CU | CARS | FOREIGN TRADE

Rise and shine! Today’s the International Day for the Elimination of Racial Discrimination, and in Mongolia, just like in any other modern country, discrimination is prohibited by the Constitution. 📜

Infringing upon someone’s rights and freedom on the account of race, nationality and origin is, in fact, punishable by imprisonment. 💀

  📌 DID YOU KNOW?

It’s been 50 years since Mongolia and Japan established diplomatic relations, and here’s what you have to know about our economic ties:

• In 2021, while Mongolia’s exports to Japan amounted to $17.7 million, imports from Japan equaled $453.1 million.

• Japanese direct investment in Mongolia reached $98.9 million as of 2020, making it the sixth biggest investor in the country. 

• The Economic Partnership Agreement from 2016 enabled Mongolia to export 9300 types of products to Japan  with preferential customs import duty.

• There are 670 Japanese direct foreign investment companies registered in Mongolia.

🏪 MONGOLIA’S RISING CONVENIENCE STORE CHAIN

Almost 4 years after having brought international standards to Mongolia through South Korea’s largest convenience chain store brand, CU, Central Express CVS (CUMN) has redefined the concept of grocery stores services. Let’s look at how this company with humble beginnings has shaped and will continue to shape the industry. 

2015: ‘Central Express’ launches, introducing the concept of convenience store for the first time in Mongolia.

2018: With 3 branches at the time, ‘Central Express’ signs a Master Franchise Agreement with ‘BGF Retail’ in April to introduce “CU” in Mongolia’s retail market.

2019: Opens 50 CU brand stores, with total daily customers reaching 30 thousand.

2021: Central Express CVS goes public.

Current success

Since 2018, CU has sold more than 63 million products, served over 25.6 million customers, and made $62.6 million (MNT 182 billion) in revenue. Following their incredible success, Central Express CVS went public in October 2021 raising $8.5 million (MNT 24.9 billion) for investment in 95 new stores, and additional distribution and food production equipment.

Above and beyond expectations

It seems that CU is beating everyone’s expectations, even their own. Last year, they earned $32.3 million (MNT 94 billion) in revenue - 5.6% above estimates for that year. Additionally, since their IPO, total assets have doubled to $41.3 million (MNT 120 billion). Though they are still unprofitable, with a loss of $5.4 million (MNT 15.6 billion) in 2021, this is lower than their estimated loss of $6.9 million (MNT 20 billion). Given CU is exceeding their revenue plan and has made losses lower than expected, making a profit next year doesn’t seem out of the question.

Competition

CU is dominating the domestic market with 182 stores all across Ulaanbaatar. Recently, CU bought out 12 stores from another major convenience store chain, Circle K, after they struggled to perform well in the market. Other brands include Ecoexpress with 12 stores, and GS25, a South Korean rival to CU, which entered the market last year. GS25 is quickly gaining market share with 41 stores currently, and 100 stores expected to be opened by the end of 2022. Going forward, it seems competition will be fierce as more convenience stores open and brands fight for market dominance. 

Bright future in store

Having already become Mongolia’s leading convenience store, what does CU’s future hold? We may have seen just the tip of the iceberg. With plans of opening up 360 CU branches by 2023, expanding into other services, like postal, banking, printing, and e-commerce, there is plenty of room for growth. 

Moreover, as of 2020, CU accounted for 0.4% of the total retail market in Ulaanbaatar. However, internationally, convenience stores account for 15% of the total retail sector in developed countries and 3% in developing countries. In other words, there is a large enough domestic market for CU to expand.

📢 100 YEARS OF MONGOLIA: ENCOUNTERS THROUGH PHOTOGRAPHY

The exhibition presenting social and cultural changes in Mongolia through photography is being held at the National Museum of Ethnology in Japan. From the “holy city” under the rule of Bogd Khaan to the modern capital surrounded by ger districts - you’ll get the chance to see Ulaanbaatar’s last 100-year history from one single place. The exhibition also includes photos of more rural areas of Mongolia that weren’t spared by the transformations of time and society.

About the artist: 

Injinaash Bor is a talented contemporary artist who has been mainly working as a documentary and street photographer aiming to unveil the truth about Mongolian livelihood and different parts of society. If you want to take a look at his works visit his flickr, or instagram. 

Exhibition details:

• Duration: March 17 – May 31;

• Location: National Museum of Ethnology, 10-1 Senribanpakukoen, Suita, Osaka 565-8511, Japan;

For more information click HERE.

🏪 CRACKING DOWN ON CAR IMPORTS

It would not be wrong to say that car has become a necessity, not a luxury in Mongolia due to the rapid migration to the capital city, poor pedestrian environment and the lagging behind public transport services. The sheer number of registered vehicles has doubled from 0.6 to 1.2 million in the last decade.

Figures:

• 1 automobile for every 3 people 

• 600k vehicles participate in traffic daily in Ulaanbaatar

• 81% of vehicles are aged 10 years and above

• 55237 cars imported in 2021, worth $385 million USD (+30% YoY) 

• 56.9% of vehicles are Right-Hand Drive (RHD)

Import limitation

In 2017, the Minister of Road and Transport Development proposed to put restrictions on RHD vehicles as Mongolia is a Right-Hand Traffic (RHT) country.  The main objective of the proposal was to limit imports of RHD vehicles and cars aged above 6 years to minimize the risk of car accidents and decrease externalities such as air pollution. RHD vehicles are subjected to higher road accident risks under RHT due to blind spots. Given the low import prices, the number of used RHD vehicles has skyrocketed in Mongolia in the past 15 years, with 93% of light vehicle imports being from Japan in 2021.

Car production

It is no surprise that the proposal was met with huge disapproval from the citizens. If the law passes, Mongolians' fan-favorite Toyota Prius, known for being high quality and affordable, will become obsolete. On the bright side, Bars Motors, Mongolia’s first car maker opened a joint automotive assembly plant in Hangzhou, China with a yearly capacity of 25 thousand automobiles in 2019. Their branch company, Bars Electric, has started the production and sale of its first electric automobile Hero on Feb 28, 2022. 

Future demand 

If you remember Mongolia’s demographics from our previous editions, due to the baby boom in the 80s and 00s there are many families with babies today, meaning there is huge customer demand for affordable vehicles. Furthermore, air pollution is a pressing issue on everybody’s mind, especially for families with babies. They are in need of transportation that is not heavy on the wallet, health conscious and time efficient. It’s also useful to know that import of electric cars are encouraged as excise duty taxes are half of the taxes on gas and diesel fuel cars.

🔔 DATA STORY

Mongolia's total foreign trade turnover reached $16 billion last year - a 25% increase compared to the same period of the previous year. While exports amounted to $9.2 billion, imports equaled $6.8 billion, indicating a positive trade balance. Minerals made up as much as 81% of all exported goods.  

🏃 QUICK STORIES

📌 Rio Tinto (RIO) offered $2.7B to buyout Turquoise Hill (TRQ). With 51% ownership of Turquoise Hill currently, Rio is offering C$34 ($26.60) a share to acquire the remaining 49% from minority shareholders. Given the promising future of Oyu Tolgoi, a huge mining project in Mongolia that TRQ has a major stake in, many investors may hold out for at least C$48 a share.

📌 98% methane identified in Red Lake-1 coal seam III, Jade Gas Holdings (ASX:JGH) updated on its six well drilling program in Tavantolgoi XXXIII unconventional gas basin in Mongolia. Furthermore, 92.5% methane was identified in Red Lake-1 coal seam IV, and 11-15m3 per tonne of dry ash-free gas content was recorded. It is an outstanding gas composition, a level consistent or even better than around the world.

📌 The Ministry of Environment and Tourism bans antler gathering for a year. The decision was made to prevent further wildfires, many of which are caused by antler collectors who happen to throw away their cigarettes in forests. A total of 65 wildfires were reported across Mongolia in 2021, causing over $1 million in environmental damage.

📌 Inflation reaches 14.2% nationwide and 15.5% in Ulaanbaatar for the month of February. Of this amount, 50.7% was due to rising prices of imported goods, which make up the majority of all 373 items of the market basket. Though, the inflation rate for February is a little lower than that of the previous month, it’s still a considerably high figure.

💼 JOB HUNTING?

• 💬 Communications Coordinator / The American Center for Mongolian Studies: Interested in Mongolian Studies and a great manager? 👉 (Link)

• 📝 Administrative Assistant / The European Union Delegation to Mongolia: Looking for a career in an international environment? 👉 (Link)

• 🖊️ Project evaluation team / World Vision: Want to conduct the end evaluation of the EU funded project? 👉 (Link)    

📷 A GLIMPSE OF MONGOLIA

About: Three Kazakh eagle hunters showing off their skills during the Eagle Festival, an annual traditional event celebrated in Mongolia to honor their heritage.

When and where? The Eagle Festival is held twice a year in March and October, though, in 2021, the autumn celebrations took place in early December. This year’s spring event was organized on March 12 in Ulaanbaatar. The festival is usually held in the capital city in spring, and in Bayan-Ulgii province in autumn. That’s why if you plan to see the majestic Kazakh eagle hunters, but don’t want to leave Ulaanbaatar when traveling, we highly recommend visiting Mongolia in spring.

What happens at the festival? 

• Eagle hunters compete to catch small animals with specially trained golden eagles.

• Prizes are awarded for speed, agility and accuracy.

• The hunter with the best traditional Kazakh dress also gets a special prize.

Good to know:

• In 2021, UNESCO added the eagle hunting practice of Kazakhs to the List of the Intangible Cultural Heritage of Humanity.

• The eagles are released back into the wild so that they can breed. Once released, the hunters make sure they successfully reintegrate back into the wild.

ESSENTIAL LINKS

• Not sure where to eat in Ulaanbaatar? Food and drink reviews in English. (Dodddo0)

• What Genghis Khan's Mongolian sounded like? (NativLang)

• Food security snapshot of Mongolia. (FAO)

• Are the Mongolian stereotypes true? (Real Mongolia)