Greening Growth in Mongolia

IMF News, December 10, 2019

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Mongolia’s livestock industry accounts for about 90 percent of agricultural production and employs 1 in 4 Mongolians.
Since 1990, the number of animals has tripled to 70 million, vastly exceeding the carrying capacity of the land.
Hotter, drier summers and massive overgrazing have resulted in sharply rising land degradation, undermining food supply for livestock and leaving animals ill-prepared to survive increasingly frequent extreme cold spells.
IMF analysis finds that the percentage of livestock deaths following cold spells is greatest in the provinces that had the largest increase in their livestock population.
In total, these losses of wealth can reach 12 percent of GDP during extreme winters.
The rise in challenges facing herders and their families has triggered massive migration to the capital, Ulaanbaatar: about 1 in 4 Mongolians lives in shantytowns, known as the ger district, in the outskirts of the capital—most of whom are former herders.
Land degradation and desertification contribute to yellow dust storms, imposing rising health and economic costs across East Asia (including China, Japan, and South Korea).

The livestock sector was once the primary engine of the economy; strengthening a sustainable livestock sector would help Mongolia diversify away from mining and achieve more inclusive economic growth.
Migration to Ulaanbaatar has placed large strains on the city’s infrastructure and contributed to a sharp increase in air pollution.
Global demand dynamics (soaring global cashmere prices) combined with a lack of land-use regulations or pasture management standards have driven herd expansion.
Fast Facts:
- Population: 3.2 million (2018)
- Capital: Ulaanbaatar
- Currency: Mongolian togrog
- Real GDP Growth: 6.9% (2018)
- Poverty: 28% (2018)

Reintroduce a pasture tax, with an exemption for small/medium herders, to help reduce herd size.
Provide incentives to boost quality of animal products—for example, training herders on techniques that improve the quality of cashmere—to improve profit margins and reduce reliance on large herds.
Increase the size of the meat industry—promoting livestock for consumption rather than just cashmere—to provide a natural limitation on herd size and incentivize herders to focus on quality over quantity.
Enforce official livestock targets set in the National Livestock Program (current official targets set limits reflecting carrying capacity but have gone largely unheeded; actual livestock numbers are twice the required levels).
Encourage regional trade policy measures to help expand external markets for Mongolia’s meat industry, which would increase Mongolian incomes and reduce land degradation via smaller herds.
Promote ethical supply-chain practices among end-consumers and retailers (examples cited: Patagonia’s commitment to promote use of recycled cashmere; Wildlife Conservation Society’s initiative to improve sustainability of cashmere production) to reduce environmental burden on Mongolian grasslands.

Preventing overgrazing and balancing herd size with nature’s capacity for pasture regrowth could have a positive and lasting impact on the sector.
Stronger and more sustainable livestock management would help diversify the economy away from mining and support more inclusive growth, reduce migration pressures on Ulaanbaatar, and lower regional environmental and health costs from dust storms.

Source: Greening Growth in Mongolia, December 10, 2019.