Export financing for Mongolian SMEs /Options to mitigate COVID-19 impact and for medium-term capacity development/

Executive summary 

To direct investment and entrepreneurs towards manufacturing is a critical stage of economic development. In successful Asian countries, governments pioneered new ways to promote accelerated technological upgrading in manufacturing that were conditioned on export performance. Export focus and discipline takes industrialisation to new levels. The significance of policies to support economic development and industrialisation by a relentless focus on export cannot be overestimated. A consistent set of government policy interventions makes the difference between long-run success and failure, and creates and sustains globally competitive manufacturing. Natural resource wealth in itself does not create sustainable and inclusive economic growth or widespread welfare of the nation. The development of economic sectors and players, which contribute to export must be nurtured. To achieve inclusive economic growth, companies need to sell their products internationally and become globally competitive. Creation of value-added production and selling to protected domestic markets is not sufficient. Companies that do not meet export qualifications, or which fail to meet even the most basic standards of global competitiveness do not qualify for export promotion. The investment of public funds and resources for export promotion should be directed to companies, initiatives and structures which enable, promote and sustain export capacity or are successful in utilizing opportunities in export markets. The companies which can contribute to more export competitiveness, like distributors of foreign produced capital equipment, need to be enabled and supported as they are, at this stage of economic underdevelopment, critical enablers of export creation.

The overwhelming presence in the Mongolian economy of export of non- or only minimally processed natural resources, unwashed coal, low-processed cashmere, un-scoured wool and wet blue animal hides, and the observation that a country so rich with natural resources needs to import e.g. leather, illustrates the weakness or failure of Mongolia to enable and promote exports of value added products. One cause for this is the absence of support in the form of export promotion and especially of export insurance and financing.