We all know that green is good,but often the best way to encourage recycling and other environment-improving activities is to put in place economic incentives. It is one thing to admonish people and tell them something is the right thing to do; it is another to make keeping a clean environment pay.
Many initiatives across the global South have proven it is possible to develop an economy of recycling and garbage collection in poor neighbourhoods. These economies take many forms and models.
At the most basic end of the scale are the desperate, survival-driven examples of recycling. In countries likeIndia, recycling can be purely a question of survival – people are so poor they can’t allow anything that might have income potential go to waste. Other countries are very familiar with large numbers of desperately poor people picking through garbage dumps and waste to eke out a living. Or, for example in Brazil, as in many other countries, it’s common to see poor and homeless people picking through garbage on the streets.
These are examples of degrading ‘green’ economies. But there other ways to encourage waste recycling that offer real income benefits and life improvements.
Brazil, a world leader in waste recycling and green technologies, has pioneered the recycling of plastic bottles, aluminum, steel cans, solid plastic waste and glass. And now energy companies inBrazilhave created credit schemes that encourage waste recycling while giving people real economic benefits in return for doing the right thing for the environment. The first scheme went so well, it quickly inspired others to replicate its programme in other poor communities.
Coelce (http://www.coelce.com.br/default.aspx) is a power company in the Ceará State in northeastern Brazil. The company is primarily engaged in the distribution of electrical power for industrial, rural, commercial and residential consumption. In 2007 it set up Ecoelce (http://www.coelce.com.br/coelcesociedade/programas-e-projetos/ecoelce.aspx), a programme allowing people to recycle waste in return for credits towards their electricity bills. The success of the programme led to an award from the United Nations.
The programme works like this: people bring the waste to a central collection place, a blue and red building with clear and bright branding to make it easy to find. In turn they receive credits on a blue electronic card – looking like a credit card – carrying a picture of a child and arrows in the familiar international recycling circle.
These credits are then used to calculate the amount of discount they should receive on their energy bill. The scheme is flexible, and people can also use the credits for food or to pay rent. In 2008, after its first year, the scheme had expanded to 59 communities collecting 4,522 tons of recyclable waste and earning 622,000 reais (US $349,438) in credits for 102,000 people. People were receiving an average of 5 to 6 reais (US $2.80 to US $3.37) every month towards their energy bills. A clear success leading to an expansion of the scheme.
Now in Ceará’s state capital, Fortaleza (http://en.wikipedia.org/wiki/Fortaleza), – population 3.5 million – there are more than 300,000 people recycling a wide range of materials, from paper, glass, plastics, and metals to cooking oil to get electricity discounts, according to the Financial Times.
In Brazil’s second largest city, Rio de Janeiro, a favela clean-up programme is being run by electricity firm Light S.A. (http://www.light.com.br/web/tehome.asp), which took its inspiration from the success of the Ecoelce experience.
The number of favelas, or informal slum neighbourhoods (http://en.wikipedia.org/wiki/Favela), in Rio is debated: according to the federal government, there are 1,020 favelas, while Rio’s housing department lists 582. The government has been trying to tackle the law and order problems in these neighbourhoods – many are plagued with violent drug gangs – and endemic poverty. It calls this programme “pacification” (http://brazilportal.wordpress.com/2011/10/20/rios-top-cop-talks-public-safety-policy-favela-pacification-program/) as it tries to bring law and order and boost economic development and social gains.
Recycling programmes are helping to bring improvements to life in the favelas by simultaneously cleaning up neighbourhoods and boosting household wealth.
Light S.A. is a Brazilian energy company working in the generation, transmission, distribution and marketing of electricity. It distributes to 31 municipalities inRio de Janeiroand has around 3.8 million customers.
According to the Financial Times, the Light project pays residents 0.10 reais per kilogram of paper and plastic (US .5 cents). It also pays 2.50 reais per kilogram of aluminum and lead (US $ 1.40).
Importantly for community relations, the scheme is open not just to favela residents but to nearby middle class neighbourhoods.
“The idea is to unite the community and the people living around it,” Fernanda Mayrink, Light’s community outreach officer, told the Financial Times.
The project has helped improve theSanta Martafavela ofRio, where police have been working since 2008 to take back the neighbourhood from the control of violent drug gangs. Community police officers can now do their job of taking care of safety for the 6,000 residents.
“You don’t see drugs and guns any more but you do see lots of rubbish,” Mayrink said.
“This project encourages recycling within the company’s concession area and at the same time contributes to sustainable development and the consumer’s pocket. Light wins, the customer wins (and) the environment wins.”
In Vietnam, the NGO Anh Duong (http://www.anhduonghg.org/en/) or “Sun Ray” shows schoolchildren how to collect plastic waste to sell for recycling. In return, their schools receive improvements and the students can win scholarships. It is estimated ruralVietnam is littered with 100 million tons of waste every year. Much of it is not picked up.
The project is operating in 17 communities in Long My and Phung Hiep districts in southernVietnam, mobilising children from primary and secondary schools. School children wearing their uniforms fan out in groups and collect the plastic waste. The money made from selling the plastic waste is being used to improve school facilities and fund scholarships for poor children.
In 2010, the project reported that 10,484 kilograms of plastic waste was collected by 26,015 pupils. This provided for 16 scholarships for school children.
The Anh Duong NGO was set up by a group of social workers with the goal of community development. They target the poorest, bringing together the entire community and seek out “low cost and sustainable actions”. The NGO has a mix of specialties, from agriculture to aquaculture, health, microfinance and social work.
“Close, but no cigar” some might say, but we were genuinely flattered to be shortlisted in 2014 for inclusion in the book Visual Storytelling: Infographic Design in News published by Images Publishing in Shanghai, China. It is a lovely book to look at and the quality of infographics chosen for the book is high so it must have been a tough call. It was further proof Southern Innovator was getting known around the world and gaining respect for its content and design. The excellent work done by our graphic designer and illustrator Solveig Rolfsdottir speaks for itself.Graphic Designer and Illustrator: Sólveig Rolfsdóttir.
2) EPAP guide: Based on extensive research throughout Mongolia by UNDP, this guide includes the application of the Blue Bag project to Mongolia’s sprawling slum districts surrounding the capital Ulaanbaatar. Website:http://tinyurl.com/yfkn2dp
The Environmental Public Awareness Handbook: Case Studies and Lessons Learned in Mongolia was funded by the European Union and published by the UNDP Mongolia Communications Office in 1999.
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.
The world is currently undergoing a high-stress transition on a scale not seen since the great industrial revolution that swept Europe in the 19th and 20th centuries. Today’s urban and industrial transition involves many more people and is taking place on a greater proportion of the planet. With rapid urbanization comes a demand for middle class lifestyles, with their high-energy usage and high consumption of raw materials.
This is stretching the planet’s resources to breaking point. And as many have pointed out, if the world’s population is to continue past today’s 7 billion to reach 9 billion and beyond, new ways of living are urgently required. Radical thinking will be necessary to match the contradictory goals of raising global living standards for the world’s poor with pressured resources and environmental conditions.
But there are innovative projects already under development to build a new generation of 21st-century cities that use less energy while offering their inhabitants a modern, high quality of life. Two examples are in China and the Middle East.
Both projects are seen as a way to earn income and establish viable business models to build the eco-cities of the future. Each project is seeking to develop the expertise and intellectual capacity to build functioning eco-cities elsewhere. In the case of the Masdar City project in the United Arab Emirates, international businesses are being encouraged to set up in Masdar City and to develop technologies that can be sold to other countries and cities – in short, to create a green technology hub akin to California’s hi-technology hub ‘Silicon Valley’. Masdar City is also being built in stages as investors are found to help with funding. Both projects hope to prove there is money to be made in being green and sustainable.
The Tianjin Eco-city (tianjinecocity.gov.sg) project is a joint venture between China and Singapore to build a 30 square kilometre city to house 350,000 residents.
Tianjin (http://en.wikipedia.org/wiki/Tianjin) is a large industrial city southeast of China’s capital, Beijing. It is a place that wears the effects of its industrial expansion on the outside. Air pollution is significant and the city has a grimy layer of soot on most outdoor infrastructure.
China has received a fair bit of criticism for its polluted cities as the country has rapidly modernized in the past two decades. This sprint to be one of the world’s top economic powers has come at a cost to the environment. In this respect, China is not unusual or alone. Industrialization can be brutal and polluting, as Europe found out during its earlier industrial revolution.
But China is recognizing this can’t go on forever and is already piloting many initiatives to forge a more sustainable future and bring development and high living standards back in line with what the environment can handle.
Sino-Singapore Tianjin Eco-city is the second large-scale collaboration between the Chinese government and Singapore. The first was the Suzhou Industrial Park (http://www.sipac.gov.cn/english/).The Tianjin project came up in 2007 as both countries contemplated the challenges of rapid urbanization and sustainable development.
The project’s vision, according to its website, is to be “a thriving city which is socially harmonious, environmentally-friendly and resource-efficient – a model for sustainable development.”
The philosophy behind the project is to find a way of living that is in harmony, with the environment, society and the economy. It is also about creating something that could be replicated elsewhere and be scaled up to a larger size.
The city is being built 40 kilometres from Tianjin centre and 150 kilometres from Beijing. It is located in the Tianjin Binhai New Area, considered one of the fastest growing places in China.
This year, the commercial street was completed and is ready for residents to move in.
Residents will be encouraged to avoid motorized transport and to either use public transport or people-powered transport such as bicycles and walking.
An eco-valley runs down the centre of the city and is meant to be a place for pedestrians and cyclists to enjoy.
The basic building block of the Eco-city – its version of a city block – is called the Eco Cell. Each Eco Cell measures 400 metres by 400 metres, a comfortable walking distance. Four Eco Cells make a neighbourhood. Several Eco Neighbourhoods make an Eco District and there are four Eco Districts in the Eco-city. It is a structure with two ideas in mind: to keep development always on a walkable, human scale and also to provide a formula for scaling up the size of the Eco-city as the number of residents increases.
It is a logical approach and seeks to address one of the most common problems with conventional cities: sprawling and unmanageable growth that quickly loses sight of human need.
Agreement was also reached on the standards that should be achieved for a wide variety of criteria, from air and water quality to vegetation, green building standards, and how much public space there should be per person.
An ambitious project in the United Arab Emirates is trying to become both the world’s top centre for eco cities and a living research centre for renewable energy. Masdar City (http://www.masdarcity.ae/en/)is planned to be a city for 40,000 people. It is billed as a high-density, pedestrian-friendly development where current and future renewable energy and clean technologies will be “marketed, researched, developed, tested and implemented.”
The city hopes to become home to hundreds of businesses, a research university and technology clusters.
This version of an eco-city is being built in three layers in the desert, 17 kilometres from the Emirati capital Abu Dhabi. The goal is to make a city with zero carbon emissions, powered entirely by renewable energy. It is an ambitious goal but there are examples in the world of cities that use significant renewable energy for their power, such as Reykjavik, Iceland in Northern Europe, which draws much of its energy from renewables and geothermal sources.
Masdar City is designed by world-famous British architect Norman Foster (fosterandpartners.com) and will be 6.5 square kilometres in size.
The design is highly innovative. The city will be erected on 6 metre high stilts to increase air circulation and reduce the heat coming from the desert floor. The city will be built on three levels or decks, to make a complete separation between transport and residential and public spaces.
The lowest deck will have a transportation system based on Personal Rapid Transport Pods. These look like insect eyes and are automated, controlled by touch screens, using magnetic sensors for propulsion. On top of this transport network will be the pedestrian streets, with businesses, shops and homes. No vehicles will be allowed there, and people will only be able to use bicycles or Segway (segway.com) people movers to get around. An overhead light railway system will run through the city centre, all the way to Abu Dhabi City.
“By layering the city, we can make the transport system super-efficient and the street level a much better experience,” Gerard Evenden, senior partner at Foster + Partners, told The Sunday Times. “There will be no car pollution, it will be safer and have more open spaces. Nobody has attempted anything like this.”
Masdar City is being built in stages as funding comes, with the goal of completion by 2016. It hopes to achieve its aspiration to be the most technologically advanced and environmentally friendly city in the world. As for water supplies in the desert, there is a plan: dew collected in the night and morning and a solar-powered desalination plant turning salt water into drinking water.
Electricity will come from a variety of sources. Solar panels will be on every roof and double as shade on alleyways. Non-organic waste will be recycled, while organic waste will be turned into fuel for power plants. Dirty water will be cleaned and then used to irrigate green spaces. Because of the design, the planners hope the city will just use a quarter of the energy of a conventional city.
To keep the city smart and the project on top of developments in renewable energy, the Masdar Institute of Science and Technology (http://www.masdar.ac.ae/) will specialize in renewable energy technology.
The cost for the city was pegged at US $22 billion in 2009.
The chief executive of Masdar – Abu Dhabi’s renewable-energy company – is Sultan Al Jaber. He sees the city as a beacon to show the way for the rest of the Emirate to convert from a highly inefficient consumer of energy to a pioneer in green technology.
“The problem with the renewable-energy industry is that it is too fragmented,” he told The Sunday Times. “This is where the idea for Masdar City came from. We said, ‘Let’s bring it all together within the same boundaries, like the Silicon Valley model (in California, USA).’”
The project needs to gather much of its funding as it progresses. The United Nations’ Clean Development Mechanism (http://cdm.unfccc.int/) is helping with financing. Companies can earn carbon credits if they help fund a low-carbon scheme in the global South. The sultan is ambitious and sees this as a “blueprint for the cities of the future.” It has been able to bring on board General Electric (GE) and the Massachusetts Institute of Technology (MIT) to sponsor the university.
1) Center for Innovation, Testing and Evaluation (CITE): Located in Texas, USA, CITE is a fully functioning city with no residents to test new technologies before they are rolled out in real cities. Website: http://www.pegasusglobalholdings.com/test-center.html
2) Digital Cities of the Future: In Digital Cities, people will arrive just in time for their public transportation as exact information is provided to their device. The Citizen-Centric Cities (CCC) is a new paradigm, allowing governments and municipalities to introduce new policies. Website: http://eit.ictlabs.eu/action-lines/digital-cities-of-the-future/
4) Sino-Singapore Tianjin Eco-city, Investment and Development Co., Ltd. Website: tianjineco-city.com
5) ‘The Future Build’ initiative, a new green building materials portal from Masdar City. Website: thefuturebuild.com
6) UNHABITAT: The United Nations Human Settlements Programme is the UN agency mandated to promote socially and environmentally sustainable towns and cities with the goal of providing adequate shelter for all. Website: http://www.unhabitat.org
Mobile phones are more and more part of daily life in the South’s slums – even for the poorest people. One result is that it has now become possible to undertake digital mapping initiatives to truly find out who is where and what is actually going on.
About one-third of the world’s urban dwellers live in slums, and the United Nations estimates that the number of people living in such conditions will double by 2030 as a result of rapid urbanization in developing countries. How to improve their living conditions and raise their standard of living is the big challenge of the 21st century.
With just over five years until the 2015 deadline to meet the Millennium Development Goals (http://www.undp.org/mdg/), and the current economic downturn reversing some gains, any tool that can make development decisions more precise has to be a benefit.
People are now turning to the growing penetration of digital technologies into slums and poor areas to find solutions. With mobile phones available across much of the global South, and plans underway to expand access to broadband internet even in poorly served Africa, it is becoming possible to develop a digital picture of a slum area and map its needs and population.
Put to the right use, this powerful development tool can fast-track the delivery of aid and also better connect people to markets and government services.
In November, an NGO called Map Kibera (www.mapkibera.org) began work on an ambitious project to digitally map Africa’s largest slum, Kibera in Nairobi, Kenya .
The partners behind Map Kibera are Humanitarian OpenStreetMap, JumpStart International, WhereCampAfrica, the Social Development Network, Pamoja Trust, Hands on Kenya and others.
Estimates place the number of residents in Kibera at one million, but nobody really knows how many live there (UN-HABITAT). The slum is typical of such deprived areas, lacking in health and water resources and plagued by chaotic traffic and housing. Few fully grasp where everything is in the sprawl.
While data does exist on the slum, it is not shared or collated into one source. The Map Kibera project uses an open-source software programme, OpenStreetMap (http://www.openstreetmap.org/), to allow users to edit and add information as it is gathered. This information is then free to use by anybody wanting to grasp what is actually happening in Kibera: residents, NGOs, private companies and government officials.
This will literally put Kibera on Kenya’s map.
The mapping team started with 12 young people recruited in Kibera to start the work in November of this year. They will be trained and also receive support from the growing Nairobi technology community.
“The project will provide open-source data that will help illustrate the living conditions in Kibera,” said Map Kibera’s Mikel Maron. “Without basic knowledge of the geography of Kibera it is impossible to have an informed discussion on how to improve the lives of residents of Kibera.”
Workshops will communicate with local residents and show them the findings available from the map. Paper maps will be distributed to residents and then updated as new information comes in. It is critical local people are kept informed to build trust and avoid conflict. As can be seen from the Google Street Views (http://www.google.co.uk/help/maps/streetview/) controversy, nobody likes to be mapped without their permission or consent.
Like Kenya, Brazil has a long history of sprawling slums sprouting around its cities. Called favelas, they are complex places, with both rudimentary dwellings and elaborate mansions. Walking into a favela can be a journey through the dreams and aspirations of generations of people, often reflected in their dwellings. Favelas have many services, including hospitals, and there are restaurants and coffee shops. In short, while they are not in the official development plans, the favelas are vibrant economic entities and home to hundreds of thousands of people.
But since they are chaotic and undocumented by official maps, the economic and social development of the favelas is hindered as even basic services like mail delivery are difficult to provide.
An NGO called Rede Jovem (http://www.redejovem.org.br/) is deploying youths armed with GPS (global positioning system)-equipped (http://en.wikipedia.org/wiki/Global_Positioning_System) mobile phones to map the favelas of Rio de Janerio. To start with, they are mapping five favelas: Complexo do Alemão, Cidade de Deus, Morro do Pavão-Pavãozinho, Morro Santa Marta and Complexo da Maré.
“The main goal was to mark public interest spots on a map and show places like schools and institutions and hospitals and restaurants,” Natalia Santos, the executive coordinator for Rede Jovem, told MobileActive (www.mobileactive.org) . “We wanted to spread the news about what slums do have, so all the people can get to know that the slum is not just a place for violence and marginality and robbery.”
The mapping process works like this: the mappers physically travel around the favela and upload information on each, individual landmark (restaurants, roads etc.) as they go. They use Nokia N95s mobile phones that are connected to Google Maps (www.maps.google.com).
According to Santos, reporters enter the information on the map displayed on the phone, and they can video or photograph to add more detail. They are using Wikimapa (www.wikimapa.org.br), and Twitter (www.twitter.com) to log the information.
As Rede Jovem recruited young mappers, they discovered an interesting fact: the male reporters (aged between 17 and 25) were frightened to enter a favela with a mobile phone for fear of either being mugged or being stopped by the police. Because of this fact, all the mappers are young women.
They are ambitious for the future despite their funds running out in December. “We want everyone who has a cell phone with GPS to be a wikireporter,” said Santos .
How important it is to the favela residents to be recognised like this can’t be overstated. “I think they are very happy because they’re seeing that they exist,” said Santos. “And the mailman says that now he can deliver the mail.”
Published: December 2009
Resources
Mobile Active.org: MobileActive.org is a community of people and organizations using mobile phones for social impact. They are committed to increasing the effectiveness of NGOs around the world who recognize that the over 4 billion mobile phones provide unprecedented opportunities for organizing, communications, and service and information delivery. Website: http://www.mobileactive.org
Google Android: Get inventing! This software enables anyone to start making applications for mobile phones. And it offers a platform for developers to then sell the applications to others. Website: http://www.android.com/
Ushahidi: is a website that was developed to map reports of violence in Kenya after the post-election fallout at the beginning of 2008. The new Ushahidi Engine is being created to use the lessons learned from Kenya to create a platform that allows anyone around the world to set up their own way to gather reports by mobile phone, email and the web – and map them. It is being built so that it can grow with the changing environment of the web, and to work with other websites and online tools. Website: http://blog.ushahidi.com/
Textually.org: is the entry point of three weblogs devoted to cell phones and mobile content, focusing on text messaging and cell phone usage around the world, tracking the latest news and social impact of these new technologies. Website:http://www.textually.org/
Betavine Social Exchange has launched. It’s a matching site for NGOs looking for mobile solutions, and developers who can help build them, all brought to you by Vodafone. Website:http://www.betavine.net
The story first appeared in the UN e-newsletter Development Challenges, South-South Solutions in 2009. It was simultaneously published on the Vancouver, Canada-based crowd-powered news website, NowPublic. It was then published in the UN magazine Southern Innovator.
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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