Umnugovi Herders Producer Association NGO-Driven
Cashmere Market Days 2003 Event
Assessment
for
USAID-funded
Gobi Initiative
(Gobi Regional Economic Growth Initiative)
by
James G. Hamilton
Agricultural Economist
TABLE OF CONTENTS
Page
1.0 Introduction
1.1 Economic Backdrop ...... 3
1.2 Gobi Initiative Goal and Strategy ...... 4
1.3 Basis for Present Enquiry ...... 4
1.4 Enquiry Limitations ...... 5
2.0 Methodology
2.1 Introduction ...... 6
2.2 Form of Enquiry ...... 6
3.0 Results
3.1 Introduction ...... 7
3.2 Enquiry Results ...... 8
3.2.1 Gobi Initiative Umnugovi Staff ...... 10
3.2.2 Herders Association NGO Managing Director . . . . . 12
3.2.3 Master Herder/Herder Group ...... 14
3.2.4 Gobi Initiative Research & Development Unit . . . . 15
3.2.5 Personal Observation ...... 16
3.3 Conclusion ...... 16
4.0 Lessons Learned, Policy/Programming Implications & Reommendations
4.1 Introduction ...... 17
4.2 Lessons Learned & Programming Implications ...... 17
4.3 Recommendations ...... 18
Tables & Figures
Table 3.1 ...... 7
Figure 1: Buyers ...... 9
Figure 2: Revenue & Expenses ...... 9
Figure 3: Umnugovi Cashmere Market Participants ...... 11
Figure 4: Umnugovi Cashmere Market Prices ...... 11
Figure 5: Umnugovi Market Shares ...... 12
Figure 6: Umnugovi CMD 2003 Event Buyer Market Share ...... 13
Appendices
Appendix I: Gobi Initiative CMD 2003 Event Briefing Report 20
Appendix II: CMD 2003 Event: Gobi Initiative Staff Questionnaire 26
Appendix III: CMD 2003 Event: NGO Questionnaire 33
Appendix IV: CMD 2003 Event: Master Herder Questionnaire 40
Appendix V: CMD 2003 Event NGO Enquiry: Key Respondents 47
Appendix VI: CMD 2003 Event Reference Material 48
CASHMERE MARKET DAYS' 2003 EVENT
Chapter 1: Introduction
1.1 Economic Backdrop
1.1.1 Repercussions of Economic Transition:[1] A recent UNDP report contains a succinct summary of Mongolia's development challenge:
(Mongolia's) political environment has been formed by almost 70 years of Soviet domination followed by a decade of experimentation with democracy and market economics. Its people are relatively young, increasingly urban, and well educated, but, they are faced with shrinking social services and growing economic disparities. Its national economy is dominated by pastoral herding while its international trade is dominated by mineral exports … A growing fiscal deficit constrains action on the part of the government (UNDP, 2001).
1.1.2 Mongolia's population has doubled in the last 30 years to the present 2.4 million and continues to grow, albeit at a slower rate. The very rapid urbanization taking place since 1960s peaked in 1990 at 57 percent of the total population. There was a significant increase in rural population between 1993 and 1996 (to 48.1 percent of the population total), the trend coinciding with a rapid decline of employment opportunities in the main cities. A reversal of this trend has been evident since 1996 and 2000 data indicate that urban population is back at its 1990 peak of about 57 percent. The population of Ulaanbaatar in particular continues to grow rapidly, the capital now accounting for about a third of the country's population, once unofficial residents are counted. About half of the active labour force work is connected, one way or another, with the livestock sector. About two-thirds of the country's export revenue is accounted for by mining.
1.1.3 On the economic growth side, the debate has been about the potential of four sectors that dominate the economy: the extensive livestock sector, mining, tourism/eco-tourism and export-oriented foreign direct investment (FDI)-supported activities such as textile manufacture. Three out of four have a close relationship with, and repercussion on, the country's environment.
1.1.4 Mongolia is characterized by vastness coupled with low population density. The argument that broad-based economic development in these conditions is seriously handicapped by high unit transport cost, a situation that can be overcome only when suitable high-value-to-volume/weight commodities emerge (gold and wool, in the case of Australia), finds easy parallels in Mongolia. It was only through massive transport subsidies that the "tyranny" was substantially lessened if not broken during the days of command economy, only to reassert itself following the command economy's collapse. Without subsidized transport, competitive advantage in Mongolia shifted to high-value-volume/weight commodities, most notably cashmere, gold, and (to a much lesser degree) other non-ferrous metal ores and concentrates.
1.1.5 Credit works best where there is a market but working capital is missing. Because of distances and low population density, markets in Mongolia are "thin," i.e., not large enough to justify the transaction costs (acquisition of information about buyers, sellers, sources of supply, etc.). A critical mass of purchasing power at the local level is missing. With the disappearance of mandated regional specialization made possible by subsidized transport of goods and their distribution, market thinness has come to stifle business development and is probably a more telling factor than the relatively short tradition of entrepreneurship in Mongolia. All of this reduces the scope for taking people "off the land" and generating alternative sources of employment (e.g., agro-processing, crafts, etc.) through credit provision.
1.1.6 Important to note throughout is that Mongolia has been implementing reforms originally designed to solve the problems of Russian and Chinese society, rather than its own. It is only now, a decade into the reforms, that the limits of some of the imported policy advice (e.g., to privatize pastureland, promote new agro-pastoralism with increased winter availability of fodder through intensified fodder production, etc.) are becoming clearer.
1.1.7 Trading and manufacturing for the market has not been a strong component of Mongolia's native traditions and they were further weakened during the socialist period. The market does not emerge naturally in Mongolia, and market institutions must be to some extent planned and put in place in order to reach all parts of the population in a relatively equitable way.
1.2 Gobi Initiative Goal and Strategy
1.2.1 The goal of the "Gobi Regional Economic Growth Initiative" (Gobi Initiative) is to assist the people of rural Mongolia to achieve market-led economic growth and development. The strategy for achieving this over-arching goal is to target informational, organizational and policy constraints to economic growth that are most likely to lead to systemic change. To this end, Gobi Initiative forged partnerships with leading representatives of government, business, media, herders, cooperatives and non-governmental organizations (NGOs) to create an environment conducive for business and entrepreneurial activity and to improve the skill and knowledge of enterprise operators and herders to enable them to respond effectively to market signals.
1.2.2 The premise stated above in para 1.1.7 above "that market institutions must be to some extent planned" (ADB, October 2002: p. 5) in Mongolia does not entirely mesh with the Gobi Initiative goal. It would appear that even if an "enabling" environment were created, market-driven economic growth and development may not be possible in disparate rural communities due to "thinness" of the market, structural weaknesses and the tyranny of distance. This fact seems to have been recognized early on by Gobi Initiative management as they prepared the "market conditions" and enabling environment for cashmere market trade fairs contrary to the precepts of a market-driven economy.
1.3 Basis for Present Enquiry
1.3.1 The Umnugovi Cashmere Market Days (CMD) Event is the third such activity organized by Gobi Initiative. Previous cashmere marketing events included the "2001 Exhibition Trade", "2002 Cashmere Fair", and the present CMD 2003 event. The former two cashmere trade market affairs had mixed results due to a variety of logistical and public-relations' factors but, overall, it was considered that the cashmere trade events provided a valuable market exchange for participating buyers and herders. What was recognized earlier on was that Gobi Initiative should not continue to be the organizing force behind such events and other mechanisms should be explored. Thus, a CMD 2003 Event NGO-driven model was envisaged and is the subject of this enquiry.
1.3.2 The Gobi Initiative Year Five Work Plan - January to December 2003 (February 28, 2003: p. 32) indicates that it will continue to promote regional cashmere initiatives. For instance,
Activity 4.1: Regional Cashmere Initiative: In 2003, a new model for support of the cashmere producers of the region will be tested. Gobi Initiative management will seek to evaluate fully all aspects of the cashmere market in Mongolia in 2003, synthesizing information and resources available from the RBN, Market Watch, and regional Gobi Initiative offices … to develop a proposal for a new marketing structure. Feedback from herders, Gobi Initiative representatives and interested groups indicates that a single regional event may be a workable model.
A significant structural change in the cashmere marketing system is necessary to produce direct market signals that reward herders who generate increased quantities of quality cashmere which is needed to sustain Mongolia's cashmere garment industry, and give a disincentive to continued poor production of low quality products.
This new model was implemented in the form of the Umnugovi Cashmere Market Days (CMD) Event held May 21-23, 2003. The purpose of this enquiry was to appraise the CMD 2003 Event NGO-driven model.
1.4 Enquiry Limitations
1.4.1 Besides document review, this Consultant had only a few hours to interview key respondent informants about their experiences and perceptions of the "Cashmere Market Days 2003 Event" NGO-driven model's organization and management. Consequently, some of the observation and analysis may not be well founded and should be collaborated and supported from other qualified sources.
Chapter 2: Methodology
2.1 Introduction
2.1.1 The Cashmere Market Days (CMD) 2003 Event which was managed by the Umnugovi Herders Producer Association NGO was assessed on an ex-post basis. That is to say that this Consultant read Gobi Initiative reports and other documentation in order to get the general background for the subsequent assessment then, developed information and data collection instruments in order to make a somewhat informed opinion about the NGO-driven model for organizing and managing future raw cashmere product exchange market events.
2.2 Form of Enquiry
2.2.1 As indicated above, this Consultant reviewed background material from Gobi Initiative reports and related documents. Additionally, key informants in the Gobi Initiative Ulaanbaatar office as well as discussions with Gobi-Altai herders gave me a sense and clue as to the direction of the enquiry and how to formulate both closed and open-ended questions in a structured format for the information and data collection instruments. This Consultant also made use of a "briefing report" prepared by a Gobi Initiative Ulaanbaatar headquarters' officer on the CMD 2003 Event to formulate additional questions and seek out the answers.
2.2.1 It was decided that key informants/respondents -- including Gobi Initiative Umnugovi key personnel, CMD 2003 Event NGO Managing Director, and one Master Herder/Herder Group -- should be interviewed using the information and data collection instruments developed by this Consultant. Accordingly, the following semi-structured closed and open-ended information and data collection instruments were developed:
i) CMD 2003 Event Questionnaire: Administered to Umnugovi Representative & Agricultural Officer (see Appendix II for completed questionnaire);
ii) CMD 2003 Event Questionnaire: Administered to NGO Managing Director (see Appendix III for completed questionnaire); and
iii) CMD 2003 Event Questionnaire: Administered to Master Herder/Herder Group (see Appendix IV for completed questionnaire).
2.2.1 As indicated above, this Consultant discussed a number of questions with staff from the Gobi Initiative Research & Development Unit. And, of course, what would an objective assessment be without some subjective personal observation so, a small section has been written on this Consultant's personal musings.
Chapter 3: Results
3.1 Introduction
3.1.1 Given the backdrop of Gobi Initiative mid-term evaluation report (September 2002: p. 74) which states that the "project should not make any efforts in coming years to sponsor the cashmere trade fairs ..", it is difficult not to take a critical perspective when examining the evidence. Having said that, this Consultant tried to look at all of the information available in order to make an objective but critical assessment.
3.1.2 Table 3.1 illustrated below shows the relative livestock population for the six Gobi Initiative aimags; including Bayankhongor, Gobi-Altai, Govi-Sumber, Dundgovi, Umnugovi and Uvurkhangai. The data show relative goat numbers in relation to total livestock population, number of goats in relation to Gobi Initiative herder groups, and number of elite goats per Gobi Initiative herder groups.
Table 3.1
Gobi Initiative Herder Groups & Goat Population in Six Aimags
Sl. No. / Gobi Initiative / Total Goats by Aimag / Gobi InitiativeAimags / Herder Groups
(HG #s) / HG Goats / HG Elite Goats
1 / Bayankhongor / 50 / 412,065 / 26,060 / 2,450
2 / Gobi-Altai / 54 / 578,999 / 51,417 / 6,078
3 / Govi-Sumber / 8 / 37,437 / 5,451 / 123
4 / Dundgovi / 41 / 623,655 / 41,411 / 3,105
5 / Umnugovi / 501 / 560,383 / 71,405 / 7,625
6 / Uvurkhangai / 52 / 655,687 / 48,120 / 5,241
Note: 1 The most recent Gobi Initiative Herder Group (HG) number had been reduced to 30 herder groups. No reasons were provided as to why forty percent of the HGs had dropped out.
3.1.3 The information presented in the above table is of interest because it provides an indicator of how much cashmere is likely to be produced per year in relation to Umnugovi. For instance, if one assumes that 250 grams of cashmere may be obtained per goat then, approximately 140.0 tonnes[2] could be obtained in Umnugovi alone. Total potential cashmere quantity for Umnugovi is important to know in relation to how much cashmere was available for sale at the CMD 2003 Event NGO-driven market exchange in order to establish whether there was any "crowding out" effect in relation to local market prices. Given that the CMD 2003 Event NGO-driven market exchange represented seven percent[3] (7%) of the local potential market, it is hard to imagine how the CMD 2003 Event NGO-driven market exchange would dampen local prices.
3.2 Enquiry Results
3.2.1 The Gobi Initiative Umnugovi Representative[4] (Ms. Tsenduren) provided this Consultant with a briefing report (Gobi Initiative Ulaanbaatar office, May 2003). Besides the structured open-ended questionnaire that this Consultant had prepared for the enquiry, this briefing report provided many additional questions and opportunities to obtain supplementary information. This slightly revised briefing report is presented below with additional data: