Mrs. D.Altantsetseg, Executive Director of the Mongolian Wool & Cashmere Association, gave us an interview, talking about urgent nowadays issues to the wool and cashmere sector of Mongolia and some possible solutions to resolve it.
- Mongolia is still exporting 70 percent of all cashmere in raw, although the country provides almost half of total cashmere in the world. What is the reason Mongolia is not able to make final products with cashmere?
- The government pledges to augment the national industry and productions. Unfortunately, we have not felt a concrete progress yet. Just recently, the government adopted the “Cashmere” national program which reflects some urgent issues faced to the cashmere sector. We asked several times the government to ban exporting raw and washed cashmere. As the program is adopted, a document on the ban is expected. We hope the law on VAT will be amended to outlaw the export of washed cashmere. A governmental regulation is critically demanded for the cashmere sector.
- You said a regulation is essential. Clarify please.
- It is true. A governmental regulation is required for this sector. To see practices in other countries, governments support the private sector, NGOs and associations through a certain policy. But Mongolia lacks such system. Our government is very reluctant to move for the good practice.
As Mongolia established the Economic Partnership Agreement (EPA), we plan to implement a joint project with Japan on thread and processing of cashmere goods. We have to improve the quality of yarn products because Japanese side always wants to buy cashmere goods. But we still encounter problems in collaborating in it. First of all, a certification is required when we export cashmere goods to Japan. Actually, Mongolian side has this certification, but the bureaucratic government blocks all the chances for cashmere factories to have this certification. When a visit of some officials from the Japan’s Ministry of Economy, Trade and Industry to Mongolia, they told us a price of Mongolian cashmere is very high, but the quality is quite poor and they suggested paying attention to it. “Mongolian factories claimed that their cashmere goods are made of 100 percent cashmere. But they were actually not” they frankly said. We admit it by the reason that small-sized factories do not have the certification, so they use imported low-standard threads and labeled their products as ‘Made in Mongolia’.
- What advantages are expected from the ‘Mongolian Cashmere’ program when it is adopted?
- The key purposes of this program are to ensure short and middle-term sustainable development of the cashmere sector in Mongolia and to raise the competitiveness. Several goals are included in the program. In the first turn, a sustainable environment for taxation, investment and finance will be ensured in order to augment the production and export of final products. Therefore, the quality of goat breeds and cashmere will be improved. Furthermore, the program focuses on introducing eco-friendly progressive technologies and make goods with high competitiveness.
Human resource in this sector is a critical issue now. Thus, the program reflects a clause on preparing human resources based on a certain requirement. It is impossible to manufacture high-standard products without skilled staffs and workers.
Commenced in 2018, the ‘Cashmere’ program will be implemented until 2021. We are awaiting concrete results, for instance, manufacturing of threads is projected to increase by 3-3.5 times, final products--by 4-5 times and the export size--by 5 times. Thus, income tax will maximize by four times.
In addition, a proper environment for taxation and finance has not developed to boost industry. Due to high interest of commercial loans (24 percent per year) offered by banks, factories have a very small chance to grow up. Therefore, the program includes a matter to set up a fund with MNT 500 billion in order to support their business.
- The cashmere sector here also lacks human resources, you said. What matters should we focus attention to prepare workforce?
- Training carried out by the Association is closely related to human resources, essential part of the cashmere sector. The government urges to diversify the national economy, make it multi-pillar and boost the manufacturing sector. But in fact, we are just losing the most effective large number of workforce due to a governmental action of exporting working people to the USA, South Korea and Japan under certain quotas, while not only the cashmere sector, but also other vital sectors lack people. This is a totally illogical system.
There is also unsatisfactory statistics. Each year, only less than 20 people apply for the light industrial technological course at the Mongolian University of Science and Technology (MUST). Another survey among graduate students of secondary schools shows that only three pupils pursued to a plan for working in the light industrial sphere. Thus, the ‘Cashmere’ program included a scholarship program for engineering students. We need a proper policy to support human resources because there is no person who is eager to be engaged in the sectors making wealth. It is impossible to develop the industrial sector and export goods unless we care about workforce. Today we need practice-dominant courses rather than theory-centered training. It takes quite long time to train graduates from the MUST. Globally, the business sector develops every minute and second.
- People who do business in the cashmere and wool sectors complain about insufficient provision of facilities and equipment to produce threads. It is impossible to import them from foreign countries, isn’t it?
- These kinds of facilities cost an arm and a leg. Only the narrow conveyer line costs 4.8 million Euros and the wide conveyer line costs 1.9 without VAT. To purchase such expensive facilities, a high-interest credit from commercial banks is required, so it would be simply zero benefit. It is difficult to nurture the cashmere sector without any support from the government such as exemption from VAT. In fact, when businesspeople import the equipment after overcoming massive challenge, they just face a high tax at the customs prior to starting the manufacturing.
The cashmere industry costs high because its raw materials, facilities, workforce are very expensive, but it is way too beneficial when doing proper marketing and management policies. In today’s quick development era of industries, the government must not be so reluctant.
- How to make our Mongolian cashmere a brand?
- Mongolian cashmere goods are sold in New York and in other largest markets due to their high quality. However, the goods still need absorb value add by making them more stylish. ‘Your biggest mistake is a poor action of attracting consumers in the foreign markets with designs. You do not have a concept on design,’ they always told us. Matters have been reflected in many projects and programs on promotion of the goods, underscoring their ecological quality.
- What works is your Association doing to connect Mongolian companies in the cashmere industry to the foreign market?
- Big companies such as ‘Gobi’, ‘Buyan’, ‘Altai Cashmere’ and ‘Goyol Cashmere’ will participate in the COTERIE, the world’s largest textile exhibition, for the sixth time. As taking part in the largest fair, consumers demand better standards. The USA is a consuming nation rather than industrial nation, and US is the 2nd largest country in the world after the European Union by consumption. Reaching the US market means accessing to the global market, thus we are striving to sell products in the US market.
President Battulga Khaltmaa suggested selling the products through networking with US Senators and we agreed. As for the functional works, the Mongolian companies are participating in exhibitions in Las Vegas and New York, making the first step to access to the US market.
- What works does the Association plan in near future?
- Mongolian Wool & Cashmere Association is paying attention to increasing the export of cashmere products. A designers’ center has been established at the Association with aims to empower and incubate small and middle-sized enterprises as well as to improve designs of their products.
Besides help companies develop their products, we also hold business English language training because a business in any industry is impossible to grow without an international networking.
With support from the Italian government, the Association is expected to set up a laboratory that will be utilized between factories because the cashmere sector in Mongolia possesses only laboratory working at the Mongolian Textile Institute. It will definitely contribute to tackling issues at the technological level.
Moreover, we are considering to implement the “Sustainable Cashmere” project in cooperation with the EU.
- Thank you for the interview.
Source: Invest Pro Mongolia #4 (2018)