Interview: M. Oyunchimeg
What changes would the private sector like to see in terms of the business environment?
M. OYUNCHIMEG: There are several, but in general the government needs to more effectively bring the business community into the policymaking process. Our new prime minister seems committed to the idea of business development, which has been very encouraging to the private sector. We were also pleased by his announcement that he will form a special council of researchers and business professionals to help formulate policy. However, there are some unresolved issues. For example, the draft law on the elimination of special permissions and licences, which has been in progress for two years, needs to be passed. There are more than 900 of these special permissions that businesses must receive from various state authorities before they can start operations. After cooperation with parliament’s Economic Standing Committee and the prime minister’s representatives, the law identifies 56% of special permissions that could be eliminated.
The pressure the taxation and inspection authorities have been placing on the business community to pay more taxes must also end. It is understandable that they must find money to plug the deficit in the state budget; however, repeated inspections make it difficult for the private sector to conduct business. When a company submits its financial statements, the associated authority checks them unnecessarily several times to find deficiencies. The government must also do more to assure businesses that it will honour the obligations contained within tenders and other concessions.
What is the importance of building up the country’s light manufacturing base?
OYUNCHIMEG: Mongolia’s richness in natural resources extends beyond its mineral wealth. We have a very strong agricultural base and more than 50m heads of livestock, thus there are significant opportunities in processing raw materials, especially animal-based products, for both domestic and foreign consumption. Leather, wool, cashmere, milk and meat all have great potential but need to be developed through a mix of public sector support and private sector initiative.
The leather industry is working to build up its processing capabilities; however, it lacks the necessary machinery and technologies. Mongolia exports vast amounts of semi-processed animal hides to China and imports finished products from South Korea. We need to export fewer raw materials and export more value-added products. Several firms have invested in bringing high-tech machinery from developed countries, but a more cooperative strategy is needed. Leather processing firms should cooperate to ensure that every link of the value chain is developed, from the herders and slaughterhouses to the wholesale markets for animal hides and factories for advanced processing. In addition to small workshops, more factories should be operating on a large scale. The government should reduce the export of raw and semi-processed hides.
The dairy industry is also working to build up its processing capacity. We have abundant milk, but, unfortunately, we cannot collect from herders before it spoils. Therefore, some dairy companies are working to build collection centres, processing facilities and farms with dairy cows from Europe. Cashmere and wool also offer significant opportunities, especially if the industry can brand itself successfully on the international market. As for the meat industry, many companies are investing in technological upgrades, and two of them were just granted permission to start exporting to Russia.
How can the government support these areas?
OYUNCHIMEG: These segments need to import advanced machinery and technology to move up the value chain. The government’s policy regarding flexible payment terms of Customs duties is very helpful. The resolution to eliminate taxes on some equipment for smaller players is also a positive change. Furthermore, we have been working with the government to add categories for equipment to the list of exemptions.
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