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Sea Buckthorn Value Chain Assessment

Sea buckthorn
Value Chain Assessment
Baruun Bus
Western Region Economic Development Project

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Sea Buckthorn Value Chain Assessment


This assessment was made possible through the important contributions of the Mercy Corps Mongolia
Uvs Office including Chimed- Program Representative, Turtogtokh - Program Officer, Gombo Chuluun Admin and Finance Officer, BB RED Coordinator, O. Oyulham and Dominic Graham of Mercy Corps
Mongolia.
The assessment also benefited greatly from information gathered and developed by the Uvs Branch of
Crop and Research Institute, Ch.Ochir of the Technological Test and Experimental Center of the
University of Science and Technology, Uvs Aimag Local Government, Sea buckthorn Producers,
Processors, and other Stakeholders. Thanks also to the Mercy Corps Ulaanbaatar and Aimag Staff in
Hovd, Zavhon and Govi-Altai for assistance in organizing focus groups, collecting relevant data and
providing useful feedback for this assessment.
The Baruun Bus Regional Economic Development Project Phase I is designed to contribute to the
creation of income generation and value added opportunities for the rural herder and urban population for
selected aimags in the western region of Mongolia through integrated local economic development. This
assessment aims to provide important information about coordination with private sector components of
the program.

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TABLE OF CONTENTS
Introduction and Objectives....................................................................................................................
Assessment Approach and Methodology..............................................................................................
Sea buckthorn Sector Selection and Background................................................................................
Sector Identification............................................................................................................................. 5
Characteristics of Sea buckthorn Berries and Bushes........................................................................6
Sea buckthorn Data Collection...............................................................................................................
International Sea buckthorn Findings....................................................................................................
Mongolian Sea buckthorn Donor Environment.....................................................................................
Relevant Mongolian Government Programs and Policies..................................................................10
Mongolian Research Findings.............................................................................................................. 11
Overview Analysis: Western Region Sea buckthorn Value Chain.....................................................12
Inputs and Input Suppliers................................................................................................................ 12
Production and Harvest..................................................................................................................... 14
Processing........................................................................................................................................ 19
Market............................................................................................................................................... 19
Western Aimag Situations................................................................................................................. 19
Value Chain and Market System Maps................................................................................................. 21
Economic Value Addition Analysis....................................................................................................... 22
Constraints and Opportunities Analysis by Category........................................................................23
Information Gaps Identified in the Assessment..................................................................................25
Recommended Action Areas and Next Steps......................................................................................25

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Sea Buckthorn Value Chain Assessment


INTRODUCTION AND OBJECTIVES
The Sea buckthorn Value Chain Assessment aims to

Identify primary actors, roles and inter-relationships


Understand sector markets
Identify supply and demand trends
Understand sector inputs, production/harvest, processing and market systems
Identify constraints and opportunities that promote value chain growth and competitiveness

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

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SEA BUCKTHORN SECTOR SELECTION AND BACKGROUND


Sector Identification
The Sea buckthorn sector was identified for its economic potential and also the Western Regions
geographic competitive advantage in producing this plant. Discussions with local stakeholders, donors,
and input from the National Local Economic Development Conference held the Fall 2007 all factored into
this selection for further investigation. Criteria discussed included unmet demand for the product
domestically as well as potentially internationally, available supply and niche environment, and potential
for income and employment generation at the local level. There was already an established group of Sea
buckthorn growers as well as the presence of both processors and some business development service
providers with experience relevant to the sector (Figure XXX).
Figure X. Sector Identification Matrix

Unmet demand/
Growth Potential

Sea buckthorn

High
Low
Low

Selection Criteria

High

Individual SMSE income


increase potential

Characteristics of Sea buckthorn Berries and Bushes


Sea buckthorn is a product that is known for various it vitamin, mineral and oil contents. It is high in
vitamin C, beta carotene, polyunsaturated fatty acids, polyphenol and other flavones. These nutritional
characteristics have made it a culturally appreciated product in much of the Central and Eastern Asia for
centuries. Now it is receiving increasing attention by European and Western markets. Still today however,
China, Russia and Mongolia are considered to be the largest producers and consumers of these berries
and products derived from them. Canada has in the past decade started producing large quantities.
Sea buckthorn has been used historically as well as currently for its soil and water conservation
properties. It grows well in light sandy soils with a pH between 5.3 and 8.3, conditions which are often not
suitable for other crops or landscaping materials. It is also one of the few nitrogen fixing plants to grow in

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these types of conditions. Most varieties of Sea buckthorn are drought and front resistant as well,
making it ideal for conditions that exist in Western Mongolia.
Sea buckthorn Products and Overview
A variety of products can be made with Sea buckthorn leaves and berries including oil extracts,
sweetened and unsweetened juices, wine and alcohols, sweets such as candies or ice cream or flavored
arruul, tea, jam, cosmetics (shampoos, creams), medicines, and vitamin products. Mongolian produces
primarily oil, juice, wine and some medicinal products such as vitamin syrups and candies (primarily for
vitamin C). Products in the Western Region are focused primarily on juice and oil. International
companies in Japan are most interested in oil for cosmetic products. There are currently some Mongolian
cosmetic markets, which could be new markets and areas for product development. MonCrem in UB
currently uses some sea buckthorn in a shampoo brand. However currently, Uvs and most parts of the
Western Region are not connected to these markets. Markets focus primarily on juice and oil production.
The oil is sold for topical use and/or digestion.
SEA BUCKTHORN DATA COLLECTION
The assessment used existing data from various sources as well as collected original data using both
qualitative and quantitative methods. First, secondary data was collected using an Internet search
focusing primarily on the international context of the sector and market information at a global scale. A
review of available data at the national and local levels was also conducted unfortunately; very minimal
levels of data are collected about this specific berry in Mongolia at the National or Aimag levels. Existing
research reports, government documents, and other studies (such as the Wild Sea buckthorn Research)
were collected from donors, research institutes, businesses, government offices and other stakeholders
involved in the sector.
To complement this secondary data, additional pieces of information were collected using several different
methods. First, a literature review was commissioned by the Baruun Bus project to understand what
research has and is being done in Mongolia related to this sector. Secondly, semi-structured interviews
were done with key stakeholders in Ulaanbaatar, Ulaangom (Uvs Aimag), and Hovd (Hovd Aimag). A total
of 3 focus groups were also held with producers and processors in Ulaangom, Uvs and Hovd, Hovd.
Finally, the Uvs Branch of the Crop and Research Institute conducted a producer and saplings survey in
Ulaangom, Uvs. Mercy Corps Mongolia field offices also contributed important information about current
levels and characteristics of production in Hovd, Govi-Altai, and Zavhan.
Level of Information
International
National
Uvs Aimag
Zavhon Aimag
Hovd Aimag
Govi Altai Aimag

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

INTERNATIONAL SEA BUCKTHORN FINDINGS


Internationally, sea buckthorn is a fairly niche and small market that grows in over 30 countries. Research
identified key organizations, projects, and activities for this sector. The major barrier to accessing these
international resources is language since almost none have resources available in English. Just several
decades ago, Russia was one of the major resource points for technological and sector specific
technology and the strong relationship between Mongolia and Russia facilitated contact with up to date
and ongoing information.
The International Sea buckthorn Association (ISA) began in 2001 (check date). It has over 100
members that come from the private sector as well as some public sector representation. As a fairly new

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organization they are still evolving and growing quite rapidly. ISA hosts conferences and meetings
annually with the most recent one in 2007 in Canada. The next conference is proposed for 2009 in either
China or Russia. The ISA also manages a website which is a clearinghouse of information about
association news, how to join, and current available resources. Again, the website is not available in
Mongolian, rather in English, Chinese, and Russia.
The International Center for Research and Training on Sea buckthorn (ICRTS) was involved in the
creation of the ISA and is the current leading international research and training organization for the
sector. ICRTS is located in China and markets a clear opportunity for research and development
information and training that is in close proximity to Mongolia. The centre also produces and distributes
the International Sea buckthorn Research and Development Journal, the only sector specific peer
reviewed publication of its kind. It is published in Chinese and also English. Review of most recent
English publications shows no evidence of research on sea buckthorn from Mongolia.
Of the many countries producing sea buckthorn, there are two- Nepal and India- that have developed
particularly interesting private and public sector partnerships. In Nepal the Seeds for Prosperity Project
uses sea buckthorn mobile processing to assist small growers in adding value to their product to make oil.
The project also connected these growers to a buyer, a burn unit of a local hospital, who then used the oil
as a skin treatment. This was unique in that the end users were not interested in adding value themselves
as is the case in most
In India, the government has developed a nutritional drink supplement used exclusively by the Indian
Military. This product has a very stable and niche national market that was well connected to up to date
research and development. Government and private sector interest were closely connected facilitating a
very strong policy environment as government support was clearly high and have a vested interest in the
quality and long-term viability of the product. This in turn has created a specialized and unique domestic
market for sea buckthorn, which grows in parts of Northern India.
The third and final major international resource identified was the EAN-Seabuck Project (European Asian
Network). This program recently ended in summer 2007 is aimed at establishing a European Asian
Network for the sustainable utilization of sea buckthorn. The objectives included:

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

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as you register there use at www.ean-seabuck.org . Materials have been translated into several
languages and are now available in German, English, Chinese and Russian.
Survey findings from a recent market oriented survey yielded the best available market segment and price
estimates available for the sector.

MONGOLIAN SEA BUCKTHORN DONOR ENVIRONMENT


There are three donor funded projects currently happening that involve the Sea buckthorn sector in
different ways.
GTZ through a Conservation and Sustainable Management of Natural Resources Program had a
Medicinal and Aromatic Plants (MAP) project that took place in the Western Region and included some
emphasis on Sea buckthorn. Reports indicate most efforts were focused on information gathering to
better understand opportunities in light of present supply and demand in Zavhon where a new. There are
5 major MAP focused companies in UB however it was felt there were fairly substantial challenges and
barriers to further connect growers to meet the product quality specifications. It did raise unmet demand
and potential for income growth however for wild sea buckthorn.
UNDP Altai Sayan Project is a XXX: biodiversity objectives to integrate into productive sector, successful
demonstrate how to integrate biodiversity into international resource management and economic
development practices and planning
Enterprise Mongolia Project: Together with Entrepreneurs is an UNDP funded project implemented
by the Ministry of Industry and Trade. It is focused on promoting niche products with regional, national or
international competitive advantage. One Village One Product (OVOP) is operated out this Project and
includes several sea buckthorn and Western Region products including Salt. This program focuses on
Vertical Product Cluster Development. They also have a Local Cluster Development Initiative that is
designed to support products and services that fill local supply-demand gaps and improve the livelihoods
of regional communities. The third component targets microfinance support.
Figure XXX. UNDP Enterprise Mongolia Project Area Overviews (Annual Report 2008)
MF (MIGA)

LCDI

OVOP

Target

Lowest to Lowincome individuals


and households in 3
aimags

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

BDS and Microfinance

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

ZA, BH, HU, TU

SE, HO, HE, UH, UB

ZA, SE, HE, UH, UB,


BU, UV, HU

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RELEVANT MONGOLIAN GOVERNMENT PROGRAMS AND POLICIES
Uvs Sea buckthorn Program (Western Region)
Several years ago, a program was developed in the Uvs Aimag to promote the production and sales of
sea buckthorn for income generation and poverty alleviation in the aimag. This program was established
to utilize the natural resource in the aimag and its regional competitive advantage. This clearly insightful
idea is now becoming an example of perhaps misguided yet good intentions. The same program has now
been approved in 5 western aimags now (names unconfirmed but presumably Hovd, Zavhon, BayanUlgii, and Gobi Altai). The program has purchased approximately 120,000 seedlings to be dispersed to
approximately 100 poor households. These were purchased from Russia at approximately 2 USD each
(totally 240,000 USD). Each household has received one training prior to the getting the plants and will
receive one more once they have been distributed. According to the local citizen horal leader and founder
of the program, households were also selected based on some prior agricultural experience and decent
land (primarily on the outskirts of Ulaangom). Poor households are expected to invest and care for these
plants for the first 3 years and then will benefit solely from the sales of berries harvested. The concept is
a noble one though the viability of this strategy in the long term has been brought into question especially
in light of pest issues and the overall lack of training and support for these new crops. Households are
expected to start receiving the plants this May 2008. The local government budget has also been
approved for the construction of a processing facility in Ulaangom. Details are not yet clear about how this
will work but it could undermine the competitiveness of several processors in the area depending in how it
is rolled out.
Government Data
In meeting with a representative at the Ministry of Agriculture, it was determined the best available data
collected about sea buckthorn was included in national berry production. However, caveats were made
that this also included blueberries, currants, sea buckthorn and some others and it was impossible to get
a break down by region or by product. Production estimates below all came from primary and secondary
other sources. Efforts to improve the availability of the data
Mongolian Standards
There are four major standards that have been developed for Sea buckthorn in Mongolia. Three are for
processed products (juice, oil, and syrup) and one is for sapling/bush production. They were developed
during the early to mid 1990s. These standards have been established to protect businesses and
consumers and promote the production of safe and quality products in Mongolia. Enforcement of
standards and the rigor of the standards were both deemed low by various stakeholders. Businesses all
reported compliance and regular testing with no one reporting major issues around these. The standards
around the production of Sea buckthorn were the least well known and effect the most number of small
and medium size producers. Local level authorities and producers expressed animosity during
stakeholder meetings as their relationship tends not to be a very strong and yet the standards are in place
to support healthy and well cared for crops.
Sea buckthorn producers and processors businesses interact frequently with the tax office, land office,
and local standards offices regarding compliance, certification and registration of their property and
business entity. These are all potential entry points for program private and public partnership activities to
promote local economic development.
Mongolian Business Associations and Events
Recently (September 2007) the Mongolian National Chamber of Commerce and Industry along with Zoos
Bank hosted a Mongolian Brand Sea buckthorn conference in Ulaanbaatar to bring together various
interests and discuss market potential for Sea buckthorn. It was around this same time that a new
national Sea buckthorn Association was established, replacing the previous one due to its inactivity and
poor functioning. The new association is still new but garners government support as well as several UB
based stakeholder businesses, research institutes and others.
There is also an Us Sea buckthorn Business Association that has been established fairly informally in
Uvs. There is interest and discussion around starting a new NGO that will function as a membership

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organization and represent Uvs aimag nationally and internationally. It is difficult to say what exactly there
relationship is or will be to the National Association but it could be useful to function as a chapter rather
than a separate entity however that is not the plan since there is concern that information will not make it
past the national level organization in UB. Stakeholders are interested in developing a strong and
functioning local business association, which is an encouraging initial step. There are several leading
people in the aimag championing sea buckthorn however, it is not clear who in fact would lead this
organization and what the organizational or funding structure would look like.
MONGOLIAN RESEARCH FINDINGS
Literature Review
Chimed Ochir, director of the Technological Test an Experimental Center of the University of Science and
Technology conducted a literature review of 34 documents from 18 leading Mongolian and Russian
researchers or representatives from several key institutions and two businesses including

Chemistry and chemical technological institute of the Mongolian Academy of Sciences


Research institute of Agricultural Science under Mongolian Agricultural University in Darkhan
National University of Mongolia
University of Science and Technology
Mongolian Agricultural University
Vitafit LLC
Gangar Invest LLC
Food Tech

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

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Sea Buckthorn Value Chain Assessment

OVERVIEW ANALYSIS: WESTERN REGION SEA BUCKTHORN VALUE CHAIN


Inputs and Input Suppliers
Cultivated sea buckthorn requires several important inputs including quality seedlings or saplings,
consistent water, natural fertilizers and protection from small animals and birds. Recently there is growing
interest in pesticides however these are currently minimally used. Quality seedlings tend to come from the
following sources:
The plant grows best along rivers or near water sources. Currently there are some low input irrigation
canals being used by small plantations. People do not usually pay for water or include this in their input
costs. Growers often use natural fertilizers on there soil and do not pay for these either. It is possible they
barter or receive these for free from local farms. There is growing interest, especially in larger scale
farming about the use of commercial fertilizers.
Currently, there is increasing concern about the negative impact of the sea buckthorn fly on sea buckthorn
production. Traditionally, growers do not use pesticides of any kind and are not well equipped with pest
prevention knowledge. There is concern about the effect of this pest on production levels and berry
quality. Recent interviews with growers of saplings and sea buckthorn bushes reported interest in
addressing this problem and also a willingness to pay a small fee for this assistance. It was difficult to
estimate how much given currently, there is no local provider of such information. Most people get
cultivation assistance or information from the local branch of the Crop and Research Institute however no
one knows how to deal with this pest issue.
According to the data from the UNDP wild sea buckthorn survey, wild varieties require even more limited
inputs. Most of the area is mixed growth with low sea buckthorn bush density that is unfenced. Small
portions of the land (less than 10%) are fenced in. Depending on the type of fencing, this costs
approximately, (check interviews) per hectare. Basic maintenance costs are low though time is required
to check and maintain proper growth.
Sea buckthorn Sapling Producer Survey in Ulaangom
Twenty sapling growers were surveyed in Ulaangom by the Local Branch of the Crop and Research
Institute to identify constraints and also current data about inputs for Sea buckthorn.
Findings found that there was a lack of well-trained growers and employees. Also, lack of water was
reported to be an issue for approximately 60% of sapling growers. Of the 89 people reported working for
the 20 different sapling producers, only approximately 1/3 received any training. Saplings growers
produced 51,800 saplings in the past year up significantly from 2006 but just below production in 2005
(see Figure X). Sapling sales to Ulaanbaatar have been decreasing however and more are going to other
aimags and staying locally.
Figure XXX. Sapling Production and sales from Ulaangom Sapling Producers
Year
Where
2005

Ulaanbaatar

28350

Other aimags

26200

Locally

Businesses

300

Individuals

10200

Total 2005
2006

Quantity

64050
Ulaanbaatar

8300

Other aimags

15000

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Sea Buckthorn Value Chain Assessment


Locally

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

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Orkhon, Selenge basin, Ohindi Valley and along Orkhon river of Selenge aimag and Zavkhan river in
Dorvoljin soum and Borkh river and Aldarkhan soum of Zavkhan aimag. Also discovered that
Seabuckthorn areas along Tes river of Uvs aimag and Khovd river and Bohmorin river.
Besides using natural seabuckthorn, Mongolians (Especially Mr.B.Laagan) made significant effort to
cultivate seabuckthorn starting 1963.As result of these efforts, as of 1988, agricultural research institute
with 300 hectare area with cultivated seabuckthorn in Ulaangom and 100 hectare area with cultivated
seabuckthorn in Bulgan Agricultural research institute in Khovd aimag and Bee research institute in
Batsumber soum and agricultural research institutes in Darkhan, Khalkh-Gol and seabuckthorn
plantations in Biger soum of Gobi-Altai aimag and some areas of Selenge aimag emerged.However,
these have disappeared now. Main reason for this is privatization of these entities to wrong people who
have inadequate knowledge and skill about seabuckthorn. As of 1988, cultivated seabuckthorn was
growing in 500 hectare area and by 2000, the area reduced into no more 10 hectare. However, by 2001,
seabuckthorn growing has picked up again and new investments are made to establish seabuckthorn
sapling and berry production areas. Around 36 hectare area to seabuckthorn plantation was established
in Batsumber soum of Tov aimag and 90 ha of seabuckthorn in Kharkhorin soum of Uvurhangai aimag in
2007 with the potential to expand with an additional 200 ha area in 2008 and 3000 ha area eventually.
Also, there are 52 hectare area in Ulziit district and Bohog area of Ulaanbaatar and 10 hectare area in
Partizan, 3 hectare area in Baganuur and total 10 hectare area in Batsumber soum of Tov aimag and 5.0
hectare area in Jargalant soum and total 40 hectare area in Shaamar, Zuunburen, Tsagaantolgoi, Zelter
soums of Selenge aimag and 4 hectare area in Agricultural Research Institute of Uvs aimag and 30
hectare area of ordinary local residents and 50 hectare area of Uvs Food company and 8.0 hectare area
in Dorvoljin soum of Zavkhan aimag and 10 hectare area in Khovd aimag which grows seabuckthorn.
Currently, Gangar Invest LLC has capacity to prepare 300.0-500.0 thousand saplings and Agricultural
Research institute of Ulaangom of Uvs aimag has capacity to prepare 30.0 thousand saplings annually.
Figure XXX:

Status of seabuckthorn plantation and harvest (As of May 20, 2008.5)


Aimag

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.

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Sea Buckthorn Value Chain Assessment

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Sea Buckthorn Value Chain Assessment


Graphic 1: Cultivated Seabuckthorn and its harvest

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.

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Sea Buckthorn Value Chain Assessment


Also,Federal Republic of Germany are interested to buy seabuckthorn products from Mongolia and
cooperate in this field. In Germany, natural seabuckthorn grows in sea coastal areas and it has several
seabuckthorn processing plants and developed several varieties of cultivated seabuckthorn.
One main approach for us to develop is to make seabuckthorn as strategically important plant of
Mongolia.
Cost and profitability of growing seabuckthorn in one hectare area
I have estimated profitability of growing seabuckthorn in one hectare area from economic standpoint of
view. In table no.2 shown cost breakdown such as price of sapling, cost cultivation of soil, irrigation and
protection associated with growing seabuckthorn in one hectare area.
Table no.2 Annual cost of establishing seabuckthorn in one hectare area (2008)
Unit Cost
No
Description of cost
Unit
Qty
(MNT)
Ploughing of land
1
L
27
1400
Tilling
2
L
15
1400
Price of sapling
3
Ea
1250
1200
Manual work
5
Man/day
250
5000
Cost of transporting sapling
6
Tugrig/km
100
580
12 Pesticide
ha
1
20000
Total

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.

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Sea Buckthorn Value Chain Assessment


Market
Sea buckthorn grown in the Western Region is primarily sold as raw berries, juice or oil within the aimag it
is grown in or at regional and national markets within Mongolia. Prices range from X to X for juice, X to X
for oil, and between 1100-2200 for berries. Variation in prices occurs for quality as well as location and
specific market sales points. Raw berries are sold at local soum, aimag, and UB markets. Most berries
are sold directly to processors through verbal contracts by producers in the aimag centers or through
middlemen who bring berries (usually wild though can be cultivated) to the processors for sale. Local
markets are a major venue for both processed and raw products. School lunch programs in soums as
well as in aimag centers were common direct markets for processors identified in all aimags in the
assessment area. More attention to these markets could be good for not only the businesses but also the
school children.
Berries are sold primarily directly to processors as mentioned earlier and the major one in Uvs being
UFC.
There is interest internationally by Japanese experts and companies for Uvs Sea buckthorn oil. This is the
second year one company is selling the oil to a Japanese cosmetic company, evidence that the first sales
were well received. This years purchases are much larger than other the previous years. The company
was unable to fully meet the demand desired by the company so was told recently that the Japanese firm
was expanding the companies it was purchasing from.
Western Aimag Situations
As mentioned previously, the assessment covered 4 aimags of the Western Region including Gobi Altai,
Hovd, Zavhon, and Uvs. Each had different characteristics, levels and types of sea
buckthorn production. Overall, Uvs had the highest production, the most developed local
business development service provision services and potential, as well as the most
established processors and businesses as a whole for sea buckthorn. There are of course
exceptions and there are some unique value chain opportunities in each.
Zavhan Aimag
Sea buckthorn in Zavhon aimag is primarily located in 3 soums (Durvuljin, Aldarkhaan, and Tes) and is
primarily wild. Cultivated plant production is small and in early stages mostly. In Durvuljin there are 7
partnerships that have been developed that have taken responsibility for protection, cultivation and
restoration of sea buckthorn in the wild. Accurate production information was not available. It is known
that significant work was undertaken here with GTZ and more follow up could provide additional
information. The aimag government supports sector production and development as they just approved
the Uvs Sea buckthorn program for their aimag in 2007. It is unclear the status of its implementation or
any plans for progress to implement such activities.
Gobi Altai Aimag
There are 4 entities growing sea buckthorn in 4 soums over 28.2 hectares of mostly wild but also some
cultivated sea buckthorn. Wild sea buckthorn harvests are estimated at 800 to 1000 kgs per household
though it is unclear how many households harvest in these soums. Most of the berries harvested are
supplied to local markets and processors in the aimag center. There are currently no donor-funded
projects in this aimag explicitly supporting the sector in any way as most entities are small with 1 large
entity accounting for most of the land area. The aimag government has also approved the Uvs Aimag
Sea buckthorn Program.
Hovd Aimag
There are 7 producers of cultivated sea buckthorn in 2 soums (5 cooperatives and 2 LLCs). Combined
these producers have approximately 13.8 hectares and in 2006 harvested close to 10 tons of sea
buckthorn. Currently production is expanding through an aimag reforestation fund that has been planting
in 2 additional soums and expected to continue into new areas. The first business was established as
early as 1978 in the aimag though cultivation began more in earnest in the early and mid 1990s. The

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Sea Buckthorn Value Chain Assessment


most recent producer began in 2007. Production areas range from .3 to 4 hectares each in size. Crop
yields will increase as many of these newly planted bushes mature in the coming years.
VALUE CHAIN AND MARKET SYSTEM MAPS
Figure XXX. Value Chain Map of Sea buckthorn Sector (Emphasis on Uvs Aimag)

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Sea Buckthorn Value Chain Assessment


Figure X. Overview of Basic Market System Components

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;

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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

Sea Buckthorn Value Chain Assessment


12.

Picking techniques damage bushes;

Market
Access and
Support

13.
14.
15.
16.

National demand growth uncertain;


International demand stagnant;
Little organized publicity;
No coordinated positioning of Mongolian
SBT;

13. Realize a more comprehensive


market study;
14. Initiate a workgroup of SBT
producers and processors to share
information;

Input supply
strengthening

17.

Very weak service delivery for training


and technical assistance;
Insufficient information available about
equipments, prices, where equipment can be
purchased;
Insufficient good quality saplings for sale;
Producers cannot recognize good quality
saplings - either from variety or sex;
Trend towards more chemical inputs
(pest control) which may contravene export
opportunities (based around ecological
products);
Equipment too expensive;
Equipment not locally available;
Producers use a low-input low-output
approach which may negatively influence
quality;
Producers avoid paying for inputs (water
and organic fertilizer);
3-year time lag between planting saplings
and harvesting berries;

15. Deliver better quality services


commercial and demand driven;
16. Prepare an equipment catalogue;
17. Train producers on quality
aspects of saplings;
18. Regulate sapling production and
implement current standards;
19. Establish a certification system
for quality saplings;
20. Set up a producer based modelfarm to show the benefits of
medium-input medium-output
approach;

18.
19.
20.
21.

22.
23.
24.
25.
26.

correct harvesting techniques;

Management/
organization

27.
28.

Producer / processor links very weak,


Access to and control over wild SBT area
by local communities uncertain;
29.
Little alliances between businesses are
established;
30.
Research institutes are under-funded and
do not produce much adapted research;
31.
Potentially large growth in number of
small producers coupled with processor
moving into an integrated value chain could
limit small producer bargaining power

21. Give ownership with legal


enforcement to local
communities;
22. Establish a working group;

Policy
regulation

32.

Insufficient data available on national


production;
33.
Government role in SBT development not
agreed with the private sector;
34.
Standards regarding SBT production are
unclear;
35.
Licenses for land and SBT production

23. Include seabuckthorn in the NSO


data collection;
24. Train producers on standards;

Financing

36.
37.

25. Banks provide an appropriate


loan product for seabuckthorn
producers;
26. Provide additional cash
collateral;

Long initial investment period;


Producers have insufficient access to
financial resources for investment;
38.
Small producers have low amount of
collateral to secure bank loan;
39.
High interest rates;

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Sea Buckthorn Value Chain Assessment

Possibilities of income growth

The potential solutions have been grouped according to the possibility to stimulate income growth and the
potential number of beneficiaries involved:

High

19

15 (includes 1, 4, 7, 12, 17,


24); 25; 26

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

ANALYSIS OF THE SOLUTIONS


In more general terms, the main reasons why business services are currently provided very limited and
often in a non-commercial way all relate to the same basic elements, which are:
The seabuckthorn value chain is a interesting opportunity for those involved, but is still a very
small sector with around 60 producers (including sapling and berry producers). This constitutes a
very small market for any service provider, which would seem to imply that specialized services
are not economically viable;
Producers opt for a low-input low-output approach and therefore exclude any payments for
services as a viable option;

Solution 5: Establish small laboratory in Uvs;


Solution description:
Currently, there is no laboratory capacity to make analysis on berry quality, seabuckthorn diseases or soil
quality. The establishment of a small laboratory would allow harnessing available local capacity for this
service. The solution would be sustainable if demand for these three types of analysis (income) would
equal the delivery cost;
Possible service providers for the solutions implementation:

Research institute;

Uvs Food company


Motivation for the solution:

Research institute - cost recovery as this is a para-statal institute;

Uvs Food company - embedded service partially offered on a for-fee basis;


Possible obstacles in solutions implementation:

Low overall demand for these types of analysis combined with high operating costs;

Low esteem for quality production;

For-fee provision of this service is questionable;

Solution 15 (includes 1, 4, 7, 12, 17 and 24):

Deliver better quality services


commercial and demand driven;
Solution description:
Access to knowledge and information is a frequent recurring problem, with businesses having a wide
range of demand for management, business and technical aspects of seabuckthorn production. A local

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Sea Buckthorn Value Chain Assessment


service provider would be able to satisfy the demand. However, due to the limited market (around 60
businesses) and the absence of "for fee" services, any action to improve commercial service delivery will
have to be introduced slowly, focusing on quality service delivery with businesses slowly learning the
economic value of the services offered. This has already been started under the BB RED program with
some businesses paying for better quality services rather than attending "free" service, but there is still a
long way to go. The preferred solution would be modeled around Mercy Corps' approach to BDS support
as has been already trialed in other aimags.
Possible service providers for the solutions implementation:

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:

Cost recovery - cost recovery as this is a para-statal institute;

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.

Solution 16: Prepare an equipment catalogue;


Solution description:
Local businesses have indicated that they lack specific information where they can get information about
equipment, ranging from drip irrigation to small tractors. An equipment catalogue would be able to satisfy
this demand.
Possible service providers for the solutions implementation:

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

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Sea Buckthorn Value Chain Assessment

Solution 19: Establish a certification system for quality saplings;


Solution description:
Sapling producers do not adhere to minimum quality standards for the production of saplings. Producers
are not able to recognize quality differences. Saplings are produced from any kind of parental source, not
controlled for quality. The general approach seems to be to "regulate" these sapling producers, which has
been ineffective over the past years. In stead, a more flexible approach could be envisioned with a
certification system for sapling producers who adhere to minimum standards. With a certification system
in place, a price for quality difference could be promoted with would stimulate all sapling producers to
move towards a better quality sapling.
Possible service providers for the solutions implementation:

Research Institute;

Institute for Standards and Measurements;


Motivation for the solution:

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:

All commercially operating banks in Uvs aimag;

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.

Solution 26: Provide additional cash collateral;


Solution description.
Herder households and rural businesses have very limited fixed assets. Banks have accepted moveable
assets but have severely reduced their value, in effect limiting the loan size businesses have access to.
Mercy Corps has established a Loan Guarantee Mechanism (LGM) under its USDA-funded Rural
Agribusiness Support Program which provides additional cash collateral to rural businesses and herder
household who lack sufficient own collateral in order to access the required loan size.
Possible service providers for the solutions implementation:

Mercy Corps

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Sea Buckthorn Value Chain Assessment


Motivation for the solution
Loan collateral will be provided as part of the business development services Mercy Corps has
established in Mongolia. Long term sustainability can be reached through a change in the bank
appraisal of moveable collateral, based on increasing awareness of the creditworthiness of rural
lenders.
Possible obstacles in solutions implementation:

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

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Sea Buckthorn Value Chain Assessment


producers to a different production system. The model farm would apply a more scientific approach on
part of its production, recording inputs and outputs carefully. At the end of the growing season, a carefull
comparison would be made on based on technical and economic indicators (quality, increase in
production, sales, etc.) This model farm would have to be based on a "real" farm in order for other
producers to see how changes can affect them directly. If this model farm would be based on the
Research Institute, it will lose a large part of the "argument" that improvements can be made by small
producers. The Research Institute would be involved to define the improved production system (based on
an economic assessment and feasibility study) and would help collect the data to compare the changes in
inputs and outputs.
Possible service providers for the solutions implementation:

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:

Willingness of local producers to participate

RECOMMENDED ACTION AREAS

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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Sea Buckthorn Value Chain Assessment


Final Assessment Report
Report on Required Product Quality and Safety Standards
Research and Policy Recommendations
Lists of Key Actors and Stakeholders
Catalogue of Selected Best Available Technologies
Training Modules and Handbooks for
a) Cultivation and Harvesting
b) Processing
c) Product Development
d) Quality and Safety Management
e) Marketing and Commercialization
D.Badgaa and Ya.Jamyansuren. 2006. Mongolian Standards for Sea Buck-thorn Oil. MNS 0783:88.
Official Edition. National Center for Standard and Metrology developed by Chemical Institute of the
Academy of Sciences. Approved by the Ministry of Agriculture and Food Production Decree no. 346 of the
Head of the State Standard Agency of the Council of Ministers, 16 December 1988, into effect January 1,
1989. Ulaanbaatar, Mongolia.
Sh. Tsendsuren and B.Algaa. 2006. Mongolian Standards for Sea Buckthorn Fruit Juice. MNS 0664:88.
Official Edition. National Center for Standard and Metrology developed by Pharmaceutical factory under
State Medicinal Supply and Production Agency. Approved by decree no.212 of State Standard Agency
into effect September 1, 1988. Ulaanbaatar, Mongolia.
Sh. Tsendsuren and B.Algaa. 2006. Mongolian Standards for Multi-vitamin Sea buckthorn Syrup. MNS
4873-99. Official Edition. National Center for Standards and Metreology developed by Pharmaceutical
factory under State Medicinal Supply and Production Agency. Approved by decree no. 64 of the Council of
the National Center for Standards and Metrology on 25 November, 1999 into effect from Dec 1, 1999.
Ulaanbaatar, Mongolia.
Uvs Food Company (UFC). 2007. Sea buckthorn Plantation and Processing Plant Project Proposal for
ADB Loan. (Edited version courtesy of UFC). Ulaanbaatar, Mongolia.
Mongolian Brand- Sea buckthorn National Conference Agenda. 2007. Co-organized by Mongolian
Chamber of Commerce and Zoos Bank in Ulaanbaatar, Mongolia. 26 September, 2007 (Pamphlet and
some presentation info gained during information)
V. Tsogt-Ochir. 2007. Enterprise Mongolia Project: Together with Entrepreneurs. Annual report. JanuaryDecember 2007. www.enterprisemongolia.mn
Avdai, Ch. Current situation of seabuckthorn research, production of Mongolia and its future perspective
Seabuckthorn-2005.UB, page 6-13
Dejidkhuu, Kh.Outcome of experiement of planting seabuckthorn in western region of Baga Khentii using
industrial method, Seabuckthorn-2005, UB.Page 59-60
Laagan B. Growing seabuckthorn in Mongolia, Barnaul, 1976, page 35.
Ochirbat.G, Using biology and ecological aspect of seabuckthorn (Hipphophae rhamnoides L.) in
combating against desertification and soil erosion Seabuckthorn-2005, page 61-66.
Ochirbat.G, Seabuckthorn breeding UB, 2008, page 20
Tsendeekhuu Ts.Dynamics and localization of various organs of seabuckthorn Thesis of PhD for
Biological Science, UB, page 107
Websites Referenced:

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Sea Buckthorn Value Chain Assessment


International Sea buckthorn Association, International Center for Research and Training on Sea
buckthorn. http://www.icrts.org/
Global Facilitation Unit for Underutilized Species: Sea buckthorn
http://www.underutilized-species.org/species/species_details.asp?id=287
Influence of Harvest Time on the Quality of Oil-Based Compounds in Sea Buckthorn (Hippophae
rhamnoides L. ssp. sinensis) Seed and Fruit Susan D. St. George and Stefan Cenkowski
http://pubs.acs.org/cgi-bin/abstract.cgi/jafcau/asap/abs/jf070772f.html
2003-07-11 | Volume 16 Number 13 | ISSN 1494-1805 | AAFC No. 2081/E
Canada:
Sea
buckthorn.
http://www.agr.gc.ca/mad-dam/index_e.php?
s1=pubs&s2=bi&s3=php&page=bulletin_16_13_2003-07-11

Value Chain Works Consulted:


Action for Enterprise Methodology Training Materials on Value Chain Analysis.
SDC Mongolia. 2006. Income Generation within the "Swiss Cooperation Strategy for Mongolia 20072012" Guiding Principles. Draft 06.11.2006.
SDC. 2007. Donor Interventions in Value Chain Development Working Paper. Community of Practice on
Value Chains in Rural Development finances by SDC Berne, July 2007.
Hitchens R, Elliot D, Gibson A. 2004. Making Business Service Markets Work for the Poor in Rural Areas:
A Review of Experiences. Springfield Centre

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