’s GDP by 2020, the reliance on the booming mining industry has raised fears of “Dutch disease”, a term used to describe cases in which the financial benefits of a resource boom lead to a hollowing out of other sectors.
“It is important to have a good mining industry,” Prime Minister Sükhbaataryn Batbold told Bloomberg in March. “But it is a tool of moving many other things forward. What we want to focus on [is] creating jobs in many other industries. We’d like to focus now on value-added products.”
In September the Ministry of Finance issued 300 billion MNT (USD 234.6 mil.) worth of Mongolian bonds to support the wool and cashmere sector. Of the funds to be raised, 150 billion MNT (USD 117.3 mil.) will go towards developing small and medium-sized enterprises, 100 billion MNT (USD 78.2 mil.) is to support the producers of wool and cashmere products, and 50 billion MNT (USD 39.1 million) will go to herders who sell camel and sheep wool to domestic factories.
The Deputy Minister for Food, Agriculture and Light Industry, Kh. Zoljargal, told local media in mid-September that 108 billion MNT (USD 84 mil.) in bonds had already been sold, adding that the money would be distributed to businesses in the form of loans through commercial banks.
In 2009 the cashmere industry provided jobs and income for a third of the country’s population of 2.6 million, supplying about 20 percent of the global market. However, an oversupply of goats is negatively affecting biodiversity and undermining herding livelihoods. A further challenge has been overdependence on demand from China, which has historically bought around two-thirds of the country’s cashmere exports, though often through back-door deals that have led to suppliers selling their products for prices far below market value.
While prices rose around 50 percent year-on-year in April for Mongolian cashmere derived from the Khentii and Sukhbaatar regions, according to data from Australian wool exporter G Schneider, industry leaders say profits could be much higher on the back of strong competition from legitimate buyers in China and Europe.
According to the Mongol Cashmere Association (MCA), current annual revenues of around USD 180 million are dominated by sales of raw cashmere, which makes up 80 percent of exports. If the country had the capacity to refine all of its cashmere before exporting it, profits could rise to between USD 480 million and USD 520 million. The MCA also said in May that the Government’s plan to raise 100 billion MNT (USD 78.2 mil.) in financing for the sector could lead to the addition of around 1800 jobs for the industry.
On October 10, the Prime Minister thanked farmers and other agriculture workers on behalf of the Government for the biggest harvest in the country’s history, with 433,400 tonnes of wheat, 191,500 tonnes of potato and 97,200 tonnes of vegetables having been produced. The Agriculture Ministry reported in July that 160,000 stockholders were breeding approximately 43 million livestock.
The positive results in agricultural output come as plans to establish an agricultural raw materials exchange are gathering pace. Set to start work in January 2012, the proposed exchange is hoping to do away with middlemen and allow herders to deal directly with buyers of their goods and products, with the aim of ensuring fair prices for both and also improving product quality.
Although the agriculture sector is showing signs of development, the UN Industrial Development Organisation stressed in a February report that it is equally important for the Government to maintain a focus on manufacturing, which employed just 48,000 Mongolians in 2008. The UN body suggested there should be regular dialogue between the public and the private sectors, with the Government providing support in the form of credits, improved infrastructure, and training and education initiatives.
Oxford business group
With the Oyu Tolgoi copper mine alone set to account for one-third of Mongolia’s GDP by 2020, the reliance on the booming mining industry has raised fears of “Dutch disease”, a term used to describe cases in which the financial benefits of a resource boom lead to a hollowing out of other sectors.
“It is important to have a good mining industry,” Prime Minister Sükhbaataryn Batbold told Bloomberg in March. “But it is a tool of moving many other things forward. What we want to focus on [is] creating jobs in many other industries. We’d like to focus now on value-added products.”
In September the Ministry of Finance issued 300 billion MNT (USD 234.6 mil.) worth of Mongolian bonds to support the wool and cashmere sector. Of the funds to be raised, 150 billion MNT (USD 117.3 mil.) will go towards developing small and medium-sized enterprises, 100 billion MNT (USD 78.2 mil.) is to support the producers of wool and cashmere products, and 50 billion MNT (USD 39.1 million) will go to herders who sell camel and sheep wool to domestic factories.
The Deputy Minister for Food, Agriculture and Light Industry, Kh. Zoljargal, told local media in mid-September that 108 billion MNT (USD 84 mil.) in bonds had already been sold, adding that the money would be distributed to businesses in the form of loans through commercial banks.
In 2009 the cashmere industry provided jobs and income for a third of the country’s population of 2.6 million, supplying about 20 percent of the global market. However, an oversupply of goats is negatively affecting biodiversity and undermining herding livelihoods. A further challenge has been overdependence on demand from China, which has historically bought around two-thirds of the country’s cashmere exports, though often through back-door deals that have led to suppliers selling their products for prices far below market value.
While prices rose around 50 percent year-on-year in April for Mongolian cashmere derived from the Khentii and Sukhbaatar regions, according to data from Australian wool exporter G Schneider, industry leaders say profits could be much higher on the back of strong competition from legitimate buyers in China and Europe.
According to the Mongol Cashmere Association (MCA), current annual revenues of around USD 180 million are dominated by sales of raw cashmere, which makes up 80 percent of exports. If the country had the capacity to refine all of its cashmere before exporting it, profits could rise to between USD 480 million and USD 520 million. The MCA also said in May that the Government’s plan to raise 100 billion MNT (USD 78.2 mil.) in financing for the sector could lead to the addition of around 1800 jobs for the industry.
On October 10, the Prime Minister thanked farmers and other agriculture workers on behalf of the Government for the biggest harvest in the country’s history, with 433,400 tonnes of wheat, 191,500 tonnes of potato and 97,200 tonnes of vegetables having been produced. The Agriculture Ministry reported in July that 160,000 stockholders were breeding approximately 43 million livestock.
The positive results in agricultural output come as plans to establish an agricultural raw materials exchange are gathering pace. Set to start work in January 2012, the proposed exchange is hoping to do away with middlemen and allow herders to deal directly with buyers of their goods and products, with the aim of ensuring fair prices for both and also improving product quality.
Although the agriculture sector is showing signs of development, the UN Industrial Development Organisation stressed in a February report that it is equally important for the Government to maintain a focus on manufacturing, which employed just 48,000 Mongolians in 2008. The UN body suggested there should be regular dialogue between the public and the private sectors, with the Government providing support in the form of credits, improved infrastructure, and training and education initiatives.
Oxford business group
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