Feature story

Boots, beer and leather gear in Mongolia

Subscribe to feature stories email alerts

Related links Mongolia homepage Small business homepage

Proud of new designs.

Ever tried Mongolian beer?

What do a professional dancer, the former director of a state shoe factory and a tannery owner have in common? They run small businesses in Mongolia and all have applied advice from the EBRD’s TurnAround Management (TAM) programme to make their businesses grow.

It wasn’t easy though. As Mongolia abandoned its 70-year-old Soviet-style one-party state in 1990 and went through political and economic reforms, Mongolians saw their economy collapse. State factories stopped production. Poverty spread quickly over this huge country as people with guaranteed state salaries woke up unemployed.

Zorigt Namjaa and 4,000 others working for the state shoe factory lost their jobs in a single day after the plant was privatised and the new owner decided to produce textiles instead.

Mr Namjaa, the factory’s former director, hid the news from his wife, who had just had a baby. “Every morning I left home to do the first job I could find. And every evening I returned with a single thought in my mind – to use my experience to start a small shoe business.”

This time go private

He finally started Sinuous in 1997 with just five workers and the conviction that private is better than state. The company made little profit. Entering the Mongolian market, let alone competing with Chinese imports, seemed almost impossible until Mr Namjaa received a phone call from the Mongolian Chamber of Commerce in January 2002.

An official explained to Mr Namjaa that the EBRD’s TAM programme could provide Sinuous with advice on restructuring the business to increase profit, improve product quality, reduce costs and explore local and export markets.

“Had I found my genie and the lamp?” recalls Mr Namjaa. The TAM programme employs experienced business leaders to give advice to small businesses in ex-communist countries. The cost of this programme is covered by the EBRD’s donor-backed Mongolia Cooperation Fund.

Pietro Papa, an Italian TAM expert on shoemaking, soon became Sinuous’ genie. He spent more than two months with Mr Namjaa and his team helping to build a future for their company. His advice helped Mr Namjaa to identify buyers, price his products, create new designs, train staff and set up a showroom in the factory to attract more business.

Production increased and so did the number of workers: 30 staff from the old state shoe factory decided to join Sinuous. The client list has also grown, with Sinuous winning big contracts to provide shoes for workers in local mining companies and cement factories.

“By the end of the TAM assistance in 2004, I couldn’t but appreciate the knowledge it had passed on to my company,” says Mr Namjaa. That explains why he advised his leather supplier to get in touch with TAM in Mongolia.

Give us knowledge

Mongol Sevro, a former state-owned tannery, was founded in 1967. Tumenulzii Tserenbaljir and his family became the new owners in 1993. It was potentially a profit-making business with the capacity to treat one million animal skins, each selling at $8. Four years after privatisation, however, profit was just $7,000.

“Our technology and equipment was old – 40 years old, in some cases,” explains Mr Tserenbaljir.

In 2002, Mongol Sevro qualified for TAM assistance. An ambitious Mr Tserenbaljir asked three TAM experts whether they could help him produce leather of a quality equal to that produced by Italian tanneries.

The answers were found by researching the best chemicals to treat leather, improving the ironing process and applying modern techniques when colouring and finishing the edges.

In 2004, Mongol Sevro saw growth at last. The leather became almost as good as that produced in Italy, yearly profit increased to $120,000 and, as well as supplying leather to locals, the company exported to China, Croatia, Spain and Poland.

“We in Mongolia had no tradition of running private businesses,” says Mr Tserenbaljir. “Courage was all we had and TAM gave us the knowledge.”

A dancer’s dream of beer

Ballet is wonderful, but it doesn’t pay the bills, especially in a former communist country where subsidies for artists and athletes died along with the command market in the early 1990s. That’s why Chingis Tseveen-Ochir of the Mongolian Dance Theatre gave up ballet and turned to beer brewing.

In 1993, Mr Tseveen-Ochir and a business partner set up Mongolia’s first private brewery, Khurd Trade. With just a few workers and only 10 customers to supply, Khurd Trade produced 600 litres of beer per day.

The business caught on with consumers and competitors, so that by 2003, Mr Tseveen-Ochir had 38 other brewers to contend with. That was when he turned to the EBRD’s TAM programme to improve Mongol shar airag beer and Khurd Trade’s management.

“TAM experts introduced us to modern fermentation techniques and convinced us to invest in purchasing a new filtering machine. Our beer tastes better now,” explains Mr Tseveen-Ochir.

Customers must have thought the same: Khurd Trade’s sales grew quickly and the number of wholesale buyers (pubs, restaurants and retailers) reached 80.

Explains Mr Tseveen-Ochir: “Working with TAM experts made us understand that our beer could only get better. We thought that Mongol shar airag was good enough for Mongolian standards but it is now as good as any international brand.”

Holding a request for sponsorship of an arts event in his hand, he muses: “I often wonder what my life would have been like, had I continued to be a dancer. Certainly I wouldn’t be sponsoring events by the Mongolian Dance Theatre!”

By Marjola Xhunga, EBRD Communications Adviser
Photos: Luke Distelhorst
Contact: TurnAround Management Programme

16 January 2007