Phase I
 The Gobi Regional Economic Growth Initiative (Gobi Initiative) was a rural business development program managed by Mercy Corps in partnership with Pact, with financing from the United States Agency for International Development. The first five years of Gobi Initiative (Phase I) ended on January 7, 2004.
Gobi Initiative was implemented in six aimags in the Gobi region – Govi-Altai, Bayanhongor, Uvurhangai, Umnugovi, Dundgovi and Govi-Sumber. Project sub-offices have been opened in each aimag capital, managed by experienced national professional and support staff.
Program Goal
- To assist the people of the Gobi region to undertake comprehensive measures that accelerate and sustain market-led economic growth and development
Program Objectives
- An increase in the operational productivity and profitability of businesses, including cooperatives, and support for creation of new enterprises
- An increase in the market value of selected animal products using ecologically sound practices and promotion of alternative livestock production methods including "semi-settled" farming.
- Improved care and use of Mongolia 's land and water resources.
- Improved access to and use of market and business news and information.
Program Focus
- Providing new business start-ups with broad-based training, existing companies with “one-on-one” management, product diversification and marketing assistance, and new cooperatives with organizational, management and product and market development training and technical assistance.
- Improving animal breeding, feeding and product quality to provide better raw material for Mongolia 's processing industry and to help ensure animal survival through the harsh Mongolian winters.
- Improving herder and local government awareness of the ecological need to protect pastures and the value of developing and implementing land and water use management plans.
- Supporting expanded business information dissemination through the Rural Business News magazine and radio programming.
Program Clients
- "Would Be" Entrepreneurs looking to start their own businesses
- Business Enterprises seeking to improve productivity, profitability and management
- Local Consultants seeking to improve their training and technical assistance skills
- Herder Groups and Cooperatives seeking to improve livestock breeding and herd management and rangeland and water use and management
- Local Governments that support rural business development, including the formation of cooperatives, and the proper use of land and water resources
- Consumers of Business Information services provided through RBN and Market Watch
Program Accomplishments
- Creation of 300 new businesses through training for 2,500 “would-be entrepreneurs”
- Increased company productivity/profitability through consulting to 300 rural businesses
- Increased aimag -level business support capacity through "training of local trainers"
- Formation of 250 herder groups comprising more than 10,000 individuals
- Formation of 57 agricultural cooperatives involving more 500 active herder families
- Introduction of a systematic herder-managed “elite” animal breeding program
- Trade fairs and exhibitions to help herders sell cashmere and obtain and exchange high quality animals
- The popular Market Watch program, providing timely and accurate commodity price information, thus significantly reducing discriminatory regional pricing differences
- The Rural Business News (RBN) magazine, radio and television programming, delivering a regular stream of national and regional business information
Moving from Gobi Initiative Phase I to Phase II - A Business Focus
"Business" vs. "Family Livelihood"
A significant accomplishment of the first phase of the Gobi Initiative is that herders now increasingly look at their activities as "businesses" as opposed to "family livelihoods". In spite of this change, many herders still remain focused on “no-cost assistance” and grants as opposed to “fee-for-service” and loans. The shift from an assistance program that is still largely “free” to a more sustainable commercially-based operating environment remains a significant challenge in rural Mongolia . In response to this challenge, Gobi Initiative is working hard to upgrade the quality of the training, thus enabling a fee-setting policy to emerge and helping to transition business training into the private sector. The project has also sharply reduced the number of grants for equipment and other production-related inputs, believing that these costs should be borne by the business and not by the technical assistance provider. The linkage of rural businesses to the private sector, for both goods and services, has become an important cornerstone of Gobi Initiative efforts.
Business Financing
Business growth is normally financed with both internal investment and external commercial financing. Throughout most of the first phase of the Gobi Initiative, such business growth was funded almost exclusively from internal resources as opposed to loans from banks. Herders in particular found it difficult to obtain loans since they often lack the collateral necessary to obtain a loan. In the final year of the first phase of Gobi Initiative, discussions were initiated with the banks to convince them to increase lending to herders and plans were finalized to implement a loan guarantee mechanism to enable eligible borrowers to negotiate better loan terms, such as the duration of the loan, and interest rate “buy downs” from current rates of 2.5% - 4.5% per month. The guarantee program, underway since the beginning of 2004, is helping to convince banks to modify their loan products and lending criteria. The program is also helping herders to establish a good credit history, making future loan requests easier and no longer subject to a guarantee.
Business Support
The NGO sector can also provide much needed support for rural business development. This is particularly the case with member-based associations, which, when fully active, can assist with procurement of production inputs and marketing and advocacy efforts on behalf of the members. A remaining constraint, however, is that the associations often see the need to engage in separate moneymaking activities to cover their operating costs. This means that an association could, in theory, become a competitor to one or more of its members. Gobi Initiative identified this potential problem during the final year of the first phase of the project and has begun working with these nascent associations to properly define their respective missions and financial plans, keeping clear the need to distinguish between the private commercial and non-profit sectors
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