Mongolia walked one step back from advancing cashmere industry development
- By Dashmaa D -
- Feb 15,2023
Our country is a major player that produces about 10,000 tons of cashmere per year and supplies about 48 percent of the raw cashmere in the world market. However, preparing raw materials is one thing, offering ready-made products made from raw materials, and comprehensively developing the cashew industry is another matter. Specifically, if 10,000 tons of cashmere are sold at 100,000 MNT per kg per year, the herdsmen earn about one trillion MNT. On the other hand, the Ministry of Food, Agriculture and Light Industry (MFALI) reported that the export of washed, combed, and cashmere products will earn about 445 million USD or 1.5 trillion MNT at the current exchange rate in 2022. About 80 percent of it was made from the sale of washed cashmere, 10 percent from combed cashmere, and the rest was found in final products. It is estimated that the world’s cashmere clothing market is worth about 2.5 billion USD a year. Therefore, if we process the raw materials as well as possible and produce and sell the final products, it means that we can earn many times more than our current income. To increase the income, it is necessary to support and develop a multipurpose factory from the complete processing of raw materials to the production of final products. Currently, about 100 small and medium-sized enterprises and household industries and workshops are operating in Mongolia, which wash and comb raw materials and supply finished products. MFALI clarified what is being done and implemented to increase the number of multipurpose factories, increase the volume of finished products, and advance the primary processing of raw materials.
The Department of Light Industry Policy Implementation of the MFALI said, “The government has implemented several projects and programs to develop the cashmere industry, and the results are noticeable. For example, in 2018 and 2019, a total of 295-billion-MNT concessional loans were granted, while 121.9-billion-MNT concessional financing was given to 24 national industries within the framework of the “10-billion Comprehensive Plan to Protect Health and Revitalize the Economy”. As a result, by last year, factories bought 3,200 tons of raw materials, and their export income reached 445.3 million USD. This is an increase of 15.8 percent compared to 2019 and 33.4 percent compared to 2021. It has been able to increase stable jobs and update equipment and technology. Then this year, 500 billion MNT will be given as a loan for cashmere production.”
Despite this support, our country still receives a very small share of the funds circulating in the world market in the field of cashmere products. It can be said that the following factors influence this. First, 80 percent of the export income, or about 8,000 tons of products (more than 30 percent of the total cashmere supplied to the world market), is washed. Washing is the primary processing, and the “Technical regulation for the processing and trade of the cashmere” was approved by the MFALI but it was not implemented. If combing is exported, by 2023, 4,500 tons of combing and 2.1 million pieces of finished products will be exported, and the sales revenue will increase by more than 200 million USD from last year and reach 660 million USD. However, the government decided last week to postpone the implementation of the technical regulations until next year. The Ministry of Economic Development (MED) proposed the postponement. Explaining the reason behind this, an expert from the Department of Integrated Development Policy of the MED said, “Due to the low capacity of the combing factories, they cannot comb all their products this year. As a result, the price of cashmere and the income of farmers will decrease. About 240,000 herding households across the country earn money and meet their needs by selling their cashmere every year. Therefore, it is wrong to take such measures in haste. If the capacity of the complex combing and weaving plant is increased from next year and the following year, then the export of washed cashmere can be banned when all the raw materials are processed.”
Then, MFALI and the Mongolian Wool and Cashmere Association announced that in 2023, seven more combing factories will be put into operation, and the total capacity will exceed to 10,000 tons. It was also mentioned that 20 major producers agreed that they would buy one kilogram of cashmere at a price not less than 100,000 MNT and not reduce the income of the herders. Combing factories will continue to work at full capacity and purchase raw materials, but businessmen from the southern neighbor will increase the price of washed and raw cashmere, following a policy of not losing their suppliers, which can be understood as reducing the development opportunities of domestic processing industries.
About this, a company’s director that operates in this field said, “When we first exported raw cashmere and started producing washed ones, hundreds of jobs were created, and sales revenue increased relatively. If the combing and selling of washed cashews are started, more than 3,000 new jobs will be created, investment in combing factories will improve, and sales income will also increase, according to the estimates of industry ministries and industries. In general, to support the development of the industry, it is necessary to solve the problem comprehensively, starting with the preparation and supply and purchase of raw materials. If we take a bold step and decide to export combed cashmere without worrying about the herders’ income for a year or two, it will soon pay off for the national economy.”
Another issue to be considered is the decrease in the number of skilled workers in light industry, sewing, weaving, and knitting, MFALI has mentioned. The number of technologists and mechanics in the Mongolian University of Science and Technology (MUST) textile and sewing industry students studying in engineering class has decreased dramatically. The director of the Industrial Technology School of MUST, J.Tuyatsetseg assumed “Three to four students are currently studying in some classes. There is a problem with human resources in the light industry. Any professional class should have at least 20 students, while some have only two to three students. In the future, MFALI, the Ministry of Labor and Social Protection (MLSP), and the enterprises and universities of the light industry sector will study in detail what professions, in how many years, how many students will be trained, and what kind of support and discounts will be provided to them. In the future, MFALI, the Ministry of Agriculture, MLSP and the enterprises and universities of the light industry sector should study in detail what kind of profession, for how many years, how many students will be trained, and what kind of support and concessions will be given to them, and take measures accordingly. Otherwise, there will be a shortage of human resources.”
On the other hand, marketing and advertising aimed at the international market should be done at a high level. Our country produces half of the world’s cashmere, and it is necessary to introduce and inform that cashmere is very fine and valuable. In recent years, due to the health of animals and the deterioration of pastures, the micron of Mongolian cashmere has decreased, but the finest and quality raw materials are still supplied, the Industrial Technology School of MUST clarified. One of the reasons for the formation of fine cashmere can be understood as extreme climate. Due to extreme cold in winter and extreme heat in summer, the regulation of the animal’s body is affected, which affects the quality of wool and cashmere. Therefore, experts continue to recommend the need to constantly promote the fact that we produce environmentally friendly products with renewable resources that provide animal welfare, and to create and promote the international brand of “Mongolian cashmere”. It can be seen from this that in the last few years, the level of cashmere processing has increased, the name and variety of finished products have increased, and the quality and appearance have improved. Also, the amount of export income is increasing year by year, there is clear progress in the development of the industry, and it is moving forward step by step. However, the issues of human resources, qualified employees, and succession planning for the sector have been neglected. In addition, the policy of raising the processing level of products for export by one step was discussed. The development plan of the cashmere industry has taken a step back.