Cooperatives in Mongolia future of country’s economic development
Published: Apr 13, 2017 Reading time: 5 minutes
“In the 90s it was hard. I was in a high school at the time. My parents, as many others, became unemployed after collapse of Socialist System and we had to think on how to survive,” says 46 year old Otgonbat Davaajav, who is the head of the Gazar Ekhiin Bayalag cooperative in the Arkhangai province of Mongolia.
Immediately after graduation, compelled by emotions to support his family, he borrowed meat from a relative and went to Ulaanbaatar, the capital city of Mongolia, to sell it. This was his first source of income. Since then he has been running a variety of businesses and earned enough money to buy land and start growing vegetables. Shortly after this, some neighbors started to grow their own vegetables on his land as well. This was in the late 90s and by 2001 there were eight people working together on a piece of land of 0.5 hectare.
As the number of people increased with time, they decided to pool their money together, buy more land, and officially register as a cooperative. That was in 2008 and now there are 35 members in the Gazar Ekhiin Bayalag cooperative growing vegetables and planting trees together on 6.5 hectares of land. Despite the increase of cooperative members over the years, the cooperative is far from a successful business. It is mostly still operating because Otgonbat is doing his best to support every member of the cooperative. “I am running a café and have other business. I have a stable income and there is no need for me to be in charge of this cooperative, but I cannot leave those people,” explains Otgonbat. “Most of the cooperative members are vulnerable people: single parents, disabled, elderly and low educated persons. Some of them have no place to go and no one to support them. I had many hardships in life too, so I know how it feels like. I cannot abandon them; I want to make their lives better,” Otgonbat continues.
Facing lack of skills and knowledge
The collapse of the Socialist System undermined the country’s economy significantly. Facing this economic crisis, public cooperatives started falling apart one by one. However, shortly after, new types of cooperatives emerged – privately owned ones. Like the members of the Gazar Ekhiin Bayalag cooperative, many other people across the country felt the need to combine their resources and start working together. According to the National Registration and Statistics Office of Mongolia, 4,111 cooperatives were registered across Mongolia in 2015. The number of cooperatives only increased 6% in comparison to the previous year.
Despite the high figures, cooperative’s contribution to Mongolian economic development remains low. “The number of officially registered cooperatives in Mongolia is different from those that are active,” says Tungalag, a representative of Mongolian Cooperatives Training Information Center (MCTIC) an NGO that improves the capacity of rural cooperatives through trainings and consulting services. “Among those that are active, very small percentage is profitable,” she adds. The cooperatives are usually set up by people with a low income or are unemployed and lack the skills and knowledge needed. The absence of strategy planning and market research, an unfamiliarity with modern technologies and techniques, a lack of resources and working capital, expensive or inaccessible credit and reluctant cooperation with each other do not allow cooperatives to easily become more sustainably profitable.
Empowered people – Improved livelihoods
To support local business, the government of Mongolia established Soum Development Fund (SDF) in 1996. Its purpose is to provide attractive soft loans to local entrepreneurs and to small and medium enterprises for establishing new production facilities or expanding on the existing one, as well as to support the activities of small and medium enterprises contributing to job creation. Yet in reality, the lack of information and understanding about the fund’s availability, low transparency, and inactive cooperation with nongovernmental organizations makes local enterprises unable to benefit from the program.
People in Need contributes to the improvement of the livelihood of the rural population that have limited opportunities for economic empowerment in Mongolia. The project “Empowered people – Improved livelihoods” was implemented with the financial support of the European Union, under their Civil Society Organizations and Local Authorities program, as well as the Czech Republic Development Agency, and in partnership with the Mongolian Cooperative Training Information Center (MCTIC), the Mongolian Women Lawyer Association (MWLA) and Knowledge Network NGOs.
Developing a business plan
During a workshop organized by PIN and MCTIC in the Arkhangai province in late March, members of the Gazar Ekhiin Bayalag cooperative together with MICTIC specialists not only identified the strengths and weakness of the cooperative, but also developed a one year business plan, in which cooperatives will continue to receive specialized technical support. 10 CSOs, representing herders, producers, and service providers, as well as 40 cooperatives in the Arkhangai and Uvurkhangai provinces of Mongolia, are currently receiving tailor-based support.
With the support of CSOs and under the supervision of PIN and MCTIC, cooperatives continue to improve their organizational and financial capacities for project development; exploring innovative livelihood options and gaining marketing skills.
The project altogether seeks to improve the transparency, information sharing, and governance of the soum development fund to make it more beneficial for all members of the community, from herders and entrepreneurs to local authorities in their endeavor to accelerate the inclusive and sustainable economic development of their region.