ADB, Japan to Help Mongolia Develop High Value Farm Products

MANILA, PHILIPPINES - The Asian Development Bank (ADB) and the Japan Special Fund are helping Mongolia develop high value agricultural products to support the rural economy and strengthen the agribusiness sector.

ADB will provide a $14.72 million grant from its Asian Development Fund, while the Japan Special Fund, through ADB, is extending associated technical assistance equivalent to $2 million for the Mongolia Agriculture and Rural Development Project. Additional finance for the project will include $1.41 million equivalent from the Government of Mongolia, $11 million from participating commercial banks and $20.37 million from agribusiness enterprises.

Agriculture is at the heart of the Mongolian economy, making up 40% of total employment and accounting for 20% of the gross domestic product in 2007. But the sector is blighted by poor quality raw materials, badly-organized supply chains, low levels of management and customer service, old equipment, and insufficient working capital. Agribusiness enterprises also struggle in the face of keen competition from the People’s Republic of China.

Mongolia has a range of industries that use agricultural raw materials – meat, dairy, leather, cashmere, camel hair processing and garments, wool carpets and blankets, felt products, and fruit and wild berry products.

“Agriculture and rural development are crucial to broadening and sustaining Mongolia’s growth and providing opportunities for the many poor who have not benefited from recent growth,” said Mandar Jayawant, Senior Country Economist with ADB’s Mongolia Resident Mission.

The project will create improvements along the ‘value chain’ of agribusinesses, helping them add value to their products and to develop premium brands that command high prices in international niche markets.It will also fund investments in rural infrastructure and services that support the agribusiness sector.

“Consumers increasingly demonstrate a willingness to pay a premium for quality products that are authentically, ethically and ecologically produced,” said Mr. Jayawant.

The project aims to create 800 new jobs and benefit an estimated 2,500 families. It also has a strong gender element as women play a major role in agribusiness. Incomes of participating agriculture producers are expected to increase by an average of 60% from 2008 to 2015.

The financial intermediary loan formula being used in the project marks a change from past ADB rural assistance to Mongolia, which has been solely through government-funded programs. Under the project, loans will be made available from participating banks to private enterprises, which by building up their own businesses will provide economic, social and environmental benefits to the wider community.

Around 15 businesses are expected to apply for the loans and ADB expects that at least 25 more will make similar investments within five years of the project’s estimated completion in June 2012.

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