Mongolia, Mongolians and Business

By PAUL SULLIVAN,
Georgetown
Mongolia has massive potential for foreign investment and for the development of businesses by Mongolians either on their own or in partnership with non-Mongolians. Some of these businesses may be part of the growing mining business in the country either directly as contractors, subcontractors and even subcontractors to the subcontractors. There is nothing wrong with starting a small business that may seem like a small part of the economy of Mongolia at first. Businesses could also start up to fill in the gasp for demand in Mongolia. That is really one of the best ways to look at starting a business: what is missing here, and what can we do to fill in that missing piece.
I am sure just about anyone reading this article can see some gaps in the needs for people who are in Mongolia. Even a small delivery service in the coldest parts of the winter time to those who would rather not deal with that sort of weather could be a start. There was a group of Egyptian young people who started such a company to deliver food, household goods and more to people who were too afraid to go out during the revolution or just did not want to deal with the horrific traffic jams in Cairo and Alexandria to get their food and other things – and were willing to pay other to do that.
Ford Motor Company started small by filling a gap in transportation. Standard Oil even started fairly small to fill in the gap for the supply of kerosene for lighting and heating in the US in the early days. Goodyear Tire Company filled in a gap for quality safe car and truck tires. McDonalds started very small to fill in the gap for fast food in an increasingly hurried America so long ago. I saw a sign the other day on one of their restaurants: “99 Billion Burgers Sold”. 99 billion! All that from a small restaurant in San Bernardino, California in 1940. McDonalds serves about 68 million customers a day in 119 countries. Walmart started with a small store in Bentonville, Arkansas. It is now one of the biggest companies in the world. Apple Computer started essentially via tinkering in a garage and then the working with the combined talents of a great salesman, Steve Jobs, and a great engineer-entrepreneur, grew quickly out of the business gates. After many years of change, invention, innovation, investment and more it is now the giant company that is ubiquitous throughout the world. There are so many examples of starting literally from nuts and bolts, a few brooms, paper and pen, with some ideas and dreams to the development of not only successful companies, but new industries that change the world.
However, most people who want to start a business are not there to change the world. They may want a better life, more economic and other security, respect from family, friends and neighbors, or many other things. Starting small is often the norm. For many people that is the only way to start. There may not be enough money for someone to start a bigger business and going into debt is usually not a good idea when one is just starting out. Maybe family members could get together to work on a joint project. Staying small is more normal than changing the world. Growing to a successful medium-sized company is hardly something to be sad or embarrassed about. Many people think big is the goal. However, this kind of misses the point in many ways.
Most people when they think of German industry they think of the giants like Volkswagen, Mercedes, Siemens, Adidas, Lufthansa, Bayer, BMW, Deutsche Post-DHL, and the like. Yes, these are massive companies that play on the world stage. However, in Germany there are many privately-held, small to medium sized companies that are some of the real powerhouses of the Germany economy. These companies are part of the Mittelstand of the German economy. They are focused often on niche markets, such as car parts, metal coverings for machinery, parts for machine tools, parts for light bulbs, and the essentials for the development of export materials and exports themselves. The Mittelstand companies are as a group some of the most important exports in this country that prides itself in being the world’s export master. And for a country of just 82 million people it competes head to head with China and the USA for the top spot in manufactured goods exports. It exports about 67 percent of all of the exports of all of the European Union states. It dominates the imports of many European states.
Germany is the fifth largest economy in the world after the US, China, Japan, and India. The populations of these countries are 330 million, 1.3 billion, 127 million and 1.2 billion. Germany is a huge chunk of the European Union’s economy. The Mittelstand is a big part of those successes. It employs about 80 percent of all private sector workers in Germany. It is about 53 percent of the German GDP. If that is not astonishing enough about 80 percent of these companies have under 10 employees, 95 percent have less than 50 employees and only about .7 percent have 250-500 employees. In the German system any company that has over 500 employees is no longer part of this group. These companies are also focused, and this is very important, on making their products to be at the highest quality with the highest follow on service, if needed. Many of these companies answer to family members or to very close colleagues from long relationships in business. Many of them hate debt, which is a very good thing. They also look to long run profits, rather than just answering to the corporate board.
Germany is a successful economy. It has gone through some very hard time in the past and has come back. A lot of that has to do with German culture, hard work, focus and following some rules along the way. Germans like rules. The German government is also heavily involved in industry. It has an industrial policy. It helps pay for part of the worker’s salaries and benefits during hard time with the Kurzarbeit system. However, it also runs a tight ship when it comes to taxation and social programs, both many economists see as holding back Germany from even greater successes. However, changing these social protection schemes could cause some dissent in the country. Many of these schemes had their initial ideas and application during the early years of Germany when there was a sense that the workers needed some protection, and maybe the business people and the elite needed some protection from worker revolts.
Small and medium sized businesses are also a major part of exports of the United States. They account for about 35 percent of US exports, but account for 98 percent of US exporting firms. Small to medium sized business of under 500 people employ about 50 percent of US labor. When the US economy is coming out of recessions it is often the small to medium sized companies that begin the fastest hiring. During this last recession many people who lost work started businesses. One of the keys to survival in a competitive economy and a competitive world is entrepreneurship and, above all, grit and determination to survive and then to succeed. It is never easy to start a small business and many of them fail. The point for long term success is to dust yourselves off, learn from the failure and begin again. As with falling off a horse (and I have done this so I know) it is best to get back on one very soon afterward.
However, for Mongolia to have a successful development of small to medium sized enterprises it needs to have a good financing system for them. Taxes for them must not be onerous. It must be fairly inexpensive to start a company and easy to register it. In my home state of Virginia and the US I could start a company with $50 online in a very short time. Mongolia also needs to make the dealing with construction permits and refitting of businesses to be easy and fair to all involved. Getting electricity should be smooth and fairly inexpensive. Registering property and other things needed for a company should be made easy and affordable. Investors will need protection of their investments, contracts and other agreements. It would be best to have a smoothly running and quick small claims court and contracts court system, part of which focuses on small to medium sized businesses. Employment of workers should be made easier with protections for all involved. These small to medium sized businesses should be allowed easy access to export markets and import markets depending on their focus. A solid and fair bankruptcy system also helps. Some of the best business people in the US have failed and come back from the ashes because the laws and other aspects of our system made victories after defeat possible. Those countries that do not support the risks of entrepreneurs will have few entrepreneurs and will likely fall behind those who have such protections.
Training programs for entrepreneurs and small business people in the legal, financial, engineering, personal relations, political and other aspects of business need to be developed in many parts of the country. Even though most people in Mongolia live in towns and cities there is no reason why the herders or others could not start businesses. Solid and effective business programs that teach about the real world of small to medium sized businesses can make a huge difference. Brining in experts and actal entrepreneurs to teach important and effective skills and the real ways to run a business, not the textbook ways can make a very big difference.
My sense is that Mongolia’s future, and the future for many Mongolian people, will be in the development of small to medium sized business within a proper legal, economic and business environment. Otherwise, Mongolia could have a rough time of it.

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