CONTENTS

Foreword        i

Donor Support for the Development of   a

Country-owned  Rural  Development  Strategy        ii

Executi ve Summary        iii

1. Introduction                 1
2. Principles that Guided the Development of the Rural Development Strategy (RDS)                 2

2.1   National ownership                 2

2.2   Pro-poor focus, Mongolia’s poverty profile and changes in livelihoods                 3

Mongolia’s  rural  livelihoods                 4

2.3   Sustainability                 5

2.4   Participation of local bodies  and citizens                 5

2.5   Implementability                 5

2.6   Holistic approach                 6

2.7   Timing                 6

2.8    Inter-sectoral  linkage and co-ordination                6

3. RDS Mission, Development Goal   and Objectives                 6

3.1  RDS Mission                 6

3.2  RDS Development Goals                 7

3.3   RDS Objectives                 7

4. RDS S tructure,  Linkage of Components and Priorities                 10

5. RDS Objectives: Challenges and Ways to    Overcome Them                 11

5.1   Improving Management Capability for   Rural Development                 11

5.2   Livestock Sector                 12

5.2.1       Current challenges         12

5.2.2       Main policy measures undertaken by the government for development of the sector         15

5.2.3       Main direction of donor activities in combating    herder poverty         15

5.2.4       Livestock  sector development objective         16

5.3 Crop Sector                  18

5.3.1       Current challenges         18

5.3.2        Does Mongolia need to have domestic    grain production?        20

5.3.3        Crop  sector development objective        21

5.4   Agricultural  Marketing,  Agribusiness  and  Non-Farm Sector Development                 21

5.4.1        Current challenges and opportunities        22

5.4.2       Development objectives         24

5.5   Rural Social Development                 24

5.5.1        Current challenges        24

5.5.2        Rural health        25

5.5.3        Rural education        26

5.5.4        Rural  social development objectives        27

5.6   Environment  Protection                 27

5.6.1        Current challenges        27

5.6.2        GOM policies and regulations on the    environmental protection        28

5.6.3        Development objectives        29

5.6.4        Forestry        29

5.6.5        Wildlife hunting and fishery        31

5.6.5.1    Wildlife  hunting        31

5.6.5.2    Fishery        32

5.7           Rural Infrastructure Development        33

5.7.1        Rural energy        33

5.7.2        Rural  communication        33

5.7.3        Rural roads        34

5.7.4        Rural  infrastructure development objectives        34

6. Conclusions and Next Steps                 35

Appendix 1: RDS outputs and activities targeted to increase incomes and improve the delivery of quality social services for the poor, people from vulnerable

groups and people living in remote areas                 36

Appendix 2:  Summary of RDS development objectives  and outputs        40

RDS  Logical Frameworks

Logical framework for building risk management capabilities  of herders        42

1. Outputs for building risk management capabilities  of herders                43

1.1   Cooperation among herders promoted                 43

1.2   Pastureland management                 44

1.3   Supply of supplementary fodder improved                 45

1.4   Supply of water improved                 46

1.5   Veterinary services improved                 47

1.6   Capacities for pastoral risk forecasting and response improved                 48

Logical framework for intensifying livestock production at optimal level        49

2. Outputs for intensifying livestock production at  optimal level                 50

2.1   Intensive and semi-intensive livestock pro duction promoted                 50

2.2   Mixed livestock and crop farming promoted                 52

2.3   Capacity for the quality certification of livestock  products enhanced                 53

2.4   Research capabilities to improve livestock  quality enhanced                 54

2.5   Extension capacities to improve livestock production systems and technologies

strengthened                 56

Logical framework for ensuring strategic food-flour security        57

3. Outputs for ensuring strategic food-flour security                 58

3.1   Risks of losing harvests minimized                 58

3.2   Markets for grains improved                 60

3.3   Risks associated with wheat and flour imports minimized                 61

Logical framework for supporting production and processing of potatoes, vegetables and

fruits        62

4. Outputs for supporting production and processing of potatoes, vegetables    and fruits                 63

4.1   Access  to  financial  capital  to  launch  production  and  processing  of  potatoes,  vegetables  and fruits provided                   63

4.2   Capacities of extension services to advise and train on production and processing of

potatoes, vegetables and fruits enhanced                 63

4.3  Support seeds and small  –scale irrigation equipment purchasing activities                 63

Logical framework for revitalizing the rural  marketing system        64

5. Outputs for revitalizing the rural marketing system                 65

5.1   Viable institutional structures supported for collection, sorting, primary processing, packaging and the delivery of market information and supplying rural producers with

necessary production inputs and consumer goods                 65

5.2   Research capability to improve quality and processing level of agricultural goods for

marketing improved                 66

5.3   Delivery of market information improved                 67

Logical framework for promoting competitive  agro-processing industries        68

6. Outputs for promoting competitive agro-processing industries                 69

6.1   Environment conducive to the development of competitive agro-processing SME in rural areas created                 69

6.2   Domestic processing industries supported to enhance their capacities to enter the international market

6.3   Rural banking and financial services  improved

Logical framework for the development of the    non-farm sector

7.Outputs for developing the non -farm  sector

7.1    Promoting non-farm SME development based on the utilization of local natural resources, Local materials and skilled rural labour and targeted to meet the local demand

Logical framework for ensuring the delivery of quality social services to rural people

8. Outputs for ensuring the delivery of quality social services to rural people

8.1   Participation of rural communities in planning and implementing investment in social infrastructure  increased

8.2   Quality of health services for rural people   improved

8.3   Quality of education services for rural people    improved

8.4   Quality of social welfare services for rural people   improved

8.5   Rural  employment  support  system improved

8.6   Gender equity improved

Logical framework for improving environmental protection sustainable natural resource   use

9. Outputs for improving environmental protection, wildlife hunting and fishery

9.1  Capacity of central and local governments to evaluate and monitor the implementation of environment  laws improved

9.2  Participation of rural communities in developing and implementing environment laws and regulations increased

9.3  Community-based  natural  resource  management  is introduced

9.4  Sustainable use of hunting and fishery resources    promoted

Logical framework for improving the forestry sector

10. Outputs for improving recovering capability of forestry resources, conservation and effective use of forestry  resources

10.1      Forestry legislative environment and organizational reform    enhanced

10.2     Building capability to prevent and fight forest fire, insect pests, and diseases

10.3     Upgrade  entomology laboratories

10.4     Effective use of forestry resources and domestic wood production    revitalized

10.4.1  Developing  forestry  resource  management plan

10.5     Social Forestry capability in seeds, seedling multiplication, and replanting

Logical Framework for supplying with  reliable, sufficient and quality water; protecting and rehabilitating water resources from scarcity and pollution

11. Outputs for supplying reliable, sufficient quality water; protecting and rehabilitating water resources from scarcity and  pollution

11.1 Depending  on the region, water resources protected and   rehabilitated

11.2 Public education campaign on protecting and saving water resources and health, targeted   at the different ages and social status of   citizens

11.3  Water saving technologies in agriculture   introduced

11.4  Water quality improved

11.5  Capability  of  hydrology improved

Logical  framework  for  rural infrastructure development

12. Outputs  for  improving  rural infrastructure

12.1 Participation of local people in decision making on investment planning and implementation  in  rural  infrastructure increased

12.2 Rural  power  supply improved

12.3 Rural communication improved through introducing advanced information and communication technology

12.4 Smooth roads that are crucial for rural development ensured by improving the repair and maintenance

12.5 Rural mass media development   supported

Foreword

Over the past few years Mongolia has seen adverse changes in the climate. There has been an increased frequency of drought and dzud. Streams are drying up and even major rivers are suffering from lower water levels. All of this has had a devastating impact on agriculture production and the incomes of rural people. It seems highly likely that this weather trend will continue.

Given this new adverse weather pattern it would be very difficult to achieve any development   in the rural areas without changes being made in the traditional technologies used  in  both livestock herding and crop farming.

Although global warming may be blamed for a portion of the climate changes in Mongolia it must be duly acknowledged that human factors have also had a serious impact on the climate. The livelihoods of rural people are declining and rural poverty is increasing because rural  people continue to use outdated practices and technology in the changing   environment.

There is a much broader context to rural development than simply the food and agriculture, or the farming and herding, issues. Any plan for the rural areas needs to consider well the full  range of environmental issues as well as the living and working conditions of  all  rural  residents. Therefore it is essential that the new rural development strategy provide comprehensive guidance to solve all of these accumulated  problems.

The Parliament Standing Committee for Environment and Rural Development believes that the preparation and phased implementation of a farsighted, relatively long-term and sustainable rural development strategy is fundamental to resolving many of the problems rural people are facing currently.

Mongolia’s rural development strategy should aim to ensure sustainable growth of the rural economy. Most importantly, however, it should provide an environment in which the well being of every rural person can be assured. This can only be attained by addressing all of the pressing environmental, economic and social issues through a harmonized approach.

The rural development strategy presented here is valuable in that it is comprehensive, based on a holistic approach and includes detailed implementation plans.

This Rural Development Strategy needs to be implemented by incorporating it into the national policy and assuring that government development programs and projects fit within the strategy.

Sh. Gungaadorj

Member of the Parliament

Chairman of the Standing  Committee

for Environment and Rural Development

Donor Support for the Development of a Country-Owned  Rural  Development Strategy

The support has built on work initiated by UNDP, which co-hosted (with the Government of Mongolia) a Government -donor conference on rural development, held in Ulaanbaatar, May 27-28, 2002. Building on this conference, a session of the July 2002 CG meeting focused  on  rural development. Donors called for further work on the preparation of a long-term strategic plan based on a set of principles that emphasize promotion of local initiative and with the government playing a facilitating role as well as providing important  social  and  other  services.

Discussions between the Government of Mongolia, civil society institutions and  a  donor  agency group made up of  World Bank, UNDP, FAO and DFID  began to identify some of  the most needed forms of donor support to assist Mongolia in developing its RDS. Among the conclusions  were:

• A sustainable livelihoods approach, building on important previous work, such as the PLSA and inputs to the preparation of the World Bank supported Sustainable Livelihoods Project, offers a powerful analytic framework for  synthesizing  the  elements  of the RDS.
• The task of beginning to prioritise possible policy options and  operational  actions should be done in a series of facilitated, multi-stakeholder forums, involving  Government, private sector and civil society  institutions.
• The logical framework approach offers a useful tool for facilitating stakeholder discussions.

A one -day planning workshop, involving the full range of stakeholders involved in rural development was held on July 18th 2002. This reached general agreement on the above conclusions on the process to be adopted in preparing the RDS and took major steps in formulating its goals. On this basis, the following donor support was   provided:

• A rural strategy support unit that, in addition to providing general facilitation and logistical support, would assemble a resource library of key documents pertaining to rural  development  in Mongolia .
• Support for a team of local consultants to prepare a synthesis  of  background  papers  and to prepare  a draft  rural  development strategy.
• Inputs from an international consultant with extensive relevant  experience
• A skilled and experienced facilitator to lead the multi-stakeholder  workshop  planned for October 2002, following a logical framework  approach.
• World Bank staff inputs.

Under the guidance of a Steering Committee formed by the Government, the support team undertook a survey of a representative cross section of stakeholders in four aimags in order to identify the priorities of the rural population. The results were used by the team in discussions with key stakeholders including the PRSP working group, the inter-ministerial committee on rural development, ministries, research institutes, civil society groups and the private sector in order to prepare a first draft RDS for consideration by the October   workshop.

During this work and discussions, a number of key themes were developed  to  provide  a holistic context for the proposals and comments of the various stakeholders. A number of significant developments were also highlighted. These are outlined   below.

1. Promoting Local Initiatives

Sustainable rural development will only  take  place  if  the  people  directly  involved  recognise that changes in their thinking and in their activities will bring benefits. Without improvements  in the ability of the rural population to express their priorities and of local government to implement changes, the pace of rural development will be slow. This does imply some decentralization of government activities.

One of the main reasons for migration from rural to urban areas is the desire for improved  access to a better standard of social services, particularly education and health. Investment is required in order to improve facilities but innovative approaches to service provision are also required to address specific problems such as the relatively high school drop out rate of sons     of herding families with limited labour.  If  the  rural  people  are  involved  in  setting  the priorities, they are more likely to provide direct support for service   provision.

2. Improvement of Risk  Management

Recent experience of disaster in both the livestock and crop sectors has created a recognition  that changes in operations and management are urgently needed to mitigate the effects of  adverse weather conditions, such as drought and dzud. Projects have provided good evidence that better preparedness through, for example, greater investment in supplementary feed and veterinary care can significantly reduce losses. Such actions are primarily the responsibility of herders, as individuals of groups, but Government has an important role to play in forecasting,  in strengthening the disaster response systems and in promoting and testing appropriate insurance  schemes.

3. Group Development and Support

Many of the poorest rural households have a relatively small number of  animals  as  their primary source of income. With little to trade, their access to the market is limited, their terms  of trade are usually much  wor se than those of the richer herders and their ability to obtain  inputs such as supplementary hay or fodder is very limited. In order to assist such poor households to overcome these problems, the strategy emphasises support for  co-operative  action.

Co-operative action is also an essential element in achieving a sustainable usage of natural resources. There is clear evidence of environmental degradation, of which a major element is  the degradation of pastures near urban areas as a result of uncontrolled ove r grazing. The promotion of increased community involvement in the management of natural resources is a  key part of the  strategy.

4. Creation of an Enabling Environment for Rural Economic and Social   Development

Even with the emphasis on livelihood  improvement for the poorer herding families,  there is still expected to be a significant number of families for whom herding is unable to provide an adequate income basis. The strategy therefore emphasises  the  creation  of  conditions favourable for the development of other economic opportunities in  the  rural  areas  as  alternatives to herding and large scale crop production. This requires both an easing of the administrative barriers to enterprise formation and operation, and improved access to finance, particularly micro-credit, which is likely to benefit the  poorer  sections  of  the  community. Small scale vegetable production, such as is being supported by the “Green Revolution” program is  expected  to  play  an  important  role  in  improving  nutritional  standards  and  in pr oviding  income  generating opportunities.

The most rapidly growing employment in certain rural areas is unregistered activity in the mining  sector.  If  current  trends  continue,  without  regulation,  there  is  the  prospect  of increasing lawlessness and conflict, environmental damage and of the sub-sector  making little   or no contribution to Government revenues.

5. Promotion of Agriculture Development and Food   Security

Achievement of the PRSP objectives requires economic growth. Part of this is expected to   come from an improvement in crop and livestock productivity. Many trials of more intensive cropping and livestock production systems have been undertaken supported by international agencies, but the evaluation has been limited and there are as yet no clearly financially viable models ready for replication and adoption on a significant scale. The strategy therefore emphasises the need for better co-ordination and evaluation of project trials and  agency  support, a strengthening of the monitoring and evaluation capa bility of MOFA and a preparedness to invest in strengthening the extension service, to  provide  technical  and  financial information when successful demonstrations have been  developed.

There has been a significant change in MOFA policy, in abandoning wide scale subsidies for wheat farming, and this increases the urgency to support MOFA in developing alternative approaches to facilitating the sustainable development of crop production, within a market economic system.

These foci for the RDS are considered to be fully consistent with the  policy  of  the  Government of Mongolia, expressed in the letter to the World Bank of the 25th March 2002 referring to the Sustainable Livelihoods Project. There it  is  stated  that  “since  July  2000   poverty reduction has been the cornerstone of its Action Plan”: that “policies to promote economic growth should not be separated from those designed to reduce poverty” and that “poverty is not only a matter of insufficient income or levels of consumption; it is also characterized by vulnerability to external shocks such as international commodity prices or natural hazards.”

For the convenience of the various ministries involved in providing inputs to the PRSP, and following suggestions of the Steering Committee, a logical framework system was developed which generally grouped activities related to the responsibilities of particular ministries. Links with other activities and ministries are stressed within the frameworks but these note shows  more clearly the holistic approach, which was adopted in preparing the   strategy.

In October, (9-11) a three-day workshop was held to review the first draft of the RDS. Participants included over one hundred representatives of all groups of stakeholders including herders and other members of the rural population, local government, ministries and parliamentarians. For two of the days, the logical frameworks were reviewed in detail through    a process of facilitated group discussions. During this workshop, general agreement  was reached on the broad strategy. A number  important  clarifications  and  additions  were  also made and these have been incorporated in this second draft of the   RDS.

Executive Summary

This second draft of the Mongolian Rural Development Strategy (RDS) has been prepared by the Centre for Policy Research. The work was undertaken by a team of Mongolian consultants supported by international staff and under the guidance of a steering committee, chaired by     Mr. Gungaadorj. All working documents were written in Mongolian and then translated. This document is designed to provide key inputs for the group preparing the PRSP, which is a cornerstone of Government policy. The initial impetus for this work came from the Government-donor conference on rural development, held in Ulaanbaatar, May 27-28, 2002.

Based on the participative processes outlined in the section on donor support a first draft of      the RDS was prepared and discussed in a three day workshop, held on October 9-11,  2002      and attended by over one hundred stakeholder representatives. This second  draft  incorporates  the recommendations of that workshop.

The document uses a logical framework format. The agreed longer -term mission statement for the RDS is to:

Ensure the well being of rural people and their all round  development

The agreed Rural Development Goals  are:

1. Ensuring sustained growth of income for rural people, especially the   poor
2. Ensuring the delivery of quality social services to rural  people
3. Ensuring sustainable use of natural resources and the   environment

The strategy recognizes that in order to achieve a sustained growth of income the promotion      of economic growth is a precondition. However, the policy clearly stated  in  the  PRSP,  and adopted in the RDS, is to ensure that all members of the rural population equitably share the benefits of economic growth, principally by providing favorable conditions that would enable people to use their abilities, talents and opportunities to reduce poverty. The pro-poor focus includes measures to enhance the  opportunities  for  people  in  remote areas to reach markets and to have improved access to health, education and information services. The problems, proposed activities and outputs, most closely related to this pro poor rural development focus, are  summarized  in Appendix 1.

Key elements of the RDS may be summarised as   follows:

Maximum Participation of Local Bodies and  Citizens

Successful implementation of the strategy depends upon the overall capacity of governance. According to the Participatory Living Standards Assessment (PLSA), the performance  of  public administration received poor ratings from the participants because of a lack of administration accountability and effectiveness. The recently approved Public Sector Management and Finance Act and the ongoing Good Governance and  Human  Security  program have a key role to play in addressing the governance issues. The requirement is to overcome the mentality, inherited from the command economy period, of solving problems through top-down  directed investment.

The RDS preparation process has confirmed  the recommendations of the PLSA, for rural as  well as urban  Mongolia:

• Give citizens greater voice and influence of patterns of public   spending
• Improve the quality and effectiveness of social services and   infrastructure
• Invest in public and private actions to reduce  risk  in  pastoral  livestock production

In the last recommendation, a key point is that the change in thinking must apply both to the  public and private sectors, working in partnership. Effective local participation in setting priorities for the utilisation of Government funds requires increased   decentralisation.

Improvement  of  Risk Management

Discussions during the development of the RDS have shown clearly that the disasters, particularly during the past two years in both the livestock and crop sectors, have focused attention in both the public and private sectors on the urgent need  for  improved  risk  management measures. The RDS reflects a widely held belief that  climate  change  will  increase the risks for Mongolian agriculture and this ha s stimulated important changes in MOFA policy, such as the abandoning of previous wide scale subsidies for the crop  sector.

Pilot programs have demonstrated that greater investment by herders in livestock production, including greater supplementary feeding and  veterinary  care,  can  significantly  reduce mortality during dzud. There is also an increased recognition that current systems of open   access to pastures are leading to over grazing and risks of ecological unsustainability and a lowered ability to cope with adverse weather conditions, such as dzud. For  environmental resource management, the strategy therefore proposes as a goal to increase the interest, role and responsibility of local communities in managing natural resources by transferring ownership,  custodianship and user rights to local  communities.

With the Mongolian climate, such measures cannot eliminate the possibility of catastrophic   loss. Restocking programs, supported by international agencies are not a long-term solution    and the RDS therefore proposes the development and testing of innovative insurance arrangements to provide a commercially viable safety net. This endorses the approach being pursued under the Sustainable Livelihoods Project. The above measures are largely the responsibility of individuals and groups. Government, however, has a key role to  play  in disaster mitigation, both through improved forecasting and information provision on disaster conditions and through more effective distribution of emergency  relief.

In summary, the objective of building pastoral risk management capability shall be realized through achieving the following  outputs:

• Promoting cooperatives and herders'  groups
• Sustainable  pasture management
• Increasing the use of supplementary   fodder
• Improving the supply of  water
• Improving  the  veterinary services
• Improving risk forecasting, response capabilities and disaster   management

The PLSA concluded that vulnerability to risk was regarded as the most important dimension   of poverty to be addressed. Loss of employme nt, natural  hazards  (dzud)  and  the  costs  of health and education were found to be the most common reasons for families falling into poverty. The RDS proposals in the agriculture log frames address natural hazards. Proposals     to stimulate employment generation, with  particular  emphasis  on  micro-credit initiatives in  the rural areas, are given in the sections relating to agricultural marketing, agribusiness and non-farm  sector development.

Group Development and Support

The PLSA found that in rural areas, the poor and very poor made up around half of all households. The primary source of livelihood of many of these families is a relatively small number  of  animals.  With  little  to  trade,  such  people  have  limited  access to  competitive markets, poor terms of trade and limited access to inputs, such as hay and supplementary  fodder. The co-operative development, proposed in the RDS, is designed to strengthen the relative position of the poorer herders. Co-operative action is also proposed to promote the  sustainable use of natural resources, such as pastures and forest areas. Groups also have a role   to play in presenting initiatives to local government and in innovative approaches to social services provision, such as mobile  kindergartens.

With donor support, groups have been able to access credit facilities and have started  to establish local enterprises to provide   non-agricultural employment for group members.

Creation of an Enabling Environment for Rural Economic and Social Development Surveys have shown that one of the main reasons for the recent relatively high level of rural- urban migration is the desire to obtain access to better social services, particularly health and education. With low population densities, the provision of social services is  inevitably  relatively expensive on a per capita basis. Finance is limited and it is  difficult  to  attract qualified personnel to remote areas. As a result, rural services are often in disrepair, inadequately staffed and unable to provide more than basic  services.

Against this background, there appear to be significant differences between sums, which are related more to the effectiveness of the local administration than to the financial provision.      For this reason, the RDS lays stress on increased participation of  the  service  users  in establishing service priorities and operational support. Any specific proposals for investment     or changes in the operational budgets are considered to be beyond the scope of the RDS, at   least at this stage.

The agreed rural social development objectives   are:

• Increased participation of rural communities in planning and implementing investment  to  social infrastructure
• Improved quality of health services for rural  people
• Improved quality of education services for rural  people
• Improved quality of social welfare services for rural   people
• Improved rural employment support  system
• Improved gender equity

Under the command economic system, large investments were made in the development of     the rural infrastructure. Almost all sum centres have electricity, water, heating and telecommunications facilities but there are often  severe  maintenance  and  operational problems. Electricity supplies, for example are often unreliable, even in aimag centres, due largely to high fuel costs and difficulties in  obtaining  payment  from  consumers.  A  recent trend is for individual herders to invest in renewable energy sources, such as solar and wind power generators but they lack information on the relative advantages of different types of equipment. The lack of a reliable infrastructure inhibits the development of rural enterprises,  such as processing agricultural products. Long transport distances from remote areas to Ulaanbaatar, using a very limited road and rail network, inevitably reduce the prices obtained   by producers of agricultural products and increase the prices charged for consumer   goods.

Even with improvements in the provision of social services, it is likely that there will be a continuing rural-urban migration. With improved  agricultural  productivity,  it  is  also  likely  that there will be a decline  in the number  of people  in rural  areas  relying  primarily  on crop  and livestock production for their livelihoods. An important element of the RDS is therefore    the  stimulation  of  non-agricultural activities in the rural  areas.  In  parallel,  the  development of more competitive markets will improve the terms of trade, and hence the incomes of rural people.

The agreed economic development objectives   are:

• Revitalizing the rural marketing   system
• Promoting  competitive  agro-processing industries
• Utilizing fully the potential of non-farm  SME   development.

During the past ten years, there has been a major programme of legislation and support for the creation of a market oriented economy. The policies on banking, finance, international  trade  and investment, however, have not yet created a favorable environment for national entrepreneurs. The high real rates of interest, for example, discourage domestic borrowing for investment in fixed and working capital. The RDS proposals for improving the business environment include providing the rural population with improved access  to  market information, and finance services and support for group formation and operation.  Also  proposed is a reduction in the significant legal and regulatory barriers to forming and running businesses in rural areas. A recent and rapidly growing source of rural employment is unregistered small-scale mining, particularly of gold. Illegal mining needs to be regularized    and regulated to minimize environmental degradation, health risks and    conflict.

The RDS team did not have the resources to consider a regional development strategy but concentrated on the process of achieving a consensus among stakeholders concerning the problems and the priorities.

Promotion of Agricultural Development and Food Security

Achievement of the PRSP objectives requires economic growth, in which agriculture and the rural economy are expected to play a significant  role.

The RDS proposals for the extensive livestock sector and support for developing small scale vegetable and fruit production are based on the extension of proven actions which will both increase production and benefit directly the poorer sections of the   community.

Another thrust of the RDS is the intensification of agriculture production through the development of farming systems, which integrate more closely crop and livestock production. An important element of the intensification plans is an increase in the use of irrigation, both of  vegetables and field crops, in order to reduce the risk of total  crop  failure.  Currently,  a  working group appointed by MOFA is working closely with research institutions in order to develop a new state policy for the crop sector, which moves away from the previously used system of wide scale  subsidies on inputs. Preparation of the new policy is expected to include    a review of food security considerations. The RDS recommendation is that the food and flour safety objective should be maximum utilization of the cropping industry’s domestic production ability and minimizing the associated import risks.

The current position is that, although many trials of developments such as minimum tillage systems have been undertaken, evaluation has been very limited. Because of the uncertainties, the RDS recomm ends better co-ordination and evaluation of project trials and agency support,  a strengthening of the monitoring and evaluation capability of MOFA and preparedness to  invest in strengthening the extension  service.

For intensification of the livestock sector, the RDS proposals are measures   to:

• Improve the Mongolian livestock by using local superior  breeds  that  have  adapted to the Mongolian climate  and
• Develop sustainable, market competitive intensive and semi-intensive livestock enterprises in areas close to feed/fodder supply and markets.

The RDS Development  process

The process of developing the RDS to this stage has proven effective in bringing together    many of the ideas present among the various stakeholders and placing them in a clear context   of development objectives, using the logical framework approach.

The October workshop, and particularly the working groups, stimulated discussion that led to  the creation of a consensus among the stakeholders, with a number of modifications and additions made to the first draft. The participation of stakeholder delegates from different aimags permitted the workshop to highlight the importance of local factors and initiatives in rural development. The introduction of unregistered mining as a topic was particularly informative in highlighting the potential importance of non-agriculture related employment in rural areas.

The RDS is being incorporated into the PRSP but it must be stressed that  the  RDS  development process is not complete. In particular, the output of the working group appointed by MOFA to develop a new state policy for the crop sector will be important both for the RDS and the PRSP since it should provide a basis for planning specific activities and investments as part of the economic development  process.

For all concerned ministries, this draft now provides a framework for the review and preparation of investment and operational plans. It should also facilitate the prioritization of proposals, both for ministry programmes and for donor assisted   projects.

RURAL DEVELOPMENT STRATEGY FOR   MONGOLIA

1. Introduction

Sustainable rural development is fundamental to accelerating the economic growth  of  Mongolia, reducing poverty and improving citizens’  livelihoods.

Since the transition to a market economy development strategies have been determined as  4- year action plans by elected governments and development programs and  projects  along  mostly sectoral lines. Although programs and projects supported by international and bilateral donors reflect goals of a strategic nature, they focus mostly on particular issues, and lack coordination and linkages to national development  priorities.

Lack of sustainable  and  long-term  development strategies contribute to the unsustainability  and discontinuity of government policy priorities, erode the trust of the public and the international donor community in government policies and decreases the effectiveness of resources used. Problem solving is dominated by “extinguishing fires afterwards” and the government efforts often dealw ith symptoms rather than root  causes.

The relevance of “The State Primary Rural Policy Directions” issued by the Parliament in    1996 as an effort to determine long-term development strategies has been  weakened  because both the socio -economic and natural-climatic conditions have changed significantly in recent years. Although more than 20 nation-wide agricultural  development  programs  and  projects have been developed, their implementation has been unsatisfactory because of lack of funds, weak specifications for implementation, too much focus on the investments and lack of incentives for ensuring the participation of beneficiaries and building their   capacities.

The Rural Development Strategy (RDS) proposes to ensure sustainable rural development by formulating a comparatively long-term and sustainable  development  strategy  and implementing it through mobilising national and international aid resources and through empowering local organizations and individuals to take local  initiatives  in  solving  rural  proble ms at the local  level.

The Government of Mongolia and the UNDP organised a National Conference on Rural Development in May 2002, the result of which was a call for the development of a national   rural development strategy through the participation of all stakeholders including ministries working in rural areas as well as the rural residents themselves. With support form the World Band, the preparatory stage began immediately following that conference and involved public polling and surveys carried out in the summer and early autumn of 2002. A Strategic Planning Workshop for Rural Development involving representatives of most stakeholder groups was held in July 2002. This workshop gave direction to the Rural Development Strategy Support Unit operated from the  Ministry of Food and Agriculture. The RDS Support Unit comprised    of Ms. Jeanne Bartholomew and Ms. B. Nandinchimeg, has played an important role in this process. Based on the mandate of the July workshop and utilizing the information gained from the preparatory work, which included compiling a Rural Development Resource Library the Centre for Policy Research developed a draft RDS in co-operation with the Ministry of Food   and Agriculture and other ministries and civil society organisations. The development of the  draft RDS was supervised by Mr. Robin Mearns (World Bank) and supported by Mr. Peter McNeill (DFID consultant) and Ms. A. Munkhtuya (World Bank consultant), who compiled, researched interviewed and evaluated information, which served as input for the writing team. The  RDS  support  unit  provided  translation,  editing  and  input  to  the  writing  team. Many national experts outside the government came forward to offer suggestions and provide  technical information. In addition, Mr. Derek Poate (DFID consult ant) and Ms. Alice Carloni (FAO) contributed comments and recommendations to  improve the draft. Mr. Poate facilitated   a national Rural Development Strategy Workshop held in Ulaanbaatar on October 9-11 2002, which discussed the draft RDS and provided many suggestions to strengthen the strategy. The current version of the RDS incorporates the recommendations from the   workshop.

Other people, especially Mr. Sh. Gungaadorj, Member of Parliament,  Head  of  the  Environment and Rural Development Standing Committee, made valuable contributions to developing the draft RDS. A steering committee composed of Mr. Gungaadorj, MP, (Head of  the Steering Committee), Mr. Davaatsedev, MP, Mr. Nergui and Mr. Myahdadag from the Ministry of Food and Agriculture, Mr. Tsedenbal from the Ministry of Finance and Economy, Ms. Erdenechimeg from the Ministry of Social Welfare and Labour, Ms. Erdenechimeg from  the Ministry of Health, Mr. Batjargal from the Ministry of Education, Culture and Science,     Mr. Yhanbai from the Ministry of Nature and Environment, Mr.  Enkh-Amgalan  from  the Center for Policy Research (NGO), Ms. Zanaa from the CEDAW Watch National  Centre (NGO), Mr. Bat-Ulzii, a herder from the Bayangol sum  of  Selenge  aimag  and  Mr.  Batchuluun, a herder from  the Uyanga  sum of Uvurhangai  aimag  provided  general  guidelines to the Strategy development process after the July workshop. World Bank, FAO, DFID and UNDP provided funding for consultants, consultation meetings, surveys and library development expenses.

The main elements of the draf t RDS are being incorporated into the Government's Poverty Reduction Strategy Paper (PRSP). Operational and policy aspects of the RDS are also being implemented through the World Bank supported Sustainable Livelihoods Program and other relevant national and internationally supported development  efforts.

2. Principles that Guided the Development of the Rural Development Strategy   (RDS)

The RDS started with the development of its mission statement. Further a logical framework format was used to specify development goal, objectives, outputs and activities,  which  are linked to each other through a means  - end relationship. The development goal is a general     goal that will be achieved when the development objectives are met. In other words, it will be the end result of the work to meet the objectives. Objectives are lower level goals compared to the development goal. They are the positive effects and consequences of the outputs. Output      is achieved through implementing a complex set of activities. Activities are very detailed implementation measures to be taken to achieve the outputs.  Performance  criteria,  measurement tools and assumptions are other elements  of  the  log  frames.  These  elements were often missing from traditional ways of developing   strategies.

2.1 National ownership

The Government of Mongolia will play a key role in the implementation of RDS together      with the private sector, civil society organisations and citizens. Therefore, the RDS was developed by a team of  national  policy  makers,  independent  researchers  and  representatives of the civil society. As such the RDS reflects the desires and aspirations of the Government,    the civil society and the broader public of Mongolia and is based on their perceptions about     the pressing problems encountered in rural development and the solutions to  make  it  sustainable in the long-term.

2.2 Pro-poor focus

A pro-poor focus i.e. increasing income for the rural poor and vulnerable people, enhancing social services for the m and improving their capacities were incorporated wherever possible     in the strategy. Enhancing opportunities for people in remote areas to reach markets and accessing health, education and information services was a part of the pro-poor focus. Details   of the  pro-poor focus are in Appendix 1.

Mongolia’s Poverty Profile and Changes in   Livelihoods

The findings of the 1995 and 1998 Living Standard Measurement Surveys (LSMS) suggested that the overall poverty headcount in Mongolia remained more or less  unc hanged over this  period at around 36%, having risen sharply from a virtual absence  of  officially  recorded poverty until 1990 or so. Changes in the depth and severity of poverty were relatively more significant, suggesting a widening of income differentials between the poor and the poorest. Participatory Living Standard Assessment (PLSA), conducted by the  National  Statistical  Office of Mongolia (NSO), with the support of the World Bank and other  international agencies, over the period March-September, 2000, aimed to complement and update LSMS. Using participatory wealth ranking, a method in which differences between well-being  categories are based on the participants’ own criteria, changes in perceived levels of well-   being were analyzed for the period 1992-2000. New  categories  of  both  rich  and  poor  emerged in the early 1990s as a consequence of unequal access  to the opportunities  offered  during the initial process of  privatizing  many  state-owned  assets  including  livestock  and  urban housing. The gap between rich and poor was perceived to have widened even more markedly over 1995-2000. While some groups were able to take advantage of new economic opportunities, including those with access to information and having ‘connections’ with local officials, many were not. The share of poor and very poor households was judged to have  increased over this period at the expense of medium households, as  more  people  fell  into  poverty than escaped from it.

Rural (and urban) livelihoods in Mongolia have become much more diverse than they were at  the start of the 1990s. A wide range of strategies for coping with and adapting to insecurity emerged in the 1990s.  The liberalization  of fuel  prices  coupled  with  the vast  distances  and  low population density of rural Mongolia le d to marked differentials in the prices of consumer goods  and  the  prices  paid  for  producer  goods  such  as   livestock  products.     As  a  result, geographical location became an important driver of  economic  opportunity,  and  migration (both seasonal and permanent) the livelihood strategy of choice for those in a position to take advantage of opportunities in more central regions or larger urban centers. The few rural communities to observe that economic opportunities had improved  in  the  late  1990s  were those with access to border trading points with China during a period of high cashmere prices. Family-splitting to take advantage of livelihood opportunities across the rural/urban divide became common. Reliance on inter-household transfers and social networks was vital for the poor, but many (often children) were also forced into degrading or illegal  activities  such  as begging and theft. Illiquidity and crisis in the banking  sector  meant those salaries,  pensions  and allowances were often paid late, forcing people to dispose of assets and into a cycle of indebtedness. While support from relatives was crucial for  many  poorer  families,  the  character of kin -based and other social networks began to  shift  towards  semi-commercial forms  and  often  excluded  the    most  vulnerable.     Table   Mongolia’s  Rural  Livelihoods: Summary from Mongolia Participatory Living Standards Assessment 2000 provides with the summary of livelihood profiles in rural areas, main causes of insecurity and vulnerability,     and coping and adaptive livelihood strategies in rural areas, sum and aimag  centers  respectively.

Several conclusions emerged from the priorities voiced by participants in the PLSA  that suggest a number of priorities for public policy and action to help create an enabling environment within which people may achieve more secure  and  sustainable  livelihoods.  These include:

• A focus on ways of reducing vulnerability, including facilitating access to assets for    the poor, and investment in public and private actions to reduce risk in  pastoral  livestock production
• Improvements in the provision of social services  and  infrastructure,  particularly  in rural areas and smaller urban centers, to enhance their effectiveness and increase community involvement
• Promoting access to information and giving greater voice to  communities  in establishing priorities in patterns of public  spending.

Mongolia’s Rural Livelihoods: Summary from Mongolia Participatory Living Standards  Assessment 2000

2.3 Sustainability

Priority was given to ensuring the sustainability of proposed objectives and activities by building the capacities of beneficiaries.

2.4 Participation of local bodies and citizens

The basic principle followed while developing the strategy was to ensure the maximum participation of local government, non-government  and  private  institutions,  citizens,  herders and farmers in designing and implementing the RDS. This is a way to ensure that  implementable targets are selected and implemented through increased interest  and  contribution of beneficiaries to the implementation process. Only in this way can this strategy overcome the weak implementation of programs and projects of the  past,  which  focused heavily on investments but ignored the desires, and participation of the  rural  people  themselves.

After a series of unfavourable years that caused mass losses of animals and crops both herders and farmers began to recognize that the overwhelming risks can not be overcome in old ways and became more active in searching for new ways to overcome risks and sustain their livelihood. This provides a good basis for enhancing the participatory development    processes.

2.5 Implementability

Designing implementable objectives given Mongolia’s natural, climatic, technological and human resources was a key principle in developing the strategy. New and costly production technologies are to be carefully tested, piloted and evaluated for viability in market economy conditions before being introduced.

During the old centralised economic system the process of determining objectives used to    focus more on direct implementation methods and did not consider external factors that might influence the implementation. This mentality has not been fully overcome. Rural development  is a complex process involving natural, legal, economic, social and political factors.  The external factors that directly or indirectly influence the implementation of the RDS were considered under the assumptions in the  log-frames.

2.6 Holistic approach

Because of the complex nature of the rural development processes and the failure to achieve desired results to date through non-coordinated sectoral approaches, a holistic approach was proposed to deal with the multitude of challenges faced by rural people. A holistic approach  was used as a way in which to address all of the factors that influence the livelihoods of rural people. Holistic does not mean simply “wholly covered”  but  it  means  all  issues  will  be  brought together on one point, the rural  community.

2.7  Timing

The strategy was designed to be implemented over  a maximum  of 20 years.  It is obvious  that  the implementation period will differ for various outputs and  activities.  Particularly,  the  timing will vary based on the implementation priorities, availability of resources  and complexity  of  the objectives.

2.8  Inter-sectoral  linkage and co -ordination

In  developing  the RDS, key sectors such as livestock, crop, agri-business, natural resources   and the non-farm sector that have strong interrelationships have been discussed in the most detail. Rural infrastructure and rural social development, which play an important role in rural development but have been developed quite fully and integrated into the National Poverty Reduction Strategy Paper by separate efforts are discussed in the RDS focusing on issues that are seen as crucial to rural development. As  such  the  RDS  sections  on  infrastructure  and social services cannot claim to be a complete strategy for those   sectors.

The above principles that guided the development the RDS have close interrelationships and mutually reinforce each other. For instance, the principle to  ensure  local  participation  facilitates the sustainability and implementability principles. Similarly, the principle of sustainability creates an environment conducive to implementing the pro-poor principle by ensuring the long-term sustainability of outcomes for the  poor.

3. RDS Mission, Development Goal and   Objectives

3.1 RDS Mission

RDS mission is to  ensure the well being of rural people and their all-round   development.

The mission stems from the essential needs of rural people to work and live  in  an  environment,  which is:

• Provided with equitable opportunities for each to realize his or her   talents
• Sustainable
• Protected against any risks and vulnerabilities of a natural, economic or social nature, and
• Capable of keeping a pace with economic and soc ial transformations, globally and nationally

3.2  RDS Development Goals

By developing the Rural Development Strategy the people of Mongolia are seeking to achieve the  following goals:

1. Ensuring sustained growth of income for rural people, especially the   poor
2. Ensuring the delivery of quality social services to rural  people
3. Ensuring sustainable use of natural resources and the   environment

Substantial increases in incomes are essential for people to  realize  their  talents  and  aspirations. For this reason, promotion  of economic growth plays a central role in the    RDS.

However, growth alone is not a sufficient objective, particularly if it does not involve all  segments of the population. For that reason the objective of poverty alleviation has equal standing.  Special emphasis will be placed on raising the incomes of the poor more rapidly     than for the population as a whole. In other words economic growth will be achieved  in a  highly equitable manner. Creating an economic environment that will enable the  poor  to  escape poverty through their own exertions and abilities shall be the major principle in alleviating poverty. Dependency mentality, expecting investments from outside the local community such as aid and grants, which causes indolence and feelings of incapability,  poses   a major stumbling block for the implementation of development policies and programs to alleviate poverty.

The satisfaction of basic social needs is an essential  component  of  the  strategy  because higher incomes alone  do not guarantee  suffic ient access to health services, education, pure  water and other forms of social infrastructure, including opportunities  for  cultural  development.

The environment not only is critical to our health and wellbeing but more than in  most countries, it is an essential source of livelihood for rural people. Shortsighted approaches to managing the environment undercut the basis for the prosperity of future generations and also will damage the health and earning capacity of the present one. Therefore, the strategy gives highest priority to ensuring sustainable use of natural   resources.

Maintaining national contribution to food security for the population at a maximum level is a special role of the agriculture sector. In the past 10 years of transition, cropping as   well as     food processing has substantially decreased. Between 1996 and 2000, Mongolia, a former exporter of food products, became an importer of 17.3  to 46.5  thousand  tons  of grain,  80.9  to 450 tons of butter and 70% of the total flour consumption, annually. RDS objectives for agricultural production and agro-processing will substantially contribute to improving food security for the population. However, achieving a target of self-sufficiency  in  all  food  products is impossible at present. It is recommended that food security be achieved through maximising the domestic potential for agricultural production while taking advantage of international trade.

3.3 RDS  Objectives

RDS goals shall be achieved through realizing the following   objectives:

1. Improving man agement capability for rural  development
   1. Livestock  sector development
   2. Crop  sector development
   3. Rural marketing, agribusiness and non-farm sector   development
   4. Rural  social development
   5. Environmental protection and sustainable use of natural   resources
   6. Rural  infrastructure development

4. RDS Structure, Linkage of Components and   Priorities

Vertical linkage between the RDS mission, goals and objectives is shown in  Figure 1 .  Given  the complexity of rural development processes the development goals and objectives are also interrelated horizontally.

At the development goal level, it would be impossible to increase incomes for local people without improving the quality and availability of social services. This is because having good health and education is fundamental to improving the people's livelihood. Likewise, it would   be possible to protect human health and ensure the welfare of future  generations  only  if  natural resources are used in a sustainable  way.

Similarly, the RDS proposes objectives that have strong inter-linkages and are mutually reinforcing. Particularly, livestock and crop sector development objectives are strongly linked through supplying key production inputs to each other - livestock  sector  with  organic  fertilisers and the crop sector with feed. Key strategies to diversify the livelihood base thus      are linked to reducing vulnerability to future risks. Likewise, the development of rural infrastructure such as energy, roads, telecommunications and information networks is crucial    to the development of the livestock, crop and agribusiness industries and the delivery of social services.

Goals and objectives, as mentioned in section 2  of  the  RDS,  are  linked  vertically  through strong cause-effect relationships. For instance, realising livestock  sector  development  objectives such as building risk management capability and intensification;  realizing  crop sector development objectives such as maximising domestic potentials in wheat production    and minimising risks associated with wheat and flour imports; and realizing rural agribusiness and non-farm sector development objectives will  substantially  contribute  to  ensuring sustained growth of incomes as one of the development   goals.

The development goal of ensuring the delivery of quality social services to rural people shall  be achieved through meeting improved rural education, health, social welfare, employment generation and gender improvement  objectives.

Given the high concerns about climatic changes, especially, among the top policy makers, the goals of protecting water resources and providing access to water are addressed in a separate logical framework.

Improving rural energy, telecommunications, roads and other transportation networks and information delivery services plays an important role in ensuring the sustained growth  of income and ensuring the delivery of social  services.

It is impossible to address environmental protection and the sustainable use  of  natural  resources separately from the users or farmers. Unsustainable use of agricultural land causes a major threat to the livelihood of farmers, both in the present and the future. Therefore, the sustainable use of agricultural land is dealt with within the crop and livestock development logical frame works. In addition, issues related to forestry, wildlife and fish that are facing  fierce attacks by illegal users endangering rare species to the point of extinction are addressed separately despite their relatively small role in GDP and  employment.

RDS objectives shall be achieved through realising related outputs. For instance, the livestock development objective of building risk management capability will be achieved through the accomplishment  of  the  six  outputs:  promoting  herders  groups  and co-operatives; improving pastureland management; fodder supply; water supply; veterinary  services;  and  risk  forecasting and disaster management.

A summary of proposed objectives and related outputs is in   Appendix 2.

Prioritisation of development objectives and outputs in terms of their  contributions  to  achieving the development goals and impacts on rural poverty and vulnerability has important implications for sequencing the implementation objectives and short and medium term investment planning. However, detailed prioritisation is a difficult task given the complexity     of interrelationships and the different resource endowments of regions. For example, in the   Gobi and steppe regions water related objectives rank first while in the more productive forest-steppe regions with a relatively good supply of natural water sources this task  will certainly not rank with the same degree.

When ranking comes to particular regions, aimags and sums it should take account of the diversity of conditions.

In Appendix 2 ranking of development objectives is in bold and ranking of related outputs is     in normal (non-bold) type. The right hand column  ranks  priorities.  The highest priority is  given to number  1.

5. RDS Objectives: Challenges and Ways to Overcome   Them

5.1 Improving Management Capability for Rural   Development

Whether RDS will be implemented successfully or not depends significantly on the overall capacity of governance , the Government's  capability  to develop  and implement   policies.

Especially, overcoming the inherited mentality to solve problems  through  top-down  investment approaches, separating clearly and enforcing adequately the role of state, private sector and others in managing economic development, reducing the role of state, increasing participation of beneficiaries, and making the system of decision-making and implementation more transparent are strongly required. Radical civil service reform is needed to address uncertain prospects for career development and insufficient linkage  of  merit  to  promotion. This reform is necessary to prevent pervasive morale decline and  corruption  among  government officials. The recently approved Public Sector Management and Finance Act and  the ongoing Good Governance and Human Security program have to play a key role in addressing the governance problems. According to the Participatory Living Standards Assessment (PLSA), performance of public administrations received poor ratings from participants, owing to lack of accountability and effectiveness. Rural citizens had very little contact with aimag and sum governors, and they had very little information on local  government activities. Bag governors  were  rated  as  being  accessible  to  their  communities, but had few decision-making powers. The following recommendations were made from the PLSA on good governance and public policies and actions for rural, as well as  urban  Mongolia:

• Giving  citizens  greater  voice  and influence over patterns of public spending
• Improving the quality and effectiveness of social services and   infrastructure
• Investing in public and private actions to reduce risk in pastoral livestock production, in particular, including ways to promote pastoral mobility and community-based pasture land management, in combination with livelihood diversification

The currently low level of fiscal decentralisation inhibits the voice and influence of local communities over public spending programs, while inadequate  community  participation  makes fiscal decentralisation less feasible because local capacity remains   under-developed.

Pressing governance issues are not addressed in a separate logical but framework format, however, they have  as much  as possible  been  incorporated  into proposed ways and processes  of implementing the RDS.

In implementing the RDS a high priority is given to ensuring the sustainability of proposed objectives, outputs and activities by building capacities of stakeholders.  Institution building    is sought to be at the core of capacity building activities along with ensuring access to all types of resources. Providing sustainable use of land and other natural resources through transferring the possession and use rights of the land and other natural resource to the local citizens' formal and informal institutions, co-operatives and herder groups is key to building sustainable use of natural resources and environmental protection. In order to implement this objective complex legal and management measures need to be taken aiming to decentralise the relevant powers and increase local  participation.

Ensuring proper coordination of activities across the involved central and local government agencies, private sector, civil society and donors is seen as an important condition for the successful implementation of the RDS. In realizing this condition the Government clearly sees its leadership role and the responsibility for increased participation of other stakeholders and enhanced transparency of the decision-making processes. At the same time the Government understands that the coordination of activities cannot be fully  realized  without  strong initiatives and support from the international and bilateral  donors.

The Government's strong willingness to enhance the coordination of activities is based on the strong need to address increasingly common cases in which inadequate coordination results in inefficient use of invaluable efforts and resources.

5.2 Livestock Sector

The extensive livestock industry pla ys a crucial role in the Mongolian economy. As of 2000  the livestock sector makes up one third of the GDP, employment and export   earnings.

The major characteristics of the Mongolian extensive livestock industry in the context of the current study are its absolute dependence on an extremely harsh and highly variable natural environment and the resulting basically constant low yield per animal. Mongolian livestock    get over 95 percent of their annual fodder from natural pastures, utilising them all year round. Pasture resources are highly dependent on erratic rainfall and their availability is subject to  snow cover during cold  seasons.

5.2.1  Current challenges

From the late 1950's up until 1990, when Mongolia began  the  process  of  economic liberalisation, all members of the rural population were negdel (state co-operative)  or  state  farm employees. During the negdel system the  extensive  livestock  industry  moved  towards the intensification of production by providing shelter structures and veterinary and breeding services for livestock, making available supplementary fodder and concentrates and irrigating natural pasture.

The intensification process was implemented by a series of large campaigns at tremendous    cost. The number of wells and livestock shelters  increased  from 14.7 and 37.7 thousand in  1965 to 40.3 and 67.5 thousand respectively, in 1985, while the livestock number was held generally constant at around 22.4 m.

Likewise, for the same period, the total harvest of natural hay, the main fodder supplement in Mongolia, increased from 522.2 thousand tons in 1970 to 1275.6 thousand tons in 1985, i.e. 26.7 kg per sheep equivalent. Fodder was mostly produced in the more productive northern  regions and a significant portion went to the centrally administered Sate Emergency Fodder Fund (SEFF). The role of the SEFF was to have stocks of hay on hand to be trucked or flown into emergency affected areas to provide short-term  relief.

The intensification process undertaken between 1960 and 1990 did not lead to any substantive increase in productivity per animal, i.e. biological productivity. However, it could increase the total output per 100 animals at the beginning of the year, i.e. economic productivity of the industry, through reducing mortality, miscarriages and infertility and increasing the number of animals that produce outputs in any given year. Consequently it can  be  concluded  that  reducing mortality, miscarriage and infertility of animals is a more cost-efficient way of increasing productivity for the extensive livestock industry compared with efforts to increase biological productivity per animal. However, this does not mean that any efforts to increase biological productivity are ineffective. There is room for increasing productivity through (i) improving the local Mongolian breeds of animals by using superior local sires with higher  yields of cashmere, meat and wool and better resistance to natural hardships; (ii) supporting market-led small-scale intensive and semi-intensive  meat and dairy farming in areas closer to  big markets or in areas with better conditions for producing  feed.

With the beginning of the transition to a market economy in 1990-1993, the  livestock  population was privatized, and  the  negdel  system,  which  had  been  developed  over  the previo us 30 years, collapsed. As a result, the livestock sector shifted to mainly subsistence-  level production based on small household economic units.  At that point, it was thought that  the privatization of livestock and liberalization of prices for livestock products would promote    a smooth shift of the agriculture sector to the market  system.

Privatization of the livestock took place before the appropriate livestock support  services, capable of functioning under market conditions, and the rural marketing system were  established to replace the former negdel service system and the state procurement   system.

This passed all of the risks related to weather and prices as well as the responsibilities for production and marketing to herding families who had no experience of running businesses in    a market economy. Herders responded rationally to these risks by increasing the herd size to    the detriment of free state -owned pasturelands and by decreasing the utilisation of purchased inputs. The number of livestock increased from 25.8 m in 1990 to 32.9 m in 1998. However, because proper breeding methods, veterinary care and selection criterion for slaughter were abandoned the quality of animals deceased and the number animals with weaker resistance to Mongolia’s  harsh  climate increased.

There was less utilization of supplementary fodder and veterinary services and an apparent unwillingness of herders to use superior stock for breeding purposes, producing the danger of     a long-term decline in animal productivity and the quality of  output.  Hay  production  declined  to 330.3 thousand tons in 1998, i.e. 4.8 kg per sheep equivalent. Most of the pasture wells constructed during the socialist period no longer function. This is because of lack of the ownership  or  custody  rights  for   the  use  of  the  wells.  This  negatively  affects  the   pasture carrying capacity and reduces the number and range of  potential  pasture  areas.  Many  livestock shelters were also destroyed due to ‘non-ownership and maintenance’. The fact that  the number of experienced herders decreased and the system for replicating the best herding practices through training and retraining of herders was abandoned has greatly contributed to severe losses during natural disasters and eroded the herders' capacity to generate and save incomes in order to overcome the subsistence nature of their   businesses.

As  a  result  of  constraints  that  emerged  as  side  effects  of  the  transition  period,  the  main infrastructure and industries collapsed. Due to the lack of available job opportunities many  urban  residents  adopted  herding  as  a  main  source  of  income  for  their  livelihoods*.  This livelihood strategy increased the herding population and the absolute number of livestock drastically. As of the late 1990s,  numbers  of  herding  households  doubled  and  reached  190,000. However, 85 per cent of all herding households currently have less than 200 animals and 63 per cent have less than 100 animals. The capacity of  these  small  households  to   overcome difficulties related to seasonal movement, haymaking, access to veterinary services, marketing of products, price fluctuations and other man-made and natural risks have  substantially weakened. Herders became more vulnerable to poverty. It is  estimated  that  herders need 300 to 400 animals to sustain their livelihood at a satisfactory level.  It needs to     be stressed that the extensive livestock sector cannot continue to directly support the current number of herding households and that many of  the  'newcomers'  to  herding  in  the  1990s  would rather pursue alternative     livelihoods if they had the opportunity to do so.

Under the pressure of increased livestock numbers and the absence of adequate regulations     the traditional best-practice grazing patterns have been violated. The subsequent overstocking began to destroy the ecological balance, the keystone  of  nomadic  pastoralism.  The  overgrazing and degradation of pastures became more serious in areas close to water points    and rural settlements. The reserve pastures, which were used in emergencies such as dzud and drought, have been occupied permanently contributing to mass losses of animals during emergencies.

The gap between rich and poor herders has increased and the incidence of poverty among herding communities is becoming more acute. Because of economic constraints for transportation and labor required to make seasonal movements and to market their products, poor herders must stay close to urban centers where pasture quality has declined. This means they are experiencing ever increasing vulnerability to insecurity  and  risks.  There are many young herders and newcomers among the rural poor, and availability of spring and winter  camps is extremely limited for them compared to older,  established  and  more  financially secure herding households.

Delivery of the appropriate social services is one of the still unsolved problems for herders. Particularly, there is limited access to the achievements of modern civilization.  As of 2000,  only  10.6  per  cent  of  herding  households  had  electricity  sources  and  12.8  per  cent  had  te levision sets. Herders are scattered across vast territories, which causes significant logistical problems for the delivery of social services.  In addition, because of the constraints caused by  the transition to a market economy, budget  resources  allocate d for rural education and health have been reduced, which negatively affects the rural  communities.

Three consecutive years of severe dzud from 1999 to 2002 resulted  in the loss  of 11 million  head of livestock leaving 12000 households with no animals. The recent dzud and drought has proven that the national pastoral risk management system was weak and could not protect the whole extensive livestock sector. Appropriate lessons were learned from this unfortunate experience. It is impossible to measure in financial terms the  psychological  suffering  of  herders loosing their livestock during the dzud .

* Livestock herding has played a role as an economy-wide safety-net throughout the period of economic  transition.

Thus, although transitional reforms centred on privatisation and price liberalisation laid out a framework in line with overall movement towards a market economy, this is far from being completed. However, it is not likely that the root problems mentioned above can be solved by the State directly: State-managed negdels  will not be re-established and Government subsidies  to the livestock sector will not be reinstated. On the contrary, many  administrative responsibilities within the Government have been decentralised and the economy as a whole   has moved toward a greater reliance on market mechanisms during the past ten   years.

5.2.2 Main policy measures undertaken by the government for development of the sector

The government of Mongolia has been revising the “The Primary Rural Development Policy Directions” approved by the Parliament in 1996, aiming at improving living  conditions  of the rural community thr ough intensifying the extensive livestock sector, developing intensive livestock near urban centers and increasing  exports.

In 2001 amendments were made to the “Law on  the  livestock  gene  pool”  and  “Livestock  health protection”. Some programs and projects including the “National Program to Improve Livestock Services” and the “Animal Health Program” have been developed and are being implemented under the Law. According to the programs, the genetic and health improvement measures  will  be implemented  in phases.

“The National Program on Protecting the Livestock Sector from Dzud  and  Drought  “  approved in 2001 highlights necessary measures to be taken during dzud and drought. It deals with improving the existing disaster relief system and determines the division of stakeholder responsibilities.

“The National Water Development Program” was adopted in 1999. The objectives of this program include improvement of a safe and reliable water supply for rural  people,  rehabilitating water resources and protection from water   pollution.

Additional subprograms such as the “White Revolution”, “Cashmere” and “Wool” were developed and their implementation has started.

The government allocates annually MNT 3-5 million from  the  state  budget  for  livestock health protection, fodder production, combating pasture insects  and  pests,  controlling infectious diseases, improving water supply, restocking and dzud relief   activities.

Given the lack of domestic financial resources, the government must rely on donor assistance   in order to fully implement the above-mentioned laws and programs with the aim to ensure sustainable livestock development in  Mongolia.

5.2.3 Main direction of donor activities in combating herder  poverty

Until recently, the main approach of the rural poverty reduction strategy was restocking programs. These programs have been implemented in Mongolia since 1995. Although  restocking efforts created important safety nets for a short period or time during the 1990s for rural   Mongolia,   the   current   government   and   donors   have  begun  to  recognize  that this approach is not sustainable to ensure long-term sector  development.   The main  reasons  for    this are related to insecure risk mitigation management, negative influences on rural financial development and creating a welfare dependant mentality in herders during the restocking activities. The most crucial flaw in the activity is that positive outcomes  could  not  be  protected from future risks. Based on these reasons, most donors are aiming to use holistic approaches and impleme nt projects to address problems related to sustainable  pastoral  livestock development in Mongolia. Measures such as livestock productivity improvement, non-livestock income earnings and developing a sustainable pastoral risk reduction system are considered in the holistic  approaches.

Based on its earlier support to the national poverty alleviation programme, the World Bank is supporting a Sustainable Livelihoods Project (SLP). The first phase of the proposed 12-year programme of World Bank support to  the  Mongolian government’s poverty reduction action plan has begun. The SLP has three components: pastoral risk management, micro-finance outreach, and a community investment  fund.

5.2.4 Livestock  sector  development objective

The livestock sector is vital to the rural development strategy in Mongolia.

In a world livestock market increasingly dominated by health and safety issues related to feed additives and over use of hormones and antibiotics Mongolia needs to fully realise its comparative advantage in the development of high quality, organically raised, minimally medicated,  environmentally  clean  livestock production.

The livestock sector development strategy aims to build risk management capabilities to ensure reliable protection for herders' wealth and incomes and intensify production at optimal levels taking into consideration regional advantages to increase   productivity.

While building sustainable livelihoods is the ultimate aim of livestock development efforts,   fully utilizing potentials for non-herding income generation activities is also given a  high priority. Increasing possibilities for non-herding income generation can be accomplished by promoting collective actions among herders, providing necessary support in capacity building and improving access to financial services. This will allow some unemployed or  under  employed herders or rural residents to engage in vegetable production, processing  of  agricultural raw products and other SME activities. It is believed this will contribute significantly to reducing the vulnerability of herders to risks as well as reducing the herders’ incentives to maximize livestock numbers beyond what is   sustainable.

In order to carry out the livestock development strategy it is essential to utilize and support initiatives and the capabilities of herders by promoting collective actions.  This  is  consistent with the principle of overcoming the outdated “herder as simply a follower of government mandate” mentality. It will create a bottom -up approach, which encourages initiatives from the herding communities. A herder collective action support policy should   cover a widespread legal and institutional framework, which supports bottom-up informal collective action initiatives and formal and informal herder group   organizations.

Social, economic and environmental problems faced by herders are closely interrelated so any problem should not be addressed as a separate matter. That can  never  achieve  complete  results. Any stand-alone sub-sector program or measure can have no realistic impact on the livelihoods of herders or the reduction of poverty. Therefore a holistic approach to the rural development strategy is being promoted as an important tool to reach the development objectives.

The objective of building pastoral risk mana gement capability shall be realized through achieving the following  outputs:

• Promoting cooperatives and herders'  groups
  • Sustainable  pasture management
  • Increasing the use of supplementary   fodder
  • Improving the supply of water
  • Improving the veterinary serv ices
  • Improving risk forecasting, response capabilities and disaster   management

In order to intensify the extensive livestock sector, two directions should be   pursued:

• To improve the quality of local livestock utilizing superior local strains which are well adapted to severe local  conditions
• To develop the market-led intensive and semi-intensive livestock sectors where fodder and markets are  available.

All activities shall be implemented in mutually reinforcing ways. For instance, improvement activities for veterinary services, fodder production and water supply are inseparable parts of  the risk management strategy. On the other hand, these measures will directly contribute to livestock intensification and productivity improvements. Likewise, livestock genetic improvement activities using the best local strains would increase the resistance of animals to weather hardships and thus contribute to building risk management   capabilities.

Experiences of the last 10 years of the transition clearly show that the existing  small  households badly lack resources to undertake such important functions as managing land resources, preparing supplementary fodder, organising timely otor migrations and accessing useful information. They thus, become vulnerable to overwhelming natural risks of dzud and drought. Therefore, it is not surprising to see that the last 3 consecutive years of dzud led to  such a sharp increase in awareness among herders about the importance of co-operation.

The UNDP funded 18-month pilot pr oject 'Strengthening Customary Herding Communities' implemented by the Center for Policy Research in 2000-2002 shows that both efficiency and effectiveness of the above mentioned functions are increased if they are organized in a collaborative way. The project piloted community-based models for managing pastures and wells, preparing and delivering supplementary fodder, accessing veterinary services and organizing marketing and alternative income generation activities. As a result, the project communities managed to achieve better survival rates of animals during the 2000-2001 winter-spring season: non project families lost 6.69% of their animals while member families lost only 4.96%. The project herding families reared 88.22% of their young animals, which is 7.85% higher than their neighbors rearing rate. Furthermore, collaboration benefited the poor members of the community by providing an access to markets and key production inputs and services, which they would not have had if they acted alone.

The currently dominant approach by the Government to regulating pasture use relies heavily    on sum and bag governors. If this largely top-down approach worked, Mongolian pastures  would not have the problems they do   today.

Normally sum and bag governor  involvement in grassland management is quite limited. At  best, bag governors make herders agree orally on the scheduling of seasonal migrations at a meeting of bag members once a year, but the decision is not implemented by herders and not monitored by the governors. The reason is simple. The bag is an administrative unit but not a natural resource management unit, and there are no formal bag boundaries. Bag membership     is based on the location of bag members’ winter camps, and this provides an  informal  delineation of the bag territory. However, it is quite  uncommon  that  a  bag  has  all  four  seasonal pastures  in its 'own  territory'.  More  usually  members  of different  bags  inter-migrate  to each other’s territories. This makes decisions at bag level very difficult to  enforce and monitor. Furthermore, a bag is too small to be an effective natural resource management unit. According to the land law the bag governor is the lowest level in the administrative hierarchy, and is therefore the closest person to herders with authority to regulate pasture use. However, because bag territories are too small, bag governors cannot fulfil this function effectively. Building good management of pastoral resources is not possible without active participation from the herders.

These limitations of bags, and low participation of herders in bag activities, make it necessary   to look for alternatives. The most promising is traditional area-based informal herder groups  who already co-operate in the use of pasture, water, saltlicks, and other livestoc k-based  activities including preparation of fodder, collecting livestock products and marketing. Such groups are often based on customary natural resource managing groups such as well or valley communities, and could become a prime focus for pastoral risk management   activities.

The experience of the 'Strengthening Customary Herding Communities Project' shows that informal herder communities need to be substantially strengthened for the successful management of natural resources and pastoral risks. In the case of pasture use, they need to be formally recognised as a basic natural resource management unit, and there needs to be a tool   to facilitate the sustainable use of pastures. The most promising tool is a contract between the recognised herder group and the sum governor. The contract  formally  recognises  the  rights and responsibilities of both parties. Recognising a community's rights to access  certain  resources provides an important tool for managing the commons. Herders have the assurance  that they will be rewarded for protecting pastures against increasing anarchy of use. Without  such assurances it will be difficult for herders to implement key pastoral risk management measures such as adjusting the size of their herds to over -winter carrying capacity  or  respecting seasonal pasture rotations

The livestock sector development logical framework is  attached.

5.3 Crop Sector

5.3.1 Current  challenges

Prior to 1990 the crop sector policy aimed at self-sufficiency and export capability in grain, potatoes, vegetables and fodder crops.  700-880  thousand  tons  of  grain,  100-120  thousand tons of potatoes, 45-60 thousand tons of vegetables and 500-700 thousand tons of livestock fodder were harvested at that  time.

In 1990-1996, all state owned crop farms were converted to shareholding companies with the aim to increase production through promoting private ownership. However irrigation schemes  on 500 hectares or more of cropland and wells remained as state   property.

Newly emerged economic entities in crop production have decreased their production volume drastically as a result of losses caused by lack of proper management under the new market conditions and an unfavorable transition environment which include high and increasing cost    of imported inputs, a bankin g crisis, inflation, high interest rates for both  capital  and  production loans, and termination of direct and indirect subsidies provided by the  state. Tractors, combines and all agricultural machinery on most crop farms depreciated and neither repair not replacement were possible to keep the farms’ equipment in good working order. Fertilizers and pesticides were not used and the national seed production system broke down.  All these problems are responsible for the decrease in crop sector   production.

Directed loans were provided to the crop sector by the state through large flourmills because commercial banks were lacking the credit resources to provide  agriculture  loans.  This  measure however has created a burden of debt for many crop farms and is one of the main reasons for the increased bad debts of commercial banks and state   budget.

Until 1995, the government largely controlled prices of the staple agricultural products such     as wheat, flour and bread in order to avoid sharp increases in consumer prices. This negatively affected the crop sector, leading to its  decline.

The government elected in 1996 pursued the policy  to  complete  the  privatization  of  crop farms and support the sector by soft loans through commercial banks and  oil  supply  companies. In 1998, the government approved the “National Program on Crop Sector Rehabilitation” which required an investment of $160 million USD. The program however     has not been implemented yet due to lack of financial resources.

Although the Japanese government has bee n providing under the KR-1 'Improving the Food Supply' and the KR-2 'Increasing Food Production' projects 40-50 tractors and  other  agricultural machinery annually since 1992, this has not met even 5 per cent of the total requirements.

The fact that large flourmills became incapable of purchasing grain from crop farms and commercial banks ceased to provide agriculture loans, had a serious negative impact on the finance of crop farms. The reason behind this was a surge of cheap imported flour from the    neig hboring countries to the domestic market.

In order to protect the domestic flour market, the government introduced a seasonal import tax on flour of 15 % for 5-6 months after the harvest season. Unfortunately this measure did not protect the domestic market as the neighboring countries harvested comparatively high-yield wheat and produced cheap wheat and flour. These producers exported  cheap  flour  to  Mongolia on a seasonal basis to supplement this small   market.

The Government approved a national program called the “Green Revolution” in 1996 in order   to reduce the rural unemployment rate, alleviate poverty, increase household incomes and encourage people and households to plant and consume potatoes, vegetables and fruits.  Although the program implementation is still continuing in all aimags and sums to encourage planting various vegetables, and providing vegetable production and utilization training, Mongolia can meet only 43 to 45% of the total domestic demand for vegetables and less than 6% of the total domestic demand for  fruit.

The government elected in 2000 adopted the following goal for crop sector development: “To meet 60-70    percent of the national flour requirements by reducing the crop sector decline”.

It is believed that goal will be achieved through encouraging domestic seed production, by  external and internal financial and technical assistance and by  streamlining  the  fallow  program. Application of chemical fallow and minimum tillage technologies are planned to reduce soil tillage costs and improve soil moisture by reducing or eliminating traditional mechanical soil tillage.

In 2001 the seed production subprogram was approved with the aim to meet domestic requirements for seed by the year 2005. In order to promote seed production, MNT 1.8 billion was loaned to 27 crop farmers from the KR-2 revolving fund. However, many farmers are not able to pay back the loans because they have lost harvests due to the 4-years  of    drought.

Under the government “Fallow Project-2001”, MNT 2.5 million was provided to crop farmers last year for the purchase of fuel to ensure good fallow preparation for the next season. This resulted in 275,000 ha of good quality fallow out of which, 6.6 thousand ha was chemical  fallow. In 2002, the government provided 15,000 ton of seed  to crop farmers on a loan basis,    30 percent was paid in advance and 70 per cent was a loan.  This  wheat  seed  was planted  on  266 thousand hectares of land. Unfortunately, the summer was extremely dry and all farms     had extremely low yields. Thus most farms are not able to pay back the loan. Farms that prepared chemical fallow had higher yields, but still could not completely achieve their goals, because of failures to follow the full minimum tillage technology   requirements.

Another factor that puts the crop sector at risk is inadequate supply of imported inputs such as machinery, repair parts and fertilizer. Today most farmers cannot afford to buy these inputs,  even if they were available.

Since Mongolia became a market economy every elected government pursued  various  measures and activities to rehabilitate crop sector production. However unfavorable weather, especially the last few years of repeated droughts, brought only bad results. Therefore the working group appointed by the Ministry of Food and Agriculture, which  consists  of  agronomy experts, scientists and scholars is working  closely  with  research  institutions  in order to develop a new state  policy  for the crop  sector.  This  working  group  intends  to submit its proposal to the Minister’s Council of Food and Agriculture and to   Parliament.

5.3.2 Does Mongolia need to have domestic grain   production?

Annual precipitation is only 270-300 mm in the central cropping region of Mongolia. This  limits cropping without the irrigation. Because of the obvious dry climate during the last few years,  crop-growing  conditions have deteriorated greatly. There is a scenario, which proposes  to import the required flour and grains, rather than engaging in costly and inefficient crop production without irrigation. However chances that the government will support this scenario are very limited. Reasons for that  include:

• According to the law on food supply adopted in 1995 meat and flour are considered strategic products. 73-78% of the daily food consumed by rural people and 40-45% of the daily food consumed by urban people consists of flour-based   products.

• Import price of wheat is high due to transportation costs. For instance, the price of   wheat imported from the USA is $270 USD per ton before customs tax and VAT. This  is much higher than the domestic wheat price. This same wheat price in the USA is    only $85 to $115 USD per ton. If we buy 312 to 328 thousand tons, it will cost $84 to $88 million USD. The current wheat price is from100, 000 to 125,000 MNT per   ton.

• As for neighbors, China and Russia are importing wheat of  17  –  0.3  and  21.3-0.4 million tons, respectively per year. So it is risky to rely on wheat importing countries, which may introduce export bans or impose high taxes  on  wheat  and  flour.  Kazakhstan could provide wheat to Mongolia but Russians would control the transportation, which makes the import from this country also  risky.

• As of today, 60,000 people are engaged in the crop sector as the main source of their livelihoods. Reduction of crop sector production would add to the unemployment  problem.

• There is a need to maintain wheat production in order to provide emergency fodder for livestock in case of weather disasters or other national crises caused by   humans.

In addition, it is extremely difficult to say whether suitable crop production technology  or  strong enough economic supports from the state for the crop sector exist today. Currently, the following options are considered for the future of the crop   sector:

• Promote irrigated wheat production
• Increase fodder production through introducing legumes, rapes, Lucerne and other legumes and perennials into rotation
• Introduce zero tillage and mulching technologies in order to maintain soil moisture    and composition as much as possible

5.3.3 Crop sector deve lopment objective

Crop sector development strategy should ensure food security for the Mongolian population  with special attention paid to meeting the nutritional needs of the poor. The main crop sector strategy is to ensure a sufficient flour supply forthe population through minimisation of import risks and maximisation of domestic grain production capabilities. The  maximisation of domestic grain production capabilities is based on  the  local  producers’  interest to ensure the improvement of their livelihoods and  to  produce  reliable  livestock  fodder resources.

According to research done by health research institutions the annual requirement per person  for vegetables is 73 kg and for fruits is 44 kg. There  is a need  to double  or quadruple  the current consumption of vegetables and increase fruit consumption by 10   times.

Nowadays consumption of vegetables has been increasing. Raising vegetables is becoming an important income sources for many poor families in Mongolia. Today, vegetable production      is becoming more commercialised.  The objective for this sub sector is to reduce poverty  and improve the living standard of the population through supporting the production    and processing of vegetables and  fruits.

The crop sector development logical framework  is attached.

5.4 Agricultural Marketing, Agribusiness and Non-Farm  Sector  Development

5.4.1 Current  challenges  and opportunities

Even though Mongolia has transformed into a market economy and more than 10 years of the transition period has passed, a marketing system that facilitates  the  smooth  flow  of  agricultural products and consumer goods has not yet been  created.

Livestock products procured far from the centralized market receive the lowest prices  conversely daily consumer goods sold far from the centralized markets demand the highest prices. This is a special problem for herders who have no access to the central markets. Thus they do barter trading and sell their raw livestock products for lower prices. Chinese traders compete against  domestic  traders and often dominate the Mongolian raw materials market.  This is viewed as a major problem by both the large  and  small  Mongolian  livestock  processing industries who feel they cannot compete with the Chinese buyers in the present livestock marketing system in Mongolia. Mongolia’s small and medium processing industries  are still weak with poor competitiveness in the domestic market. This limits their opportunity    to access the export market. At the same time, Mongolia has comparatively few large agricultural processing industries. Mostly what large processors there  are  operate  as oligopolies.

Herders' terms of trade continued to worsen. In 2001 compared to 1995, the price index of products herders sold increased by 33.2 points over the price index of consumer goods herders bought.

Sustainable development in agriculture and meeting the priorities of rural social and economic development will be very limited if the national processing industries cannot increase their competitiveness in the world market. In particular, the development of small and medium size agricultural raw material processing enterprises in rural areas will become a major and  important source of increased income for agricultural producers. These SMEs will provide additional employment possibilities for rural labor thus decreasing  the  highly  seasonal  demand for rural labor. The over all result of this will be increased earnings in both rural    herder and laborer households thus susceptibility to natural risks will be somewhat alleviated and  poverty levels will be reduced

During the socialist period agricultural products and raw material processing were done by the state owned large enterprises. However, since entering the market economy, most of the large enterprises have closed because of old outdated equipment and technology, weak competitiveness in the market, and lack of independent financial   capabilities.

Outside of the cashmere industries, updating and retooling of the bigger processing industries has been very slow. Nevertheless, many small and medium enterprises have been established recently in the food-processing sector. This has  lead  to  increased  competitiveness  among these industries. According to the 2002 survey conducted by the National Statistics Office    there are  407  agricultural  raw  material and product processing industries operating currently  in Mongolia. However 75.8% of those industries are situated in urban areas like Ulaanbaatar  and Erdenet cities and in Selenge and Tuv aimags where infrastructure is more developed and the market situation is well structured. Of these 407 companies, 29.7% process meat, meat products and casings, 27.3% process milk and milk products, 7.4% process skins and hides, 1.0% process animal and plant oils, 31.4% process flour and flour products, 1.7% pr ocess    fruit and vegetables, 1.5% process livestock feed and starches.  Most of these industries have  less than 50 full time workers. 58.1% of all surveyed food supply processing industries use    only 50% of their total operation  capacity.

In the past 10 ye ars, major laws and legal acts dealing with market economic principles have been revised and new laws passed. These laws and acts are the basic  foundation  of  the  business facilitation legal environment. However, the government policies  on  banking,  finance, international trade and investment have not yet created a favorable environment for national entrepreneurs. For instance the income tax rate for economic units or businesses is   very high. The inflation rate is still in double digits and the loan interest rate is 40-60%. These things do not encourage or promote    investments.

Efforts to promote competitive agribuinsess and nonfarm sector  development,  increase  incomes for rural producers and solve their pressing social problems are limited unless viable and  competitive financial services are in place in rural areas and access by rural people to    these services is ensured. Key to the successful development of rural financial services is the introduction an adequate system of livestock and crop insurance capable of  meeting  the  interests of both rural producers and insurance companies. Support is needed to increase the number of competitive providers of rural financial services and the development of bottom-up savings and credit organizations among rural  people.

In the early years of the transition period, agriculture product prices were controlled but in  recent years the controls were removed and the market price mechanism began to function for agricultural products. Prices began to respond to product demand and supply. Nevertheless, Chinese competition is still strongly felt and influences the domestic market price for raw agricultural products. In addition, small traders and brokers that function in the informal economy  play  a vital  role  in the  agricultural raw material trading scheme.

In the future, livestock raw materials should to be processed before exporting. However protecting the interests of inefficient enterprises still operating with old technology by  prohibiting the export of raw livestock pr oducts is not the proper way to solve this issue. Therefore the strategy aims to develop small and medium enterprises  that  will  increase  exports by utilizing modern technology and improve their capability to enter the   market.

In addition to processing agricultural raw materials, there exists local potential for launching other alternative income generation production and services. Although markets for such production and service activities are small they have good potential  to  better  use  local  material and labor resources thus contributing to generating off-farm jobs and income. These include, growing potatoes, vegetables and fruits for herders and residents of rural settlements; consumer goods and services such as ger felt, wood, iron, leather and sewing  products,  jewellery and bakery products; production inputs such as fodder, cattle and horse carts, simple equipment and tools; construction; products and services based on the use of natural resources such as feed, salt, wildlife, fish, onions, berries,  medicinal plants, medicinal and hot springs   and tourism attractions; services such as showers,  hairdressing  and  shoe  repair.  The  basic ways of developing these activities are by promoting cooperation among herders, providing      an access to market information  and  micro-finance  services  and  removing  legal  and regulatory barriers to running businesses in local areas. A recently emerged and fast growing economic activity is the illegal hand mining of gold, fluorspar and other minerals by local  people who mostly re-work the slag left by big registered mining companies. Illegal mining needs to be regularized and regulated to minimize environmental degradation and   conflicts.

Furthermore, the existing potential for involving local people in the implementation of public works such as building and maintenance of local roads, education and health facilities  needs     to be investigated and utilized in order to provide opportunities for jobs  and  additional  incomes in rural areas.

5.4.2 Development objectives

The development objectives for the rural marketing, agribusiness and non-farm sectors   are:

1. Revitalizing the rural marketing system
2. Promoting  competitive  agro-processing industries
3. Fully  utilize  the potential  of non-farm  SME development

The rural marketing, agribusiness and non-farm sectors development logical framework is attached.

5.5  Rural Social Development

5.5.1 Current  challenges

Improving rural education, health and social protection services and solving the high priority social problems are the most important objectives to improve rural citizens wellbeing  and provide them with a happy life. Specific programs and objectives in those sectors have been developed and currently are being carried out, thus it is not required to duplicate  those  programs in the rural development strategy. Some sensible social aspects that relate to rural development will be highlighted in the strategy. For instance, direct the investments to be     made in social services to the rural areas and increase participation of local organizations and private citizens in the implementation of both national programs and  locally  initiated  programs.

In the socialist period the social sector was a highly developed  sector  and  the  health,  education and social welfare service systems served the public in all places and at all   levels.

Since the market economic system has spread across Mongolia, the distribution and quality of social services has declined due to serious budget deficiencies. The rural  population  has suffered the worst under this new   reality.

The rural population is very sparse and infrastructure is not well developed, thus herders do    not have access to quality health, education and social protection services. Their  living  standard is thus lower than the urban    population.

The unemployment rate in aimags is said to be below 10%. There  is a special  calculation  that says if a herder has 100 head of livestock, he or she will be considered as a full time worker. Based on this calculation, out of 190  thousand  herder  households,  84%  have  less than 200 head of livestock.   Thus 169 thousand households consisting of 338 thousand people should    be classified as underemployed. It should also be noted here that a herder with only 100   animals is not economically viable. According to a 2001 survey on employment, 0.6% (2.5 thousand people) of the total agricultural workers left the agriculture sector to find work in another sector. The survey found that those, who have changed their employment to other sectors, have lower educational levels, lower compe titiveness in the labor market and have lower earning capabilities. The point is that these former agriculture workers (rural residents)  can only find low paid  work.

Weak and bad social service distribution in the rural areas and a risky situation for raising livestock and other economic factors negatively affects the rural people. They become less      and less willing to live and work in rural areas. This results in a high rate of migration from  rural areas to settled urban  areas.

In the past 10  years,  the annual migration rate increased from 0.8% to 4.4%. The migration  rate is high from Uvs and Zavkhan aimags. In the years between 1995 and 2000, 8 of every 10 migrators came to Ulaanbaatar or Tuv aimag. This mass migration has left behind uninhabited bag and sum centres, has decreased the importance of small settlement towns and is leading to increased inconveniences for the local population that remain. The migration has caused increased population density in the urban areas and is making the  delivery  of  health,  education, social protection, and economic and cultural services more and more difficult  in  rural areas. According to one survey, 42% of Ulaanbaatar migrators, 25% of Darkhan uul and Tuv aimags migrators responded that their employment possibilities increased, 52-58% responded there was no change and 10% responded that their situation after moving to the   urban area had worsened.

5.5.2 Rural health

National statistics show that the doctor/patient ratio and the number of hospital beds per 1000 persons are comparatively high. Most of these doctors and beds are located in the large  urban areas or in aimag centres. Therefore, sum and other smaller administrative units lack these resources to provide quality medical services in remote  areas.

Limited funding appropriated for rural health services often has to be spent for hospital maintenance or heating expenses. After these expenses are paid what remains is insufficient to provide the hospital with necessary medicine or up to date medical equipment. This  means     that the quality of medical  services,  which  can be delivered  by local  hospitals,  is very  low.  One survey revealed that 44 sums of 15 aimags have no doctors and an additional 77 sums of   19 aimags have an inadequate number of doctors. In 2001, 35% of all sum ambulances and   39% of all aimag ambulances did not meet national standards and are no longer   serviceable.

Privatising the medical system and promoting paid medical services is likely to increase inequality in services and lead to further in poverty  in remote areas. Getting medicines to  remote areas is difficult. Once those medications are transported to remote areas the price has    to be doubled to cover the transport costs. Thus what medication is available in rural areas is twice the price of the same medication in Ulaanbaatar. Rural patients  who  travel  to  Ulaanbaatar for treatments must pay high travel expenses in order to get good medical service The rural poor often can not afford the travel expenses, thus their access to quality health   service is extremely limited.

“When there is a need for medical attention, first you have to call and get a check-up by the    bag nurse.  To bring  the nurse  you need  to travel  at least  1-2  hours by horse.  The bag nurse   has no vehicle, so has to ride back with you. Based on her diagnosis, if you need emergency services from the sum centre you have to travel another 4 hours on horseback.   By this time    the patient’s condition may have worsened. If the bag nurse doesn’t give a referral, the sum emergency services won’t come. If the patient’s family insists they have to pay the cost of transport both ways.” National Statistics Office and World Bank,  Participatory  Living  Standard  Assessment  /PLSA/, 2000

Herders, who make up one third of the total population of Mongolia,  have no access to safe    and clean drinking water. They must use water from rivers, streams, melted snow and ice livestock watering wells and springs. Those water resources are not protected from any kind     of pollution, which includes livestock and human wastes. Salmonella, jaundice, viral hepatitis and other diseases can be spread through seepages from open trash disposals and animal and human wastes entering the water  source.

The infant mortality rate in rural areas is 46% higher than in cities. The rural mortality rate for children under five years of age is 39% higher than  in  urban  areas.  The  rural  maternal  mortality rate is twice as high as urban  areas. 

Food safety became a big issue during the transition. Requirements of the Veterinary and      Plant  Control Office are not followed with uncertified home processed meat, milk, potatoes    and vegetables being available for sale in markets. Diseases associated with nutritional deficiency among vulnerable groups, mothers and children are common. Disorders assoc iated with deficiency of iron, protein and vitamins are prevalent especially among small  children.

5.5.3 Rural education

Since the transition to a market economy the education system has experienced difficulties     due to the economic crises, which resulted in a shortage of state  funds  devoted  to  the  provision of social services. The result has been a serious decline in the quality of educational services in the rural area. It is a fact that the more distant the schools are from the centre, the lower the quality of education offered in those schools. Common  problems  mentioned  by remote schools are lack of professional teachers, lack of financial support to buy textbooks,   lack of training materials and lack of resources to repair school  buildings.

In rural areas a high percentage of boys have dropped out of school. Those children who  dropped out of school mainly come from poor, vulnerable and women headed families. According to one survey, 9.3% of all dropout children left school because of poverty, 45.3%     left to help the family with herding livestock. The high percentage of dropouts that occurred     in the early 1990s is creating a young adult generation in rural areas that are almost illiterate, with no basic education. Also, the children who dropped out of primary schools early have a tendency to experience learning difficulties and dropout again, even when they go back to school.

Overall, bag level primary education, the first and therefore, the most important mechanism to provide rural children with education, needs  to  be  rehabilitated  on  a  national  level,  if education of rural children is deemed important.

Kindergartens are non-existent at the bag level. Mobile kindergartens were started in 1994  within the framework of Non-Formal Education of School Dropout Children with the aid of UNICEF, UNDP and Save the Children Fund UK. This mobile kindergarten and pre-school training centres aimed at involving young children under the age of 7 from remote/herder families.  The training centres are located in a  ger or a railroad car, herder families often  become involved in training of their pre-school  children,  for  example  by  participating  in  plays, and providing the teachers and children with meals. The service fees are paid by herder families (and sometimes, by the local government), and teachers are  paid  from  the  national budget. Remote sums, bags and  aimag  teachers  still  experience  difficulties  with  receiving their  salaries  on time.

The gender imbalance among school pupils, especially  in  higher  educational  institutions  shows that men are not keeping  pace  with  Mongolian  women  when  it  comes  to  education. This decrease in the education level of Mongolian men is something that should cause all Mongolians to worry.

Because of lack of school dormitories children of remote herders live with relatives in sum centres  or  a  group  of  children  live  together  in  a  separate  ger.  These  kinds  of  living arrangements can negatively affect their study and cause them to drop out of school. As of  2000, the national average is 1  computer for 358 pupils however, in Arhangai, Bulgan, Tuv, Uvs and Khovd aimags the average is 614 to 788 pupils per   computer.

5.5.4 Rural social development  objective

The rural social development objective is to ensure the delivery of quality social services to rural people, which will be achieved through realizing the following   outputs:

1. Increased participation of rural communities in planning and implementing investment in social infrastructure
2. Improved quality of health services for rural  people
3. Improved quality of education services for rural  people
4. Improved quality of social welfare services for rural  people
5. Improved rural employment support  system
6. Improved gender equity

The rural social development logical framework is  attached.

5.6. Environmental  Protection

5.6.1 Current  challenges

In the last decade Mongolia’s environment has faced many adverse factors and changes.   In   the past 40 years occurrence of strong windstorms has increased by four times. Increased desertification is a real threa t, with borders of the Gobi desert zone  pushing  northwards  more  and more with each coming  year.

Due to the recent climatic change, global warming  and  increasing  droughts,  many  lakes, rivers and springs are drying up, levels of vegetation in pastures are decreasing, desertification  is spreading, salt lakes and salt flats are increasing, and soil fertility is   declining.

Due to the expansion of mining, both licensed and informal, there is a widespread practice of unregulated digging, and destruction of fragile  ecosystems,  many  of  them  former pasturelands.

Since 41.3% of Mongolian territory is comprised of desert and semi-desert zones, there is a   high tendency towards natural disasters such as dzud and drought. Since almost half of the Mongolian population engages in pastoral livestock production and low -input farming, the productivity of this kind of agriculture is highly vulnerable to environmental disasters and climate change. Mongolia is faced with a real challenge to promote sustainable agricultural   deve lopment under these conditions. The desertification negatively impacts the land quality  with water sources drying up, declining pasture plant yields, increased salinity of both soil      and water, loss of fertility and increased sand dune movement. Overgrazing only contributes     to the problem and allows new areas to be susceptible to desertification.  According  to  statistics, a total of 9 million hectares of pastureland is currently  overgrazed.

Arable land, according to official statistics, is 1.2 million hectares. However, according to the 2001 statistics, only 497 thousand ha is being utilized of which 217.6 thousand ha is planted     to crops and 275 thousand ha is fallowed leaving 707 thousand ha of arable land abandoned. According to the research that involved   90%  of  cropping  land  in  the Orkhon-Selenge basin,

47% of all fields have been degraded to some degree, 13% subject to severe land degradation, and 28% could be classified as suffering medium level   degradation.

Today Mongolia’s eco-system imbalance has regional characteristics. For example, in Tuv  aimag regions there is a severe ecological imbalance due  to  the  heavy  concentrations  of people and the livestock. In Omnigovi, Dorngovi and Bayankhongor aimags some types of vegetation that inhibits  sand  dune  movement and desertification processes are being gathered  in large quantities and exported.

Due to a lack of knowledge about the fragile balance, composition and  co-dependency of various parts of the eco-system, there is widespread misuse of Mongolia’s natural resources causing environmental damage.

An effective and sustainable environmental resources management system has yet to be established in Mongolia since the transition to a market  economy.

The following factors continue to negatively influence the development and implementation    of effective environmental  management:

1. Lack of knowledge among citizens on sustainable use of natural resources, protective  and restorative measures.
2. No one is responsible for enforcing penalties and fees to cover environmental damages associated with the common use of natural resources. Those who cause desertification, pastureland degradation, water or soil pollution, pay no fines or fees. This  is  contributing to the depletion of our natural    resources.
3. Legal, policy or regulatory framework to promote adequate natural resource  management is weak at local   levels.
4. Lack of financial resources is inhibiting community  mobilisation  and  local  government activities to promote new technologies and techniques to protect or restore the  local environment.

5.6.2 GOM policies and regulations on environmental   protection

Since the transition to a market economy in the 1990s, the following positive measures have taken place:

• Mechanisms to implement and enforce environmental laws are becoming more effective,  and monitoring and evaluation methods are  improving

• Economic and other incentives are being promoted in order to increase effectiveness of implementation of the environmental  laws

• Specialised environmental agencies are emerging, environmental education, ecological training and other information dissemination measures have become more active at local levels and implementation of nature conservation programs is   improving.

• Establishment of a national level environmental monitoring and evaluation, and ecological information/data collection system is at the inception  stage.
• Based on donor and international organisation grant programs and  projects,  natural  resource and environment protection and management activities are being carried out in some rural ar eas with the involvement of NGOs and local   communities.

• Community based natural resource management training and pilot tests have shown  positive  results  in practice.

• Sustainable financial sources are emerging for environmental protection and rehabilitation  in local areas.

Due to the transition to a market economy, Mongolia’s environmental laws have  been  amended, and to date, there are 26 new environmental laws in effect. Even though substantial efforts have taken place at the legislative level to improve the legal framework for  environmental protection, implementation and enforcement of those laws is still   weak.

Extension of protected zones (for fragile eco-systems), and improvement of environmental protection measures are examples of government activities to protect our beautiful nature.   As    a result of such measures 13.1% of Mongolian territory is under national   protection.

As a result of the 2002 “Land Law” and the “Law on Land Privatisation to Citizens  of Mongolia” Mongolian citizens now have the right to own land for the first time in history. In  order to implement adopted laws and regulations, programs on “Forestry” and “Protecting    Rare Natural Plants and Their Proper Utilisation” and many programs for  endangered  biological species have been develope d and are being carried out. Even though a number of these programs and projects were developed and implemented their proposed output  to  alleviate rural poverty and improve rural people’s living standards have not shown sufficient results. In addition suff icient funding for real activities under these programs is lacking and monitoring and evaluation has not been done as required. The point  is  that  most  of  the  programs are more like a declaration instead of a real program. In the  future  the  implementation  process  needs  to be intensified.

5.6.3 Development objective

The objective in this sector is to ensure environmental protection and sustainable use of natural resources by improving the enforcement of relevant legislation and introducing advanced methods o f natural resource management.

To achieve this objective interest in nature conservation and the responsibility of formal and informal groups of local people need to be enhanced. This can  be  accomplished  by  transferring natural resource possession and use rights to communities of local people. Implementation of the objective has to be supported with complex legal and organisational measures to decentralise relevant powers to local  levels.

The logical framework for environmental protection and    sustainable NRM is attached.

It is impossible to address environmental protection and the sustainable use of  natural  resources separately from the users or farmers. Therefore, the sustainable use of agricultural  land is dealt with within the crop and livestock deve lopment logical frame  works.

5.6.4 Forestry

According to 2001 official statistics the value of forestry production is MNT 1685.5 m, which does not include the informal sector.

Transition to the market economy brought new challenges to the  forestry  sector.  New problems in logging and wood processing, hunting, and management of the protected areas   have yet to be solved.

Illegal logging, forest fires, insects and various types of diseases have affected one fourth of Mongolia’s forested areas. There is serious mismanagement of forest resources due  to  excessive logging activities. Reforestation efforts are well below the replacement rate. Reforestation activities have been financed from the state budget. To date  6,000  to  8,000 hectares  have  been  replanted.  However, this cannot be said to have had a positive impact,   with only a 40% survival rate for the newly planted trees, due to bad quality seeds and the environmental challenges of Mongolia. In some areas of Mongolia it takes more than 200    years for reforestation to be successful.   Forests cover only about 6% of Mongolia, in the    north, with semi-desert and desert zones prevailing in the south of the country. As mentioned earlier, the forest regenerative process takes a very long time, and use of such scarce resources should be very limited. However, illegal logging with passive  acknowledgement  and  sometimes even active participation of state officials is a widespread  phenomenon.

The “Law on Forests” and the “Law on User Fees for Logging and Fire Wood Preparation Activities” were enacted  in 1995.  The law on Forest  Fire  Management  was passed  in 1996.  The “National Program on Forestry” was developed in 1998.  These laws and programs were  not fully implemented due to financial difficulties, poor organisational management, and lack   of human resources.

In 2001, the amended “National Program on Forestry” was approved. This program is to be implemented in 3 stages with completion by the year  2015.

The forestry sector is faced with the following key problems of institutional and technological nature:

• National level policies and strategies for the forestry sector are not well   defined
• Organizational  structure  is  ill-defined, division of roles is not clear, and management is   not effective
• Law implementation is weak due to lack of proper instructions and poor implementation mechanisms
• Statistical information on the forestry sector is not well   developed
• Community participation is weak in forest management, protection and reforestation activities
• Ineffective research activities, and poor promotion of innovative methods and   techniques
• Human resources are weak and community participation is poor, especially at local levels, which leads to widespread illegal logging activities and other misuses of forest    resources
• Public knowledge about forest resources is  weak
• No proper system to co-ordinate between forest resource management and   utilisation
• The implementation of the management of the forest resources and forest industry is weak
• The technologies in the forestry sector are outdated and  inefficient

The above problems result in the following negative socio-economic   consequences:

• Production of logs and wooden planks decreased between 3 and 5  times
• Widespread fires and insect invasions in the forest areas of  Mongolia  are  causing  depletion of the forest resources and are negatively affecting people and wildlife (that rely the forests for their  livelihoods)
• Revenue of the forestry sector  plummeted
• Wood products decreased
• Market for wood products became  destabilised
• Infrastr ucture of the forestry sector is  underdeveloped
• In settlements and villages that relied on forest resources for income, unemployment rose and poverty  deepened.

The main reason behind inadequate management of the forestry sector and lack of implementation of the proposed programs and laws is the absence of a specialised forestry organisation with a specific action plan and clear division of labour at local levels.

The forestry sector objective is to improve the regenerative and restorative capabilities and promote protection and sustainable use of the forest resources.

The forestry sector development logical framework is attached

5.6.5 Wildlife hunting and fishery

According to official 2001 statistics, income from wildlife hunting was MNT 4864.7 thousa nd and that of fishery was MNT 66.9 m. These figures do not include proceeds from illegal  hunting and fishing.

5.6.5.1 Wildlife hunting

There are more than 10 thousand species of animals in Mongolia, out of which only 200  species can be hunted.  The rest are considered to be non-game   wildlife.

The “Wildlife Protection” law of 2000 regulates hunting  and  protection  of  wildlife.  According to this law, species of wildlife that are not classified as rare or endangered can be hunted and/or raised, bred or farmed following specified regulations. Also, certain types of endangered or rare species can be raised on animal farms in order to produce  animal  by-  products, such as honey, deer horn, deer musk or similar products.

Therefore, even though a proper regulative environment has been established to protect and promote sustainable use of wildlife, the wildlife resources of Mongolia are declining. Specifically, the number of Mongolian bear (Mazaalai), antelope, wild camel, wild wolf, raindeer, and deer is rapid ly decreasing. The main reason for this is illegal hunting, and the illegal trade in fur and other animal products.  Penal measures for offenders who are found  guilty are not being enforced  properly.

Certain species are facing danger of extinction in some areas of  Mongolia.

Lately, marmot hunting has been drawing a lot of public attention. In  the  Regional  Consultative Conference of  Bag Governors held in June and July of 2002, it was suggested   that the marmot might become extinct due to illegal off-season   hunting.

The Government of Mongolia has taken measures to protect and promote biological diversity   by reintroducing the Przjevalski Horse (Takhi), protecting and repopulating species such as     the Mazaalai Bear and Wild Camel, and declaring as “Nationa l Protection Zones” the home ranges of endangered species such as the antelope and snow leopard. Also, certain rare plants have been grown on farms and replanted in their natural environments. The Government of Mongolia is promoting a legal and policy environment to protect endangered species and their natural environment, to sustainably utilize wildlife resources, encouraging traditional knowledge and practices that protect the environment, and to increase people’s knowledge  about ecology and the environm ental.

5.6.5.2Fishery

In Mongolia, commercial fishing has been  active  since  the  mid-1950s in areas rich in fish  such as the Tsagaan Nuur region of Khovsgol aimag, Buir Nuur of Dornod  aimag and Ogii  Nuur of Arkhangai aimag. Commercial fishing in Mongolia takes the forms  of  small-to- medium enterprises, companies and fish  farms.

During the planned economy, before 1990,  the  central  government  regulated  fishing.  The most fish caught in one year was a record 600 tons of fish. After being caught the fish were sorted according to species and type for marketing. Regular evaluations of the remaining fish population used to be  done.

However today, fishing activities are not regulated by specific fishing regulations, and fishing enterprises are only concerned with using the fishing resources, with no thought to preserving any for later, with no protective measures in sight.   For example, fishing enterprises tend to   over -fish during the spawning period, and regulation of fishing  especially  during  the  spawning period has not been strictly enforced. As a result of such mismanagement, fishing resources have declined by 4 to 5 times, and prohibition of fishing in certain areas has not     been  properly implemented.

Since the transition to a market economy, private fishing enterprises are now acting only as users, and not as protectors of the resources on which their livelihoods depend. Recently, the Ministry of Nature and the Environment has been imposing local limits for fishing, but due to  the weak monitoring and evaluation,  and poor organisational structure and management, there   is a large discrepancy between the numbers of fish exported and the actual number of fish reported as caught. Due to the relaxed regulations for obtaining fishing licenses, fishing has been done in a highly disorganised manner. To date, no accurate data  and  information collection mechanism exists, and the number, value and type of fish caught and exported is     not readily known. Ever-increasing numbers of fishing enterprise activities are not properly regulated and there is overcrowding of fishing enterprises and individual fishermen along the banks of large rivers and lakes. This overcrowding is beginning to cause an imbalance in the eco-systems of lakes and rivers. Due to the disorganised fishing activities,  environmental pollution is increasing. There is also no proper regulation of sport fishing. Thus, Mongolia’s fishing resources, especially the number of rare and endangered fish species is   declining.

The fishing sector lacks well-trained professionals and human resources. Since the 1960s an average of 10 people each year received specialised fishing and resource management training from vocational and technical schools, institutes and universities in the former Soviet Union. Most of  these specialists are now retired or no longer able to pass their knowledge to the  current fishing enterprises. Due to the poor training of new fishermen, and the emergence of many private fishing enterprises with poor technology, many foreign (mostly Chine se) fishermen are now indiscriminately fishing with  nets.

There is a need to promote a sustainable fishing industry in Mongolia through researching the actual fish resources left in the rivers and lakes of Mongolia. Then quotas based on the facts  need to be implemented and enforced. Fishing enterprises need to be  regulated.  New  and modern fishing technology needs to be promoted. Accurate information collection and monitoring and evaluation mechanisms need to be instituted on both the national and the local levels.

Therefore, it is crucial to use modern scientific methods to establish the quotas for fishing enterprises and individuals on lakes of Tsagaan Nuur of Khovsgol, Buir Nuur of Dornod, and Ogii Nuur of Arkhangai, and regulate all fishing activities according  to  clearly  defined  national policies. Mongolia needs to promote training programs/seminars on  sustainable  fishing, and establish accurate data collection and monitoring and evaluation   mechanisms.

The logical framework for wildlife and fishery is incorporated into the logical framework ‘Improving Environmental Protection, Wildlife Hunting and  Fishery’

5.7.  Rural Infrastructure Development

Improving rural energy, information distribution systems, communication systems and road building and maintenance are a key to accelerating rural economic growth and improving the livelihoods of rural people. Specific programs and objectives in those sectors have already     been developed and are being carried out, thus it does not require duplicating these in the rural development strategy. Some sensible aspects that relate to rural infrastructure however will be highlighted in the strategy. For instance, the proposal to direct more of the investments made     in the infrastructure sector into the rural areas and to increase the participation of local organizations and citizens in both the planning and implementation of   improvements.

5.7.1 Rural energy

Energy supply is unevenly developed and distributed throughout Mongolia. Therefore, with many small independent power stations operation costs and the prices they charge their customers vary widely. Diesel power stations in sum centers operate mainly in the evenings   and mornings. Many herders have no energy supply in their homes. This is a major obstacle blocking rural business development. If more rural businesses  could  operate  employment would increase, and poverty alleviation would follow. The rural energy shortage is one of the factors contributing to migration from rural areas to urban   areas.

The key problems  in the energy sector are the inefficient use of the installed energy facilities,  the high costs of imported electricity and the high costs of diesel and generators in rural settlements. There is a current demand in Mongolia for a national energy supply network that can provide domestic electricity at low costs to all consumers in all   locations.

Agricultural production development is poor due to lack of rural energy resources. More technological studies and research needs to be carried out on how to increase rural production and enhance agriculture productivity through utilizing new and innovative renewable energy sources. There is a great need to improve the herders and farmers knowledge about good low cost renewable energy resources currently available to them and to improve their access to competitive suppliers of these  systems.

5.7.2 Rural communication

The national telecommunication network covers all aimags, towns and sums. In recent years, short-wave communication systems have been installed in bag centers. However, it is still difficult and very expensive for herders, farmers or rural citizens living at a distance from a population center to have telephone or two-way  communication systems in their    homes.

The national post office services have suffered from national budget shortages over  the  last decade. Thus the post office communication equipment and services have become very old, outdated and slow compared to other telecommunication   providers.

It is important to improve the rural telecommunication system  by installing modern systems   that can provide rapid two-way transmission of urgent emergency information to and from the rural population. This system should provide an immediate information distribution scheme in order to reduce emergency weather related agricultural production risks and enhance the  delivery of quality social services such as rapid transport to hospital of critically ill people   living in remote areas.

5.7.3 Rural roads

Return on investments in road and bridge construction is comparatively  low and the duration    of investment return is very long because Mongolia is a vast territory with a  sparsely  distributed population and the daily utilization rate of each rural road is low.

There is a need to improve and increase the number of roads in order to improve the transportation network, which would improve the investment  environment,  accelerate  economic growth and increase economic relationships with other countries. However because   of the previously mentioned problems, road building and improvement activities have been   very limited.

Auto roads play a vital role in the national transportation network. Mongolia has a total of 200 thousand kilometers of auto roads, but only 2000 kilometers of those roads are paved and only  3000 kilometers of roadway have received any improvement such as grading, leveling,  surfacing or bridgework. The remaining 195 thousand kilometers of roadways are simple cross-country dirt tracks.

Half of the total 700 bridges in Mongolia are wooden bridges. These bridges are often over utilized meaning the bridges sometimes carry loads heavier than they were designed for and    are being used long past their repair or replacement times. In 1998 the Government passed the “Law on Auto Roads” and legally mandated funding  for  national and local roads. However those approved funds cannot come even close to providing the quality  of  roads  that  this country  needs  and is beginning  to demand.

To date, both domestic and international loans  have  been  made  to  the  government  of  Mongolia to improve and build national and international roads. But funding to invest in local road building such as inter sum roads is very limited.

5.7.4 Rural infrastructure development  objective

The rural infrastructure development objective is to improve the rural infrastructure through realizing the following outputs:

1. Increased participation of local people in decision making on investment planning and implementation in rural infrastructure
2. Improved rural energy  supply
3. Improved communication services through introducing advanced information and communication technology
4. Smooth operation of roads that are crucial for rural development by improving the repair and maintenance
5. Improved  rural  mass media

Rural infrastructure development logical framework is  attached.