Wednesday, May 14, 2014

State support for the cashmere sector

If Mongolia can export cashmere as an end product, we can earn benefits of 1.9 to 2.9 trillion MNT every year, say specialists. Due to the issues of turnover, insufficient equipment, and a limited workforce, for now we export washed cashmere to our southern neighbor. There are 15 production complexes, 23 small and medium knitting factories, over 50 textile factories, over 100 domestic workshops and approximately 7,000 workers in Mongolia’s cashmere industry. We prepare 7,000 tons of wool every year, out of which, only 15 percent is turned into finished product in Mongolia. The Republic of China exports an average of approximately 4,000 tons of brushed cashmere a year and provides most of the world’s supply.

We have the opportunity to compete with China with our brushed cashmere, but the main challenge is “how”. According to Yondonsambuu, vice principal of the Mongolian Wool and Cashmere Association, they have made an effort to stop washed cashmere export, but 10 to 15 years will be needed to build suitable wool and cashmere production factories with the capacity to produce all the wool in Mongolia. While the factories are being built, we will definitely face the issue of continued export.

Cashmere is growing coarser. It creates an opportunity to sell Mongolian wool cheaper than Chinese wool at 22 USD. Yondonsambuu underlined the significance of rating wool by its texture. It may be necessary to increase red goat numbers in Altai soum of Khovd Province, and provide cashmere which is less than 16.5 mkm in diameter as “Mongolian King Fine Cashmere”.

In most competing countries, wool and cashmere production factories only see 15 to 20 percent profit.
The loan interest at some foreign banks is less than five percent. It helps industries improve their business. Unfortunately, In Mongolia, it is usually at least 18 percent, but mostly fluctuates between 26 to 27 percent. As a result, the state has begun issuing soft loans to certain industries. In 2011, the state issued 100 billion MNT in loans at eight percent interest. It led to an increase of 20 percent in cashmere products and 30 percent in exports. But it is not sustainable to get continuous loans from the state. Lowering interest at private banks provides a better opportunity for industrialists to expand production.

For the development of the wool and cashmere sector, 68.8 million USD and 115 billion MNT were distributed from the Chinggis Bond, but only 40 percent reached industrialists. The government made a decision to help national producers by buying 4,000 tons of cashmere, but as of now, companies don’t have access to it.

Currently, from the Chinggis Bond, 65 projects were submitted to Golomt Bank, but only 58.13 billion MNT required for 34 projects has been distributed. Due to lack of collateral, 18 billion MNT for 10 projects was rejected.

If the government wastes time waiting and doesn’t provide grants to industrialists, we may be taking a step back in reaching our goals. The cashmere sector has the potential to earn profits in the overseas market, perhaps even more than mine deposit exploration and collecting currency reserves,.
Our domestic producers remind us that if the state does not pay attention, our goal to advance in the global market will be just a dream, and Mongolian cashmere will simply continue to support Chinese cashmere products with our raw materials.

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