Retailing in UB, tracking camels in the Gobi, and scenarios for 2040…

The June 4 Doing Business with Mongolia seminar provided a stimulating range of speakers and topics. Hosted by Standard Chartered Bank in a meeting room looking out over St Paul’s stately dome, it was attended by nearly fifty people.

British Home Stores’ International Division Director Mathew Kay described the process that culminated in opening its first store in Mongolia on the 28th of October 2013. Approached by the Max Group, a major Mongolian concern, BHS soon found itself in a good relationship with a team he described as “young, enthusiastic, with good general skills but no experience of big retail spaces”. The preparatory work included training Mongolian staff both in the UK and on site, and merging six existing shops to make a large store with a UK look. One of the toughest problems was to create a reliable UK-Mongolia supply route, with the current main route by road through Lithuania and taking 20 days. “In the end, the lesson was that it isn’t so much the route as the shipper that makes the difference”, Mathew noted. The store opened to considerable fanfare, and has proved a successful venture for the Mongolian and British partners.

Frequent flyers to Mongolia took comfort from Alan Daniels, who described Hunnu Air’s direct flights from Paris to Ulaanbaatar which began on 10th June of this year. The twice weekly flights will only be for the summer months this year, but the company believes it can expand the service in the coming years, with a bigger plane, more flights, and the introduction of a cargo service. Asked why Paris rather than London, Alan described the difficulties of getting a slot at over-congested Heathrow, and replied that “Paris was a good place to start.” Nor does he rule out flying from another UK airport in the years to come…

Architect Matt Cartwright riffed off the previous speaker by describing how his luggage got lost on the way to UKTI’s most recent trade visit to Mongolia. An inauspicious start to what turned out to be a highly positive visit for Matt – once he had bought some new clothes. His practice, Twelve Architects & Masterplanners, is already involved in impressive projects such the new Rostov-on-Don airport in Southern Russia, but Mongolia is new territory. The meetings he had during the week-long visit left him with an abiding impression of dynamism and ambition. Matt reflected on what he saw in UB, notably two issues that might mean opportunities for those in his line of work: “There is a lack of meaningful public space there, outside of the vast Chinggis (formerly Sükhbaatar) Square. And there are few internal public spaces – surprising when you think of the freezing temperatures for so much of the year.”

Paul Horsnell, Standard Chartered Banks’ Global Head of Commodities Research, talked about commodity prices, and what they meant in the short term for the Mongolian economy. The audience posed a number of questions about specifics, including the potential of rare earths extraction and prospects for more coal to be processed (notably coal-washing) in the country rather than simply being shipped out “raw.”

Trudi Lang described a fascinating scenarios process that the World Economic Forum carried out in partnership with the Government of Mongolia. Over 250 experts helped develop three scenarios for the year 2040. The aim was to assist Mongolia to answer three strategic decisions key to achieving long-term sustainable and diversified growth: 1) How should the mining industry and its potential revenues be managed to maximize their benefit to the country; 2) What forms of economic diversification should be pursued and how; and 3) What trade and investment relationships will be needed to achieve both?

The first scenario, Regional Renaissance, postulated a future in which Mongolia and its neighbours experienced greater economic and political integration providing Mongolia with the opportunity to sell its main minerals (copper and coking coal) and achieve economic diversification (although with the challenge of managing export revenues in a way that prevents economic overheating and social unrest). The second scenario, China Greening, considered the impact of a more ecologically-minded China, reducing demand for Mongolia’s main minerals but opening up opportunities to diversify into green products and services. The third, Resource Tensions, explored the consequences of geopolitical tensions ravaging the region and natural resources being used for political leverage. In such an environment Mongolia could struggle to access finance and markets and to pursue diversification opportunities, although it could carve out a role as a neutral and respected neighbour. The scenarios discussed not only possible futures (“After Oyu Tolgoi and Tavan Togoi, what next?”) but also policy responses to the three strategic decisions. Some are common to all three scenarios such as developing a good investment and business climate with public buy-in, for both minerals and other sectors; designing a form of sovereign wealth fund that works as an investment fund or development fund as needed; and actively engaging with regional neighbours to forge strong political and economic relationships. Other policy options related to specific scenarios suggested interesting choices for Mongolia to consider, e.g. facilitating cross-border infrastructure for regional economic cooperation in Regional Renaissance; joining regional supply chains for green and sustainable industries in China Greening; and locking in long-term contracts to hedge against regional instability in Resource Tensions.

The presentation provided much food for thought to businesses looking for opportunities in today’s Mongolia.

Finally, John Hare reminded the audience that “Mongolia is far more than just a place to make money”. He described the efforts of the Wild Camel Protection Foundation to protect the world’s remaining stock of wild double-humped camels. “These are not the familiar domestic camels beloved of Mongolian nomads,” he emphasised. With small humps and flat heads, there are only 450 of the wild camels left. John described the breeding programme his foundation supports, which recently released its first two camels into the Gobi desert. They were released with satellite collars, allowing them to be tracked and for “camera traps” to be set up as they head for known sources of water. “The cameras show that one of them, a young male, has acquired four females – I’d say he’s doing well for himself!” (The Foundation is organising camel racing and Mongolian wrestling on September 7th at Hole Park, Rolvenden, Kent to raise money to purchase winter hay for the Mongolian breeding centre).

July 16, 2014