1. Introduction
Cashmere is a major export commodity in Mongolia that is only surpassed by gold and copper exports. Therefore, the commodity has immense economic value to the country. The product contributes to GDP growth, income generation, employment, and foreign exchange (The World Bank, 2003: p. 1). The export of Cashmere has made the industry vibrant and competitive in transforming lives and the country’s economy. The sector employs many people to enhance contributing to job creation. Most poor people in Mongolia rely on the export of Cashmere to earn a living, indicating the connection between the product and the livelihoods of most Mongolians (UNDP, 2019: p. 54). Due to the economic significance of exporting Cashmere, there is a need to develop a competitive and efficient industry that can use connections within and across the sector to add value, increase incomes, and reduce costs. There is a need for a transition to a market economy, which will enhance the economic value of Cashmere to Mongolia’s economy (Takacs, 1994: p. 2). Cashmere is a major export commodity in Mongolia, and it has evolved into an industry that serves many segments of society. Economists can measure the economic value of Cashmere in terms of GDP contribution, the number of people employed, and its direct effects on many poor people’s livelihoods in the country.
The article is organized as follows; it starts with an abstract and an introduction that introduces the reader to the issue at hand, followed by a literature review, which is done using peer-reviewed articles, consequently the methodology used in the data collection explaining the concepts and methods used. Additionally, the data collected is presented and analytically examined for the reader, and lastly, the conclusion is given based on the research findings.
2. Literature Review: Economic Impact
Cashmere is Mongolia’s third major official export, after gold and copper. The export of this commodity provides income to more than a third of the country’s 2.4 million people (The World Bank, 2003: p. 1). Moreover, the cashmere industry is the single largest employer in the country’s economy that employs more than 16% of the workforce. The Cashmere industry accounted for over 6.3% of GDP during the 1993-2002 period. The sector is the primary source of livelihood for the poor people in Mongolia.
The export of Cashmere has enormous economic potential because Mongolia is a major producer of high volumes. Mongolia is the second major producer of raw Cashmere globally, considering that it produces over 25% of the global supply. Mongolia is second to China, which produces over 60% of the worldwide supply. Mongolia exports most of the Cashmere made, which is estimated at US$45.2 million, and this accounts for more than 8.6% of the country’s exports in 2002 (The World Bank, 2003: p. 6). Therefore, Cashmere is an essential commodity in the Mongolian economy, considering the volumes produced, value exported, and the entire industry’s financial results. The Mongolian economy depends on cashmere export for growth and development. In 2002, more than 38% of the raw Cashmere produced was smuggled to China, and it was valued at $16.8 million (Maekawa, 2013: p. 32). This indicates the significance of exports in Cashmere to the Mongolian economy at large. By contributing to GDP, employment, and local livelihoods, exports in Cashmere affect the entire economy.
Export in cashmere products has provided an economic boost to many Mongolians who previously depended on livestock herding. For instance, in 2002, more than 243, 234 (43%) of Mongolian households relied on livestock herding for livelihoods (The World Bank, 2003: p. 6). Goat herding was the most prevalent form of livestock herding. However, the sector’s failure led to increased unemployment that affected families and the economy of Mongolia. The cashmere industry has provided a priceless safety net for many of Mongolia transitioning from livestock rearing to other economic sectors.
The export of Cashmere is threatened by various factors that include the fluctuating performance of the cashmere industry. The cashmere sector in Mongolia has experienced a succession of busts and booms in the last ten years (Nanda, 2019: p. 32). Disappointing public sector policies have contributed to this outcome. External factors like the uncomplimentary economic environment during the early 1990s, weather conditions and the East Asia crisis have also influenced its performance. During the period between 1993 and 1996, the export of Cashmere grew from US$33.5 million to US$71.2 million, and the products share in exports increased from 9.2% - 16.8% (National Statistical Office of Mongolia, 2011: p. 1). However, the exports plummeted in the 1997-1998 period before recovering in 1999-2000 (The World Bank, 2003: p. 6). The exports fell again during 2002 to US$45.2 million, and this was a low rate of exports. The highs and lows experienced in the industry hurt cashmere exports’ sustainability since the global market requires a stable supply of the commodity. It may become difficult for Mongolia to compete with large producers like china when its production and export levels fluctuate (UNDP, 2019: p. 1). Moreover, the fluctuating volumes of production and export of Mongolian Cashmere may reduce the allure for its products. New producers may outpace Mongolia and take its positions in the global export market.
Five significant shortcomings in the industry could undermine cashmere export’s economic impact, namely supply distortions, low public and private institutional capacity, decreasing cashmere quality, inadequate marketing, distribution systems, and demand imperfections (The World Bank, 2003: p. 6). Supply distortions could lead to many challenges in the production and export of Cashmere, leading it to Mongolia’s failure to consolidate its economic gains from the export. Such distortions may dilute the export market, affecting Mongolian cashmere (Global Times, 2018: p. 65). The gains made by the product in the export market may be lost, leading to reduced economic performance.
Decreasing cashmere quality is a significant problem facing the industry, affecting future dependence on the products for export. Quality is an imperative component of the export market because consumers prefer high-quality products (Fernandez-Gimenez, 2001: p. 49). Higher-quality standards govern the international market, and the failure by Mongolia’s Cashmere to fulfill these thresholds may lead to the debacle of its cashmere export. This is more important, considering that Mongolia competes with major producers like China, and quality may become a competitive aspect in the global market (Ianchovichina & Gooptu, 2013: p. 65). As a result, Mongolia could lose its position in the export market to other producers who may fulfil the required quality thresholds.
Demand imperfections could derail the positive economic impact of cashmere export in Mongolia. Demand is a significant predictor of markets, and it informs supply chain operations like marketing and distribution. Imperfection in demand may undermine planning and forecasting processes, hence leading to imperfect or flawed distribution processes (Lise, Hess, & Purev, 2006: p. 32). Demand imperfections may also be costly by leading to unnecessary expenses due to structural problems. Inadequate distribution and marketing systems may hurt the cashmere industry’s growth and development, leading to insufficient production and export. Although the sector has been performing well in the international market through exports, this may not be sustained in the future unless the distribution and marketing systems are expanded. Therefore, the supply chain systems should expand by creating elaborate marketing and distribution systems of international stature.
There is inadequate private and public institutional capacity to direct industrial policy development, which has undermined the cashmere industry’s ability to grow. There is a need for the development of power within the private and public sectors to create enhanced policies for industrial growth (Konagaya, 2007: p. 34). The cashmere industry suffers from inadequate institutional capacity both in the private and public sectors. This may affect the industry further in the future since it may lack the background for additional development (Molintas, 2012: p. 54). The economic gains of cashmere export may be diminished by the lack of capacity from growth, leading to Mongolia’s substantial financial problems.
The lack of a well-organized public sector to deliver available goods, outdated and unregulated production patterns, and inadequate strategic business development policies have subdued competition (The World Bank, 2003: p. 6). These factors have also undermined the attainment of full potential by the cashmere sector. The country’s cashmere sector has only grown slightly up the value-added chain past primary production, making it vulnerable to fluctuations in market demand.
Government objectives primarily influenced the emergence of cashmere export in enhancing employment, growth, and poverty. However, the government did not prioritize complementary policies for supporting the development of the internal market. Moreover, there was insufficient attention to the institutional frameworks necessary for creating an internally competitive economy (Komiyama, 2005: p. 86). These are the main reasons the cashmere sector failed to develop and become competitive. There have been significant slumps in cashmere production, directly linked to the failure of policy development and the development of institutional foundations (Lee, Lo, & Enkhtuvshin, 2010: p. 65). Therefore, the sustainability of cashmere export is not guaranteed, considering that the sector is not competitive, and the government has failed in creating a sound institutional framework for growth. The Mongolian cashmere industry depends on external factors beyond its control in the international export market, which may not be a good sign for the sector (Kazato, 2009: p. 32). The cashmere industry’s economic viability is not guaranteed shortly unless new mechanisms develop industrial growth. The failure of institutional frameworks may be the biggest undoing of the government, which could be a starting point for reform. There should be efforts to reform the public and private sector capacity and introduce viable policies. This may create a new impetus in the cashmere industry, leading to competitiveness and increased production (Kaczensky et al., 2011: p. 82). In the absence of reform, it may not be possible for the cashmere sector to bounce back. Competitiveness is an essential aspect in the international export market, and it underpins the need development of capacity by the local industry to compete in the international arena (Lee, Lo, & Enkhtuvshin, 2010: p. 43). A sound policy framework will catapult the industry in developing competitive muscle to survive and thrive in the international market. The sector has a huge potential to perform well in the global export market if necessary, adjustments are made.
The economic impact of cashmere export in Mongolia is threatened by the industry’s continuing stall and low demand (Futaki, 1993: p. 103). The growth of the industry, coupled with ever-growing demand, drove the export’s high economic effect. However, from 1997 to 2002, there has been a sharp decline in the sector’s demand and negative growth. These two adverse developments threaten the viability and positive impact of cashmere export. Other factors that are likely to affect the industry negatively include market distortions, harsh weather, poor distribution, production systems, and inadequate policies (Baulch, 1997: p. 32). Efforts to reform policies and procedures could help save the sector from falling, guaranteeing the commodity’s constant export. This will sustain the positive effects of the export.
The economic impact of cashmere export is indicated by the rise in the number of low-income families during the downturn in production. The slump hurt the many households that could not sustain themselves with other income-generating activities like goat herding. Cashmere production has proved to be more effective in economic terms than other income-generating activities (Badarch & Ochirbat, 2002: p. 187). The main reason why the production of Cashmere experienced a slump was low policies. Mongolia faces a big problem with poor policymaking that negatively affects the cashmere sector. If this trend continues, the country may lose its coveted and productive global export market position. Cashmere production has been the primary source of income and empowerment for most households, and other activities like livestock herding have failed to generate similar outcomes (Asian Development Bank, 2011: p. 43). The government should make specific policies to enhance the development of the industry as an economic hub.
3. Research Methodology
3.1. Introduction of Research Methodology
This chapter explains how the researcher collected data from different viable sources depicting the authority and the authenticity of the information given. The chapter provides information on the research approach, where the researcher chooses to use either qualitative or quantitative research, supporting the decision based on the nature of the research. Additionally, this subsection will inform the reader whether the researcher needed to adopt a hybrid of the different approaches and techniques to the research methodology (Goddard & Melville, 2004).
The chapter also dwells on research design; the research design tends to justify the approach taken and show the techniques that the researcher will use to provide quality information for the research. Further, the chapter discusses the different research methods used in the research. Some of the research methods used may be questionnaires, interviews, observations, etc. (Kothari, 2004).
The chapter will further discuss the methods that the researcher will use for data analysis and the ethical considerations to put the researcher in place to ensure that the research does not infringe any right or law. Further, the researcher will discuss problems and limitations to let the reader understand the circumstances around the research. Lastly, the chapter will be concluded with a summary of the research methodology explaining the summative approach that the researcher adopted.
3.2. Research Approach
The research focuses on the economy of Mongolia as far as cashmere exportation is concerned. Since the economy is measured through income in figures, the research will be based on qualitative statistics. However, the economy of a place may be subjective according to the approach of different persons interviewed. As such, the researcher will analyze the perspective of different stakeholders to measure the contribution of Cashmere to the economy and the wellbeing of the Mongolian people. The non-quantifiable findings will be analyzed to classify meaning according to different levels that the researcher will establish.
In that way, the research will be very informative as it will weigh between the figures forwarded and the views of the state holders rating their satisfaction and dissatisfaction. As such, the biasness that is brought about by the researcher’s subjectivity may be minimized by the involvement of the qualitative research approach to the research (McPherson et al., 2018).
3.3. Research Design
The research will assume the descriptive and correlational research design; the design will allow the researcher to gather information from the status quo of the research on items adding an effect on them. The design will help the researcher get the characteristics, trends, and relationships between researched entities (Sileyew, 2019). In our case, the researcher will establish the characteristics, relationships, and movements between the Mongolian economy and the cashmere export business. The descriptive design will help the researcher and the reader understand the measure of a variable; conversely, the correlational design will determine whether or not variables are related (Sileyew, 2019). Since the research aims to reveal the relationship between cashmere exportation and the economy of Mongolia, the correlational design will best inform the relationship between the two variables. Additionally, the measure of the different variables will be quantified by the descriptive design and the value and measurement inferred.
3.4. Research Methods
The researcher will devise the research methods since primary and secondary data will be used to ensure precision and accuracy. The data collection will provide qualitative insights since the researcher will weigh the data and information presented to give meaning. On the other hand, external tests, surveys, interviews, etc., will be used to provide quantitative insight into the research at large (Quinlan et al., 2019).
The survey and questionnaires will be administered in different parts of the country, targeting the farmers, retailers, and exporters of the said commodity to another country. All the middlemen and the government representatives will be inquired so that information obtained may be informative and lead to a comprehensive conclusion. During the data capture and presentation, the respondents’ identities and properties will be treated enormous, ensuring that they are free from unnecessary exposure.
3.5. Interviews
Interviews are a powerful tool t get insights from the research participants since one can acquire the required information with a higher response rate than other methods. The interview method will be applied to individuals who have a very tight schedule yet are crucial, and their information will be vital for the research. People such as significant business owners, government representatives, and people who have critical information about the industry will be interviewed. The interview will take the form of a structured interview where the question will be predetermined, ensuring uniformity in the order of inquiry and the sequence in which the questions follow each other.
3.6. Questionnaires
The questionnaires will be predetermined and customized, ensuring to lay the questions understandably to its audience. However, the researcher will post common questions to the different groups in question. The questions in the interview will also be identical to the questions posed in the questionnaire, only that the questionnaire will tend to be more detailed to give the precision needed reducing ambiguity.
3.7. Observation
The observation technique as a method a researcher uses is best appropriate when researching what people do (Gerpott et al., 2020). As such, I will use a structure observation technique to help me develop a reason behind the trends and the persistence in the people’s economic activities in Mongolia. Observations are based on the researcher’s perspectives and thus may sometimes be biased. Thence the kind of information that this research will gain from the participants through structured observation will be qualitative. This approach will help reduce the biasness that comes alongside the non-quantitative approach through observation. Some of the data aimed at collecting data using this method are the actual production of the raw material from the animals, at one instance from some animals.
3.8. Methods and Procedure of Data Analysis
Based on the type of data collected, the researcher will analyze some of the data statistically, where the researcher will textually analyze some of the data. Pie charts, tables, percentages, and degree-oriented pie charts are also used to analyze the respondents’ responses by administering various questionnaires and interviews. The data analyzed will provide meaning to the different data presented by the respondent.
The primary indicator to be used is percentages, where a different number of participants will be tallied together and a percentage of the total number established.
4. Data Analysis and Interpretation
This chapter will introduce and discuss the data presented to the researcher and draw meaning from the data presented. Different methodologies will be interpreted, and thence meaning given to different issues in the Mongolian economy. The researcher will post the analytical responses. The final responses are critically analyzed in numerical summative figures converted into percentages indicating the sections of individuals who share the same opinion.
4.1. Data Analysis
Some of the information obtained in the surveys are (Figure 1, Tables 1-8):
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Figure 1. The number of males equated to the number of females.
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Table 1. Individuals and their occupation.
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Table 2. Individual involvement in other economic activities.
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Table 3. Level of satisfaction from the economic activity.
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Table 4. Cashmere exportation has increased the living conditions of the population.
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Table 5. The middlemen in the cashmere export industry have are essential and contribute to business success.
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Table 6. Middlemen in the cashmere exportation have led to an increase in profits to the farmer.
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Table 7. How would you rate the government involvement in creating a conducive environment for the cashmere export business?
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Table 8. How badly the economy is likely to be affected when the season is low.
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Figure 2. Breadwinners versus non-breadwinners.
70% of the respondents were breadwinners in their families; that does not include women who responded on behalf of the family (Figure 2).
4.2. Data Interpretation
In the research, the interviews targeted 100 men and 100 women drawn from different parts of the Mongolian soil to produce and export cashmere products. Most of the respondents were breadwinners in their families, including women who claimed that they largely anticipated providing for their families. These ensured that the researcher obtained the information from the people directly affected by the economy and felt the burden of the effects of the cashmere industry.
Most of the respondents were drawn from farmers who constituted the highest percentage. The researcher also engaged other people involved in the cashmere production in the factories; lastly, the public opinion was obtained from professionals such as economists, financial bodies, etc., on the state of the economy as far as cashmere exportation is concerned.
Almost half of the respondents participated fully in the cashmere production and exportation without having other partial work. Most farmers responded to having cashmere production as their primary business and relied on no additional economic activity in the area. Some people were satisfied with their nature of work and were willing to continue; almost half the total respondents were equally averagely satisfied. However, some individuals felt that they were not satisfied with the nature of their work and the economy at large.
The researcher met the contribution of the middlemen in the farmer manufacturer relationship with mixed reaction where the middlemen were viewed as a channel to reach the manufacturer. Yet, the middlemen took advantage of the inability and robbed their profits.
Whereas most of the people a good number of respondents felt that the government did its best to create a conducive environment for cashmere production, an excellent percentage of the people do not buy into that idea. Additionally, most respondents believed that the economy would deteriorate if the cashmere industry faced its off seasons due to low-income returns. Thus, indicating the contribution of the sector to the economy in Mongolia.
5. Discussion
Cashmere is one of the most significant contributors to the country’s economy; however, there are parts of the chain economic chain in the industry that experiences different economic effects. Farmers are the most affected, more so when the season goes down, and the income from the Cashmere goes to 0% until the following season. Middlemen are very important in ensuring that the raw products reach the manufacturers as they help the farmer get the market for their raw material. However, the expensive nature of the cashmere products does not fully reflect the economic advantage expected to the farmer.
The satisfaction levels from working as a farmer or a factory attendant in cashmere production companies vary. Many farmers show a lack of contempt, and the factory workers were well pleased with the nature of their work. Farmers are the most likely victims when cashmere offseason; this is because most of the farmers depend only on Cashmere as their only source of livelihood.
The participants showed the different reactions of the government effort to support the industry, with a significant percentage not being satisfied with the efforts by the government to create an efficient market. The policies and the implementation may also be an issue that the government needs to polish up. However, most people agreed that the cashmere export business has greatly raised the economic standards of the country. The claim may be anchored on the free availability of the animals grazing lands and ready marketing, making it easy for any household to venture into while in Mongolia.
6. Conclusion
In summary, Mongolia’s cashmere export’s economic impact is enormous, considering that the export contributes to GDP, creates employment, and is the primary source of livelihood to the country’s low households. Therefore, the export of Cashmere is of significant economic impact since it affects various aspects of its economy. In examining the economic impact of exporting Cashmere in Mongolia, it is necessary to look at its commodity production and the percentage contributed to the global export market. Mongolia is the second-largest exporter of Cashmere after China, the leading producer of the product. Mongolia produces 25% of the worldwide export of Cashmere, while china produces over 60%. This indicates Mongolia controls a significant portion of the worldwide market. Since the beginning of exporting Cashmere, the country’s economy has grown significantly, employment rates have increased, and many poor people’s lives have improved. Other economic activities like livestock herding have not contributed to the economy and livelihood of cashmere export. Therefore, there is a need to develop policies and systems to enhance Mongolia’s cashmere industry’s growth. However, the sector faces many problems that undermine the sustainability of exports’ economic gains. For instance, the government has ignored policies to strengthen the industry and compete. The industry has also faced numerous challenges underpinned by fluctuations in demand and reduced quality. The lack of institutional capacity in the private and public sectors is also a significant issue facing the industry. The government should develop policies that enhance the industry’s competitiveness to guarantee the future sustainability of economic gains.