Agricultural stock exchange law approved

On June 2, parliament approved a stock exchange law for products of agricultural origin and raw materials. The law shall come into force starting January 1, 2012 as preparations are needed to implement the law.

According to this law, the stock exchange on products of animal origin and raw materials shall enable Mongolia to establish a mechanismfor fair prices on products of animal origin and raw materials serving as an income source for herders and people, create the possibility to sell them for a good price, to set up an initial complex structure of preparing animal-origin products and raw materials in 329 soums of the country, and for setting up the sales mechanism of raw materials prepared in healthy circumstances for market purposes.

According to the government bill, the stock exchange has been envisaged to be a state-run economic entity while members of relating standing committees and working group proposed operating the raw material stock exchange in the form of company, the later was supported. The law makers considered it appropriate to involve livestock breeders in the stock exchange relationship in the form of cooperative taking into account the market directions and the development prospects. MP Ts.Davaasuren proposed to provide herder/producers with independent participation in the stock exchange considering them as legal subjects but not forcefully pushing them to form business cooperatives. Most MPs supported the idea to form business cooperatives from joint efforts and prepare and supply raw materials in large quantities which, as they think, will meet the market demand. The herders would be able to unite in cooperatives and participate in stock exchange sales through their brokers.

According to the law, the lowest ceiling of live animals to be sold will be 100 head. The stock exchange of products of agricultural origin and raw materials shall have the coordination council consisting from 13 members representing the state and non-government organizations, and the head of the council will be elected for 3 years. The coordination council will have its office, the rules related to its activities will be approved by the government, and the work performed by the service will be reported to the government.

MP D.Baldan-Ochir, head of the working group said the following about the stock exchange and preparations for the stock exchange:“We have to work hard to complete preparations in the remaining period of time to implement the law. The stock exchange center will be located in Ulaanbaatar. An electronic network will be necessary for communicating with rural regions at auction sales. In other words, the soum raw material cooperatives will communicate by electronic net or telephone on the particular stock exchange auction.

It means 329 soums need electronic communications; therefore, a soft infrastructure for stock exchange needs to be built. It would be easy because more than 200 soums in our country are already connected by a fiber optic network. The setting-up of an inter-soum cooperative will be the key problem for the stock exchange.Soums could have many small cooperatives which already exist and all of them are member cooperatives.

A key cooperative must be prepared under the “Mongol Mal” program. It is planned to hold an experimental stock exchange auction before implementing the law. For that, we must educate and train stock exchange employees and the cooperative raw material managers. In the first stage, we will sell cashmere, wool, meat, animals and wheat. The herders must prepare raw materials according to the standard, which is very important. In previous years, our herders had the experience of supplying wool and cashmere to sales and purchasing agents and cooperatives. The reputation of the stock exchange is inseparable with the standard”, said Baldan-Ochir.

‘The cooperative will mediate by selling herders’ cashmere and wool and will operate on a commission percentage of the raw materials income price. The herders will bring certain shares to run the cooperative business.

Business of one cooperative will run on normal speed by accumulating an average Tgs80-100 million in capital. But we must think more about the family income of Mongolian herders and whether they would be able to collect this sum of money. If under the “Mongol Mal” program the team of hay-mowing or the construction of store premises are financially supported by granting low-interest and long-term loans, the cooperative business could radically be able to become profitable. This state policy need to be implemented’. Today there are more than 2000 cooperatives of livestock breeders nationwide.

source: 'The Mongol Messenger' 

Posted in: mongolian agriculture