WHAT IS THE POLICY FOR LIVESTOCK SECTOR REFORM?
(Concepts of project proposal to the Government-initiated reform program, published by “Daily News”, 4 September 2012)
The current situation of the extensive livestock industry
1. Despite the well adaptation to the harsh weather conditions of Mongolia local livestock breeds have low productivity and limited scope for further improvements. As a result their capacities to meet increasing demand for livestock products and livelihood needs of herders are weakening from year to year. /Evidence: supply shortages of meat and milk in urban areas and resulting price increases/
2. Adaptation rates of local breeds to climate change, characterized by dryness and increased frequencies of drought and dzud, are not satisfactory /Evidence: animal losses during drought and dzud years causing high fluctuations of GDP/
3. Animal numbers increased sharply relative to carrying capacity of pastures making the rotational use of seasonal pastures and accesses to reserve areas in emergencies –keystone of nomadic pastoralism for centuries- stop functioning. Given the absence of the necessary regulation this led to increasing pastureland degradation and desertification /Evidence: most aimags and soums don’t have reserve pastures, disorganized migrations leading to hoof dzuds and grazing conflicts are commonplace/
4. Use of pastures without any charge and accountability mechanisms:
A. Discourages proper annual sales /off-take/ of animals leading to supply shortages of meat and milk and subsequent price hikes in urban areas
B. Discourages ownership mentality towards pastures and impedes initiatives of herders and local government officials to sustainably use pastures through planning
C. Encourages chaotic use of pastures in which a few wealthy herders, the city rich and companies tend to expand their grazing rights and most herders tend to lose their grazing rights thus leading to social inequality
D. Encourages improper practices of neglecting the interests of local governments and herders in issuing mining licenses
E. Discourages initiatives for pricing systems towards encouraging quality improvements rather than animal numbers
In the above situation herders rationally choose to economically behave just to increase animal numbers disregarding any quality improvements. This devil’s circle weakens the industry competitiveness and serves as a key reason for the persistent herders’ poverty.
In the socialist period Mongolia had around 90 thousand herder households who were able to look after animal numbers to meet domestic demands as well as to export significant livestock. At that time one household liked after around 500 small stock (sheep & goat) and 140 big stock (horse, cattle and camel) which provided sufficient household incomes. But now around 80% of herder households have less than 200 livestock, which cannot provide full employment for household members (hidden unemployment) and generate incomes much less than household livelihood needs. There is an estimate that a herder household needs around 400 livestock to meet basic livelihood needs. Increasing animal numbers of the current 170 thousand herder households to this level means to increase the national livestock population up to 70 m, which Mongolia’s pasture cannot sustain. This situation means that the extensive livestock industry has ‘absorbed’ too many households far beyond its ‘feeding’ capacity only to keep in poor subsistence but does not allow them to either ‘die’ or develop, thwarts the herders’ willingness to strive for innovation and more productive jobs and as a whole confines 40% of the population in chains of underdevelopment.
Way out of the situation
Whether we can break the above described devil’s circle and drastically improve the livestock sector competitiveness depends on the following three interrelated and mutually reinforcing policy measures:
1. Introduce possession or contractual use (leasing) of pastures by herder’s groups
2. Introduce grazing fee system
3. Use additional economic incentives to ease the process of changing herders’ behavior from the animal number maximization to quality improvements
Possession or contractual use of pastures by herder’s groups
The pastureland possession goal is to end the existing chaotic use of pastures by recovering the traditional rotational use system with accesses to reserve pastures and enforcing it through formal agreements. It means to formally acknowledge and enforce each herder’s right to possess seasonal pastures in likely different locations and access to reserve areas in emergencies, thus ensure sustainable use of pastures and prevent pastureland degradation.
The pastureland possession will:
i. Encourage ownership mentality towards pastures and investments in their sustainable use and protection
ii. Discourage the maximization of animal numbers by specifying land use boundaries of herders groups and enforcing stocking density regulations, thus encourage productivity improvements
iii. Create conditions in which the interests of herders and local governments are well considered in converting pastureland into another uses such as mining
Principles to be applied:
i. Special resources such as summer, autumn pastures, otor reserve areas, surface water points, saltlicks, protected areas, places of historical and cultural significance need to stay at soum’s disposal and used commonly (not possessed). Bags can have commonly used special resources under the same principle.
ii. Herder groups (HG) are entitled to possess pastures not mentioned in (i). Citizens and economic entities of Mongolia are also entitled to possess pastures not mentioned in (i) for the purposes of operating intensive and semi-intensive livestock farming
iii. Decisions on, which areas and which seasonal pastures to start from, are be made by the soum Governor according to land use plans based on requests of herders and traditional patterns of pastureland use and specifics of a particular pasture resource
iv. Herder groups are land user groups. Herder groups are organized in a way that no one in land use boundaries of the group is excluded and nobody’s land use rights is restricted
v. The number of member households in a group is equivalent to the number of households within groups’ land use boundaries
vi. Pastureland is contracted to herder groups keeping the existing land use pattern, in other words, herders are entitled to possess pastures where they are located currently no matter whether pastures make contiguous land area or separated areas
vii. Member composition of herder groups possessing pastures may change from season to season. In other words, a particular household may make up a group with other three households who camp together during the winter-spring period but may make up another group with other four households who camp together during the summer-autumn period.
viii. Herder groups have rights to make independent decisions regarding pasture use within group boundaries. These includes, for example, decisions regarding allocating a camp site to a new member of the group. However, land use decisions beyond herder group boundaries are decided by the involvement of bag and soum governments, when required. Sample pastureland use rules of herder groups are provided by the government, but reviewed and approved by the local governments.
ix. Pastureland is contracted for the term of 15-60 years.
x. Pastureland use contract is signed by the soum Governor and all members in the group
xi. A sample pastureland use contract is provided by the Government.
xii. Reciprocal grazing rights in emergencies like drought and dzuds are an inseparable part of the land use contract. The number of migrating animals is strictly regulated based on the carrying capacity of recipient land users/herder groups.
xiii. Herder groups are obliged to maintain stocking density regulations to prevent overgrazing. Rotational use of pastures and accesses to reserve pastures in emergencies was a key principle of nomadic pastoralism to keep ecological balance and prevent pastureland degradation. The key condition for functioning of this principle is to keep animal numbers under appropriate carrying capacity limits. Because of high fluctuations of grass yields due to weather conditions the carrying capacity needs to be estimated on an annual basis. Carrying capacities can be estimated on annual, quarterly, monthly bases. The methodology for estimating carrying capacity is approved by the Government.
The contractual use of pastureland by herder groups proved to be feasible in Mongolian conditions. Under the peri-urban rangeland project funded by the Millennium Challenge Account (MCA) of Mongolia around 400 herder groups have got their pastureland under land use contract in 50 soums in the territory of Тuv, Selenge, Bulgan, Orkhon, Darkhan-Uul, Uvurkhangai, Arkhangai, Dornod aimags. Herder groups have got the pastureland, to operate more intensive livestock activities, ranging around 500-2500 ha per group on their own will and through negotiations with neighbor herders on land use boundaries and approvals from bag meetings and soum Governors.
Grazing fee system
Grazing fee system will serve as:
i. Economic mechanism to enforce stocking density regulations as a part of the land use contract
ii. Revenue source for the soum-level sustainable fund to annually finance the planning and implementation of the pastureland and risk management activities based on herders proposals. Given the absence of such funds, the existing ineffective system of risk and disaster management where herders ask for assistance from the government and the latter for international aid and funds are used in inefficient ways, doesn’t cease to exist.
Grazing fee system should be introduced through following principles:
1. Fee levels and enforcement procedures are a part of the land use contracts
2. A differentiated grazing fee should be established according to four factors- pasture quality (vegetation yield and quality), location, animal type and the degree of overstocking:
i. Livestock benefits are different from good and poor pastures. Therefore, the state, as owner of pastures, needs to create equal economic conditions for herders charging a higher grazing fee from good pastures
ii. The same applies to locations, as herders located closer to urban areas gain extra benefits from the low costs of accessing markets and services. Lower fees for remote pastures will also discourage herders from migrating to peri-urban areas that lead to severe land degradation.
iii. Despite being a major source of cash income, goat is considered to be a worst user of pastures by destroying grass roots. Therefore, a higher fee for goat makes sense, in terms of both impacts on pastures, and payment capacities of herders with more goats.
iv. Finally, animal impacts on pastures are proportionate to the degree of overstocking; therefore a base fee needs to be increased at least proportionately to the degree of overstocking. This will provide a key economic incentive for herders to maintain ecologically sustainable stocking density.
3. Local governments are entitled to reduce and free grazing fees for herders who invest in pasture improvements.
A grazing fee system is in line with the section 18.104.22.168 of the “Mongol Livestock” program which says to “Introduce an economic mechanism to link between stocking density and pasture carrying capacity, set a limit on animal numbers in overstocked areas and encourage herders to stick to it”.
But, questions of how herders would respond to grazing fees, possibility of designing a grazing fee system acceptable to herders, principles to underline such a system intrigue a lot.
To answer the above questions World Bank supported Sustainable Livelihoods Project (SLP)-II has piloted a proxy-grazing fee system in the form of soum Livestock Risk Management Fund (LRMF) in four soums representing main ecological regions of Mongolia – Mankhan soum of Khovd aimag for the high mountain region, Undur-Ulaan soum of Arkhangai aimag for the forest-steppe region, Tumentsogt soum of Sukhbaatar aimag for the steppe region, and Khuvsgul soum of Dornogobi aimag for the Gobi regionin 2011. The pilot results show that it is feasible to design and implement a herder-friendly grazing fee system in Mongolia. Soum LRMFs were paid MNT 21.4 m for 214000 sheep units in the Mankhan soum, MNT 12.5 m for 125000 sheep units in the Undur-Ulaan soum, MNT 7.5 m for 75000 sheep units in the Tuvshinshiree soum, and MNT 10.9 m for 109800 sheep units in the Huvsgul soum. The fund revenues have been used for financing pastureland and risk management activities according to approved rules under the project supervision.
Supporting additional economic incentives for changing herders’ behavior from the animal number maximization to quality improvements
As discussed in the previous sections the introduction of contractual pastureland use and grazing fee system are important measures in changing the herders’ economic behavior from the animal number maximization to quality improvements.
Changing the herders’ behavior is not easy process depending on many factors such as herders’ commitment, skills, financial capacities to invest in quality improvements (e.g. buying better animal breeds and improving breeding qualities of the existing animals etc.), quality and availability of state services to herders. Especially, at the beginning stage, there is a high risk of any extra income from quality improvements cannot compensate for potential income losses from animal number restrictions discouraging herders from changing their economic behavior. Therefore, additional economic incentives are essential, in parallel with two key measures discussed above, to keep herders interested in changing their behavior. The “Мongol livestock”program has proposed in its section 4.5.2 targets to introduce economic incentives based on the quality of livestock products and actions need to be taken urgently to achieve them.
Although buyers of most livestock products are private sector players they have not developed yet capacities to introduce quality-based price incentives. For example, bacteria content of raw milk supplied by herders to processors is very high not allowing them to produce UHT products. As a result processors import significant quantities of milk powder from abroad to produce highly demanded UHT products greatly contributing to sales drops and resulting low prices of milk supplied by herders as well as reduced supplies of fresh milk to urban populations and losses of valuable foreign exchanges. Currently, processors are not interested in offering any price premiums for better quality milk as supplies of such milk cannot reach a scale quickly to allow them to change their technologies. Therefore, it is economically justifiable for the government to cover costs of price premiums for low-bacteria content milk until milk supplies reach enough scale. When processors no longer need to import milk powder from abroad and change their technologies they will be able to offer price premiums without government support. Such mechanisms, based on public-private partnerships, to support livestock sector development can be well applied to cashmere, wool, meat, hide and skin. Such policies are well in line with the national interest to improve herders’ income while reducing animal pressures on pastures, protect interests of national milk processors and consumers.
In addition, pulling out the excess labor in the livestock sector by creating jobs elsewhere should be an inseparable part of the national longer term development policy. Policies for creating such jobs needs to first focus on organizing comprehensive activities in local areas targeting primary processing, collecting, transporting and providing services to ensure quality improvements of livestock and livestock products.
The suggested policy measures will significantly contribute to:
1. Needed improvements in meeting growing demand for livestock products by enhancing the livestock sector competitiveness and the quality of livestock products
2. Improving productivity and incomes of herder households
3. Environmental protection
4. Meeting the national sustainable development for harmonizing the interests of consumers, processors and producers
Center for Policy Research, Think Tank NGO