The Government of Mongolia decided to invest MNT 1 trillion to local industries after their announcement “Let’s Produce in Mongolia.” Out of this investment, the agriculture sector received MNT 267 billion. The Government hopes that this money will be able to correctly regulate the trading of raw materials, process leather and hide, keep prices at a stable level, increase the production of value-added products and increase employment. This will help revive and develop the sector dedicated to leather and hide production.
Currently, there are 25 processing manufacturers of leather and hide and 187 industries that develop finalized products from these raw materials. Two of these industries are foreign invested. The Government is investing MNT 110.4 billion from the Samurai bond through commercial banks to fund projects revolving around animal skins and final production industries.
10.3 million pieces of leather and hide have been processed. Of these 10.3 million, 25.8 percent were produced in Mongolia to create finalized products. Of the rest, around half of them were partially processed at the first level, and the other half went to China as raw material and processed at the first level. 40 percent of these products are exported to ten different countries including Italy, Spain, Turkey, and South Korea. The remaining 60 percent are used locally as souvenirs, bags, clothes, shoes and uniforms for army, police and emergency personnel.
Every year, raw material reserves total MNT 150 billion. 25 percent, or MNT 38 billion, go to national Mongolian producers. 75 percent, or MNT 112 billion, are bought by local and foreign traders to export as raw materials to be processed at the first level. The Ministry of Industry and Agriculture released data that shows the country lost MNT 800-900 billion worth of final products locally due to high levels of exports. Parliament passed measures to support herders and manufacturers in 2012 to combat the loss of revenue.
The Government issues a bond worth MNT 140 billion which will allow soft loans to be granted to national Mongolian producers of final products and deep processed products. Little by little, by 2017, the Government is obliged to move all leather and hide manufacturers to a new zone and will create soft loans with an interest rate of less than seven percent per year. Through this, MNT 110 billion will be borrowed to increase the circulation of capital in order to buy raw materials. Another MNT 30 billion will go towards technological renovation.
With the investment from the Government, people are hoping to get 200 more manufacturers of leather and hide products, especially within the countryside, to make more finalized products such as bags and shoes. They also hope to create 25,000 jobs, thus increasing employment levels. If Mongolia is able to process MNT 150 billion each year, Mongolia can expect sales to reach MNT 1 trillion. Mongolia is currently targeting countries such as China, Russia, and those in the European Union as its main exporters of leather and hide. Exports equal USD 450 million. In addition, there will be another MNT 202 billion in taxes within the budget.
SOURCE: Mongolian Economy