Documente Academic
Documente Profesional
Documente Cultură
Sea buckthorn
Value Chain Assessment
Baruun Bus
Western Region Economic Development Project
The objectives are to better understand the dynamics of the Sea buckthorn sector in the Western Region
as well as the broader context within which it fits. The scope of this assessment therefore includes
exploration and analysis of available data regarding the international situation, the Mongolian context and
specific emphasis on the value chain of Sea buckthorn in the Western Region, and Uvs province
specifically, of Mongolia. The Western Region includes for this assessment Hovd, Gobi Altai, Zavhon and
Uvs. Information about cultivated and wild sea buckthorn are both included in the assessment though due
to limitations in available data, more emphasis is on cultivated.
In addition to filling important gaps in information for this sector, the result is to identify core pilot activities
for phase I of the project and generate recommendations for phase II of the Western Region Economic
Development Program.
ASSESSMENT APPROACH
AND
METHODOLOGY
The primary methodology was based on the Action for Enterprise approach to value chain assessments
for program design. This process influenced sector identification and the sector analysis which included
exploring stakeholder roles and relationships, governance and government environment, mapping of the
value chain, and constraints, opportunities and local resources found along the chain (Figure XXX). By
identifying problems and then opportunities and local resources to address these, the assessment builds
on important strengths and contributes to the broader environment. Market based solutions that support
local business development providers and existing institutions are prioritized. After this, recommendations
and suggestions are made regarding program involvement and proposed next steps.
Figure XXX. Action for Enterprise Value Chain Analysis Components
The assessment also explored components of the market system as identified by the Springfield Centre
(Figure XXX). Together, these two approaches yielded important information and improved understanding
of the sector as a whole and potentials for market based interventions.
Figure XXX. Springfield Centre Market System Diagram
Unmet demand/
Growth Potential
Sea buckthorn
High
Low
Low
Selection Criteria
High
Sources
Internet, Review of International Organizations, Research
Interviews, Review of Existing Research, Government Programs
Interviews, Focus Groups, Producer and Input supplier Survey, UNDP/ Altai
Sayan Research
Mercy Corps Mongolia data, GTZ reports
Focus Group, Mercy Corps Mongolia data
Mercy Corps Mongolia information
Establishment of a Network for transnational technology and know-how transfer for sustainable
utilization of Sea buckthorn in Europe, China, Russia and the NIS countries.
Improvement and exchange of knowledge on harvesting and processing.
Achieve improved product quality and safety towards attainment of international quality standards
thus improving product access to European Markets.
Establishment of long term Sea buckthorn industry in the targeted countries supporting rural
sector development.
Strengthen the competiveness of the European food industry in the use of bio-active compounds.
Support healthy nutrition in the Asian and European population.
Support of the anti-erosion measures by incentives to care for Sea Buckthorn plantations when
appropriate
The project was funded by the European Commission and coordinated by the German company TTZBremerhazen and included several key members including the Northern Research Institute of Forestry in
Russia and also ICRTS.
Several resources were developed over the course of the project including 5 Trainings (presentation
materials) and Handbooks on Cultivation and Harvesting, Processing, Product Development, Quality and
Safety Management, and Marketing and Commercialization. Also, the project generated a catalogue of
best available practices among various aspects of sea buckthorn as well as a comprehensive report with
sector specific recommendations. These were developed based on information gathered through
surveys, interviews, information exchanges and research by and for EAN-Seabuck members. Many
individual sea buckthorn businesses participated in the project. All materials are available online so long
LCDI
OVOP
Target
Industrial/geographic
clusters of lowincome, low-output
producer groups in 4
aimags and UB
Geographic producer
groups/clusters engaged
in production of the
selected products
Interventions
Microfinance support
Consulting, business
coaching, Microfinance
and Marketing
Approach
Voluntary grouping or
individual households
Geographic clustering
Accelerated clustering
around anchor entities
Business
Process
No value-chain
characteristics
Mainly simplified
horizontal linkages
Horizontal clusters on
the vertical value chains
(value add process)
Geography
Several interviews were also conducted with some researchers and contacts from these institutions to
further understand their role and the way research and development functions for the sector. Topics
included cultivating, reproduction, production techniques, harvest and processing technologies, chemistry
and product development. (See appendix for table of documents). The research was useful in identifying
a history and fairly recent capacity within the sector for research and development. It also points out the
fact that these researchers and entities are less connected to other research globally and regionally (from
Russia and China as well). (see appendix for summary points of institutional roles and challenges).
Research was included as a result of interviews early on with businesses and other stakeholders as they
identified lack of research and development as a major issue on the decline. It was also noted that
businesses with personal connections to research and development institutes, universities or training
centers were most able to capitalize on information and knowledge generated. Information overall does
not appear to disseminate efficiently or effectively from institutes to businesses. Very little new research is
coming out of these institutions as a result of lack of funding and the dissolution in many cases of the
strong contacts and relationships that existed previously with Russia pre 1990. Overall, this issue around
a connected research and development system to private producer and processor businesses is an
important one but is a system not yet worked out in this new market based economy.
Funding mechanisms have changed and pre-existing dissemination methods seem to no longer be
functioning as many businesses reported a lack of knowledge about available technologies and know how
about various sea buckthorn topics. As noted, while this information may be somewhat outdated, if these
institutions and individual research was connected and exposed to global best practices and current
developments, it is clear effort would also need to go into strengthening the institutional dissemination and
awareness mechanisms, something that could happen through the new business associations evolving in
Ulaanbaatar and Uvs.
Wild Sea buckthorn
The primary data used was from the UNDP Altai Sayan commissioned Hovd Soum (Uvs Aimag) Wild Sea
buckthorn Reserve Study in August 2007. This detailed study aimed to document the varietals, quantities
and prospective production levels of Wild Sea Buckthorn in one of five soums that is known for Wild Sea
buckthorn and in the Altai Sayan Region. A second soum was also studied though findings have not yet
been reported. The information is useful in understanding the amounts of wild sea buckthorn that exist as
well as
10
Ulaanbaatar
28350
Other aimags
26200
Locally
Businesses
300
Individuals
10200
Total 2005
2006
Quantity
64050
Ulaanbaatar
8300
Other aimags
15000
11
Businesses
2400
Individuals
6800
Total 2006
2007
32500
Ulaanbaatar
12300
Other aimags
23900
Locally
Businesses
Individuals
Total 2007
15600
51800
Approximately 45% of sapling growers noted that they planned to expand sapling production and start
producing fruit bearing bushes of there own. Another 30% planned to get out of sapling production and to
shift towards their own bush production for fruits. These businesses reported having 82.2 million MNM to
invest in this expansion and felt they needed another 34.5 million MNM to expand to the scale they
desired.
Prices for saplings have risen considerably in Ulaangom from 600 to 700 MNM per sapling in 2005 to now
1200 to 1500 MNM per sapling in 2007. It was unclear if prices varied for female and male bushes though
most businesses separated these out.
(Insert NEW tables)XXX
Production and Harvest
One of the most unique characteristics of sea buckthorn is that it takes usually 3 years before the bush
will bear its first fruit. Therefore, there is high investment up front with basically no returns until years later.
However, input investment is fairly low cost aside from time spent watering and caring for the bushes. It is
important to plant the trees properly and in an appropriate female to male ratio to maximize berry yields.
There are a range of different recommended planting procedures now including 1:10 male to females,
2:8, etc. Agreement tends to be around 1:10 and efforts to standardize and make recommendation on
best practices would help substantially.
Quality single variety seedlings/ saplings are highly valued as they achieve the best quality berries and
yields. There are approximately X varietals some known for being sweeter, oilier, different in color
(ranging from yellow orange red. Native varietals are known for being oilier but also often smaller.
Harvesting is all done by hand in the Western Region. Temporary labor is hired usually for 2-4 weeks at a
time to assist in this process. Most producers harvest over 2-3 weeks in September while a select few in
Uvs aimag also harvest in December. The December harvest is possible only in Uvs because the
temperatures drop low enough to ensure full freezing of the berries at their maximum ripeness. Many
places in Uvs however do not wait until December largely due to damage caused by birds that eat the
berries. It has been
Production and consumption of Seabuckthorn in Mongolia
As of 1974, in Mongolia, wild seabuckthorn grew in 30.0 thousand hectare area and harvested 7000 tons
of seabuckthorn berry annually. However, between 1991 and 1993, harvest amount was reduced to 300500 tons of seabuckthorn berry annually. Especially, lately, seabuckthorn cultivated area has decreased
10 times or more as seabuckthorn plantations are damaged under the name of seabuckthorn harvest,
especially harvesting seabuckthorn by illegal human activities such as damaging and breaking
seabuckthorn trees and its branches during harvest and burning of natural seabuckthorn bushes,
livestock grazing and flooding etc. One evidence of this is disappearance of seabuckthorn areas of
12
1
2
3
4
5
6
7
8
9
10
Uvs
Batsumber of Tov
aimag
Ulaanbaatar
Khentii
Bulgan of Khovd
aimag
Khalkhgol of
Dornod aimag
Shaamar of Selenge
Dorvoljin of Zavkhan
Gangar LLC of UB
(Kharkhorin of
Uvurhangai)
Bogd of
Bayanhongor
Total
1988
Area
Harvest
(hectare)
(MT)
200
333
2000
Area
Harvest
(hectare)
(MT)
6
10
2007
Area
Harvest
(hectare)
(MT)
84
80.0
10
6.0
46
40.0
2
2
3.0
-
30
-
40.0
-
52
3.0
50.0
2.0
6.0
10.0
5.0
3.0
3.0
2.0
20
2
30.0
3.0
3
-
6.0
-
40.0
8.0
40.0
5.0
70.0
10
257
400
39
50
316
224
UFC (oral communication) sets the production in Uvs and nationwide at the same level (around 80 MT
and 220 MT of raw berries respectively). As UFC also imports raw berries for processing from Russia
(around 160 MT per year), they estimate total processing in Mongolia (including imports) at around 380
MT per year.
13
14
According to the above graphic, by 2000, cultivated seabuckthorn area has reduced only to 39 hectare in
national level. In other words, total seabuckthorn cultivated area has been decreased by 6.6 times and
harvest amount decreased by 8 times. However, since 2000, Mongolian people and businesses started to
realize benefit of seabuckthorn and have been intensively planting seabuckthorn during last 7-8 years. In
next few years, seabuckthorn cultivated area may reach up to 4000 hectare. Along with this growth,
seabuckthorn processing has improved and production of various seabuckthorn products such as drinks,
juice, syrup, jam, jelly, mixture, oil has increased. Also started to import natural seabuckthorn and
cultivated sapling from Russia in large quantities. Main seabuckthorn production is done and sold in
Ulaanbaatar. 70% of all seabuckthorn products are sold in Ulaanbaatar and remaining 30% is sold in Uvs,
Hovd, Gobi-Altai, Zavhan, Selenge aimags. During last 8 years, Mongolia had potential to process 1.0
thousand tons of seabuckthorn. This needs to be increased every year. For this, Mongolia needs to
harvest 13.0 thousand tons of seabuckthorn and produce 2.0 thousand tons of pure seabuckthorn oil and
7.8 thousand tons of pure seabuckthorn juice and other seabuckthorn products. Current seabuckthorn
plantation area should be increased 10-12 times in order to produce these amounts of seabuckthorn
products within next 10 year.
National and international demand and need for Seabuckthorn
National demand is not easily quantifiable. There is a lot of rumor of mayor investments (ranging from
establishing 500 ha in Uvs aimag to a multi billion MNT investment in Tuv aimag. National demand was
estimated between 7,000 MT by Dr. Ochirbat (oral communication) to over 22,000 MT by UFC (oral
communication). Even if this represents a very large gap in estimated demand of Seabuckthorn products even the lowest estimate is still many times higher than current production and would indicate a growth
potential.
Many countries of the world are interested to buy and grow seabuckthorn lately. Especially, China is very
interested in seabuckthorn and it is grown seabuckthorn 1400.0 thousand hectare area in Northern China
and Inner Mongolian Autonomous Region in order to stop desertification and soil erosion. Now, there are
2 large plants and 200 smaller plants each can produce 5000 tons of seabuckthorn in China.
Also, lately, Japan is very interested to buy and grow seabuckthorn. Our country is collaborating with
Japan in testing seabuckthorn in Japan and cooperating in any possible way. Currently, there are 3-5.0
hectare area of seabuckthorn in Japan. Seabuckthorn oil and syrop are being exported to Japan in small
quantities. However, annual need for seabuckthorn products in Japan is enourmous. Mongolia is in no
position to meet this demand. In order to meet this enormous need for seabuckthorn in Japan, Mongolia
needs to implement separate projects.
15
Total
(MNT)
37,800
21,000
1,500,000
1,250,000
58,000
20,000
2,886,800
Table no.3 Cost associated with mature seabuckthorn field (5 th year after plantation)
Unit Cost
Total
No
Description of cost
Unit
Qty
(MNT)
(MNT)
1 Mechanical maintenance (4 times)
Litre
72
1400
100,800
2 Manual work
Man/day
130
5000
650,000
Month
3 Other costs
12
100000
1,200,000
4 Cost of harvesting the berries
g
5000
800
4,000,000
TOTAL COSTS
5,950,800
Income
kg
5000
1500
7,500,000
Profit
1,549,200
Processing
The next major step, which adds value to the product, is processing. Juice and oil processing is done in
one of several ways depending on the level of investment and scale of the operation of this business.
Most businesses make both since pulp can first be expressed for juice and then the seeds and skin
remains later pressed for oil. Oil from settled pressed pulp also tends to rise and can be skimmed off as
well. Oil contents vary between the pressed and skimmed pulp but are not marketed any differently in
Mongolia.
The assessment acknowledges that home processing of berries into juice is a market for berries in the
Western Region but the costs and types of processing at this scale were not explored except that it was
usually for personal consumption or in some cases school consumption. Usually, berries are pressed and
then either the juice bottled directly or boiled to prevent fermentation.
Packaging and storage are two important steps that happen alongside processing. Ulaangom College has
a new food laboratory that includes a new bottling machine. Students learn methods for improved bottling
and food safety. Labeling is fairly limited in all but the UFC company in the Western Region and was
identified by most businesses as an area they were interested in working on, along with the overall
presentation of their product through bottling.
16
17
18
Retailers, Consumers
Processing
(Oil and Juice)
Local Business
Development Services
- Lending Institutions
- Crop & Research Institute
- Ulaangom College
- Business Association, Businesses
- Consultants
Production and
Berry Harvest
International,
National, Local
Policy and
Economic
Environment
Inputs
The above picture demonstrates the different levels of the system as well as some core components.
Starting at the base are the inputs, then the production and harvest of sea buckthorn berries, then
processing and ultimately sales to various consumers through markets. At different points along this chain
individuals or businesses come into contact with different business development services when the go to
a bank, purchase equipment or seedlings, seek technical or business advice. All of these players are
important for sea buckthorn. The left hand side
CONSTRAINTS AND OPPORTUNITIES ANALYSIS BY CATEGORY
Technology/
Product
Development
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Constraints
Presence of pests;
Problems with birds and rodents;
Insufficient knowledge of most producers
regarding technology and husbandry
practices;
Quality testing of berries is only available
in UB;
Producers not familiar with concept of
training fee;
Female and male trees not sown in
correct proportions;
Tree varieties are mixed, resulting in
berries of varying industrial quality;
Insufficient good areas where water and
good arable land adequate for SBT growing;
Collection schemes do not consider
sufficient payment for quality,
Deterioration of quality during transport;
Insufficient commercial production of byproducts which could be economically
interesting;
Solutions
1. Train producers on disease
control;
2. Provide disease control services
for producers;
3. Provide information on equipment
for control birds and rodents;
4. Train producers on seabuckthorn
technology and husbandry
practices;
5. Establish small laboratory in Uvs;
6. Introduce a training fee gradually;
7. Train producers on how to
recognize male and female trees;
8. Map suitable seabuckthorn
growing areas in Uvs aimag;
9. Introduce stricter quality control
system during collection with more
price distinction;
10. Improve berry transport;
11. Study use of by-products;
12. Train producers and pickers on
19
Market
Access and
Support
13.
14.
15.
16.
Input supply
strengthening
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
Management/
organization
27.
28.
Policy
regulation
32.
Financing
36.
37.
20
The potential solutions have been grouped according to the possibility to stimulate income growth and the
potential number of beneficiaries involved:
High
19
Medium
11
2; 10; 13; 18
5; 16 (includes 3);
Low
22
Low
6; 23
8; 14; 20; 21;
Medium
High
Number of beneficiaries of the solutions
Research institute;
Low overall demand for these types of analysis combined with high operating costs;
21
Research Institute - participants at the workshop in Uvs identified the Research Institute
as the organizations with most knowledge on the technical side of seabuckthorn production. The
Research Institute is currently not providing "for fee" services and will also have to learn to provide
commercially viable services. As such, it is recommended to provide services on a cost-share bases
through the Research Institute during the current phase of the BB RED program;
Sain Tus NGO. Sain Tus is already providing services on a semi-commercial bases and
Mercy Corps will work with Sain Tus to expand these services to cover general businesses and
administrative areas as well as technical areas where Sain Tus can access the right quality of local
and/or UB consultants.
Motivation for the solution:
Training or service fee aiming for profit in the case of Sain Tus;
Possible obstacles in solutions implementation:
The Research Institute's originated as a state owned company during the socialist period. Since
becoming independent, the Research Institute has delivered extremely valuable services to the
agricultural sector in Western Mongolia and indeed in the whole of Mongolia, focusing on the
provision of seeds and saplings and maintaining the parental strains for seabuckthorn reproduction;
As such, they have been able to generate an income and sustain themselves;
However, cost have tend to be larger than income and they still receive a very small amount of
State funding for their operations;
As a state institution, they cannot access bank loans and have subsequently been unable to
renovate their equipment or invest in modern production techniques. Instead, they rely on donor
funding for investments;
Sain Tus is also receiving funding to provide services for free, this can interfere with a commercial
approach. However, Sain Tus has a strong conviction for the additional sustainability that commercial
service provision brings and will remain interested in providing commercial services where there is a
definite angle compared to state-funded free-of-charge services. This can come through geographic
differentiation, differentiation by subject of quality.
None - The current approach is still very much low input - low output and it is not
conceivable that this service can be delivered as a commercial service. However, with long tern
growth potential, it is felt that this input has to potential to contribute to stimulating investment in the
seabuckthorn sector. As such, it is possible that a catalogue may be produced with full cost recovery
in the future;
Motivation for the solution
This would be done by Mercy Corps as there is not commercial sustainability foreseen;
Possible obstacles in solutions implementation:
None
22
Research Institute;
This is part of the mandate of both organization and they would continue to operation of the
certification scheme once it has been set up. Building understanding around the differences between
a certification scheme and "enforcement of regulations" is crucial for the scheme to be run
successfully in the long term. Initial costs would be covered by Mercy Corps;
Possible obstacles in solutions implementation:
Gather sufficient stakeholders who support this approach. If the certification scheme does not
manage to identify and therefore market the better quality sapling, producers will remain confused
and there will not be an automatic price difference for quality.
Solution 25: Banks provide an appropriate loan product for seabuckthorn producers;
Solution description:
Investments in seabuckthorn production require a long loan period, longer than the current 2 year cap the
banks have imposed to date.
Possible service providers for the solutions implementation:
Formally established Credit Unions or Xas' banks Franchise Credit and Savings
Cooperatives
Motivation for the solution:
Provision of commercial credit
Possible obstacles in solutions implementation:
Bank have not been willing to entertain longer loan periods and may not want to engage in a
discussion on this subject;
The credit system in Mongolia seem to be a bit overheated and the Mongol Bank gave a warming
in March 2008. Acting on this recommendation, banks has limited rural lending which may
influence loan products at aimag and soum level;
Inflation has risen sharply in Mongolia over the first 5 months of 2008 which will tend to make
credit more costly and may make long term credit too expensive considering the potential ROI in
the Seabuckthorn sector.
Mercy Corps
23
None
Considering the very small market for services related to the seabuckthorn market in Uvs - with only
around 60 producers of berries and samplings - it is felt that a traditional business development service
approach is not currently viable for most solutions - the market tends to be too small. In order to produce
change, a combined approach could be implemented, teaching a small number of producers the value of
knowledge and husbandry practices which could then lead to an increase in the number and demand for
business services and thus constitute a more acceptable market opportunity in the near future. For this
reason, Mercy Corps has opted to provide a stronger support to potential service providers in order to
move promote (as of yet) non-commercial service provision. The most promising activities remain the
same as above - with potential to become commercial solutions in the long term.
Additionally, Mercy Corps feels the following solutions should be considered, although it is not very
probable that the will become commercial solutions. However, these solutions will help to provide new
insights to producers and therefore contribute to stimulating a different mind-set with regards to quality
production:
Solution 20 and 21: Organize a study tour to high quality sapling production areas (Russia)m
and to equipment suppliers in China;
Solution description.
As indicated above, local businesses and service providers have not clear understanding of the benefits
better quality inputs (saplings and equipment in this case) can have on the efficiency and economic
returns for the Seabuckthorn sector. It is exactly this lack of understanding which is a main factor
influencing progress in the sector. Accepting that general service provision should be based on a
commercial approach for long term sustainability, it is felt that exposing the producers to different
approaches would be a good way to instill the seeds for change. Exposure to better quality sapling
production in Russia and applied technical solutions for adapted equipment (China) is thought to help
provide more insight to producers. As this would be a one-time activity, the low level of sustainability can
be accepted to promote innovation in the seabuckthorn sector.
Possible service providers for the solutions implementation:
Mercy Corps
Motivation for the solution
Not a commercial solution
Possible obstacles in solutions implementation:
None
Solution 22: Set up a producer based model-farm to show the benefits of medium-input mediumoutput approach;
Solution description.
As indicated above, local businesses and service providers have not clear understanding of the benefits
better quality inputs (saplings and equipment in this case) can have on the efficiency and economic
returns for the Seabuckthorn sector. It is exactly this lack of understanding which is a main factor
influencing progress in the sector. Accepting that general service provision should be based on a
commercial approach for long term sustainability, it is felt that exposing the producers to different
approaches would be a good way to instill the seeds for change. The establishment of a model-farm
based around an on-farm applied research model would be a second way to expose Seabuckthorn
24
Local producer;
Research Institute
Motivation for the solution
Local producer will provide labor for free, but will receive the input and additional production in
change;
Research Institute would lead this initiative as part of their mandate, with costs covered by Mercy
Corps;
Possible obstacles in solutions implementation:
AND
NEXT STEPS
Detailed action plans of partner organizations should be included here - mainly Sain Tus and the
Research Institute. Once these have been included, the VC Assessment has concluded.
RESOURCES AND REFERENCES
References and Bibliography
Sea buckthorn Program in Uvs. 2005. Approved by Resolution 3/5 of Aimag Citizen' Representatives'
Hural on 22 December, 2005. Ulaangom, Mongolia.
G. Bayaraa. 2006. Survey Report on Distribution and Reserve of Wild Sea buckthorn in Khovd Soum,
Uvs Aimag. Uvs Branch of the Research Institute of Plants and Crop Cultivation. Ulaangom, Mongolia.
UNDP Mongolia. 2007. Semi-Annual Progress Report. Community Based Conservation of Biological
Diversity in the Mountain Landscapes of Mongolia's Altai-Sayan Eco-Region. January to June 2007.
MON/04/G41. (Commissioned by UNDP Altai-Sayan Project). Ulaanbaatar, Mongolia.
Ts. Enkh-Amgalan, SDC Mongolia and Sophie Reviron, ETH Switzerland. 2007. Geographic Indications
Presentation. Ulaanbaatar, Mongolia.
Ts. Enkh-Amgalan, SDC Mongolia. October 2006. Summary of the findings on the areas of interventions
of donor projects in the value addition sector and related to it issues in Mongolia. (Courtesy of SDC)
G.Chimed-Ochir. 2007. Review of Scientific and Research Works on Sea buckthorn. Technological Test
and Experimental Center of the University of Science and Technology. (Research Report Commissioned
by Case Study, BB). Ulaanbaatar, Mongolia.
EAN-Seabuck "Establishment of European-Asian Network for the development of strategies to enhance
the sustainable use of Sea Buckthorn". FP& Contract COOP-CT-2005-016106. Finished July 2007.
(Website, Registered to authorize permission of use). Reports, resources, and documents of reference
include:
EAN-Seabuck Flyer
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