X Close

Emerging Subjects Blog


Emerging Subjects of the New Economy: Tracing Economic Growth in Mongolia


Doing Business in the New Economy: Stories of ‘Wealth Creators’ in Dalanzadgad

By uczipm0, on 8 April 2015

By Byambajav Dalaibuyan

Dr. Byambajav Dalaibuyan is an Affiliated Member of our project, currently based at the Centre for Social Responsibility in Mining (CSRM) at the University of Queensland, Australia.

Two years ago, when the Mongolian economy was experiencing double-digit growth, I conducted a scoping study on small business developments in Dalanzadgad, Umnugovi, jointly with business development specialists. We had two days. The first day involved meetings and a public talk by our international guest. The second day, we managed to visit three local businesses: a dairy farm, a bakery and a work clothing manufacturer. All had received training for business development. Surprisingly, all were run by women. They showed us their workplaces and told about how they had started and run their businesses.


Dalanzadgad (soum) is the capital city of Umnugovi province and is ‘host’ to many mining projects, including the giant Oyu Tolgoi and Tavan Tolgoi mines. The centralised governance system does not allow the local government to gain any more benefits than others, so the growth of revenue from mining will not necessarily make this place any wealthier. However, there have been indirect and multiplier effects of mining on the local economy and wealth distribution.

Dalanzadgad 2013 - Copy

Center of Dalanzadgad, with government building on the right (Photo by Byambajav Dalaibuyan, 2013)

Unlike other aimags, Umnugovi owns 51% of the ‘small’ Tavan Tolgoi mine. The government dividends allowed the aimag government to distribute on-off cash handouts worth 500,000 tugriks to every Umnugovi citizens during the boom period. The mine is still the biggest contributor to the aimag budget.

Dalanzadgad is the most populous soum in Umnugovi. It has approximately 20 thousand residents (while other soums have on average 3500-5000 people). For many it is difficult to sustain a business only relying on local demand. Relatively bigger soums like Gurvantes, Tsogtsetsii and Khanbogd have the same problem, but they have the big mines nearby which could become potential markets for their businesses. Prices are a bit high in Umnugovi, partly because it is remote and an average income level is above average.  The landscape of the town has been changing quite rapidly in the past few years. There are new shopping centres, apartment buildings, and hotels. The asphalt road connecting the main districts of the town have recently been constructed.

Dalanzadgad 2013

Dalanzadgad mall (Photo by Byambajav Dalaibuyan, 2013)

‘Businesses have been affected most’, said a local businessman about the impacts of the current fiscal crisis. ‘We, ordinary people living by our salaries don’t feel the pressure’, he continued. ‘Instead’, he said, ‘it is people at the top and bottom of the society, which means big businesses and the poor, who have suffered most from the fiscal crisis’.

This year (i.e. 2015), luckily, I had a chance to visit the three businesses again. I wanted to see how they had changed since 2013. The high expectation that mining would boom continuously has not been met. I was curious about how these businesses had adapted to this change. I was not able to meet one of the three businesses, but in addition I was able to meet the owner of a new pure water plant business. This added insights on how the economy is being experienced on the ground by local small businesses.

Dalanzadgad Street (Photo by Byambajav Dalaibuyan, 2013)

Dalanzadgad street (Photo by Byambajav Dalaibuyan, 2013)


‘Wealth creators’

The term ‘wealth creator’ (Баялаг бүтээгчид) is becoming a buzzword in Mongolia. It seems to denote those people who create economic value but it is also used with different meanings. Some people refer to people who manufacture goods locally as ‘wealth creators’, while people who produce goods for export and replacing foreign imports are particularly praised as ‘wealth creators’. The term was used widely by the Government of Prime Minister Altankhuyag. For example, it convened the ‘Wealth creator-young herders’ forum’ in 2014. In many ways the term is a branding initiative aimed to promote the private sector.

Whatever the usage is and beyond its political overtones (and unlike the term ‘Supporting National Manufacturers’ (Үндэсний үйлдвэрлэлээ дэмжье), the new term does have some moral connotations. Doing business is considered engaging in the social good. An important agenda behind promoting ‘wealth creators’ may be concern that the public needs to understand that the backbone of the ‘market society’ is the people who create economic values through their own creativity and hard work and they need to be respected and supported. Perhaps for some people it may be an attempt to differentiate between private wealth accumulated by unknown sources such as ‘billionaires born from the state’ or political riches from that of new value creators by showcasing the latter.

Is mining a ‘wealth creator’? Many people, including those in the extractive industry, think it is. The Ministry of Mining has sometimes used the term referring to miners and mining companies. But that is not shared by some people, including MP G.Uyanga who has recently spoken during a parliament session that local manufacturers such as felt slippers makers are ‘wealth creators’ rather than exploration and mining companies who only dig or extract wealth.


Four stories

I begin with a brighter story.

Dairy farm

When we came to the dairy farm a woman greeted us and invited us to her ger. We wondered where her husband was. She replied that he was working outside in the farm. She was representing her household. It was obvious that our foreign colleagues did not expect this gender difference. When we walked out to look around the farm the husband was feeding their cows and doing other stuff. He did not join our conversation.

It was a small dairy farm located in the outskirt of Dalanzadgad. It was apparent from their properties that the family was not wealthy.

Outside of dairy farm (Photo by Byambajav Dalaibuyan, 2015)

Outside of dairy farm (Photo by Byambajav Dalaibuyan, 2015)

‘I herded a small number of animals for 10 years and then the dzud happened’, she said. Her family lost many animals during the 2009-2010 dzud. Left with a few goats and sheep (100-150), they decided to move to Dalanzadgad. Their hope to find a job was not fulfilled. She spent a year in Selenge aimag with her relatives. Selenge, located in the north, is one of the main agricultural regions of Mongolia and herders often sell milk to customers in nearby settlements and towns. When she returned home she wanted to start a dairy farm.

Dairy farm (Photo by Byambajav Dalaibuyan, 2015)

With low interest loans from the Soum Development Fund and Oyu Tolgoi’s business development project she was able to purchase four cows and other resources. She travelled to Selenge to buy good dairy cows. Her husband built a barn and shelter. They built a house for processing milk at that time and they were selling their milk to local dairy plants and individual customers. She had received business training funded by Oyu Tolgoi LLC and joined a study tour to dairy farms in other regions.

The farm is much bigger now. The barn was renovated to accommodate 20 cows. They commenced a milk plant. They now have contracts with local schools and nurseries to supply their packed milk and yogurt. Some of their products are sold at the local market as well. ‘There were only two dairy plants in Dalanzadgad before we started ours’, she said.

Dairy processing (Photo by Byambajav Dalaibuyan, 2015)

Dairy processing facility (Photo by Byambajav Dalaibuyan, 2015)

She now wants to have secure pasture and sources of fodder for their cows. She has been to Inner Mongolia with other local businesses to learn about their dairy farms and technologies. ‘Low interest and long-term loans are crucial for business’, she said.  She has established a cooperative together with her family and relatives. The cooperative includes the dairy farm and a bakery. Her younger brothers also run a small jewelry shop.


A local couple with two young kids invested their money in a bakery. They built a house and a brick furnace themselves. The husband was away when we visited them. He worked for a mining company operating in Gurvantes soum, approximately 300km west from Dalanzadgad. Initially, the husband managed the bakery but it was passed to his wife because of his mining job. The bakery was quite well equipped and it employed three local people.

Bakery (Photo by Byambajav Dalaibuyan, 2013)

However, she mentioned that it was struggling to compete with a new bakery that had recently opened in town. The new bakery was run by people who had migrated from the Eastern region of Mongolia and their bread was far better than the local one. The local bakery started to quickly lose their market share. A year ago the bakery supplied approximately 80% of bread in the town but now it dropped to 20%. They did not just sit and lose their market share. They invited a professional from Ulaanbaatar to teach making good quality bread and other products. That did not result in a significant change. They even tried to steal the bread recipe from their competitor by sending their people to be employed by them. The competitor was well aware of that threat and protected its ‘secret’ recipe. Desperate to retain her business, she was starting to make other products, such as noodles and pastries. Unfortunately, I could not contact her and visit the bakery this year. I was told that it was not operating well.

Work clothing maker

The owner and manager was a local woman in her fifties. She was truly a success story. In the workshop nearly 15 local women, some of whom were disabled, worked under her management. She had contracts with some big mining companies to supply work clothing. Oyu Tolgoi was the major buyer. With ‘Made in Dalanzadgad’ labels, their clothes were fashionable and our colleagues praised the quality. We were told that there was an order from Canada to buy their clothes but the distance and pertaining expenses did not allow for it. ‘I am not an educated person, and I do not have the skills to promote our business unless someone helps me,’ she said.

Work clothing maker 2013 - Copy

Work clothing makers (Photo by Byambajav Dalaibuyan, 2013)

She was unhappy about her business when I met her this year. The previous demand from the main buyer had decreased and the orders from other mining companies are not sufficient to keep her workers paid. She now has fewer workers and employs them an on-demand basis. She was proud that mining companies were aware of the quality of her products. ‘We now have half of the staff we had last year’, she said. ‘The company supplied clothes worth 500 million tugriks in 2013, but it dropped to 140 million tugriks in 2015. Oyu Tolgoi has helped us nurture this company but the local government now needs to help us to promote our business and connect with costumers’, she said. ‘They only contact us for statistical data collection’, she lamented. She had paid for an advertisement of her products on local TV and hoped to attract new clients through their new website.

Water plant

It was a new, two-storey, building. The owner was a man in his mid-30s. He managed it with the help of his wife. It appeared that the plant was very well-equipped and managed. The owner explained to us the processes of producing bottled water, walking with us from one end of the linked machinery to the other. He showed us facilities for the workers such as the dressing room, a shower, and a training room. Many posters about occupational health and safety were displayed.

Bottled water plant training room (Photo by Byambajav Dalaibuyan, 2015)

Bottled water plant training room (Photo by Byambajav Dalaibuyan, 2015)

His bother used to study in Japan. With his help, he arrived in Japan in 2007. He spent about three years in Japan doing a range of casual work. He said that he had learned a lot from Japanese collective work culture, safety rules, and punctuality.

Because I lived in Japan for several years we discussed much about differences between the two cultures. He told me about his first encounter with his employer in Japan. When he arrived in Japan he wore suites and a tie. The employer was looking for a foreign worker but did not expect a man in nice suits. After calling his brother, the employer finally found him. He said that he works with his workers together in the plant and does not put himself in a position of darga. He values stability in the workplace and tries to create a favorable work environment. ‘Safety and hygiene are important. We gave people work clothes, but they often forget them at home. Now we have a dressing room and they don’t need to take clothes home’, he said.

Bottled water plant - 2015 - Copy

Bottled water plant (Photo by Byambajav Dalaibuyan, 2015)

He also recognized that low interest start-up loans were crucial for sustaining his business. The market was important as well. Three of the four water plants in Dalanzadgad sell their water to Oyu Tolgoi. 50% of the water of his plant is procured by Oyu Tolgoi. The other mining companies in Umnugovi procure his products as well. He was aware of diversifying his customers so to avoid overreliance on one customer.  He was happy about the success of his business. He started this business in the basement of an apartment with four workers. Now he earned a solid market share. He said that the demand for bottled or packed water was increasing in Dalanzadgad because people are concerned about their health. He has 4 trucks which they use to deliver water to their customers.



Low interest loans are crucial for all businesses and many small local businesses would not have started without such loans. Commercial banks requirements often include high interest fee (15% annually) over a short term (3 years) and they require different kinds of collateral which are very difficult for start-ups and small businesses to meet. The limited amount of loan distributed through Small and Medium Enterprise (SME) Fund in every aimags and soums has 7% annual interest. Oyu Tolgoi and other mining companies have offered a limited number of loans with relatively low interest. For example, in addition to cash loans, Oyu Tolgoi has supplied materials to clothing companies as a loan. ‘The Minister of Labour visited us and promised to help get 200 million tugriks from the SME Fund but I have not heard anything yet,’ said the owner of the water plant. ‘I borrowed 180 million tugriks from a bank to construct this building and its interest fee would be roughly 100 million tugriks in total’ he continued.

Not many businesses have been established and run by groups beyond families and relatives in Mongolia. This is evident from the stories of small businesses presented here. A bigger organization requires more people, commitment, and trust. When we were in Dalanzadgad in 2013 a local couple asked to meet with us to get advice on their business idea. Six families were hoping to establish a cooperative to produce locally grown pickled vegetables. Their main problem was that four of them were passionate about the project, while the other two were not so confident and they were not sure about how to build a good company.

There have been a range of aid and government programs to develop small businesses or create ‘wealth creators’ in different rural areas of Mongolia in the past two decades. Most local economies are homogeneous and remote. Nomadism and socialism did not create local economic diversification. Many policies and aid programs to increase ‘wealth creators’ have often failed to reach their goals. For example, the ‘One village – One product’ policy promoted by Japanese donors did not result in ‘One soum – One product’. Unfortunately, there have never been follow-up studies of these programs that are publicly available. Although everyone in Mongolia seems to want to support ‘wealth creators’ and the Government of Mongolia seems to seek to increase its support, a local and long-term business support mechanism has not been established.  Each of the business mentioned had developed their own approaches and technologies to be able to continue, but they were precarious. It is almost clear now that without creating links to sustainable or large enough markets or customers it will be impossible to develop sustainable local businesses in Mongolia.




37 Responses to “Doing Business in the New Economy: Stories of ‘Wealth Creators’ in Dalanzadgad”

  • 1
    Laurenbonilla wrote on 9 April 2015:

    Thank you to Dr. Dalaibuyan for a very interesting blog post. In addition to revealing how local businesses are faring in the changing economy, your study also sheds light on the implications of Mongolia’s centralized governance system. As noted in the beginning, the state limits the amount of mineral wealth redistributed to ‘host’ regions. Though Dalanzadgad does have access to special streams of local mineral revenues and businesses can get loans and support from major mines like Oyu Tolgoi, we see that Dalanzadgad is not very different from other areas of Mongolia. (Indeed, when I was there in 2011 and 2012, there was not even a consistent supply of electricity). This makes me wonder about Prime Minister Saihanbileg’s recent proposal to restructure the local taxation system by allowing for greater and more direct royalty and tax payments to local governments in mining areas. Such a change could have a positive effect on ‘wealth creators’ in a place like Dalanzadgad. Yet the decentralization of mineral revenues could have quite a significant impact on creating regionalisms and spatial inequalities across what are currently relatively homogeneous rural economies.

  • 2
    Byambajav Dalaibuyan wrote on 27 May 2015:

    Thanks for the comments.

    Lauren, PM Saikhanbileg’s amendments to the tax law was approved by parliament last week. However, the strategic or major project areas or soums will not be covered. As for other mining-affected communities, they will have more payments or transfer from royalty and tax payment to their Local Development Fund (LDF).

  • 3
    Laurenbonilla wrote on 27 May 2015:

    That is really helpful to know, especially about how strategic or major project areas will be exempt. Thank you for sharing this information.

  • 4
    marissa_j_smith wrote on 10 April 2015:

    I have always thought of “buteekh” as more like “assemble”… arguments that oppose it to extraction, very interesting. What word did MP G. Uyanga use?

    As far as “local economic diversification,” good to think about scale. There is quite a bit in Erdenet and Darkhan really, and one would have a hard time to not attribute that to socialism and nomadism. What levels are there between making uniforms for Oyu Tolgoi and making uniforms for Canadian buyers?

  • 5
    Byambajav Dalaibuyan wrote on 27 May 2015:

    She used the word “buteehk”. I think create or construct are closer to the meaning in this context.

    Scale is very important for sustainable business. I think better hard and soft infrastructures may help local businesses scale and diversify (or specialize).

  • 6
    Rebecca Empson wrote on 12 April 2015:

    Thanks for this fascinating post. It is interesting to see how these different businesses do diversify the economy, but they are also fundamentally dependent on the mining industry too – not just for their loans, but also for the consumers of their goods.

    Maybe the changes proposed to increase the budgets of local areas where mining takes place will also increase the consumer-base in mining-active provinces and districts, increasing the incentive within Mongolia to move to mining active regions?

  • 7
    nayyer raza wrote on 22 February 2023:

    Nice Artical Good Efford Bro mail protecting service

  • 8
    Nayyer Raza wrote on 22 February 2023:

    Nice Artical Good Efford Bro data backup solutions in houston tx

  • 9
    Talent battle wrote on 23 February 2023:

    Thank you for this article bro mu sigma interview pattern

  • 10
    Yishma’el Ifiok wrote on 24 February 2023:

    informational content I have also written the Tech Mahindra placement exam latest syllabus check out Tech Mahindra latest syllabus to get placement.

  • 11
    Hrœrekr Siddharth wrote on 28 February 2023:

    If you guys are preparing for the persistent placement exam then checkout persistent latest syllabus

  • 12
    alexjarvis wrote on 2 March 2023:

    System 360 provides world-class IT solutions to local businesses in and around the Houston area. We work with our clients for all of their IT needs and projects. Our team of expertly qualified professionals has years of experience and amazing dedication to help your business leverage technology for continued growth and success. Our Mission is to deliver secure, quality, cost-effective solutions to help our clients achieve their goals of productivity and profitability. Our Vision is to be recognized by our clients and partners as an honest, value- providing technical expert. Our Values are Honesty, Integrity, Sense of Urgency and Constant Improvement. email protection advanced

  • 13
    Æðelwulf Teona wrote on 3 March 2023:

    If you are preparing for virtusa placement exam then checkout virtusa latest syllabus

  • 14
    Mary Jane Ashtoreth wrote on 9 March 2023:

    Thanks for the article and if you are preparing for a persistent interview then checkout persistent interview pattern that will increase chances of selection

  • 15
    Jürgen Pío wrote on 11 March 2023:

    If you are preparing for a virtusa interview then checkout virtusa interview pattern

  • 16
    Rick wrote on 14 March 2023:

    Obtaining loans for business can be a critical component of success for many entrepreneurs, especially those operating in emerging economies like Mongolia. It’s encouraging to see stories of wealth creators who are thriving in challenging economic conditions and demonstrating the potential for innovative business models to drive economic growth. You can use this https://paydaysay.com/loan-sites-like-cashnetusa/ site for more information. However, it’s important to remember that taking on debt always carries risk and requires careful planning and management to ensure long-term sustainability.

  • 17
    Talent Battle wrote on 14 March 2023:

    Talent battle is a group of mentors and educators who help Engineering, BCA, MCA, and other students prepare for their campus and off-campus placement opportunities. We have trainers with an average of 8 years of experience in training students for their Tech company interviews. We help students in learning Aptitude, Programming, Verbal Ability, and all other skills necessary to get placed in their dream companies.

    Visit: https://talentbattle.in/

  • 18
    Edith wrote on 25 March 2023:

    Thanks for this article and checkout Samsung off-campus drive.

  • 19
    Health caredepth wrote on 25 March 2023:

    You are looking for awesome , extremely useful articles. Share more educational and helpful articles. I’m grateful. Home Health Care for Senior Women

  • 20
    Sultan wrote on 28 March 2023:

    Thanks for this post and check out TCS freshers off-campus drive

  • 21
    Zazil wrote on 1 April 2023:

    If you are looking for an internship then you should have to check out Goldman Sachs Intership

  • 22
    Moyra wrote on 3 April 2023:

    If you are a college student and looking for an internship then you should have to check out Hexaware internship

  • 23
    Priyanka wrote on 4 April 2023:

    Thanks for this article and check out Infosys internship

  • 24
    Chalice wrote on 5 April 2023:

    Thanks for sharing this article and if you are looking for an internship then check out Mindtree internship

  • 25
    tiana wrote on 10 April 2023:

    Thanks for sharing this article and check out cocubes internship

  • 26
    Karo wrote on 11 April 2023:

    If you are looking for an internship then you should have definitely check out Ntt Data Internship

  • 27
    Oda wrote on 11 April 2023:

    Thanks for sharing this article and check out Oracle Internship

  • 28
    Oda wrote on 11 April 2023:

    If you are looking for an internship then you should have to check out Oracle Internship

  • 29
    Achelous wrote on 12 April 2023:

    If you are looking for an internship then you should have to check out VMware Internship

  • 30
    Ambrosius wrote on 13 April 2023:

    Thanks for sharing this article with us if you are looking for an internship in virtusa then you should have checkout Virtusa Internship

  • 31
    Damhnait wrote on 3 May 2023:

    If you are preparing for an Accenture placement paper then you should have to check out AccenturePrevious year questions

  • 32
    Tiwonge wrote on 4 May 2023:

    If you are looking for an internship to earn money then you should have to check out Cocubes internship program

  • 33
    Aspire Bedding wrote on 12 May 2023:

    Aspire Bedding also offers a stunning collection of bridal bed sheets in Pakistan, perfect for newlyweds and couples who want to add a touch of elegance to their bedroom decor. These bed sheets are crafted with luxurious materials and intricate designs, making them perfect for a special occasion. Despite their premium quality, Aspire Bedding’s bridal bed sheets are priced reasonably, ensuring customers can find the perfect bed sheets without breaking the bank.

  • 34
    Mannat Clothing wrote on 12 May 2023:

    Looking for some new clothes but don’t want to spend a lot of money? Check out Mannat Clothing’s sale on brands in Pakistan! You’ll find great deals on women’s clothing, including branded suits and dresses. So, take advantage of these discounts and update your wardrobe today!

  • 35
    Panache Apparel wrote on 12 May 2023:

    Panache Apparel, a successful online clothing brand in Pakistan, has become synonymous with fashionable attire at unbeatable prices. Focusing on bringing the best branded clothes sale to their customers, they showcase a diverse range of Pakistani brands sale, catering to various styles and preferences. Their periodic sale on brands in Pakistan has garnered widespread attention, making Panache Apparel a go-to destination for bargain hunters and fashion enthusiasts. The sale on clothing brands in Pakistan, available exclusively through their user-friendly online platform, ensures that shoppers from all over Pakistan can enjoy fantastic deals and the latest trends. So, for an unparalleled online sale on brands experience, Panache Apparel is the ultimate choice for every fashion-savvy consumer.

  • 36
    Qhaaf Bedding wrote on 13 May 2023:

    Qhaaf Bedding is a popular online bedding brand in Pakistan that offers a wide range of bed sheets, comforter sets, and other bedding accessories. They are known for their high-quality products and affordable prices. Customers can easily find comforter sets on their website and compare the comforter price in Pakistan to choose the best one that suits their budget and preferences.

  • 37
    Matt wrote on 18 June 2023:

    I like all of the points you have made in this article. Thanks for sharing.
    Cégeladás honlap, amennyiben befektetőként vagy cégvásárlóként eladó cégek hirdetései iránt érdeklődik.