Partnerships and financing. Issue 16

into green products and services, such as solar and wind-power generation and high-end organic food products.

Another sees Mongolia at the heart of a dynamic economic area comprising Northern China and Eastern Russia, combined with an integrated, open North Korea. In this scenario, Vladivostok is a thriving seaport benefitting from an opening of Arctic sea lanes, and the free movement of goods and people across borders is commonplace.

There are signs that the government agrees on the need to change course and diversify.

In 2012, the government established a new ‘core’ Ministry of Environment and Green Development and, in mid-2014, it unveiled a three-month-long plan designed to boost infrastructure, mining, manufacturing and the development of small and medium-sized enterprises. Infrastructure spending proposals included the building of a road to connect the landlocked nation’s two neighbours, Russia and China; the construction of thermal power stations; and the development of two economic free trade zones.

Manufacturing While noting that there are various routes to diversification, the United Nations Industrial

Photo: UN / Eskinder Debebe

Photo: ILO / Byamba-ochir Byambasuren

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Development Organization (UNIDO) is encouraging the government to implement policies that will help develop a competitive and high value-added manufacturing sector.

A recent UNIDO report on Mongolia refers to historical and empirical evidence showing that countries that produce and export manufactured products experience faster long-term growth and are eventually able to diversify into even more advanced industries.

Mongolia’s manufacturing sector is small and accounted for only 6.2% of GDP in 2012.

Of the total economically active population of around one million people, only 48,000 were employed in the manufacturing sector.

The UNIDO report states that the small overall population limits the size of the

domestic market, and that the challenge is to identify those manufactured products that it is feasible to support initially, in the sense that they use local raw materials, can be produced economically and compete in international markets.

UNIDO recommends an industrial strategy based on two main pillars. First, steps should be taken to improve the quality of manufactured products for specific niche markets. “The country could improve the quality of those products which require unique Mongolian raw materials, design or processes. The establishment of a marketing structure and trade associations is vital to promote traditional products of Mongolian origin. There is great potential for exports of high value-added industrial products based on cashmere, yak hair, sheep wool, camel hair and red meat.”

Second, UNIDO proposes the aggressive promotion of Mongolian products in international markets, including participation in specialized fairs and branding. “Mongolian manufactures should be recognized for their quality, their unique identity and by price differentiation, for all of which a coherent marketing strategy is required.”

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