Results of last year’s harvest

Mongolia had a larger-than-expected harvest this fall. Mongolia Web News reports that

about 205,821 tons of cereals, 142,124 tons of potatoes and 80,627 tons of vegetables were harvested this year.

Also, Mongolian farmers brought in 1008.8 thousand tons of hay, 25.9 thousand tons of hand-made fodder and 950.2 tons of silage crops.

Compared with the same period in 2007, the harvest of cereals, potatoes, hay and silage crops increased 85.3 thousand tons or 74.4 percent, 18.5 thousand tons or 16.2 percent, 116.0 thousand tons or 13.0 percent, and 796.1 tons or 6.2 times more, respectively.

Hopefully, this will help to make Mongolia more self-sufficient in the coming year and less subject to food price inflation.

Largest Economic Sector in Mongolia

According to Mongol Bank, Mongolia’s largest economic sector is foreign remittances. $195 million enter the country annually from the 430,000 Mongolians working abroad (only 130,000 are officially counted). This means that 1 in 15 Mongolians is working overseas. (Source)

New Coke plant in Ulaanbaatar

Coca-Cola has just spent 22 million dollars to build a new six-hectare manufacturing plant in Mongolia. Coke has enjoyed a 50% annual growth rate in the country; they supply direct employment for 3,500 people and perhaps indirect employment for as many as 35,000 suppliers and business partners.

“With the burgeoning beverage market in Mongolia we have recorded remarkable growth rates. In 2002 we sold 4 Coca-Cola products to every average Mongolian consumer. In 2008 we are selling an average of 67 beverages to every Mongolian consumer. This has caused our first plant to run out of manufacturing capacity 7 years ahead of schedule” said Mr. Jambaljamts [Chairman & CEO of MCS Group]. “We are greatly encouraged by the outstanding performance of our bottling operation as both the bottling company and The Coca-Cola Company have exceeded all projections of profitability and sales. Our investment in the new plant is just our first step to bring world class manufacturing to Mongolia.”

It’s Boom Time!

That’s what Peter Morrow, CEO of Khaan Bank, claims about Ulaanbaatar’s retail sector, according to the UB Post. Morrow reports that, in 2000, the State Department Store was just a series of vegetable and meat stalls, while today, it is a thriving department store with high-end goods. If Mongolia’s mining sector takes off, the rest of UB’s retail business could follow suit.

Investors are worried, though, in the light of recent unrest and the slow progress of mining in the nation. Next month, they will have an opportunity to address these issues at an economic forum in UB. Morrow insists that Mongolia is absolutely a good, stable place to invest.

Mongolia’s GDP grew by at least 9 or 10 percent last year, as they begin to exploit the resources that Russia controlled for so long. The strong economy, proximity to China, and an ambitious promotion of tourism has put Mongolia on the business map, and international corporations are being drawn to UB. The fact that the nation is a late bloomer economically means that they have avoided some of the chaos currently plaguing the world market, such as the mortgage-backed securities that have played havoc with the U.S. economy.

Still, Mongolia has some obstacles to address. First, there needs to be a clear sign from the government that they are ready to sign off on some new mining projects, something they’ve only done once in their 20-year independence. Second, the nation needs to convince investors that the July 1 unrest was an isolated incident and that the new government is ready to move forward. So far the Democratic Party has been able to stall the installation of the new Parliament, but Morrow and other investors are hopeful that this can be accomplished by next month.

Morrow will be among those presenting at the economic forum, addressing these issues as well as environmental, legislative, and international trade concerns. Morrow is confident, though, that UB is a showplace that will convice investors by itself. “You can see the great vibrancy, the excitement of what’s happening here,” he says. Probably nothing earth-shattering will come out of this forum, but it will hopefully open international eyes to the great potential for investment in Mongolia.

Mongolian Government to Subsidize Cashmere Purchases

Because banks have been charging high interest rates, cashmere sales have slowed recently in Mongolia. Currently, herders are currently holding more than 2,000 tons of cashmere. In response, Montsame reports that the government of Mongolia is guaranteeing loans of MNT 10 billion to cashmere processing facilities to purchase from the herders. Sixty percent of that money is going to the Gobi Cashmere company.

Doing business with China

Mongolia seems to be growing closer and closer to China, and a desire for increasing closeness was expressed by China’s Vice President Xi Jinping, who is visiting Mongolia this week. China has been Mongolia’s top trading partner and top investor for nearly a decade, and this year has seen a 68% increase in bilateral trade over last year. About 90% of Mongolia’s rice, clothing and vegetable imports come from China, and more than 6% of the Mongolian labor force are employees of the 700 Chinese businesses operating in the country. China’s geographic proximity makes it easier for them to make the infrastructure investments that put them first in line to tap Mongolia’s mineral wealth.

Some Mongolians have expressed displeasure over the rising food costs in their country. In an attempt to alleviate the problem, the government borrowed money to import flour, which they distributed to bread makers at discount prices. However, the bread makers refuse to pay cash for the flour, refuse to store the flour and refuse to accept the set price for bread established by the government. It seems like the government did not do their homework on this one. It’s tough switching to a free market economy!