Mongolia: Tackling retail rights
Efforts by Mongolia’s government to improve conditions for increasingly wealthy local consumers bode well for the fledgling retail industry. There are concerns, however, that watchdogs and legislation will not be able to keep pace with the rapid growth of the industry.
A national consumer conference titled “The People are King” was held in November in Ulaanbaatar with the aim of educating both consumers and producers on the importance of product quality. Consumer representatives said that manufacturers should guarantee quality at the beginning of a product’s lifespan, and that distributors should not ignore reasonable demands by customers. More than 800 representatives from around the country attended the event, with many raising questions over consumer awareness regarding rights protection.
The main issue tackled at the conference – consumer protection – is expected to grow in importance as the retail sector plays a larger role in the economy. In the first quarter of 2012, wholesale and retail trade expanded by 51%, following growth of 70.5% in the final quarter of 2011.
In July 2012, a mission from the UN Conference on Trade and Development (UNCTAD) presented findings of a peer review it had conducted on the Authority for Fair Competition and Consumer Protection (AFCCP), which is responsible for proposals to the government on consumer protection law and policies.
UNCTAD found that the agency had limited experience of joint work with the police in consumer protection cases, with, “no transfer of investigatory skills from professional investigatory agencies to the AFCCP”. It also noted the lack of a public relations policy, stating that the agency must develop a consistent policy for human relations, staff development, knowledge management and experience sharing.
Meanwhile, the European Bank for Reconstruction and Development (EBRD) has taken a lead role in developing the retail sector through the provision of a $4m senior loan and $2m mezzanine loan in October 2012 – one of the first in the country – to support BSB Service, a leading electronics retailer. The EBRD said the proceeds of the senior loan will be used to build a large, specialised retail store in the Khan Uul district of the capital.
Such growth reflects confidence in a sector that already hosts a number of luxury retail giants, such as Louis Vuitton, Hugo Boss, Cartier, L’Occitane and Dunhill. In mid-June, Mongolia also made its first appearance in the AT Kearney Global Retail Development Index, achieving ninth place in the respected survey of the world’s top 30 emerging retail markets.
Wealth expected to be generated by vast coal and copper mines should see GDP grow six-fold in the next decade, potentially placing the country in the top five of millionaires per capita by 2020. As an affluent middle class emerges, urban migration is expected to see local nomadic traditions dissipate the capital’s population hit around 1.4m by 2020 compared with its current 1m.
As a sign that it is preparing to be more assertive in protecting consumers, in November the AFCCP imposed a MNT 4.97bn ($3.58m) fine on NIC, the largest retailer of petroleum products in Mongolia, for the “creation of a false shortage of gasoline in the market”, reported Business Mongolia, a local business news website. On November 6 and 7, NIC limited the sale of gasoline and diesel products to raise fears of a shortage that would drive prices up, an AFCCP investigation found.
Further consumer protection steps have been taken by the central bank, including a MNT61bn ($43.88m) soft loan for flour mills that will allow them to supply first-grade flour at a maximum wholesale price of MNT550 ($0.40) per kg and a maximum retail price of MNT650 ($0.47) per kg.