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Economy / Featured News / Mongolia News / April 29, 2014

The Real Economic Situation

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Politicians have repeatedly stated that the economy was not in crisis and that livelihoods were still safe. Many people in Mongolia have not felt the same way, however.

“It has been a while since the number of customers declined after the traditional celebration of Tsagaan Sar,” said G. Anar a garment seller at Narantuul Market at 12:00 on a Tuesday in April. “These days are really something. I’ve never seen customers be so rare.”

People do not have as much to spend as they used to, she said. And the lack of business was having its own toll on those who work at the market.

“After some months, we won’t be able to pay for the lease, and we have no other option than to take out a loan,” said Ts. Bayandalai, another salesperson at Narantuul who pays up to MNT 70,000 a month for her space at the market. “I am worried about how we can sustain our livelihood for the future.”

Anar and Bayandalai are just two of the 5,000 booth operators leasing space at Naranutal, in addition to the 200 pushing carts at the market. Their revenues have fallen from between MNT 15,000 and MNT 20,000 a day to MNT 5,000 and MNT 10,000 because of the decline in the number of customers. And their stories are not so unique.

The situation is better in the parking lot outside the market, where salespeople sell small goods to incoming travellers. Continued transit in and through the city have sustained sales, they say, as Narantuul is still the destination where many vans and trucks drop off passengers.

“Our revenue has not dropped from MNT 200,000 a day as the prices of our products are from MNT 20 to MNT 30, which is cheaper compared to Narantuul,” said Kh. Khulan, who sells food outside the market.
But deliveries to the market are falling too. According to Mendbayar, a truck driver who travels 800 kilometres to Ulaanbaatar from Zavkhan Aimag, he is making half as many deliveries as he did a year ago, travelling once a month rather than twice a month as he used to.

“It has turned difficult to find customers and I ask my relatives if they have any goods to be transported,” he said.
Bumbugur market was nearly empty the same day on April 1, just a few hours after arriving at Narantuul. Bumbugur’s more central location should make it a more popular destination, but the depreciation against the Chinese yuan has made clothes and home appliances too costly for customers here too. Those who sell home appliances there said that compared with year-long daily income of MNT 150,000 to MNT 200,000, today they are lucky to get MNT 100,000.

“We used to import goods from China two times a month. But now we do it only once a month and sometimes we do not do it at all,” said R. Buyan, who sells home appliances at the market.
Wholesale meat market Khuchit Shonkhor –  popular because of the relatively cheaper price for meat and the variety of options – is also seeing goods growing more expensive. Meat prices have seen up to an additional MNT 2,000 a kilogram from the month before.

Herders were asking for more money for their meat, said salespeople, which was being passed on to the customers. Fodder prices have risen alongside the price of flour in Mongolia. Herders have grown frustrated with the jump in prices, just as their livestock are beginning to breed.

Although the government claimed enough wheat was produced in Mongolia last year to meet domestic demand, Mongolia still had to import 100,000 tonnes of wheat last September to prevent any change in price. It was for nought, however, as the prices for wheat and fodder grew anyway. A package of fodder has doubled in price to MNT 10,000 from previous months.

he same situation was seen at the Bars market. Bars is a popular market for the sale of imported fruits and vegetables. Salespersons here, too, are suffering from fluctuations in the exchange rate, but also because of added tax at the border.
The prices of fruits and vegetables increased from MNT 10,000 to MNT 25,000 per box from last year. For example, the price of a box of bell peppers has grown from MNT 28,000 last year to up to MNT 48,000 this year.

Mongolia’s customs since last February have enforced a new standard so that the taxes match exactly with Chinese customs. The prices of fruits in China are still the same as that of last year, but because the tugrug has depreciated and customs taxes have grown, fruit stands have had to raise their prices.

According to B. Baigalmaa, a leaseholder at Bars market, the 5 percent customs tax, 10 percent value-added tax and 20 percent increase in the prices of fruits because of the exchange rate depreciation are making it impossible to maintain cheap prices for produce.

“The customs tax is being raised much higher,” she said – 80 percent from before the changes in customs were implemented.
“Politicians are trying to cover the loss of export revenue by increasing import tax. It would obviously lead to the increase in the prices of imported goods. Poverty is expanding because citizens’ wages are not increasing.”

Across town at Zuun Ail, the arrival of spring is expected to place greater demand on construction materials. It is another market being ravaged by the exchange rate. The price for cement mix, for example, had grown from about MNT 8,000 a packet to MNT 12,000 this year.

The greater expenses for construction materials and tools have put many construction projects on hold.
Most of the merchants that operate at Zuun Ail said they use bank loans to fund purchases to stock their shelves. They pay back those loans after they have started selling their goods, but the delays to construction projects will make it harder to repay those loans this year.

The operators at Zuun Ail said business had never before been so slow during spring, and many blamed policy makers.
“There are a number of citizens like us who do not ask the government for money and pay our taxes. We are sustaining our lives on our own,” said O. Saran, a merchant at Zuun Ail. “Under the names of monitoring and checking, customs officers are searching us thoroughly at border point to impose more tax on our imported goods because they think that the current amount of customs tax is insufficient.”

These testimonials are just a few examples of how small business is suffering. Many small business operators suggested that elected officials come and visit these local shops to see the truth of the economy. That might be a bitter pill to swallow.

SOURCE: Mongolian Economy

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