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ENTERPRISE MONGOLIA PROJECT
(MON/05/103)
INDEPENDENT TERMINAL EVALUATION
Executive Summary
July, 2008
In conformity with standard procedures, upon project completion United Nations
Development Programme (UNDP) and Ministry of Industry and Trade (MIT) jointly
conducted a terminal evaluation on the Enterprise Mongolia Project (EMP)
accomplishment over three years. The Evaluation seeks to assess EMP’s overall
performance and the possibility of a 2nd Phase which the Government of Mongolia has
requested to UNDP.
The Mission was composed of the national consultants: Prof. D. Otgonchimeng, Prof.
D.Namsrai, and Prof. S. Lhagva. Dr. Eduardo Quiroga was the team leader. The Mission
held working sessions with representatives of national stakeholders, CO management, the
executing agency (MIT) and donor representatives. It held detailed technical discussions
on project design, implementation, monitoring and management issues with the
management and staff of Project Implementation Unit (PIU). The Mission interacted
with the beneficiaries, notably man and women of rural households involved in crop
production, agro processing and handicraft operation in the EMP centres of Ulaanbaatar,
Selenge aimag, Bulgan clusters and Khentii aimag. The Mission was enriched by the
interaction with beneficiaries of different walks of life.
RECOMMENDATIONS
To the Attention of UNDP and the GOM
Based on the evidence signifying extensive progress achieved by EMP in:
 putting into service key elements of product development process [3 pillar strategy]
with considerable potential to reduce poverty levels in the regions covered by the
EMCs, and
 the momentous motivation among beneficiaries to take ownership of EMCs services
so they can take advantage of the market economy,
 Consider extending the EMP for additional 4 years to realize its substantive potential
to reduce poverty within the framework of MDG Goal 1 through the empowerment of
beneficiaries in the project sites through PDP services supported by finance.
To the Attention of All Key Stakeholders
Consider the following design features associated with EMP 2nd Phase
Overall Framework
The 2nd Phase architecture must consider consolidating the PDP launched as the 3 pillar
strategy. To this end, Annex 12 proposes a preliminary conceptual framework geared to
consolidate crop production, agro processing & cottage industries taking into
consideration Mongolia’s physical and institutional characteristics. The combined
evidence signifies that the performance of the institutional framework is decisive to allow
the interplay of incentives to enhance productivity. A checklist to review the performance
of the institutional framework has been included in Annex 12. Fig 1 illustrates a possible
architecture of the 2nd Phase.
 Consider adapting and consolidating PDP as an integrated concept including
financing and legal components (ref: Table 2). It should help to standardize
management procedures and targeting market segments to increase incomes among
beneficiaries.
 The current number of EMCs appears sufficient. Since UB appears well served by an
important number projects and services related SME, a UB-EMC appears
unnecessary, unless there are other factors beyond the scope of the present Mission.
 As proposed in Annex 13, it is of paramount importance to standardize management
procedures and achieve economies of scale. This will facilitate the provision of
services in an integrated manner to ensure the realization of expected results among
LCDIs and OVOPI. To this end, one possible strategy consists in [1] making the
current 10 OVOPI supported by PIU, self sustaining by the end of the 2nd Phase, and
[2] through MCEs provide support so that LCDIs become OVOPI.
 The OVOP web shop should become operational from the start and become a
platform for communication (among all stakeholders and the world at large), facilitate
sales leads, advertising/marketing, and feedback. Consider putting on line key
materials used in training sessions. It will contribute to the sustainability of the
training conducted. .
 Consider expanding the scope of stakeholders in particular those organizations, either
CSOs or business oriented entities for a possible 2nd Phase activities, i.e. organic
production, eco-labeling, the use of green funds, export oriented activities to target
market segments in specific countries, etc.
 EMP needs a customized M&E framework that can track progress in its expected and
unintended outcomes at different levels, especially the collection and analysis of the
data system.
o Environmental sustainability must be monitored through national
indicators. The carrying capacity of each ecosystem containing a Em’s
should be established to avoid resource depletion by the uncontrolled
expansion of agricultural/dairy or processing operations using natural
resource, i.e. fresh water fish for smoked fish and the like.
o Project outputs and outcomes must be monitored under the RBM
framework. The notion here is to track the progress in outputs and
outcome generation by gauging agricultural, dairy, agro processing and
cottage industry indicators. A project geared to alleviate poverty through
income growth, needs to measure income changes systematically, i.e. it is
essential to determine the beneficiaries’ incremental revenue derived from
participating in EMP operations through crop and farm budgets. 1
o Family expenditure should also be determined to measure life quality
changes using family income/expenditure analysis. Altogether human
development indicators must also be used so that a comprehensive picture
emerges in terms progress in poverty alleviation. The current literature is
rich in techniques and procedures to monitor agricultural/ rural
development efforts from the standpoint of human development.2
o The prevailing high literacy among beneficiaries opens a window of
opportunity to continue introducing knowledge-based innovations to
increase productivity. Similarly, there should be considerable potential in
enhancing record keeping through targeted training in cost accounting;
and, consequently achieving greater precision in measuring income
changes derived from EMP innovations introduced.
Promotion and development of export markets
Several small enterprises interviewed by the Mission showed their capabilities and
intention to tackle foreign markets. However, financial and institutional factors were not
in place yet. For this 2nd phase, consider deploying all public support to make export
development and promotion achievable.
 Specifically, consider reviewing with GOM’s MIT and other pertinent organizations
the legal and administrative conditions to ensure that export of goods are smoothly
carried out. In this connection, Japan could be considered as a priority market given
the support and interest in EMP manifested to the Mission by the GOJ representatives
in UB. Explore the procedures and possibilities to make Mongolia as one of Japan’s
Most Favored Nations in trade.
Agriculture and Agro processing: Potential and Management Issues
Agriculture and agro processing capabilities within pertinent EMCs need technical
enhancing. Field data collected by the Mission suggest that many beneficiaries need
technical advise on the direction they should take their enterprises, particularly in the area
of dairy processing. There are several consequences in this context.

1
Many beneficiaries involved in crop and dairy production, including honey bee
operations, are conducting production under organic principles. These beneficiaries
require [1] access to pertinent organizations to register their “organic products”
status; [2] information on foreign market niches where these organic products can be
placed. These factors will allow the export of organic product; and in this manner
realize benefits from their efforts.
A standard method to collect and analyze crop and farm budgets is. Gittinger, P. Economic analysis of
agricultural projects. EDI Series in economic development. World Bank. Washington, D.C. 1982
2
The most important web sites are: www.worldbank.org; www.ifad.org; www.undp.org; there are special
entries under M&E and poverty alleviation analysis.

These beneficiaries involved in organic production, with the guidance of pertinent
EMCs, should be able to have access to green funds to finance their production.
Community Based Tourism
The CBT’s operations visited by the Mission in Dadal soum of Khentii Province face
two constraints: [1] absence of ecosystem management, and [2] inadequate transportation
facilities. As ecosystem management and rural infrastructure development are outside the
scope of EMP, there are two options.
 On the one hand, proper planning and management are critical to ecotourism's
development or it will threaten the biological diversity upon which it depends. In this
context, in a possible 2nd Phase EPM management will need to strengthen its
capabilities and link up with appropriate environmental and rural infrastructure
authorities to continue with the operation with CBT. The principles and potential of
ecotourism are outlined in Annex 15.
 Otherwise, senior management may consider transferring CBT to another project
dealing directly with ecosystem management and rural infrastructure.
Access to Financing
EMP’ original design allowed access to financing [pillar 2] to evolve almost
independently from the other pillars. It is clear that Prodoc did not anticipate synergies
between the available credit and the other two components [pillar 1 and 3] to induce
economic growth among beneficiaries. As reviewed in Annex 6, the available and early
evidence suggest that focusing only on small- seasonal credit funds, though possibly less
risky, is a limited approach to induce rural growth.
Consider transforming the credit component as the financing arm of EMCs. To this end,
the following actions need to be considered.
 MIGA partners could join if agreeable with EMP’s design for 2nd phase
 It will be necessary to recall the funds entrusted to the XacBank so these funds will be
managed by EMP or any other organization donors recommend. These funds,
however, will be used to provide collateral to potential entrepreneurs during the 2nd
phase.
 Each EMC will broker credit loans from selected banks to finance operations
proposed by EMC’s entrepreneurs. The collateral funds will be used as needed by
EMCs with banks with compatible lending policies with beneficiaries’ needs.
 Given the current inflation rate in the country reflecting the world wide inflation rate
stemming from the spiraling increase in oil prices, to ensure financial sustainability,
there is very little choice but to apply positive interest rates.
Exit Strategy
One possible strategy would consist of creating a financial arm for the proficient
operation of EMCs. To this end, this financial facility will need to deliver credit funds
leading to growth. One possible arrangement would be as follows.


If EMCs provide advice to potential entrepreneurs supported by timely and adequate
financing that continuously bring results, it would be a vital step towards providing
advice for a fee. The fee should cover the operating costs of providing advice
supported by lending. It could not cover all costs incurred by running an EMC. Fee
charges in exchange of information could evolve in the following manner [this
timetable is discussed in detail in Annex 13].
The first year would be free of charge. The second year, 25% of fees would be
charged. The third year, 50% of fees would be charged. Fourth year, 100% of fees
would be charged.
Project Management
Given the complex technical nature of EMP’s second phase, the National Project Director
should have solid technical qualifications. Likewise, project manager and staff should
also possess strong technical qualifications. The Steering Committee members will have
to be ready to recommend policy modifications, such as in the case of interest rates,
product certification, management standardization, and others.