Along with growing economies, the global South is seeing growing numbers of readers and a newly flourishing publishing industry. The creative economy – of which book publishing is part – is experiencing a jolt from a combination of expanding economies and urbanizing cities. Just as the first settled cities of ancient Mesopotamia (today’s Iraq) spawned literature and learning, so the rapidly urbanizing South is changing dynamics and creating the space and demand for books.
The creative economy is seen as the “interface between creativity, culture, economics and technology in a contemporary world dominated by images, sounds, texts and symbols” (UNCTAD). It has been shown to be an effective way for emerging economies to leapfrog into high-growth areas in the 21st century world economy.
Telling stories about local conditions and people’s rapidly changing lives is proving a commercial success formula. Fast-growing India is forecast to become the largest market for English language books within a decade. India’s economic boom, which saw 6.7 percent growth in 2009, and its expanding middle class are driving demand for books. India saw the number of literate people pass 66 percent by 2007.
“It is a forward-looking generation,” said Manish Singh, country manager for publisher Harlequin Mills and Boon, to The Guardian newspaper.
Estimates of India’s book reading market put the number of readers at just 5 million out of a population of over 1 billion people. But according to Anantha Padmanabhan, the director of sales in India for publisher Penguin, “that is set to increase dramatically.”
A survey by Tehelka (http://www.tehelka.com) found Indians are favouring stories about local conditions and set in the places where they live.
India’s most popular current writer is Chetan Bhagat, a former investment banker. He has sold more than 3 million books in the last five years. His latest, Two States, sold a million copies in four months.
Bhagat puts his success down to the way the stories are written. “This is not like the mature English literature market,” he said. “It needs an English that is highly accessible, simple, and with stories that are still interesting and relevant.”
Book prices in India have stayed affordable for the middle classes. A book can cost from US $1.85 to US $2.65 for a paperback – still a high cost for the poor, however, who live on a dollar a day.
In Egypt, around 30 percent of the population is illiterate and book reading has been historically very low: it has been claimed an average literate Egyptian reads a quarter of a page of a novel per year. From this low base, a best seller only needs to sell a few thousand copies.
However, in Egypt small-scale independent publishers are starting to make an impact. Mohamed Hashem – founder of the Dar Merit publishing house (http://www.zoominfo.com/Search/ReferencesView.aspx?PersonID=1007104230) – has built from scratch in 12 years one of the country’s most critically acclaimed publishers: all from a tiny apartment in a rundown Cairo building.
“We can’t compete with the big firms in terms of profits,” he told The Guardian, “but the new wave of authors will always be sitting here. Yes, we have poverty and limited resources. But we also have the future.”
Launched to counter what Hashem felt was an unimaginative book market, his stable of authors have shaken up the Arabic fiction world. The global success of Alaa al-Aswany’s The Yacoubian Building (http://en.wikipedia.org/wiki/The_Yacoubian_Building) is proof Hashem’s gamble on edgy talent was correct: rejected by two government-run publishing houses, the book went on to be a hit in English and Arabic and has been made into a film.
Hashem is being credited with unleashing a wave of new talented authors that has pushed literature out from being the preserve of a select group.
One of its successful authors, Hamdi Abu Golayyel – winner of the country’s top literary prize, the Naquib Mahfouz medal – believes “Merit has changed the way pioneering literature emerges in Egypt.”
“Before, you had the innovative writers – there are normally no more than five or six in a generation – meeting together in mutual isolation, because popular opinion rejected them.”
Merit “had the drive and ambition to support and distribute new and younger authors properly. Today innovative writing is wanted by the people.”
Hashem’s secret in attracting talented writers has been more than just business savvy: he also gives them “the freedom to write in my own way,” according to writer Ahmed Alaidy.
The writers also have a credibility advantage: they are writing about their circumstances rather than just imagining what it would be like. Writer Hani Abdel Mourid comes from Cairo’s traditional garbage-collecting neighbourhood; another author, Mohamed Salah Al Azab, has written a book named after the folding seats on Egypt’s lively minibuses.
Demographic changes and Cairo’s relentless expansion are being cited as the catalyst for the new writing.
“The fact that the city has grown the way it has,” says Samia Mehrez, a literature professor in Cairo, “the fact that what we used to call the periphery is now the centre, that is very important.”
“The year we started, we published five titles and the number of people interested could be counted in the dozens,” he told The Guardian. “Now we have 600 titles under our belt, and thousands are interested. It’s my duty to try and expand that circle. We’re chipping away at a wall, and slowly we’re making progress.”
Published: May 2010
Resources
1) Creative Economy Report 2008. An economic and statistical assessment of creative industries world-wide as well as an overview of how developing countries can benefit from trade in creative products and services produced by UNCTAD and the Special Unit for South-South Cooperation in UNDP. Website:http://www.unctad.org/en/docs/ditc20082cer_en.pdf
2) Global Creative Economy Convergence Summit 2009: The summit is about the successful and emerging creative technologies and initiatives that are driving economic growth locally, nationally and internationally. Website: http://www.gcecs2009.com/
5) Jaipur Literature Festival: Described as the ‘greatest literary show on Earth’, the Jaipur Literature Festival is a sumptuous feast of ideas.The past decade has seen it transform into a global literary phenomenon having hosted nearly 2000 speakers and welcoming over a million book lovers from across India and the globe. Website: https://jaipurliteraturefestival.org/
Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.
Africa has seen huge changes to its communications and media in the past five years. The rise and rise of mobile phones, the expansion of the Internet and the explosion in African blogging and social media, on top of flourishing print and broadcast media, all bring an increasing range of options for telling African stories and increasing dialogue.
With all this new media creating new communications channels – and all the turmoil and change affecting millions as economies and countries change – people need the ability to make sense of it all. One magazine is trying to play that role.
An entrepreneur and multimedia innovator has created a unique publication that is capturing the spirit, ideas and stories of modern Africa. It is a high-quality product, has gathered together talented writers and photographers and is gaining a growing global audience. Chimurenga Magazine (http://www.chimurenga.co.za/) based in Cape Town, South Africa, calls itself a “pan African publication of writing, art and politics.” Named for the Zimbabwean Shona word for “revolutionary struggle,” it is published three times a year. Editor Ntone Edjabe is from Cameroon and came to Cape Town in the 1990s after the end of South Africa’s racist Apartheid regime.
With more than 100 contributors, the magazine offers insight into contemporary Africa, what occupies people’s thoughts and how their lives are actually lived.
It is involved in a wide range of other activities, including co-curating a Global South Dialogue Series. And its readership is truly diverse.
“We have readers who are long-term prisoners at Pretoria Central Prison, who have subscriptions that they get to us in coins, and readers who are successful businessmen,” Edjabe said to The Financial Times Magazine.
Chimurenga is out to challenge perceptions of Africa. Practicing the art of long-form journalism more associated with established high-end publications like The New Yorker (newyorker.com), the magazine sets out to challenge perceptions about Africa.
“Discourse on Africa is geared towards simplicity,” Edjabe told CNN. “Everything must be simple – ‘he’s a poor black man, he’s a victim’ – like there has to be a simple story, in a way this is what signifies Africa and global consciousness.
“The moment you bring a degree of complexity to it, it kind of throws people off, they just don’t know where to look anymore. It’s like, ‘what’s going on?’ So Chimurenga in a way does not try to maintain the superficiality of this narrative – we engage with life, we try to present life as complex as it really is.”
Stories in the journal include Billy Kahora writing on the decay of a neighbourhood in Nairobi, Kenya, Michael Abrahams writing about his time in the Cape Town mental hospital after a suicide attempt, and Sean O’Toole following a Zimbabwean immigrant on his journey into South Africa.
The magazine’s website carries back issues of the journal, along with a shop selling magazines, books and t-shirts and the “Chimurenga Library,” an archive of pan-African, independent periodicals. There’s also live online streaming of music – “from ancient techno to future roots” – through the Pan African Space Station radio station, there is a biennial publication of urban life it calls “Africa-style,” and the writings of 14 African writers who visited 14 African cities to check-up on life in urban areas.
As an example of the creativity of Chimurenga’s talent, a special issue of the magazine tried to better understand the impact of violence in South Africa in May 2008 that led to the deaths of 62 people. It did this by creating a fictitious newspaper called The Chimurenga Chronic (http://www.chimurenga.co.za/chimurenga-magazine/current-issue) set during the violence.
The writers are a mix of Anglophones and Francophones, all based in Africa. Common subjects focus on the world of lower-middle class Africa. Examples of past issues show the variety of its content: Conversations With Poets Who Refuse To Speak, Futbol, Politricks & Ostentatious Cripples, Conversations in Luanda and Other Graphic Stories, *We’re all Nigerian!
Well-travelled editor Edjabe has studied and lived in Lagos, Nigeria and Johannesburg, South Africa. He has worked as a disc jockey, music writer and basketball coach. He launched Chimurenga in 2002. He told The Financial Times Magazine “I printed 1,000 copies, which I carried around in my bag. I sold it mainly to friends.”
It was supposed to be a one-off publication but became a journal, initially written mostly by his friends.
“I found out later that this is how most journals actually begin,” he said. “At the time I thought it was unique.”
He aspired to get Africans writing about the Africa they saw and lived in. The challenge was changing the dynamic he found of writers only considering something worth writing about if it had been featured in non-African media.
Edjabe had already made his mark with an innovative initiative to show the diversity of what Africa has to offer. Three years after arriving in South Africa he started the Pan African Market (PAM) in Cape Town. An African cultural centre, it began as a craft market with various traders able to run their individual businesses and leasing stall space from the market. PAM became very successful because it brought together Africans from across the continent and offered a vibrant mix of artists, small businesses and food. It now has 33 stores and stalls from 14 countries of Africa. Shoppers can find arts and crafts, hair dressing, tailoring, holistic healing and catering.
Hard copies of Chimurenga are distributed around Africa and sent to Europe, the United States and India.
“There’s a feeling about writing something, sharing something that is beautiful and truthful from one’s perspective,” Edjabe told CNN.
2) Venture Capital for Africa: VC4Africa is the largest online community of investors, angels and entrepreneurs working to build businesses on the continent. Website: http://vc4africa.biz/landing/?redir_to=%2F
Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.
Southern Innovator’s Fifth Issue Profiles Innovators in Waste and Recycling
United Nations, New York, USA, 28 April 2014
• Fifth issue of Southern Innovator tackles ways to improve human development in a worldwith finite resources • 60-page color magazine offers a snapshot of our fast-changing world
The fifth issue of Southern Innovator (SI) magazine is out now. It explores how innovation can tackle the challenges of improving human development on a planet with finite resources.
SI researchers identified innovative, low-polluting options to the world’s energy needs. They found that it is possible to alter the way that things are made to reduce or eliminate waste and toxic pollutants harming human health and damaging the environment. And not only that: they also discovered that there are sustainable incomes to be made from the economy of waste reduction and recycling – an opportunity that has yet to be fully realized. The innovations shared here demonstrate that raising living standards in the global South and responsible use of the world’s resources are not necessarily incompatible.
Some innovators are transforming attitudes towards fashion, proving that it does not have to be a wasteful industry. Others are turning commonly found waste – food waste, or human or animal excrement – into fuel for heating. The link between good design and the efficient use of resources is apparent in many of the innovators’ solutions. If a new, green economy is to work, then it must appeal to people’s aspirations and be something that they want in their lives and are willing to work to achieve.
Southern Innovator (southerninnovator.org) champions a 21st-century global innovator culture. It is based on intensive research and produced by the United Nations Office for South-South Cooperation in (UNOSSC) in UNDP. UNOSSC also organizes the annual Global South-South Development Expo (southsouthexpo.org), a traveling celebration bringing together Southern innovators, with previous venues in New York, Washington, D.C., Geneva, Rome,Vienna, Nairobi and Doha.
We hope that you enjoy the magazine and find its content interesting and illuminating, a snapshot of a fast-changing world awash with innovators, creators and doers making their world a better place.
For information on sponsoring issues of the magazine, either through helping to fund its print run, or through an insert relating to an issue’s theme with pertinent content for our readers, contact Cosmas Gitta at cosmas.gitta@undp.org.
United Nations General Assembly: Sixty-ninth session, Item 24 (b) of the provisional agenda, Operational activities for development: South-South cooperation for development, 17 July 2014.The research informing Southern Innovator Magazine played a part in the formulation of the UN’s post-2015 development agenda, including the Sustainable Development Goals (SDGs).
Results Review and FY 2002 Resources Request (USAID/Mongolia March 17, 2000):“Improving Productivity and Exports: A key to Mongolia’s growth is increasing non-traditional exports. However, with less than ten years of free-market experience, Mongolia has little experience on how to accomplish this objective. In response, USAID began a six-month program in January2000 to: 1) instruct Mongolians on the principles of competitive analysis; 2) establish benchmark data that will help Mongolians to rank their country against others vis-a-vis key competitiveness indicators; 3) create Mongolian-specific case studies to illustrate successful competitive behavior or pinpoint obstacles and constraints; 4) work with business leaders from garment, cashmere, meat, information technology and tourism industries to apply competitiveness tools and focus attention on key priorities for government and private sector action. Over six hundred influential Mongolians from government, private sector and academia are participating in the process. USAID hopes to assist in developing a national action plan for competitiveness in the fall, once a new government is in place.
The Global Bureau’s Global Technology Network (GTN) which develops business linkages between U.S. and Mongolian firms has been active for two years. GTN efforts have fallen short of expectations with only three relatively modest linkages established in 1999. In January 2000,through its relationship with the International Executive Service Corps (IESC), GTN sponsoredMongol Construct 2000, a trade mission to the United States for construction firms. The purpose ofthe mission was to learn about advanced construction techniques and develop linkages with U.S.firms. In 2000 IESC will expand its assistance to a select group of garment manufacturers, who areattempting to establish non-traditional markets.“
Background: This excerpted text is from a business prospectus prepared in 1999 for USAID to promote construction opportunities in Mongolia to the US construction industry. At the time, Mongolia was in the grip of a severe crisis, called one of “the biggest peacetime economic collapses ever”. By 2012, Mongolia was called the “fastest growing economy in the world”. It is proof the foundations for Mongolia’s recovery from crisis were laid in the late 1990s.
“No other Asian country enjoys more political freedom today than Mongolia. And no other Asian country has shown greater commitment to open markets. But Mongolia has received little reward for its efforts.” Fortune Magazine, December 1998
Discover a New Democracy
Mongolians are some of the highest per capita donor recipients in the world: On average US $50 per person. The vast majority of this aid is targeted at infrastructure projects. Mongolia in 2000 is an opportunity waiting for American business. Democratic, with a free market economy, the country offers regulatory freedom, a belief in the private sector setting standards and a pro-Western attitude friendly to American companies.
Mongolia’s history is marked by the rise and fall of cities, the ebb and flow of political and economic systems. The country has experienced being the largest empire for its time in the 13th century, to being occupied by foreign powers. Economically and socially the country has lived through feudalism, communism and now, capitalism. The one thing that has remained stable throughout this rich history has been the nomadic way of life. Livestock remains to this day a major pillar of the economy and contributes to one of the country’s major foreign currency earners, cashmere wool.
After over 70 years of communist rule, Mongolians finally turned their backs on communism and robustly embraced free markets and democracy in 1996 with the election of the Democratic Coalition. A gradual opening up of the country had begun under the ruling Mongolian People’s Revolutionary Party after the collapse of the Soviet Union and under pressure from peaceful public demonstrations.
After the fall of the Soviet Union, the country suffered what many economists have called the largest peacetime economic collapse in the 20th century.
While it is a fact that Mongolia’s economy is severely underdeveloped, both in terms of infrastructure and diversity, it is also true the country is the freest in Asia. As Fortune Magazine noted in a December, 1998 issue, “No other Asian country enjoys more political freedom today than Mongolia. And no other Asian country has shown greater commitment to open markets. But Mongolia has received little reward for its efforts.” Mongolia, for American business, offers a win-win situation, an opportunity to join in the building of a strong democracy in Asia while tapping the rich resources, both natural and in human capital. American businesses can enjoy a regulatory environment that is more flexible than in the United States, and a government that lets businesses do what they do best: serve the needs of customers and make money.
Youthful
A Bright Young Future
Demographically, Mongolia is a very young country. A by-product of high birth rate policies during the communist period, 60 per cent of Mongolia’s population are aged between 1 and 24, with 37.6 per cent between the locally accepted definition of youth of 15 to 34. In 1998 the New York Times Magazine called Mongolia “The youngest place on earth”. Even a cursory glance at the streets of the capital, Ulaanbaatar (population 600,000), will reveal a young population taking their fashion and cultural cues from the West, and who hold correspondingly Western aspirations to own homes and start businesses. Mongolia enjoys exceptionally high rates of literacy ( 96 per cent), post-secondary enrolment (65,089 students in 1998) and the urban population quickly embraced Western consumer products as they became available.
Growing
The Construction and Environmental Services Industry in Mongolia
Today, Mongolia officially has 100 architectural and engineering design companies and over 500 construction companies. Of these, 40 are considered large operations with their own in-house design and engineering outfits, or who have a close relationship with one or more companies that either manufacture or import construction materials. The country is a rich resource for raw materials for the construction industry, but this vast wealth remains under-utilised. According to geological surveys spanning the decades from 1930 to the 1990s, over 200 deposits were discovered that could be tapped for construction materials.
At the beginning of the 20th Century, there were few permanent standing structures in Mongolia, apart from Buddhist monasteries and royal palaces. At the beginning of the 20th Century most Mongolians lived in the round ger felt tent. It wasn’t until the communist revolution that construction of sedentary dwellings and buildings in the country picked up pace. In 1924, three years after the 1921 revolution, the State Committee for Construction was established (by 1926 it became the Construction Department of the Ministry of Industry), and undertook the large-scale construction of buildings based on European designs.
From the 1960s the construction industry in Mongolia emerged as the country industrialised. Mongolia received aid from both China and Russia up to the Sino-Soviet dispute, and both countries were the main funders for construction projects. Many buildings in the downtown of the capital were built by the Chinese government.
Up until the election of the Democratic Coalition in 1996, all construction activities were conducted under the direction of the state. Building booms took place in the 1970s and 1980s as the communist government tried to meet the demand for apartments and other facilities. At its peak in 1989, the construction sector made up 10 per cent of the gross national product. With the collapse of the Soviet Union at the end of the 1980s, many building projects in Mongolia ground to a halt as Soviet subsidies were withdrawn. Across the country it is possible to see the empty shells of apartment buildings, holiday resorts and half-built sports stadiums.
The Mongolian People’s Revolutionary Party, under popular pressure for a change, began to gradually make the shift to free markets and democracy. The first state privatization programme began in 1993 under the direction of international experts. It wasn’t until the election of the Democratic Coalition in 1996 that significant reforms were taken to fully introduce a free market economy. And it wasn’t until 1997 and 1998 that the fruits of these measures started to appear.
The construction industry was fully privatised in 1998, with companies becoming limited or wholly owned entities. There now exists a mix of private and public companies in this sector. All of the companies are in the early stages of learning how to work and prosper in the free market.
The legacy of working under a command economy has left many companies ill-equipped and under-funded, many not operating at full capacity or not at all.
The private sector has shown itself to be capable of initiating real estate development projects, most commonly the building of private apartments, shopping complexes and small hotels.
Weaknesses in management and financing do lead to long delays, poor quality and in some cases, the abandonment of a construction project mid-way. According to the State Statistical Office, the construction sector shrank from 1991 to 1994. In 1994, activity increased 26 per cent from 1993. Since then the gross national product has averaged growth of 3.3 per cent, but still has not caught up with the rate at the end of the 1980s.
The environmental services sector has received a significant boost from international donors working in Mongolia. Various donor funded projects are building and renovating facilities using energy-efficient technology. These donors have also conducted training workshops and education campaigns for local construction companies. Being a very cold country, awareness is high over the financial and environmental benefits of energy-efficient techniques. Construction techniques, however, are weak and Mongolia has a long way to go in utilizing these technologies efficiently.
It is a misnomer to think most Mongolians are wandering nomads. In fact the majority of the population of 2.4 million now live a sedentary lifestyle in small towns or in the big cities of Ulaanbaatar, Erdenet and Darkhan. Under communism these urban centres were economically dependent on state enterprises, many of which now have either gone bankrupt, idle or have been privatized. There is currently a significant migration to the capital from these economically devastated communities. Officially the government was able to track 6,518 people, mostly between the ages of 18 and 39, moving to the capital in the first half of 1998 – a 60 per cent increase on 1997. Unofficial migration to the capital is believed to be far higher.
At present a majority of the population still live in ger tents or sub-standard makeshift wooden housing. The construction industry cannot meet the high demand for modern housing, with amenities like running water, toilets and electricity.
“The business atmosphere in Mongolia is inviting and [our] partnership has faced very few obstacles while entering the market. Based on our positive experience here, we plan to continue and expand our presence in the Mongolian marketplace.” Mrs. Bolormaa Reiner, Representative Johnson and Johnson-Mongolia
Foreign Aid
Economic Prospects for the Country
Large donor community
Along with the collapse of the Soviet Union, Mongolia also lost significant economic subsidies, which contributed to the severe crisis of the early 1990s. The World Bank has estimated these subsidies reached a third of Mongolia’s GDP in the late 1980s. Since then international donors have played a key role in helping to restructure the Mongolian economy to adapt to the demands of a market economy.
Infrastructure has always been a weak point for Mongolia, and it was considered the most isolated and underdeveloped of the former Soviet bloc countries. International donors have placed infrastructure development at the top of their agendas. Since 1997 foreign aid in the form of grants and loans has hovered around US $250 million, with the vast majority of this aid going towards infrastructure development. Priority areas are highways and transportation, power stations and communications. By sector the aid breaks down as follows: 30 per cent to mining, 27 per cent to energy, 19 per cent to transport, eight per cent to communications, five per cent to social security and three per cent to other areas. The donor community and the Mongolian government want to dig the country out of decades of underdevelopment, which currently hampers the budding private sector from becoming more sophisticated.
These large-scale infrastructure projects offer enormous opportunities for US firms experienced in working in cold-weather conditions. There are also opportunities to develop world class office space for these international donors, something that is currently lacking in Ulaanbaatar.
Foreign investment to date
Actual large-scale foreign investment to the country has been slow coming and still doesn’t represent a major economic opportunity. The major players in direct foreign investment outside of development aid have been Mongolia’s old neighbours, Russia (20 per cent) and China (33 per cent). This decade the country has attracted US $200 million in foreign investment and registered 840 jointly owned or wholly owned ventures.
New-found affluence
It is estimated that around five per cent of the capital’s population fit into a middle or upper income category. The late 1990s have seen the emergence of a new breed of affluent Mongolians. Many of these affluent Mongolians struck it rich trading in once-unobtainable consumer products or servicing the expanding foreign community. This class of traders have developed a sophisticated taste for all things Western – Mercedes Benz cars, four-by-four jeeps and western fashions. Vehicle registrations have steadily risen since the introduction of a market economy. In 1996 the number of vehicles was 65,020; by 1997 it was 70,088.
New home owners
In 1998 50,000 families became homeowners as a result of privatization of apartments. All the apartments are of Soviet era and do not meet the aspirations of the growing middle class. Many of these new homeowners immediately set about renovating these apartments, installing modern appliances and furniture. A significant minority is renovating apartments with the intention of selling them on to wealthier Mongolians or foreigners. The high number of renovations and additions to buildings in the capital is also indicative of other things: the economy has changed and existing buildings do not meet the new demands, and that people have money to pay for the renovations.
Business Opportunities
USAID has identified the following opportunities in the Mongolian construction sector:
– Donor-funded projects: Large-scale infrastructure projects that are funded by loans or grants from international donors, are a safe bet. These projects require management and technical expertise that is often difficult to find locally. This includes projects that require an international tender.
– Fully funded foreign projects: Any project requiring a building that meets international standards. International companies have little choice when it comes to finding adequate office or retail space.
– Low-cost labor: The Mongolian workforce is highly literate and often speak a second language, usually Russian amongst older workers, and English amongst the young. Unemployment levels are high in Mongolia and workers are keen to get a job. Generally salaries are as follows:
– Manager: US $250
– Accountant: US $200
– Engineer: US $150
– Secretary: US 100
– Driver: US $100
– Qualified worker: US $100
Source: FIFTA
– Donors: Many large-scale projects are directly funded by donor grants or loans and therefore are a low-risk, reliable source of income. At the June, 1999 donors meeting in Ulaanbaatar, US $320 million was pledged, the largest amount in eight years of donor funding. Most of these pledges are targeted at “hard” infrastructure and private sector development.
– Imports rule: Imported construction materials dominate the marketplace and will continue to do so for the foreseeable future. Many of the materials are poor quality and from China. American companies can attract customers with their obvious advantages in both quality and innovation.
– Large resource base: Mongolia’s large wealth of mineral resources is inefficiently utilized, with many mines and factories working under capacity or not at all. These resources could be tapped to produce construction materials locally for the domestic market, or more lucratively, for the booming Chinese market hungry for resources.
– Very cold country: Mongolia’s capital, Ulaanbaatar, is the coldest capital in the world. Mongolia’s winters dip below minus 40 Celsius, and for those who live in apartment buildings, this can be a difficult time. Many apartments are inadequately insulated, and dip below zero when the central heating system is disrupted due to poor maintenance. There is an urgent need for high-quality aluminium and plastic windows and doors. Budgets are tight in Mongolia yet many organizations spend vast sums to heat buildings. It has been proven that during the course of the winter heating costs can be reduced from Tg 4,200 (US $4.20) per square metre, to Tg 280 (US $0.28) in an energy efficient dwelling.
– Windows are expensive: Mongolia must import all windows and glass products. When the cost of freight is added, windows become an unnecessarily expensive portion of any construction bill. This is a business opportunity for any company who can domestically produce glass products and windows at a cheaper price than imports. A National Code for Insulation of Buildings is being revised and none of the existing windows and doors meet this requirement.
– No chemical industry: While Mongolia exports oil to China for refining, the country does not have a domestic chemical industry, and consequently plastic and rubber is imported for construction purposes. Stone tiles like marble are currently also imported from outside, despite this resource being available in Mongolia.
– Central heating and water unreliable: For those who live in apartment buildings, the regular disruptions to both the water and heating supply are not only inconvenient, but also bad for business. Technology that can by-pass relying on the central system (common to many Soviet-era cities, this system is wasteful and subject to regular breakdowns), is urgently needed. Alternative energy sources like solar power and wind can bring electricity to those who are not on the grid.
– Free trade zones: The towns of Sukhbaatar (Russian border) and Zamyn-Uud (Chinese border), both served by rail, are the focus of Mongolian government attempts at increasing cross-border trade. At Zamyn-Uud Japan has upgraded the customs house facilities and trans-shipment facility. On the Chinese side, a major trading market has been constructed and a boom is taking place based on trade with Mongolia.
“Arthur Andersen has had representation in Mongolia since 1993. We have been very active in the development of the accounting and auditing profession in Mongolia. January 1999, Arthur Andersen opened Arthur Andersen Mongolia Audit LLC.” Mr. C. L. Ruddell, Representative Arthur Andersen-Mongolia
What Do Mongolians Say They Need?
In interviews conducted by USAID, Mongolian government officials and construction companies detailed what they felt were the most urgent priorities:
– Education and training: The vast majority of engineers and managers in the Mongolian construction industry received their training under communism. They were trained to work under a centrally planned economy, and will need to learn how to thrive in a free market situation where there are no guarantees. The Construction Training Institute currently only offers courses to managers and engineers. Its curricula is out-of-date and awareness of modern construction techniques and standards is weak. Exposure to computer-assisted construction methods is urgently required as well as training in foreign languages.
– Awareness of International Standards: No Mongolian companies can offer state-of-the-art consulting on construction projects.
– Licensure, apprenticeships and guilds: Standards are very weak in the construction sector and there is not a highly developed mechanism to ensure construction managers, engineers and workers meet a minimum qualification.
– Being Earthquake-proof: While the National Design Codes and Regulations do stipulate that buildings must meet minimum requirements against earthquakes (Mongolia is located in a seismically active region, and severe earthquakes have happened), most buildings post-1989 fail to meet these requirements.
– Weak infrastructure: Developing the transportation infrastructure of Mongolia will be key to future improvements in the economy. The rapidly developing Chinese economy offers many opportunities to Mongolia if roads and highways can be upgraded.
– Better coordination and promotion: Working with FIFTA or the Foreign Investment and Foreign Trade Agency, Mongolian companies seeking foreign investment for projects need to improve their networking and presentation skills.
Obstacles and Market Risks
Corruption: While Mongolians will tell you corruption has reached all levels of government, it is important to keep in mind it does not come close to the levels of corruption found in other former Communist countries. Foreign businesses do not suffer from harassment or intimidation by criminal gangs.
Inexperience with the free market: Foreign businesses and travellers to Mongolia do experience difficulties communicating Western business concepts like consumer rights and service. It has to be said that over the past three years this has changed considerably for the better, and continues to improve as Mongolian businesses learn the importance of the axiom “the customer is always right”.
Differences between Mongolian and US standards: While Mongolia’s regulations and laws are different from those in the US, it is important to keep in mind that the regulatory environment in Mongolia can be much freer in some areas. Also, many of the new laws have been drafted based on US laws and Mongolia’s constitution was written upon the advice of US legal experts.
Harsh climate: The long cold winters do present problems for some foreign businesses not used to working in cold-weather climates. This is also an area where American companies are at a specific advantage.
Financial instability: Mongolia has had a number of serious banking crises since the early 1990s. Many private and public banks are insolvent due to bad loans. This can lead to long delays to construction projects and/or non-payment of salaries.
Contract bidding: Only those contracts that are directly commissioned by the government will be subject to an open bidding. Private sector work is usually not subject to open bidding or design competitions.
Downtime: Since Mongolia does no international corporate presence in the capital, any technical problems to equipment or software can involve downtime and delays as parts or repairs are sought in China. It is important to take this into consideration when establishing an operation in Mongolia.
Advantages of Working in Mongolia
– Regulatory freedom
– Private-sector driven
– Market economy taking off
– Democratic
Privatization of Land: Can I Own Land in Mongolia?
The dual legacies of communism and nomadism have made the issue of private ownership of land in Mongolia a thorny one. The government has passed the necessary legislation to make owning land in urban areas possible. However, inexperience with the concept of owning property and the laws that govern this make buying land risky. It is advisable to get a reliable local partner and to use the services of a law firm that knows the Mongolian situation. Long-term leases are available and might be a good option.
Mongolian Government
Financial commitment to date:
The Ministry of Infrastructure Development has developed projects to encourage the production of construction materials locally. Due to financial constraints these projects have not been implemented. They include projects on cement, glass and paint production, rock processing, lime extraction and road development.
Government plans:
At this time the Mongolian government has not been able to develop a long-term strategy for the development of the construction sector. There are no specific policy incentives directly supporting real estate and housing development. The Ministry of Infrastructure is looking to the private sector to offer direction and guidance.
Future Opportunities
The Tumen River Project: The eastern portion of Mongolia is included in a major trade zone development project initiated by the United Nations Development Programme. The Tumen River Area Development Programme (TRADP) is focusing foreign investment and infrastructure upgrading on eastern Mongolian, North-East China, the Democratic People’s Republic of Korea and eastern Russia. This region has cumulatively attracted US $961 million from 1991 to 1997, with Mongolia’s second biggest trading partner, China, making significant development gains. While the Democratic People’s Republic of Korea has been a thorn in the Project’s side, both Mongolia and China are keen to push ahead with improving infrastructure and trade links. It is impossible to ignore the fact that China has made significant gains and that trade links with Mongolia continue to tighten.
A feasibility study is currently underway on a railway link from Arxan, China to Choibalsan, Mongolia, and possibly on to Ulaanbaatar. As donors begin to fund these projects it would be prudent for American businesses to start building a relationship in the region to take advantage of future contracts.
Commercial Street 2005: The City of Ulaanbaatar, Mongolia’s capital and commercial centre, has drafted the blue prints for the construction of a modern commercial and business centre for the next millennium. Commercial Street 2005 will offer infrastructure and services that match global standards. The current Soviet-era infrastructure of Ulaanbaatar is an impediment to future growth and is unsuitable for Mongolia’s new market economy.
The project covers 20 hectares of 1 km length in a historically vibrant part of the city. The city will pay for the engineering and infrastructure works for the complex and local businesses will pay for the construction of secondary buildings. Commercial Street 2005 is looking for foreign investment to participate in the building of a food supermarket, trade and service complex, a twin-towered international trade and service complex, a banking centre, a business centre and renovations to nearby apartment buildings. It is estimated the project will create 10,000 jobs and would cost an estimated US $100 million.
Darkhan: With a population around 55,000, Darkhan is as-yet an untapped opportunity. Located north of Ulaanbaatar and close to the border with Russia, Darkhan is linked by a good road and rail. Along with the mining town of Erdenet, Darkhan has a modern infrastructure. Having been trained to work in the former state industries that once dominated the city, the population is well-educated and skilled. Today, coal mining and agriculture are key to the economy. The city is potentially a good stable base for accessing the Russian market.
Getting started
Registering prior to undertaking construction work is relatively simple. The Government Agency for Construction issues three degrees of licenses. The first license is for small projects, the second is for small to medium-sized projects, and the third is for large-scale projects anywhere in Mongolia. As the project develops the company is obligated to notify and allow local building inspectors to enter the site.
Residency Permits
All foreigners wishing to remain in Mongolia for more than 30 days must apply to the State Centre for Civil Registration and Information for a temporary residency permit or a short-term residency permit.
Temporary Residency Permit
The applicant must present to the State Centre for Civil Registration a request issued by FIFTA. FIFTA will issue such a request to any agreed foreign investor immediately. Permits are generally issued within a couple of days and are valid for a period of time from three months to one year. A temporary residency permit can be renewed an unlimited number of times. Each renewal will re-validate the permit for a period from three months up to one year, as requested by the investor.
Short Term Residency Permit
This non-renewable permit is issued to foreigners who plan to spend no more than 90 days in Mongolia. Applicants are required to present a written request from a Mongolian or foreign organization stating the activity in which the person will be engaged and the reason the permit is needed. In case of an exploratory visit by a potential investor, a letter from the home company will suffice.
Entry Visas
Investors may apply for single-entry and multiple-entry visas at the Foreign Ministry’s Chancellery Building in Ulaanbaatar or at Mongolian diplomatic missions in other countries.
Single-Entry Visas
A single-entry visa is valid for three months from its date of issuance and entitles the bearer to enter and stay in Mongolia for 30 days. A letter of invitation or applicable work papers are required. This type of visa is issued at the Ulaanbaatar airport or land border-crossing point.
Multiple-Entry Visa
A multiple-entry visa entitles the bearer to enter and exit Mongolia an unlimited number of times and is valid for a period of six months to one year. For the issuance of this type of visa, an official letter stating the reason for travel and a copy of the certificate of the organization must be submitted by the investor.
(Source: FIFTA)
Infrastructure facts
Airports – Mongolia has 81 airports, of which 31 can be used year-round. Only eight are paved.
Roads and highways – Mongolia has 1,531.7 km paved roads.
Railway – Mongolia has 1,750 km of rail track, mostly a north-south line reaching from Russia to China, with spur lines to the copper mining city of Erdenet and the coal mining city of Baganuur. A short line goes from the eastern city of Choibalsan to Russia.
Registered trucks – 25,473 (1998)
Major infrastructure projects (1997-1999)
USA
Mongolia energy sector project – US $45,500,000
World Bank
Mongolia coal project – US $35,000,000
Transport rehabilitation project – US $32,313,000
Asian Development Bank
Telecommunications – US $24,381,000
Power station rehabilitation – US $38,277,000
Ulaanbaatar heat efficiency project – US $29,487,000
Provincial towns basic urban services project – US $7,695,000
Road development – US $22,499,000
Ulaanbaatar airport project – US $37,524,000
Japan
Road construction (1996) – (Yen) 11,590,000
Rehabilitation of power plant IV (1995) – US $46,000,000
France
Rehabilitation and extension of UB telephone network – (F Franc) 25,000,000
Germany
Telecommunications – (DM) 10,000,000
South Korea
Thermoelectric power plant in the Gobi desert – US $8,000,000
Upcoming major infrastructure projects
Asian Development Bank
Improving Ulaanbaatar heat efficiency (until 2002) – US $39,785,000
Japan
Building of rural schools – US $20,000,000
In 1998 Tg, 208 billion was invested in Mongolia, of which Tg 57.2 billion was on construction/major improvements
Source: State Statistical Bulletin
Construction trends in Mongolia show that in-country production of materials has suffered greatly.
Building doors and window
Tg 417.8 million in 1989
Tg 2.9 million in 1998
Bricks (million pieces)
172.8 (1989)
18.9 (1998)
Cement (in thousand tons)
512.6 (1989)
109 (1998)
On a positive note, sales of furniture went up
Tg 34.7 million in 1989
Tg 185.2 million in 1998
US-Mongol Construct 2000: Building a New Democracy was published by USAID. It helped lay the foundations for a construction boom in the mid-2000s.
“Support for incoming and outgoing trade missions are among the business outreach and support services offered by the U.S. Agency for International Development’s (USAID) Global Technology Network (GTN) program. USAID, in turn, draws heavily on expertise from the International executive Service Corps (IESC) in organizing and implementing these trade missions.
“In January 2000, a USAID supported, IESC-assisted, incoming trade mission from Mongolia was instrumental in introducing Mongolian businesses to the American construction industry. Dubbed “U.S.-Mongolian Construct 2000,” the “reverse” trade mission brought representatives from 15 Mongolian construction firms to meet one-on-one with American companies in Dallas, Seattle and Anchorage and Fairbanks, Alaska. The Mongolian trade mission began in Dallas, where the group attended the National Association of Home Builders’ Show (NAHB) – the largest event of its kind in the country. Next, they traveled to Seattle for the Evergreen Gateway Building Products program. In Alaska, the group learned how U.S. construction companies handle building on permafrost and deal with extreme cold weather conditions. According to the U.S. Ambassador to Mongolia, Alphonse F. LaPorta, ‘Mongolia is at the center of a region undergoing substantial infrastructure upgrading, as the market economy takes hold.'”
Update:
A resources “boomtown” throughout the 2000s. Source: Bloomberg. When I left in 1999, Mongolia’s PPP was US $8.8 bn; today (2021) it is US $42.4 bn.A dramatic decline in inflation paired with political and economic stabilisation allowed Mongolia to enjoy the fruits of the fast-growing economies of the 2000s. Source: Statista.It doesn’t hurt when your neighbour (China) is experiencing an economic boom as it drives down poverty rates.
“I highly recommend Mr. David South as a communications consultant who gets results.” Brian DaRin, Representative/Director, USAID Investment & Business Development Project, Global Technology Network/ International Executive Service Corps-Mongolia, 23 September 1999
David South Consulting 
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