SURVEY ON PRODUCTION AND MANUFACTURING OF THE WOOL, CASHMERE, AND CAMEL HAIR

Transcription

1 Mongolian Wool and Cashmere Association Mongolian-German Project on International Trade Policy/WTO SURVEY ON PRODUCTION AND MANUFACTURING OF THE WOOL, CASHMERE, AND CAMEL HAIR Dr. Prof. G. Yondonsambuu (Head of MWCA) D. Altantsetseg (Executive Director, MWCA) Ulaanbaatar 2003

2 Contents page I. Mongolian Livestock and Raw Material Resource 1.1.Mongolian Livestock Resource of Raw Wool and Cashmere by Development Region 1 by Darkhan Uul Province by Zavkhan Province II. Quality and Utilization of Raw Material 2.1. Quality of Raw Wool, Cashmere and Camel Hair Current Situation of Raw Material Utilization 5 III. Wool, Cashmere and Camel's Hair Processing Industry 3.1. Cashmere Processing Industry Establishment of Cashmere Processing Industry Difficulties and Challenges Faced by Cashmere Processing Industry Perspective Trends for Further Development Wool Processing Industry The Establishment of the Basis of Wool Processing Industry Difficulties and Challenges Faced by Cashmere Processing Industry Perspective Trends Camel s Hair Processing Industry The Establishment of the Basis of Camel s Hair Processing Industry Challenges Experienced in Camel s Hair Quality and Processing Technology Perspective Trends 18 IV. Wool, Cashmere Articles Export Volume, Structure, Pricing 4.1. Cashmere Export and Opportunities Export of Knitting Industry Prices and Rates 22 V. Production Capabilities of Darkhan Uul and Zavkan Provinces 5.1.Darkhan-Uul Zavkhan 24 VI. Annexes 26 VII. References 48 P.O.Box:Ulaanbaatar 36/456 Tel: Fax: Eermel@magicnet.mn, Altantsetseg@yahoo.com, Tsatsral_U@yahoo.com

3 I. Mongolian livestock and raw material resource 1.1. Mongolian livestock The Mongolian livestock has amounted 23.7 million heads, out of which sheep amounted 10.5 million, goat million, camel thousand, horse million and cattle million in Comparing with year 1998 when the Mongolian livestock has reached its highest record, the total livestock number has decreased by 9.2 million out of which 2 million goats, 4.2 million sheep and significant amount of horses, cattle and camels. The cause for such a considerable decrease in the total number of livestock was the natural disaster zud (extraordinarily harsh winter), draught, and food and mouth disease that continued for two consecutive years. Total amount of livestock is illustrated in Annex 1. The supply and reserves of the raw cashmere has doubled from 1500 t to 3000 t during as well as the number of goats has increased from 6.1 to 11.0 million heads. However, the growth in heads of goat causes significant increase of adult goat proportion (30%) within the herd that will affect negatively not only quality of cashmere productivity but also the grazing pasture by overloading it. Number of sheep, goat and camel heads in Zavkhan and Darkhan-Uul aimags is illustrated in Annex Resource of raw wool and cashmere Figure 1. Resource allocation of wool by regions: Resource allocation of wool Forest and mountain area 30% UB 1% Eastern area 15% Central area 23% Western area 31% Figure 2. Resource allocation of cashmere by regions: Resource allocation of cashmere Forest and mountain area 30% Central area 24% UB 1% Eastern area 15% Western area 30% 1

4 Figure 3. Resource allocation of camel hair by regions: Resource allocation of camel hair Forest and mountain area 15% Central area 40% Eastern area 19% Western area 26% Total number of sheep and goat heads also size of raw wool, cashmere and camel hair are illustrated in Annex 3, Annex 4 and Annex 5 respectively. A. Cashmere II. Quality and usage of raw material 2.1 Quality of raw wool, cashmere and camel hair Classification of goat breeds in Mongolia is listed below: Strain: Buural Breed: Mongol Bayandelger Gobi Gurvan Saikhan Erchim Uuliin bor Olgiin-Ulaan Onjool Zalaa jinstiin tsagaan Key features of stated breeds and strains shown in Annex 6. The quality of the Chinese cashmere ranked on the top position followed by the Mongolian one on the second position. Comparative table of Chinese and Mongolian cashmere quality indicators: Chinese cashmere Mongolian cashmere Average size of micron Length Color mm White, pale mm Pale, dark Size of micron and color of Chinese cashmere is far the best; however the length of fiber in Mongolian cashmere is longer and considered being the best for spinning. Recently, the quality of cashmere is becoming a main concern of scientists, experts and institutions. Research shows a double increase in heads of goat compared to 1990s; however the diameter of fiber is increasing year after year. 2

5 Goat Head thous.head years The diameter of fiber of the Mongolian cashmere had been 14.5 micron for the last 20 years. However, recently it is becoming 15.5 to 16.5 micron in diameter, indicating the increase in thickness by 1.5 to 2.0 micron. Below is the average fiber micron size for raw cashmere received by Gobi Cashmere Co. Ltd Average diameter /mkm/ Average of micron/years/ Scientists explain that due to the following factors the width of cashmere fiber has been altered: 1. Proportion of mixed breeds mainly with high output but thick micron cashmere breeds such as Gobi Gurvan Saikhan and Uuliin Bor within a herd is increasing. Study shows 37.1% of total breading stock either the abovementioned breed or mixed with them. 2. There has been a dramatic increase in the number of adult male goats compared to 1998, revealing some 5 times increase compared to 1998 (research has been done by PhD Yo. Zagdsuren and PhD B. Mandakh from MLASI). 3

6 Such quality deterioration of Mongolian cashmere directly affects its price level. The Iranian and Afghan cashmere belong to Cashgora classification with fiber diameter micron and in terms of quantity and quality they are ranked below Chinese and Mongolian cashmere. Until 2001, the price for the dehaired cashmere coming from Iran and Afghanistan was 20 USD, which is lower than the Mongolia one for every kilogram. However, since April 2002, the difference had narrowed and became only 3 USD and in November and December 2001 the price for that cashmere even increased and currently valued just as Mongolian. According to international standards, fiber of cashmere never exceeds 17.5 micron, if exceeds, it is no longer regarded as cashmere and shifts to cashgora classification, which is priced one quarter of qualified cashmere. Flowchart of Afghan and Mongolian cashmere price research is illustrated in Annex 7. Wool Mongolia produces in average 15 to 16 thousand tons of raw wool annually of which 93-95% is coarse and semi coarse wool. Total supply of wool is broken down into 4 regions of which Central and Western regions produce roughly 80% of the total output and considered to be the high quality wool suppliers. Semi coarse, fine and semi fine wool resource allocation by region is shown in Annex 8. First class coarse and semi coarse wool are the most demanded types by Chinese traders and other purchasers. Another factor generating demand is the quality of processing. Wool Supply in Western Region The Western region is the highest quality wool supplier. First and second ranked semi coarse wool account for 50% of total production of the region. Gobi-Altai, Zavkhan, Uvs aimags that belong to this region, manufacture more than 1000 tons of wool annually each. Wool Supply in Central Region The quality of wool produced by central region is relatively poorer than that in western region. However, Huvsgul, Bayankhongor, Uvurkhangai aimags produce more than 1000 tons of fine wool annually. Taking the semi coarse wool alone, Govi-Altai and Bayanhongor aimags produce each in average tons annually and regarded as the best quality and quantity supplier in the region. Arkhangai, Tuv, Dundgobi aimags each produce over 1000 tons of wool annually. General overview of sheep wool quality produced in Mongolia The structure of Mongolian sheep wool is regarded as not regular, consisting of 4 types of hair: downy, medium hair, coarse hair and dead hair. To determine the quality rank of the wool by first and second grades, a diameter of wool fiber (microns) and content of cashmere (hair) are taken into consideration. The Mongolian wool is given first, second and third grades for quality. Foreign and domestic traders usually never raise any issue related to the length of Mongolian sheep wool, however complaints about coarseness, grease and impurity levels cause some critics. Camel hair The Mongolian camel hair supply is divided into 4 regions depending on camel location, camel number and quality of camel hair: 1. Western region: Bayan-ulgii, Bayanhongor, Govi-Altai, Zavhan, Uvs, Khovd aimags (provinces) amount 39.2 per cent of total supply. The characteristic of hair is light- 4

7 colored, yellowish and white containing larger proportion of downy and fine-grained hair. 2. Central region: Uvurkhangai, Arkhangai, Bulgan, Tov, Selenge, Hovsgol aimags supply reddish, brown not downy hair which amounts 8.4 percent of total camel hair supply. 3. Southern region: Dornogobi, Dundgobi, Omnogovi aimags supply reddish, brown, not very downy and coarse hair which amounts 44.6 percent of total camel hair supply. 4. Eastern region: Dornod, Sukhbaatar, Khentii aimags supply mixed color and average grained camel hair, which amounts 7.8 percent of total supply. Following is the classification of camel hair: Camel Hair Classification Classification Classification Index Description I Soft hair of young camel Soft, downy, fine-grained hair with intermediate fiber and coarse hair II Coarse wool of main corpse The hair is coarse, long, less downy relative to classification I and arid. Hair taken from shoulder, side, belly and thigh of different age camels both III Hair taken from knee and beard of adult male camel female and male. Long, less downy, fine, coarse and grained hair taken from neck, nape of the neck and knees. IV Tangled hair Camel hair which is tangled in small parts. Note: - Because camel hair gets less likely tangled, the hair of classification IV is hardly found. - Hair taken from main part of body is sorted into white, whitish, and yellowish colors: White: downy, tuft hair of yellowish and white shade Whitish: downy, tuft hair of whitish yellow tone Yellowish: brown, dark brown, reddish brown, orange etc various colors Raw cashmere utilization: 2.2 Current situation of raw material utilization Description Total supply of cashmere /ton/ Total purchase by industries /ton/ Total export with custom duty /ton/ Difference in tons /1-2-3/

8 Raw wool utilization: Description Total supply of cashmere /ton/ Total purchase by industries /ton/ Total export with custom duty /ton/ Difference in tons /1-2-3/ III. Wool, Cashmere and Camel Hair Processing 3.1. Cashmere Processing Establishment of the Cashmere Processing Industry Although, Mongolia had been ranked as the world leading supplier of raw material resources of goat and camel hair, the issue of industrial processing was raised only four decades ago, i.e. since mid 1970s. With implementation of small pilot factory, fully equipped with world leading technology for finished processing of raw cashmere, supplied by Japan with assistance of UNIDO in 1976, the basis for industrial processing of raw cashmere has been first established in Mongolia. Later, with the capacity of processing over 100 tons of goat cashmere, 200 tons of camel hair and manufacturing 68 tons of tops, 120 tons of yarn, over 400 thousand pieces of knitwear, 120 thousand meters of blankets and thick woolen cloths annually, Gobi factory was constructed by grant aid of the Government of Japan and put into operation in 1980 with its full capacity. It has been years, since the cashmere goods labeled Made in Mongolia and manufactured in modern equipped Gobi factory started to win popularity among many consumers worldwide and hitherto represent Mongolia. The successful launch of the first experimental factory and Gobi to process camel and goat hair has created favorable environment to boost other industries in cashmere sector but due to the ideological barriers that existed until 1990, no significant change and modernization in sector has been introduced at that time. Total volume of export goods made of goat and camel cashmere as of 1990 indicated in Annex 9 Initially cashmere-processing sector was launched to produce export-oriented goods to be supplied to third world countries, thus managerial staff has been trained to work in open markets, which became a significant asset to ensure smooth and steady operation, especially in the primary raw material processing sector and attract the a large amount of foreign and local investment during last 10 years of market transition. Meanwhile, the so-called experimental pilot plant, regarded as country s cashmere processing basis has extended its operational capacity by 5 fold and became Buyan company, utterly equipped with world leading Italian techniques and technologies. Moreover, numbers of cashmere factories and workshops with foreign investments, such as Mongol- Amical company with US investment, Cashmere Fine Asia with Italian investment, Monforte with British investment and Tuul Cashmere Co, Ltd with Japanese investment have been established and efficiently operating in the current market. In other words, if there were only two cashmere-processing factories namely experimental pilot plant and Gobi in 1990, presently the number of primary raw cashmere processing factories reached 450, indicating a significant increase of primary processing (combed cashmere) by 1.6 fold relative to total output of processed raw cashmere and finished 6

9 processing taking up 60% of total raw material. Industrial capacity of cashmere processing as of 2003 illustrated in Annex 10. Over 10% of those factories are started with Chinese investment and involved in primary processing of raw cashmere. In parallel, there are numbers of knitting plants with Chinese investment set up in Mongolia, which produce knitwear by imported yarns (threads) and export to USA under Made in Mongolia labels. Although, the purpose of these plants is to use up quota granted to Mongolia by USA, it is beneficial in terms of job creation and contribution made to export and state budget. The titles and capacity of knitting plants operating in Mongolia as of 2003 are shown in Annex 10. Above-mentioned investment had lead to modification of the structure of cashmere processing sector and affected the share of industry that has reached 48.8% Difficulties and Challenges Faced by Cashmere Processing Industry 1. While the cashmere processing industry is intensively developing and increasing its capacity, since the September 11, the external market prices for combed cashmere, the major output of industry, kept on steady decline and dropped to $ per kg implying a substantial decline by 2.5 times compared to years when the combed cashmere was priced at $ per kg. Due to the falling market prices, plants and companies with foreign and local investments operating in Mongolia has suffered losses and are in difficult economical situations. 2. More than 90% of total population of goat in Mongolia is dark colored, and just 1.2% of total population of camel is white colored. Recently, there are number of negative tendencies occurring that affect the quality of raw materials as the fineness of goat yarn has coarsened by micrometers and proportion of intermediary hair that used to be found occasionally, now makes up a significant portion and the portion of coarse hair in different kinds of camel hair (down wool, coarse hair, top hair) tends to increase over the past few years. Such tendencies not only hold up production but also impose adverse effects on the external market prices for combed cashmere as well as the income of manufacturers. For instance, the cost of Mongolian combed cashmere (goat's) priced less than USD per kg compared to Chinese in external market that caused by a lack of processing technologies in manufacturing end products. 3. Factors such as poor retention of original form in the course of wear; weightiness, poor pilling-resistance and bad design of currently manufactured cashmere garments destroy competitiveness among similar articles in the world market. As a consequence, the prices go down, and become difficult to secure market position. As far as the camel hair articles are concerned, the market access remains restricted due to the low awareness of global consumers. 4. Cashmere goods produced in Mongolia fail to enter global trade network, thus to access it, involvement of third parties is sought, which in turn affects price decrease of Mongolian cashmere articles and harms income of producers. 5. Enterprises with foreign and domestic investments operate on seasonal basis caused by shortage of turnover asset as it comes to the issue of purchasing raw material. Various factors contribute stated shortage: failure to accumulate funds as they have to trade their goods at relatively low prices, high interest rates of Mongolian commercial banks, short maturity dates, strategy of Chinese traders backed up by state financial supports that artificially elevates price for raw material in the market (to hinder purchase of factories). 7

10 6. Chinese traders and brokers exploit current disorder and turmoil at the raw materials market and the customs to export to China greasy cashmere purchased at high costs without paying necessary taxes and fees. It is reported in the surveys, 700-1,000 tons of greasy cashmere annually bypassed the customs and border without any taxes paid. With aid of such conspiracies, about 40% of total greasy cashmere stored up in Mongolia leaves the country through the customs and border, thereby creating a shortage of raw materials. 7. The greasy cashmere produced in farms of herdsmen has to undergo numbers of steps before it is finally delivered a factory, and the pricing tends to rise at each level so that the present market price for greasy cashmere fluctuates $19-21 per kg. However, it is considered to be rather high regardless the current price for combed cashmere at external market, which is priced at $ Literally, the enterprises that pay such price will soon find themselves in a deadlock. 8. Primary processing factories with production capacities that exceed the stock of raw materials by 1.6 fold have to fiercely compete with each other in the raw materials market in order to acquire raw materials ahead of others. However every such move worsens the situation and leads to a higher price of raw materials. 9. Low-level discipline, skills and productivity of employees within a company negatively impacts the final outcome as well as the competitiveness of company overall. Conclusion 1. Since 1990 as the country shifted to market relationships, the cashmere processing industry has been operating smoothly, attracting much of foreign and domestic investments, and intensively building up its production potential. As of today it has adequate potential to afford 100% primary processing and 60% deep processing of a total raw stock stored in Mongolia. More than 90% of all enterprises engaged in primary processing are small factories with Chinese investment. 2. The substantial price decrease of combed cashmere in external market (which now makes up just a half of its highest point recorded in ) has placed the cashmere processing industries in an economically hard situation. 3. Introduction of world leading techniques and technologies from Japan, Italy, Britain and China into cashmere processing industry of Mongolian, created favorable condition to produce articles according to the high preference of outside markets. For instance, the quality of combed cashmere that has undergone the primary processing visibly meets the world standards. However, competitiveness of end product on the global market is low when it comes to such factors as pilling-resistance, loosening off the form, design and style. 4. Due to its failure to acquire own segment in the world trade network, articles produced in Mongolia are sold through the middle agents that affects price reduction by $10-20 against the same articles produced in China. As a consequence, it negatively affects the economic capability of wool and cashmere processing industry of Mongolia. 5. The current disorder on the raw material market and conspiracy like operation at the customs and border generate auspicious environment for Chinese merchants and their companions impairing competitiveness of local manufacturers in obtaining essential source of production. 8

11 Perspective Trends for Further Development One. The substantial grounds for outlining the perspective trends with respect to the cashmere processing industry 1. According to studies carried out by researchers, the world population of XXI century is inclined to a simple consumption patterns. 2. People of upper to middle upper classes would mostly consume cashmere garments. For such people color and design are of most significance than the quality. 3. The major part of income derived from the goat will likely be cashmere in the future. This is why; regardless of the adverse impact of goats to pasture, herdsmen remain interested in increasing its population. 4. USA and other developed countries of Europe are keen on transferring primary processing enterprises away from their countries to less developed countries with rich raw material resources. 5. Increased usage of household items of natural origin, such as cashmere and other raw materials is estimated in countries with humid and chilly climate such as North America, Canada, Norway, Finland, Sweden and Russia. 6. Because of high added value of cashmere products, there occurs no adverse impact in rise of expenses by transportation and distribution throughout the world. 7. Because of the worldwide distribution and awareness among consumers, cashmere products assured their market position even in the future. Two. Development trends 1. The capacity of primary processing production is not expected to be upgraded and would remain at the same level. However, priority will be given to the introduction and adaptation of environmentally friendly technology. 2. Potential to produce yarns from different cashmere in Mongolia is broken down in two stages 1 st stage within nd stage within 2025 In line with such implementation, knitting enterprises established in the countryside will be supplied with yarns. Thus, a network connecting urban and rural regions will be set up. For such purpose, two-phase credits to be granted from the Japanese Government will be duly used. 3. Organize actions to carry out step-by-step arrangements: breeding and selection activities focused at making whiter the color of Mongolian goat, thinner the fiber of cashmere. 4. Measures will be taken to bring the quality of knitwear and textile products up to average standards of developed countries of the world and to introduce the International trade mark. 9

12 5. Provide with opportunities to introduce Mongolian cashmere products at European and US markets gain access without any mediation. 6. Solve the issues associated with the technique and technologies to provide finished processing of cashmere textile and knitted articles, improving design and styles as well as training labor force in this field. 7. To slash increasing interest of exporting raw cashmere by various illegal means; provide favorable condition for industries with reliable supply of raw material. 8. Discuss issues of providing mutual benefits and privileges in terms of custom tariffs with the Russian Federation and China. 9. In the global market of cashmere products, China competes by its low prices, Italy by leading design. Thus Mongolia should employ its pure cashmere image to secure own segment and compete in the global market. 10. Under the scope of the project wholesale trade network establish a raw material stock exchange and ensure its regular operation. 11. A central joined laboratory for wool and cashmere industries has to be established to settle on scientific basis inadequacies between industries at the customs and border. 12. As a result of the project 2+2 implemented by German side, a wide-range campaign to promote unique specifics of Mongolian goat cashmere in the other countries of the world has to be launched. The cashmere industry is faced with necessity to expand its market position worldwide Wool Processing Industry Establishment of Basis for Wool Processing Industry In conformity with the treaties and contracts concluded with the former USSR the first in Mongolia enterprise, namely a wool-washing plant in Khatgal, was built and commissioned in In parallel with construction of a wool-washing plant in the countryside, industrialization movements were made to set an industrial complex comprising about 10 units as skin, hides and wool processing plants, a power station, communal services, and housing buildings in Ulaanbaatar, and by March of 1934 the complex was commissioned to start its operation. The industrial complex had the capacity of producing 100 thousand meters of cloth and 200 tons of felt annually provided they work in one shift. The establishment of wool washing plant in Khatgal and felt & wool cloth plant in Ulaanbaatar laid down the basis of wool processing industry of Mongolia. The first production enterprise was set up in Mongolia it has been more than 250 years since the first machinery production started its development in Britain. Another interesting fact is that the world s first machine processing plant as well as Mongolian is both built for wool processing industry. A period of sustained and increased growth of the wool processing industry, the basis of which was laid down in the 1930s took place during the 1970, 1980s, apart from operational launch of number of high capacity self-dependent plants such as a wool-washing plant and a carpet plant in Dornod province; a high capacity carpet plant in Erdenet; the 2 nd knitting 10

13 plant, a spinning plant, the 2 nd felt&felt boots plant, and wool-washing plant in Ulaanbaatar. Moreover, expansion and modernization of Ulaanbaatar city's carpet, woolen textile and 1 st knitting plants considerably increased their capacity. As a consequence of such actions, at the end of 1980s the industry has been enabled to produce 10 thousand tons of thermal washed wool, over 4.0 thousand tons of woolen yarn, 1.3 million pieces of knitwear, 850 thousand meters of felt, 600 thousand felt boots and 1.9 million square meters of carpets annually. In other words, capacity of 100% primary processing and 60% finished processing of total sheep wool production has been facilitated Difficulties and Challenges Faced by Cashmere Processing Industry The period of intensive development, modernization, achievements set up in wool processing industry has failed to keep on accomplishing in 1990s. The quantity of production to be produced in 1990 (i.e. before recession faced by the wool processing industry) and products scheduled for export are shown in Annex 11. With the transition from the centrally planned economy to market relationships and commencement of privatization process in the country, the wool processing industry encountered a recession. The current state of enterprises functioned back then is presented briefly in Annex12. It is shown, just 3 enterprises hardly able to function at 10% of their capacity out of 14 that launched their operation in full capacity before the year 1990 and the Erdenet carpet plant operates at 40% of its capacity. Reasons of such decay of enterprises established during the period of transition and privatization of state property are different and specifics; there is a number of factors affected the situation in general. 1. The wool processing enterprises except the Ulaanbaatar carpet were set up with technical and economic assistance from the former USSR. It was agreed upon that the production should be delivered directly to the USSR. Therefore, more than 90% of the total products manufactured used to flow as export to the Soviet Union only. With the collapse of USSR and formation of the Russian Federation, the policy to oppress and keep down Mongolia economically has been pursued. The clear evidence of that policy was the fact that over 40% import tax was imposed on the wool products exported from Mongolia that in turn caused corrosion and even close down of wool processing industry of Mongolia because of diminished access to northern neighbor's market. 2. While the access to northern neighbor s market was closed, market of southern neighbor remained open enabling Mongolian enterprises carry on their production. However, not long before this market was closed down, as the policy to turn Mongolia into the countrysupplier of raw materials maintained from the PRC was implemented. Consequently, 30% import tax on the wool products of Mongolia was imposed. 3. During the period of centralized planned economy, enterprises operated in compliance with plans approved, and exported their production to particular markets according to the agendas agreed upon. Enterprises had no need to compete in the market, it was sufficient enough to be involved in production only. As the entire country shifted to market relationships, former planning regulation mechanism had faded away besides the markets of two neighbors closed thus the wool processing industry faced an urgent necessity to look for third markets. Leaders and managers of the industry who lacked proper experience and skills failed to meet challenges as they were required to perform dictated by the market rules. In other 11

14 words, the main factor that has led to the decline of enterprises was lack of skilled and trained staff capable of managing the wool processing industry in market conditions. 4. The quality of products was not adequate, failing to satisfy the requirements of the third world countries, which served as a decisive factor leading to a decline of the industry. If the quality, appearance, packing were capable to compete up to the third world's market requirements the wool industry's enterprises would have not fallen short in such great quantities, some would have been functioning to some extent. The major reasons why it was not understood during the 70 years of development of this industry since its establishment that the quality of products of the industry was far from being able to meet the requirements of the developed countries and no adequate measures for remedying the situation were undertaken so far were as follows: a) With respect to its textile industry's technical and technological development, the former Soviet Union was considered to be relatively out of dated as compared with the leading countries of the world. Similarly, there were little chances for the wool industry enterprises of Mongolia having been set up with the technical and economic assistance of the country that was regarded as an obsolete one to be able to compete at the global level. Obviously, it affected the situation gravely. b) The engineers and technical staff used to get education and training only in the former USSR were not provided with opportunities to be conversant with the latest technical and technological achievements. In addition, the knowledge of foreign languages was restricted to the Russian language only, which later made it difficult to get a rapid startup at the third world's markets and strengthen their positions. c) The wool of Mongolian sheep grazing on natural rangelands throughout four seasons of the year under the country's harsh continental climatic conditions has some its specifics. In comparison with other countries' sheep's wool, the Mongolian one is slightly coarse, sometimes there can be found broken hairs, with much impurities, non-uniformly in terms of its width and length. So far the Mongolian sheep's wool is not graded according to its designation in keeping with its specific characteristics (which kind of wool is most convenient and would be profitable for producing what kind of production), which, of course, is not to the benefit of the production quality. d) If we refer to the experience of such countries as Japan, Britain, Italy, Germany, China leading in the world with respect to their textile industry's progress and achievements, it can be seen quite clearly that there is a great gap between the development level of their finished processing technique and technologies, expertise and professional level of their engineers and technical staff employed in those countries and their Mongolian counterparts. The Mongolian enterprises are not only relatively obsolete in terms of their technology as compared with other segments of production, but also no sufficient personnel and experts have been prepared hitherto. Some humiliating hearsay that can be heard sometimes that the Mongolian wool industry enterprises practice turning out raw, semi-processed products seems to be rather close to reality. 12

15 Conclusion The policies pursued from the state for developing industries processing raw materials of an animal origin are as follows: a) Industries of strategically top priority having primary social economic significance; and b) Industries due to be developed on self-dependent basis in consistence with the market regularities. While the wool processing industry of Mongolia is referred to the second one, i.e. industries to be developed on self-supporting basis, but for the last period of over 10 years passed since the transition of the country to market relations started in 1990, most of the enterprises used to function back then now are standing idle or have to alter their profile not to mention their development. With the exception of a number of small enterprises with Chinese investments, dealing with finished processing operations, no investments either foreign or Mongolian have been made for providing finished processing to manufacture finished commodities. The capacities of enterprises with foreign and domestic investments conducting their operation in Mongolia now are presented in Annex 13. Proceeding from Annexes 11, 12, and 13 it can be concluded that: 1. As of today, the Mongolian wool processing industry's capacity to provide primary processing of raw materials exceeds 1.2 fold the raw stock available and has raised by 145 per cent as compared with that of the period of planned economy (before the year of 1990). At the same time, the production of carpets has reduced by 70%, the felt boots production by 60 and more percent, and the production of textile and woolen knitwear virtually has ceased. It is stipulated by the following factors: a) The Dornod carpet plant is practically impossible to be restored for carpet producing purposes, and equipment and plants of other enterprises are mostly worn out, and there are little possibilities to be able to apply their capacities to the full as well. b) The "Eermel" joint-stock company's yarn producing line designed for producing fine yarns and carpet threads has been dismantled, and actually, it has stopped producing woolen yarns. The "Ulaanbaatar" carpet plant applies just 10% of its capacity, and the "Erdenet" carpet plant, over 40% due to which the spinning room is not able to work at its full capacity. c) The "Suljee" joint-stock company has changed its profile turning into a sewing enterprise. 2. The quality of wool undergone primary processing has substantially improved, and is able to meet the standard requirements with respect to its impurities content. Carpet production has improved in terms of its designing and patterns, and its assortment increased. 3. The quality of sheep wool being the major raw material has worsened. The portions of campy hair, top hair, impurities, colored and tangled, yellowed/stained hair have been increased. 4. As the import tax rates in both southern and northern neighbors have not been reduced, a lack of marketing opportunities is a hard blow to the production being the major factor owing to which the production output is ever reducing. 13

16 5. Due to a lack of circulating capital they have to compete with Chinese merchants and changers at the market of raw materials, often failing to be supplied with the stock of raw materials in sufficient quantities, accordingly, they can not ensure a smooth operation of their enterprises, which acquires a seasonal character Perspective Trends One. The grounds for outlining the wool processing industry's perspective trends: 1. The climate of the world has warmed up by 1 to 1.5 degrees centigrade, and the global warming process is expected to further intensify. 2. The major yield obtained from the Mongolian sheep is its meat and skin. A number of various projects and research studies are being carried on with the purpose of improving the quality of wool of the Mongolian sheep that is likely to be raised as mutton sheep, but there not much probability that they would be of any effect. The quality of wool of mutton sheep is, as a rule, of inferior quality. 3. According to studies carried out by researchers, the global community is expected to shift in the XXI century as much as possible to simple consumption patterns and it is deemed that out of fibrous materials preference is likely to be given to polyesters. The simple consumption trend means that from among other raw materials wool is to be consumed much more. 4. The amount and distribution of timber around the world are reported to be persistently reducing from year to year, while its consumption, on the contrary, ever growing. In view of this, pilot studies are actively carried out in such countries as Britain, German for applying "woolen fibrous" materials instead of timber for cold-proof insulation purposes in buildings. If it proves to be effective the consumption of wool, especially low-grade its kinds is likely to rise sharply. 5. While people around the world have accustomed to using clothing made of synthetic fabrics, being cheap and durable, for the last few years there is a strong tendency towards giving preference to products made of "natural" raw materials. And, definitely, wool refers to those "natural" raw material kinds. 6. Densely populated European countries with restricted land resources, especially some most developed ones seem to be desirous to drive out from their territories some enterprises dealing with primary processing of raw materials by relocating them in underdeveloped countries or countries with vast territorial resources. It is likely that it might turn out to be beneficial to Mongolia as well. 7. Most of people around the world now prefer to use mats instead of carpets, and hang paintings instead of carpets in their houses and hotels. 8. Developed countries leading in textile industry tend to avoid as much as possible producing fabrics, blankets, carpets by using traditional weaving techniques, actively seeking for more productive and cost-effective techniques and ways. One of such examples is a non-woven fabric. At present, many products as cloth, blankets, shawls, scarves, doormats are produced of such non-woven fabrics. Moreover, its production is expected to be growing further. 9. As woolen products are of low value added, and relatively of heavy weight and bulky, there is a high probability that delivering them from a great distance to sell at markets would bring in no profit. Such being the case, the most profitable market for woolen 14

17 products seems to be that of our northern neighbor's. On the other hand, according to surveys, for Russian consumers the most well acquainted and accustomed products of such kinds are woolen products. In this sense, it is the Russian market that should be the major market for Mongolian woolen products. Two. Perspective Trends Basing upon the above mentioned reasons, the industry's perspective trends are outlined as follows: 1. The current potential of enterprises and workshops carrying out primary processing of wool far exceeds the stock of raw materials available, advanced technique and technologies of such leading in this industry countries as Britain, Japan and China are widely introduced and applied, the quality of washed wool has reached the level sufficient to meet any consumer's requirements. Considering all this, no measures are to be taken for raising capacities in this sphere. However, it is required to introduce and apply technologies that would help to reduce the content of impurities in washed wool to the level of world's leading countries. 2. Take measures to raise the Mongolian breeds of sheep sorting them out according to the designation of their wool as, for instance, wool to be used for carpets, that for blankets, for cloth. 3. Raise producing capacities designated for the manufacture of carpets, blankets, and fabrics to carry out finished processing of wool and turning out consumer goods. The amount of tow appeared in the course of utilization of carpet products shall be in keeping with the level of Belgian-made carpets of the same kinds. The elasticity of blankets, fabrics shall be brought to the level of products made of fine quality wool. Take actions for exporting carpets and textile products to the USA and European countries. 4. Introduce latest techniques and technologies for producing textile designated for industrial applications (cold-proof insulation materials for construction, air filters, felt pads, etc.) and solve the issue of ensuring a comprehensive utilization of low-grades of wool. 5. Take measures to provide International Quality marks for the Mongolian carpets, blankets, cloth, and fabrics. 6. There is a strong necessity to take efforts designed to reduce import taxes of the Russian Federation and China so that Mongolian wool products could have a free access to markets in those countries Camel's Hair Processing Industry The Establishment of the Basis of Camel's Hair Processing Industry The task of producing export-oriented finished products by machine processing of raw materials was put forth for the first time as early as in the beginning of the 1970s when over 3,000 tons of camel's hair used to be stored up per year. 15

18 Under the scope of achieving the objectives put forth, the "Gobi" plant was commissioned in As a result of it, the basis was laid down for machine processing of camel's hair in Mongolia, producing high quality products to compete at external and domestic markets, and extensively developing this industry. The camel's hair processing industry thus established more than 20 years ago has been intensively developed especially since the year of 2000 when policies designed to support national business started being pursued on the part of the state, and now there producing capabilities having been built up that allow to provide 100% primary processing of the raw stock laid in in the country and more than 50% finished processing, producing a wide range of knitwear made of camel's hair. The camel's hair processing capacities and processing levels are shown in Annex 14. The advancements made in the camel's hair processing industry are the result of extensive introduction and application of techniques and technologies of such leading worldwide in this sphere countries as the USA, Italy, Britain, China. Also, Mongolian engineers and technical staff succeeded to gain proper expertise and skills to utilize the above technique and technologies utmost have contributed to such a success. A lot of issues necessarily required to be settled are being faced in the course of development of this industry including raising the capacity built up in the processing industry, expanding its positions at external and domestic markets, coping with the challenges and difficulties experienced with respect to its technique and technologies, bringing the elasticity and fineness characteristics of products manufactured to those of cashmere ones by ensuring a simple structure and fineness of camel's hair Challenges Experienced in Camel's Hair Quality And Processing Technology Whereas there are lots of factors influencing the quality of finished products such as the particular technical and technological levels, labor force's skills and expertise, industrial micro environments, however, of decisive importance is the raw material. As to the processing industry's technological requirements, the major price-formation parameter on which largely is dependent the quality of raw materials is fineness. The finer raw materials' filaments, the higher size yarns (threads), lightweight, elastic, elegant products are possible to be manufactured. Among the raw materials obtained from the five sorts of livestock (horse, sheep, ox, camel, goat) Mongolian sheep's down can be regarded as the most valuable, even "Master model", with respect to its characteristics up to the industry's technological requirements. In the result we have now obtained nearly "pure cashmere" with % hair content, i.e. almost without any impurities, producing up to 60 size yarns (threads) and further turning out as light-weight and elastic as silk "Super" products for competing at the market. At the present technical and technological level it is not possible to manufacture products made of camel's hair that would be up to the level of goat cashmere s and production of goods with higher competitiveness would be possible if the following issues would be solved: 1. At present camel's hair fiber's mean fineness value exceeds that of goat's by 4 to 5 micrometers, which means that actually there are no opportunities to produce yarns sized 45 and more, light-weight, elastic articles. The only way to solve this issue is to intensify breeding and selection activities to be carried out throughout the country designing to make camel's down fiber finer. If fineness of mature camel's down fibers will be as that of yearling camel's it would be a genuine breakthrough in the camel's hair processing industry. 16

19 2. Camel's hair consists of down, coarse hair and top hair. Of little difference in terms of their weight, having much in common among them those three kinds of hair pose a serious problem in reference to the technological operations for sorting out impurities from down basing upon their weight differences, affecting thus their efficiency. In addition, camel hair's coarse hair, especially its top hair's average length exceeds down's length 1.5 to 2.0 times (cashmere hair is just per cent longer than its down), and relatively much stronger. As a result of all this, any business with even latest techniques and technologies processing camel's combed down, fails not minimize the content of impurities below 2.0 per cent. Making it less than 2.0 per cent means to suffer losses. Thus obtained combed camel's down sorted out from hair including intermediate fiber and coarse hair, which is as high as 7-10 fold in comparison with cashmere's turns out to be thicker than pure cashmere, which, in its turn, would make ready-made articles produced even tighter, coarser, non-elastic. For bringing camel's hair goods up to the level of articles made of pure cashmere, it is needed that camel's hair consists at the most of two fibers. 3. The technological operation for obtaining down from camel's hair is relatively expensive as compared with cashmere. For example, processing camel's hair to obtain down with 2.0 per cent impurities, coarse hair content will require applying a lot of operations, as a matter of fact, as many as nearly twice if compared with those used for processing cashmere with just 0.3 per cent of impurities content. It shows that the camel's hair processing industry is of higher cost per unit. Apart from this, another factor leading to an increase in its cost is dash, sand and earth contained in camel's hair. The equipment capable of processing cashmere for a period of 4 to 5 years wears out after 8 to 10 months of processing camel's hair. Due to such wear and tear of extremely expensive equipment for the past few years, some companies and firms seem to have preferred to concentrate their efforts only on working with goat's cashmere. While the camel's hair processing industry has now been rapidly developing with improving its products' quality and increasing its assortment, strengthening their position at domestic markets, due to the above mentioned quality's non-uniformity it won t be able to compete at markets of the world's leading countries with well-developed cashmere industries and its opportunities still would be restricted. And even if camel's hair fiber will be made possible to be compared with that of goat's cashmere, and processing technique and technologies will attain such a high level that this problem will be settled, products made of camel's hair will never be perfect enough to stand as high as products made of goat's cashmere regarding such its specifics as elasticity, elegance and consumer's satisfaction. Conclusion The Mongolian population of camels used to number thousand heads in 1954, by the year of 2002 reduced to thousand heads. This reduction in the population number of the camel being one of the five sorts of livestock traditionally bred by the Mongolians is explained by researchers and veterinary experts in connection with the cheap costs of its hair, plenty of meat and fats. And that is the case. Estimates made according to the average market prices show that an income yielded by a household from one camel (its hair) makes up just 7,500 to 10,000 tugrugs per year. The technique and technologies used for processing goat's cashmere are rather similar to those used processing camel's hair. It is only non-uniformity of raw materials' quality that makes the latter coarse, cheap and not as attractive and elegant. Regarding this, there are no slightest possibilities to anticipate any rise in the market prices of camel's hair. Only if we 17