Resource information
The Mongolian cashmere industry has
experienced a series of booms and busts over the last
decade. Unsatisfactory public sector policies contributed to
this result. External factors such as the unfavorable
economic environment of the early 1990s, the East Asia
crisis, and weather conditions have also affected its
performance. Over 1993-96 cashmere exports doubled from
US$33.5 million to US$71.2 million, as cashmere's share
in exports increased from 9.2 to 16.8 percent. Cashmere
exports weakened in 1997 and 1998, recovered briefly in
1999-2000, and faltered again in 2002 to US$45.2 million,
below their 1996 levels. Cashmere's share in exports
fell from 16.8 to 8.6 percent over 1996-2002. Within this
background, the report examines the industry's five
principal shortcomings: supply distortions; decreasing
cashmere quality, demand imperfections, inadequate marketing
and distribution systems, and poor public and private
institutional capacity to guide industrial policy
development. The lack of an efficient public sector to
provide public goods, inadequate strategic business
development policies, and unregulated and outdated
production patterns have stifled competition, and prevented
the industry from reaching its potential. Mongolia's
cashmere industry has moved only marginally up the
value-added chain beyond primary production, leaving it
especially vulnerable to changes in market demand. It also
examines Mongolia's current legal and administrative
mechanisms for regulating grazing land - poorly understood
by central and local governments that also frequently lack
the capacity to implement the laws. The 1995 Land Law gave
local governments broad authority to regulate grazing. With
clarification of their legal mandates and capacity-building
interventions, local governments, perhaps in partnership
with local herding associations, would be capable of
regulating pasture use. This paper examines the structure,
conduct, and organization of Mongolia's cashmere
industry and discusses the strategic supply chain linkages
needed to improve its production, marketing, and
competitiveness. The paper looks at how agents along the
cashmere industry supply chain can generate collective
efficiencies and gain competitive advantages by deepening
collaboration. It also examines how public policy affects
industry and firm decisions on cashmere production and
marketing systems, and the incomes of herders and rural
communities. It suggests a set of actions and policies for
the private and public sectors - including the donor
community - to facilitate cashmere's transition to a
truly competitive industry. Highlighted are existing
initiatives to improve market coordination, and generate
cost savings, and propose areas for expansion.
