Mongolian Economy 
E.Enkhbayar is the founder of the Pax Mongolica startup company. The company is currently working on a project that exports Mongolian products to Japan through e-commerce.
-Mongolian products are currently being exported to a lot of different economies. Japan is the 5th largest economy in the world. Why did you choose Japan, in particular, to export to?
-Firstly, there is a trade agreement between Japan and Mongolia. In other words, Japan and Mongolia have taken the direction to expand the spectrum of trade, show each other discounts, and create a favorable condition for both to export. In addition to the two neighbors of Russia and China, Mongolia has the third neighbor policy. Out of the third neighbors, the country that works most in partnership and supports Mongolia the most is Japan. The relations between Mongolia and Japan has many different categories.
Additionally, the Japanese Government and other organizations show much support and aid to Mongolia. I also have a wide range of experience working with Japanese people. Through it, I have connected with Japanese companies and have founded this project.
-In your approximation, when will the Mongolian products start being sold in Japan?
-It will kick-off at the beginning of next year, 2021. Within our action plan, the website was supposed to launch this summer. However, due to the conditions because of the coronavirus, our work has slowed down a bit. The CEO of the company that we are partnering with from the Japan side was to come to Mongolia this autumn and I was to go to Japan in November. Our plans have shifted as the border was closed and certain limitations regarding it have restricted our plan. By next year, our website will be launched and the products will start being sold immediately.
-What kinds of products are to be exported?
-Most of the products that are produced by Mongolian manufacturers are not that diverse. People generally know what Mongolian products can be sold on the global market; cashmere, leather, some agricultural products such as honey, sea buckthorn, natural salt, beauty products, etc. The website has an image that it is aiming to portray Mongolian products to Japanese consumers which consists firstly of organic, high quality, has a price range that is not that expensive, and is eco-friendly. These are the keywords that are being used to describe Mongolian products.
One of the things that the Japanese side is requesting is that while being organic, it should 100 percent consist of Mongolian raw materials and not consist of any foreign components.
-When originating your business model, to a certain extent, you saw a market gap. E-commerce aside, how competitive is the Mongolian export market to Japan?
-The market has much potential in the future. It is a very large market with a population of 126 million, and as you previously stated, it is one of the largest economies in the world. As of currently, there is no e-commerce between Japan and Mongolia. There are a few direct export companies that are partnering with Japanese companies becoming their official distributors. There is no other company that is exporting many different kinds of products as a carrier like us. There are instances of Mongolians and Japanese people individually exporting Mongolian products.
-What requirements do the Japanese companies set for export products and does the Mongolian side have the proper capacity to reach it?
-We say Japanese standards, European standards, and American standards, etc. Standards need to be differentiated and understood. Firstly, there is the required standard you must meet when being brought across the border into a certain country. For instance, food products that are being exported may contain some elements that are not allowed in other countries. Other than this, the main important standard is not something that is written on paper and approved as a law. It is the consumer standard that can’t be seen with the eyes or held with the hand.
What are the general qualifications of the products that the consumers of a country want? Japanese people are consumers with very high standards. It is something everybody speculates. What the Japanese people want are simplistic designs with high quality and elegance. In June 2019, our company has organized an event that is aimed to determine whether Mongolian products as they are can be exported to the economies of China, Korea, and Japan, and to determine what the necessary improvements have to be made. There were about 70 small and medium enterprises gathered there with Chinese, and Korean sales company CEOs alongside the CEO of the Japanese company we are partnering with.
What the CEO of the Japanese company said was that the designs are way too patterned and decorated. It needs to be simplified. The Korean CEO gave a similar product review. Mongolian producers generally try to beautify the product way too much and add additional ornaments. This increases the cost of the product and generally is not that significant in regards to the quality of the product. What the Japanese consumers use is a simple design with high quality.
Many improvements need to be made to export Mongolian products. Our work is not limited to only selling the Mongolian manufacturers’ products to Japanese consumers. This project has a wide spectrum and we are working directly with the producers providing them with consulting services to make it more suitable to the taste of the consumers of the market targeted.
-What difficulties do you face in regards to the different business and economic cultures of the two countries?
-For Mongolia’s case, export is not an easy business sector. There are many underlying contributors to this. If we think about the difficulties from the Mongolian side, Mongolian manufacturers do not have the confidence that they can sell their products on the global market. I think this is the most important one. If I go to someone and sell my product without having confidence in it, how can I sell it to someone else? This mindset needs to change. We are so used to saying the Japanese standard, European standard, and American standard. The Mongolian standard is something that ranks low in our own eyes.
Secondly, there are some bureaucracies. Export is not something that only concerns the business sector. Government involvement has to be present. There is paperwork for customs, at the very least. What I have heard from different company heads is that there are many limiting factors. When you go to one place they tell you to go to another. When you go there they tell you a different place, and once you get there, they tell you to go to the first place you went to. You lose so much time going around like this. Which organization is in charge of what is not that clear and there is much unnecessary waiting time.
Another thing is the financial abilities of the Mongolian manufacturers. To export, you need to have a certain financial basis. Most of them create their tomorrow’s products with today’s profit. In other words, the companies do not have a base fund meaning they can’t take large orders and produce them on time. Japanese and Chinese companies as a whole can mass produce. Mongolian companies that can do this without financially struggling or taking out large loans are very limited.
These things are not something that is not fixable. It can improve as time passes. To change this, we need to have the confidence that we can sell on the global market. They need to want this from the bottom of their hearts as well. People need to ask this from themselves whether they want this. If they do, they can overcome other difficulties. There are more than a few companies that did want to export internationally but have given up due to the difficulties they have faced along the road. Whether the companies are going to consistently aim for it or not is very important.
Not only will you face challenges when you leave the Mongolian market, but you will face many doors in the face in other countries as well. If you think it isn’t going to work every time something like this happens, you will never reach your goal. On the contrary, you need to think about how you can open the door and what changes you need to take to your approach. The reason Mongolia isn’t able to export isn’t that the consumers of a country have some secret agreement to not buy Mongolian products. It mostly depends on the producers. Manufacturers need to study the market of the country well first.
When studying the success stories of international companies most of them have had extensive market research before exporting internationally. For example, before entering the American market Toyota has done a mountain of research. The first successful car that they have sold in America is Crown. The reason for this is that the car was made extremely compatible with the American market as if it was made for America. Another example is when Samsung wanted to export fridges to Brazil, they sent two of their employees to live in Brazil for three years just to study the market and the culture. After living there for three years they reached one conclusion; that fridges should have locks on it because there is a lot of stealing and cases of stuff disappearing from the fridge.
Cases as such show that it is extremely important to study the market you are targeting beforehand. This is an issue regarding what I previously stated. Since Mongolia is not that strong economically, we often don’t have the capacity for such research. An advantage of our project is that we don’t need to spend that much time, effort, and money as our Japanese partner company is researching for us. The company has an extensive background of years of marketing and sales of the Japanese market thus they know the specialties of their market and the tendencies of the consumers. We are improving on the products that this company is choosing through the recommendations of this company as well. This partnership lifts much weight off our backs and shortens the length we have to go through.
-You mentioned the keywords that you are using to advertise Mongolian products on your e-commerce website. What is the brand stigma of Mongolian products in the eyes of Japanese consumers?
-The Japanese company we are partnering with did market research among Japanese consumers on what their perception of “Made in Mongolia” is. Those included in the research have given many different types of responses such as sumo, nomadic, probably cheaper, how the quality might not be as good as Japanese products, or organic. However, almost half of the responses said that they have no idea. It is something they have never seen, heard of, and used.
Pax Mongolia project meeting with Japanese CEO Hiroyuki Shiraishi
We see this as an advantage. If the Japanese consumer’s perception of Mongolian products is a blank piece of paper, we can sketch on it to our liking. We can paint a good picture on a blank canvas. If they have used a Mongolian product and were left with a negative image, then this would have been very difficult for us to correct. We have the opportunity to create consistent consumers.
The aim is to advertise Mongolian products as non-contaminating, consisting of raw materials that came from nature, does not have chemicals and preservatives, and were created through eco-friendly production. To reach Japanese consumers, we need to respect them. They have their purchase guide. We need to make our products fit there, sending them the message that this product was made for you and sent to you. If this message can be portrayed correctly, then we will be able to work successfully. We need to determine what the advantages of Mongolian products are. We don’t have such high technology, and cannot mass produce. The heavy industry is not developed in Mongolia. Therefore, the specialty of Mongolia is agriculture. This is what we need to build upon. Mongolia has a large landmass and is untouched. How do we turn this into an advantage?
Mongolia has 70 million livestock while the EU as a whole has about 85 million livestock. The problem is that we do not receive the economic benefits of this. We obviously can’t export computers or cars to the Japanese market. The things we can export are very few, so we need to think about how we can create certain advantages from the limited exports. Consumers are now more so than ever want to purchase products that have social and ecological responsibility. This is especially the case with MEDCs.
Japanese consumers as a whole use of high-quality products. On the contrary, if you consider American consumers, despite the state’s economic potential, there are different levels of consumers. Some have very high demands while there are ones who don’t put any census on their purchases as well. This might as well be because there are a lot of different people who come from different backgrounds. However, Japan is homogeneous and they have the same standards and rules as a society. They are very similar to one another. We need to understand this very well.
-Earlier you stated that Mongolian manufacturers lack confidence in themselves. You have a very large goal in mind and your work has been set back due to the global pandemic, etc. as well. What motivates you to keep going and to turn your ideas into reality?
-The honest answer is that I am certain that this project will be successful. You just need to be patient and persistent through hard times. The reason I am certain is that Mongolians have to sell the products that they have crafted with their minds and created with their hands. That is how the Mongolian economy will improve. It is not like we will always sell our raw materials. Mongolians are starting to manufacture many different kinds of things. They are improving upon them and want to sell it on the global market as well. All the work and efforts of all these people will reach something.
Even if not now, if I keep building the road, someone will use it at some time. I understand that to reach success it will take a lot of time, effort, and patience. When thinking about the project idea, I had one goal in mind which was to do something helpful for the Mongolian small and medium enterprises. I did base it on my foreign network with Japanese and Korean people. More so than this what motivates me is that I want to operate a business that is helpful to people. I want this to be helpful to the Mongolian manufacturers, and the economy. Almost all large Mongolian businesses import products.
People say the global quality, and global standard a lot. However, no census says this is what global quality and the global standard is. It depends on the country itself. Some brands advertise themselves as international quality and standards in Mongolia. If this is the approach we take to everything, we are always going to end up copying something. When something is high quality we say global standards in Mongolia. Of course, to an extent, this is something that needs to exist. Since we are developing, we need to learn. If we always live like this, we will never leave our position as a consumer country. We need to create our standards and developments. Though there is much we need to replicate from the world, we also need to create something that the world wants from Mongolia as well. My dream is to bring out something like this even if it is just one. I am fully confident that we can do this.
When a Japanese company is believing in us and supporting us all the way, we need to believe in ourselves first. If we keep waiting for someone to say we want to import your products, no one will say this. On the contrary, people will try to export their products. We need to fight for this ourselves.
