Economic Sectors

May 11, 2007 at 9:54 am Leave a comment

The Mongolian economy is dominated by agriculture, industrial output that is closely related to the agricultural sector, and mining and mineral activities. During recent years, at the industry and sector levels and within an overall market-oriented framework, priority is being given to the development of domestic raw material processing industries, mining, tourism, information technology and infrastructure activities.

Food and Agro-Processing Industry

Agricultural sector in Mongolia has been and is still holding a weighty share in the country’s economy. In 2005, the agricultural sector produces over 25 per cent of GDP and 13 per cent of the national hard currency income is generated from exports of products of food and agricultural origin. And also one fourth of export sales are contributed by the agricultural sector. Approximately 50 percent of the total labor force is engaged in this sector.

Livestock

We have over 170 thousand herding households working in livestock sector, which produces over 80 per cent of total agricultural product. Number of livestock has increased during the last two years and reached 30 million at the end of 2005, which is a 10 per cent increase or 2 million heads of livestock more compared to the previous year.

Currently, Mongolia has 30.4 million heads of livestock which is being produced annually about 200 thousand metric tons of meat, 328.000 metric tons of milk, 8.4 millions of skin and hide, 17,000 metric tons of sheep wool, 3.0 thousands metric tons of cashmere. In this regard, the Government’s policy intends to improve capacity in order to protect livestock from natural disaster’s risks, consequently to increase aid and loan assistance through attracting foreign investors and donor’s attention, to promote national investment as possible, to promote efficiency and productivity through introduction of some elements of intensification. Last years, the policy on active implementation has been taken place to support initiatives on rural people’s cooperation and co-working, starting of settled intensified farming based on new technologies for improving livestock production and herding methods.

Mongolia is the second biggest raw cashmere producer in the world after China. Mongolia prepares around 3000 tons of cashmere per year. Mongolia produces more than 21% of the world output of cashmere and also exports high quality skins, hides, wool, meat and other animal products.

Crop sector

In crop sector, there is wide range of opportunities to intensify crop sector by increasing national and foreign investment. Before 1990, even though 1.2 millions ha of arable land had been utilized under crop production nationwide, privatisation of the state owned large crop producing entities during transition period from state planned economy to market economy system had contributed to the negligible effect that caused about 690 ha of land unutilised and substantial decrease of arable land. With increased demand of agricultural products and enough available and suitable land such as Khalkhiin gol river basin area that also could be used for cropping create more opportunities for future investment in the crop sector.

There is wide range of possibilities to invest in the national processing enterprises that are based on inexpensive and high quality raw materials. Many small and medium sized food processing enterprises, which meet sanitary and hygiene requirements and equipped with modern techniques and technologies have been established and their products’ variety and packaging have been improved a lot. Due to newly established meat processing and slaughtering plants, currently there are total 28 large, medium and small sized meat plants with capacity of processing 70 metric tons of meat annually. Processed milk production has been increased due to the increased number of small and medium sized dairy processing plants that was doubled compared to 1999 and reached 88 plants nationwide.

At present, there are operating about 130 large and small flourmill plants with capacity of producing total domestic consumption. Also there are more market competition among producers with increased production and increased variety of different products such as bread, cake, spaghetti, beverages and soda. In last four years, annual food production has been increased by 2.1 to 5.5 percent. However, major objective of our national food enterprise is to introduce new technologies into production, provide domestic market with high quality products through improved productivity, eventually to support import substituting and export production. In this regard, this sector requires high need for the substantial investment.

Food industry

Mongolia’s food processing industry began in the 1960s, processing agricultural raw materials and manufactured products for local consumption and export. Todays food processing industry is comprised of meat processing, milk and dairy processing, flour and flour product manufacture, production of alcoholic beverages and production of salt.

Presently, there are over 1800 small and medium sized business entities engaged in the food industry. These industries produce 10% of Mongolia’s GIO. Up to 14% of total industrial workers are engaged in this sector.

In Mongolia, there are about 135 flour milling factories with a combined capacity to produce 288,000 tons of flour per annum. Ten of these comprise the larger plants with a joint capacity to produce 210,000 tons per annum. Currently, only 22% of plant capacity is utilised due to the lack of raw materials (wheat). In 2005, 30-40000 tons of flour was produced that satisfied only 15-16% of the domestic flour demand. A broader range of bread, pastries, macaroni and other related flour products are appearing on the market and the quality of these products has improved as is the packaging of locally produced goods.

New technologies for the production of beverages and soft drinks are being introduced and the range and quality of these products are improving through competition. MCS Group was appointed the official distributor of Coca Cola, and subsequently produced Coca Cola soft drinks under licence in 2002.

Meat and meat product
Meat and meat product manufacturing has an important place in the food sector and is considered to be the most potential sector for future development. There are 28 medium and large slaughterhouses with a total capacity of about 85,000 tons of carcass meat per year. However, they only use 20% of their total capacity.

In total, there are over 70 SMEs that produce meat products. Total meat production was 199.3 thous. tons in 2004. As far as the food supply to the population is concerned, local meat production meets all the domestic demand and some meat products are exported.

In 2004, 8.7 thous tons, 2005, 7,3 thous tons of carcass meat were exported. Russia is the basic meat export market for Mongolia. Since 2004, Canned meat and pet food has been started to export to Korea, Japan and Indonesia.

Looking at the 2005 statistics based on the livestock number, Mongolia was able to provide domestic meat consumption and to export meat. Due to the high import customs tax of Russia, high railway transportation cost and consumer monopoly, the price of the exported meat has decreased annually.

Milk and milk production
The average milk and dairy product consumption per capita increased by 18.8kg in 1990 compared to 1985. This consumption increased constantly during the last 10 years and reached 126.0kg in 2002 respectively. For instance, the dairy industry in 1990 was 315.7 thous. tons and 328.6 thous. tons in 2004.

Currently, many small and medium factories and business entities manufacturing milk products are established in the aimag, towns and soums, providing solid basis for the further development of the dairy industry. In 2005, the total output of processed milk was 7.1 mln litres, which are 5 times more than 2000.

In 1995, 1223.8 tons of milk and milk products were imported and in 2004, 6848.5 tons of milk products were imported. There are about 88 small and medium sized dairy plants, with a total daily capacity of about 50.0 tones of fresh milk, producing butter, cheese and other dairy products. Local dairy production has not been able to meet the population’s needs fully.

Mon-Fresh factory of Monsonic Group and a New Zealand-Mongolian joint venture, NZM-Food Company introduced tetra-pack technology and are now producing milk and fruit juice using UHT technology.

In recent years, alcohol producing factories such as APU and SAPU have introduced new technologies involving more sophisticated measuring equipment to produce low alcohol beverages and have improved the quality of their products.

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Information contained in this web site are partly derived from a CD-ROM "Guide to Investment and Trade-Mongolia", produced by Foreign Investment and Foreign Trade Agency (FIFTA). All trademarks are properties of their own respective owners.

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