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e-Magazine (For the Japanese version of this article)

Engaging with Mongolia’s Roller Coaster Economy (2) Shinji Yoshimura Researcher Hokkaido International Exchange and Cooperation Center [Date of Issue: 31/May/2017 No.0267-1045]

Date of Issue: 31/May/2017

Engaging with Mongolia’s Roller Coaster Economy (2)

Shinji Yoshimura
Researcher
Hokkaido International Exchange and Cooperation Center

Moves to develop business exchange between Mongolia and Hokkaido are gaining momentum. Businesspeople are coming and going between the two regions, where a string of related events have also been held, leading already to the conclusion of several contracts. This is the second half of the report following the previous issue; No.0266.


2. Exchange between Hokkaido and Mongolia

Hokkaido has more exchange with Mongolia than almost any other region in Japan. JICA’s trainee intake program made Hokkaido’s agriculture and dairy industries the first point of contact, but as of around 2010, a growing number of Hokkaido construction-related companies also began setting up operations in Mongolia. When the Japanese and Mongolian governments announced their Mid-term Action Plan for Strategic Partnership in the fall of 2013, Hokkaido’s name appeared in relation to sharing agricultural and livestock-raising knowhow and advancing cooperation with private companies.

It was February 2016 when Hokkaido government and private-sector representatives got together to establish an association to promote economic exchange with Mongolia. Spearheaded by the Honorary Consulate of Mongolia in Sapporo (the Honorary Consul-General being former House of Representatives member Tsutomu Takebe), the Hokkaido-Mongolia Economic Exchange Promotion Research Committee has a membership of around 20 companies and associations, including the Hokkaido Bureau of Economy, Trade and Industry (METI Hokkaido), the Hokkaido prefectural government, the Sapporo municipal government, and my employer HIECC (Hokkaido International Exchange and Cooperation Center). In the summer of 2016, the IIST and METI Hokkaido greeted this initiative by launching the Hokkaido-Mongolia economic and industrial partnership development project noted earlier. Here I would like to go through two business events which were held in Mongolia and Hokkaido as part of the project.

• Hokkaido Business Forum in Mongolia
On September 20, the Mongolian Foreign Ministry and the Hokkaido-Mongolia Economic Exchange Promotion Research Committee held the “Hokkaido Business Forum in Mongolia” in Ulan Bator. The close friendship between Committee Chair Tsutomu Takebe and former Mongolian Foreign Minister and Member of Parliament Luvsanvandan Bold enabled this event to take place.

Nineteen personnel from Hokkaido—primarily Research Committee members—participated in the forum. On the day, around 150 people gathered in the Great Hall at the Mongolian Ministry of Foreign Affairs, including local businesspeople and government representatives, with presentations given by both regions about the possibilities for business partnership.

The presenters included representatives from HIECC, the Sapporo Chamber of Commerce and Industry, software developer E+Craftman Co. (headquartered in Sapporo), and nursing care facility operator M-Link Co. (headquartered in Kitami City) from Hokkaido, and from Mongolia, representatives from the Department of Foreign Trade and Economic Cooperation in the Ministry of Foreign Affairs and the Mongolian Chamber of Commerce and Industry. A very animated occasion running for around three hours in total, the Forum received extensive coverage from all the major local newspapers and television stations.

The contribution of E+Craftman deserves particular note. In his presentation, company president Nobusuke Niiyama put forward specific proposals for collaboration with local IT companies, and found a queue of businesspeople waiting to speak to him during the break. Two months later, E+Craftman and Mongolian software company Modiw Soft, which had met with Niiyama during that break, formed a business tie-up. The plan is for software to be developed in Mongolia to fill orders from Japan. Distance will be no obstacle because all arrangements will be made via the Internet, with the tie-up offering major merits for both sides. Niiyama was apparently not expecting any business to emerge out of his first visit to Mongolia, but this deal has in fact become a model case for Japan-Mongolia cooperation in the IT field.

• Hokkaido-Mongolia Business Forum in Sapporo
On February 7, 2017, around four and a half months since the Hokkaido Forum in Ulan Bator, a Hokkaido-Mongolia Business Forum was held in Sapporo. A party of 14 came out from Mongolia, including Luvsanvandan Bold and representatives from 13 private firms. This group was created in November 2016 by Luvsanvandan Bold, who is also an economic heavyweight in Mongolia, to serve as the Mongolian counterpart to the Hokkaido-Mongolia Economic Exchange Promotion Research Committee, and draws its members from a wide range of business types, including IT, apparel manufacturing, consumer electronics sales chains, and tourism. Both sides aim to serve as windows for business in their respective regions. In the morning of February 6, the day after the Mongolians arrived in Sapporo, they went to see the opening day of the Sapporo Snow Festival. Luvsanvandan Bold took the stage at the festival opening ceremony next to Tsutomu Takebe, and afterwards paid courtesy visits to Hokkaido Governor Harumi Takahashi and Sapporo Mayor Katsuhiro Akimoto.

Hokkaido-Mongolia Business Forum

Hokkaido-Mongolia Business Forum

The Snow Festival visit was followed by a business matching session. The Research Committee reached out beforehand to local companies with which business tie-ups seemed possible given the profiles of the Mongolian companies known to be coming on the trip. The event began with 10 Hokkaido companies from fields such as leisure facilities, agricultural equipment, and finance outlining their operations to the Mongolian group. Companies from both sides then got together around the table in pre-arranged configurations to engage in business talks.

The actual forum was held in a hotel banquet hall in central Sapporo in the afternoon of February 7. The Mongolian companies on the trip all took the stage in turn, using slides to explain their business operations. More than 50 businesspeople from Hokkaido came along, listening intently to the various presentations. The latest JICA report on the Mongolian economy and the Research Committee’s activity report were also outlined. At the end of the forum, the Research Committee and its Mongolian counterpart concluded a memorandum of understanding on cooperation between them, signed by Takebe and Bold as the respective representatives. Companies also took full advantage of breaks during the forum and the get-together afterwards to exchange business cards and engage in business talks.

Conclusion of MoU

Conclusion of MoU

3. Conclusion

While the Mongolian economy is usually highly volatile, it has been sluggish for the last while, with the many causes for concern including a consumption slowdown and the government’s budget deficit. However, through the IIST’s FY2016 project, I met many young Mongolian businesspeople who are actively engaged in shaping the future even in the midst of recession. In addition to pursuing further industrial diversification, Mongolia is also keen to work with Japan as a “third neighbor” that is neither China nor Russia. Mongolia presents a whole range of business chances for Japanese companies that are prepared to make a medium- to long-term commitment. Companies trying to take profits from short-term investments of one to two years, on the other hand, risk being chewed up by the country’s roller coaster economy.

So what are our current options? The Japanese side can change its mindset. The foreign business strategy pursued by Japan, and particularly regional Japan, has centered on selling Japanese specialty products to other countries. However, not only is the absolute number of buyers in Mongolia quite limited, but the local currency has lost value in recent years. Simple exporting based on the belief that a good product will always find a buyer might produce sales to the tiny number of affluent Mongolians over the short term, but it will not lead to long-term business. I suggest the following approach:

(1) Help Mongolian companies and groups to boost their income
(2) Earn profits through that process.

For example, Japanese technologies could be used to manufacture products in Mongolia and sell them to China and Russia. Rather than just selling products, building business that tracks alongside national development is surely what the world wants from Japanese companies.

Delegates from Mongolia

Delegates from Mongolia

(original article : Japanese)
(For the Japanese version of this article)


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