Mongolian agricultural officials envision their organic meat and vegetables being served on Chinese dinner tables and are looking to foreign investors for help in making this a reality.
“Usually, the money coming into Mongolia is for mining. There is never much interest in the agricultural sector … But we see great potential,” Duursakh Luvsandorj, a department director at the Ministry of Industry and Agriculture, said on the sidelines of the Hong Kong Mongolia Investment Summit recently.
With additional capital investment, the sector can move from merely exporting raw materials such as milk, cashmere and meat to processing value-added agricultural products as well, Luvsandorj said.
If successful, the shift would allow Mongolia to retain a greater share of revenues and possibly develop food brands with wider international appeal.
According to ministry data, Mongolia has 41 million head of livestock, including sheep, goats and camels, worth US$7.15 billion. The country supplies 21 per cent of the world’s unprocessed cashmere.
Only 10 per cent of animal products are processed locally, with the remainder sent to Russia or China. In some cases, the final product is then imported back into Mongolia.
With the right investment, the ministry says, locally sourced and processed hides, cashmere clothing and other animal products, could create an industry worth US$88 billion. Last year, the country received US$3.8 billion in foreign direct investment.
“The ministry wants to focus on the export of organic produce. For centuries, our lifestyle has been natural,” Luvsandorj said.
Identifying China, Russia, South Korea and Japan as target markets, he said he believed healthy organic Mongolian foodstuffs would be well received.
One of the world’s most sparsely populated countries, Mongolia has over one million square kilometres of available agricultural land and an abundance of minerals.
It is in the early stages of an infrastructure building spree as the government rushes to connect disparate mines and communities and provide adequate housing in its major cities.
According to the ministry, agriculture employs 35 per cent of the workforce, including herders practising traditional nomadic and pastoral farming.
Wedged between Russia and China, the country is well positioned to supply two of the world’s fastest-growing economies. The biggest potential market could be China, which has the world’s largest population, supplied by a local food industry blighted by health concerns.
“I see the potential but also the challenges,” said Henry Lee, director of Quam Capital and co-manager of a Mongolia investment fund.
“Do they have the ability to produce and ship everything? The same infrastructure challenges that affect the mining industry also affect the agricultural industry.”
The country is also bedevilled by a harsh climate and severe winter storms called dzud. In 2009-2010 such a storm killed an estimated eight million animals, 17 per cent of the country’s livestock, UN reports said.
Upgrading the country’s farming sector will require the construction of dairies, animal barns and greenhouses to help overcome the elements.
In some areas, a fragile top soil means that only pastoral herding is appropriate, as overgrazing leads to soil degradation and sandstorms, making it unsuitable for large-scale animal husbandry that benefit from economies of scale.
To encourage investment, the government has announced a series of incentives, including rent-free land leases and tax breaks on construction of agricultural farms and factories and on farming machinery.