Vegetable Production Feasibility Study Report

Vegetable Production and Irrigated Agriculture Project (RRP MON 51423-002)

Project Number: 51423-002 February 2020

Proposed Loans and Administration of Grant Mongolia: Vegetable Production and Irrigated Agriculture Project

Table of Contents

A. Introduction 1 B. Seed Production 2 C. Feasibility of Support to Seed Research Institutes 3 1. Central Region Institute of Plant and Agriculture Science (IPAS) at Darkhan-Uul Aimag 3 D. Rationale to Support Mongolian-based Seed Production 6 1. Cost of Improvements 7 E. Food Quality and Pest Management 8 F. Feasibility of Support to Plant Protection Institute 9 1. Overview 9 2. Rationale for Support 9 G. Vegetable Production 11 1. Overview 11 2. National Programme on Vegetables 12

CURRENCY EQUIVALENTS (as of 4 February 2020)

Currency unit – Togrog (MNT) MNT1.00 = $0.00036357 $1.00 = MNT2,750.50

ABBREVIATIONS ADB – Asian Development Bank CIMMYT – International Maize and Wheat Improvement Centre GERES – Group for the Environment, Renewable Energy and Solidarity HPLC – High Pressure Liquid Chromatograph JICA – Japan International Cooperation Agency IAEA – International Atomic Energy Agency IP Intellectual Property IPAS – Institute for Plant and Agricultural Science IPP – Institute for Plant Protection LED light-emitting diode MOFALI – Ministry of Forestry, Agriculture, Livestock and Irrigation MFARD – Mongolia Farmers Association for Rural Development MRL – maximum residue limit MULS – Mongolia University of Life Sciences NGO – nongovernment organization PRC – People’s Republic of China R&D – Research and Development

GLOSSARY aimag – a provincial administration area soum – a district administrative area within an aimag

NOTE (i) In this report, "$" refers to United States dollars.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

A. Introduction

1. Through this output, the project aims to improve efficiency and increase farmers’ share of the value addition along the value chain, focusing on production, storage, and marketing of vegetables. The project will finance investments in civil works, equipment and technical assistance for climate-smart vegetable production, and storage and marketing facilities. This output will focus on: (i) setting-up collaboration-based collective farming models (vegetable farmers and seed producers) with access to improved technology (including but not limited to seeders, harvesters, tube wells, storage facilities, small-scale winter greenhouses, and community ponds). Modality for ownership : owned by soum government and provided to farmer groups, subject to successful forming of community grower groups following the model of an ongoing ADB grant project1; (ii) increasing linkages with agribusiness including wholesale marketing facilities in Ulaanbaatar through training and development of supply contracts; and (iii) improving the production of high-yielding and climate-resilient vegetable seeds at government research stations in Western, Central and Southern regions. This report looks at benefits or need for support of inputs to be delivered.

2. Agriculture including vegetable production is affected by climate change in Mongolia and impact is likely to increase with predicted reduced rainfall and erratic rainfall incidence, reduced snow precipitation and snowpack and, rising winter temperatures (up 2 degrees in the last 10 years). This is a common feature across the region. Wind is increasing in strength and duration as part of the changing temperature regime. The impact of reduced rainfall and snow (leading to drought) is seen in very little forage cover over the country exacerbated by overgrazing as herd numbers increase. More livestock water points have contributed to this problem and will probably also lead to declining water tables on current rainfall trends. This has led to the increase in the rodent problem because the demanding pests have spread from the small low grass area in north central Mongolia throughout most of the country and this has been supported by overgrazing and water points and less snow/winter warming. These pests are adapted to the low grass area and were controlled to some extent by hard winters/ taller grasslands habitats and this natural control on spread and population is no longer effective.

3. River flows and flow peaks are likely to be lower, so irrigation water supply peaks and troughs become more important. Drought will reduce wheat yield as this is mostly dryland; potato is both dry and some irrigated and, most other field grown beet, carrots are small plots some dryland and some irrigated will be affected. Mongolia is currently self-sufficient in wheat but researchers at IPAS indicate that drought tolerance introduced into the wheat varieties from Russia has been the key to maintaining crop yield as rainfall becomes more erratic. This makes the wheat more “resilient” and a yield is still possible under conditions of stress while larger areas can be planted to compensate for lower yield to some extent as land is not limiting.

4. Vegetables are also affected in the same way especially for field dry land crops and then water availability/infrastructure is needed for irrigated production. Beyond this, extended dry periods still affect field where irrigation is limited or just dryland is used because of higher temperatures, low humidity, high light intensity and increases in wind intensity increase stress on plants. Breeding and selecting varieties that are more adaptable and resilient to a changing and more erratic climate can compensate for the changing climate although this is not a guaranteed yield support mechanism in extreme conditions. It also takes time to develop this material and considerable resources. Neighboring countries including PRC rely heavily on irrigation, so their varieties are not necessarily suitable or readily adaptable. The market acceptance of the more

1 G9192-MON: Community Vegetable Farming for Livelihood Improvement.

2 resilient types may be less when compared to the those grown under irrigation. Green houses and irrigation can compensate to some extent for increasing CC but better genetics is the long term key to resilience because this can be used to increase other factors such as cold tolerance for early and later production to extend the season and to increase the storage life of vegetables.

5. Increased drought impact is a major factor that can be predicted as a trend from climate models although when, where, duration and intensity are less predictable. The longer term impacts have compounding impacts with livestock in poor condition going into winter more likely to die, feed availability for winter less, quality and quantity of field grown vegetables is lower and spoilage in storage more likely and, there will be a greater impact of rodents on field and poor storage because there is less grass and herbage as feed alternatives. Climate smart vegetable production supported by improved varieties that are more resilient to field conditions and or green house production with minimal inputs will help address CC impacts and improve the year-round supply of vegetables for Mongolia.

B. Seed Production

6. Vegetable seed production has been identified as a limiting factor in vegetable production in Mongolia because the country imports seed of staple vegetables including cabbage, onion and greenhouse crops including tomato, cucumber, melons, lettuce and other winter greens such as fresh cabbage. Ongoing efforts to increase self-sufficiency in seed production have focused on potato (now self-sufficient), carrots and turnips (self-sufficient) with long storage cabbage (40% self-sufficient), beetroot (15% self-sufficient), onions (5%) and garlic (30%) as the next target. Two main seed systems exist: one is the government system through the Institute for Plant and Agricultural Science (IPAS) and its related seed farms and regional institutes and the Mongolian Farmers Association for Rural Development (MFARD) who have worked with the Swiss Development Agency for many years. MFARD focused on first on potato and now cabbage and onion seed production. MFARD imports vegetable seed for cabbage (long storage round types such as Hurricane F1) onion, green house vegetables and supports farmer groups in production and marketing. MFARD also works with IPAS on variety testing and some seed bulking for sale.

7. IPAS has the staff and basic facilities to produce more locally adapted vegetable seed although does not have the field or greenhouse production facilities to make best use of the skills and international connections it has. Drought tolerant high yielding wheat variety “144” is an example of successful variety developed by IPAS. This limits the outcomes from its breeding and selection work because it takes time to bulk up seed and the farms for bulking lack basis irrigation infrastructure and seed cleaning, packaging and storage equipment. The regional institutes farms are in the same state and need irrigation infrastructure, seed cleaning, packaging and storage equipment to bulk store and sell seed into the region grower market.

8. The Mongolia University of Life Sciences (MULS) has a research facility in Gobi South that is working on vegetable production and seed supply and has received support from South Korea. The Gobi environment makes greenhouses necessary for vegetables because of the lack of surface water for large scale production outdoors. MULS has expertise and the facilities although lacks seed cleaning, packaging and storage and overwinter storage for biennials for seed production the following season.

9. Although there is expertise for seed production, three issues limit production: (i) Lack of an Intellectual Property (IP) mechanism for genetic material. The Seed Law introduced to Parliament in 2019 is expected to be passed soon. The former lack of IP limited the use of large commercial gene banks (under license) and reduced the returns

from breeding because the new varieties cannot be protected, helping support development costs. IPAS and MULS have the potential to develop vegetables much better adapted to Mongolia with support and IP incentive. (ii) The ability to bulk up high-quality certified seed is very limited as outlined above and commercial seed production is very small scale for vegetables. Outdoor production for hybrid seed for example is minimal because of a lack of facilities, slowing the use and spread of better genetic material. (iii) The size of the market for vegetable seed is small so that commercial seed companies have limited interest in the development or adaption of varieties. The Syngenta involvement was through an aid activity originally funded by Switzerland. In 2018, MFARD imported MNT346 million (equivalent to about $135,000 ) of vegetable seeds from various countries for distribution to its members, the amount imported being constrained by available financial resources.

10. The size of the market is small so that international commercial interest is limited, meaning Mongolia must do more to breed and select better adapted vegetable varieties. This ability has been demonstrated by IPAS and MFARD with improved potato and drought resistant wheat and to a lesser extent in carrots, turnips and beets with long storage cabbage, onion and garlic the next targets. Hybrids offer good potential as demonstrated by the Hurricane F1 cabbage (a Syngenta Ltd product and seed is imported) and these need to be developed and multiplied locally through the existing seed system.

C. Feasibility of Support to Seed Research Institutes

1. Central Region Institute of Plant and Agriculture Science (IPAS) at Darkhan- Uul Aimag

11. ADB conducted a Market Study and Value Chain Analysis of Vegetables and Fruit (2018) in Mongolia that also considered seed production. Mongolia has a seed system in place for a range of crops that functions from well to poorly, depending on the crop and location of seed production. MOFALI is re-establishing a seed farm research and growing network based on existing sites in the regions that were largely privatized but mostly failed. These field stations/seed farms are in a very run-down state because a lack of investment and from expropriation of old equipment such as irrigation pipes for sale as scrap, leaving the farms with very restricted scale for actual seed production.

12. Wheat is the major crop and has support from IPAS for research, breeding selection and farms for field assessment and seed multiplication for other seed farms and directly to farmers. There are short falls in the seed system function in terms of research and development (R&D) support and facilities at IPAS and the ability to meet demand and supply the quantity/quality of seed the central region needs from IPAS and related seed farms. Other cereals, grain legumes, fodder legumes and green manure crops supported by IPAS have the same issues although these are less important to wheat. Although the R&D side is able to produce elite lines through a range of breeding techniques, the next stage of seed multiplication and field testing is not adequate because of limited or non-existing facilities of multiplication farms starting with irrigation, farm machinery, storage sheds for equipment, seed cleaning and packaging equipment, seed storage in cool store or similar for overwinter vegetable seed breeding, and the ability to field test a range of material simultaneously and or open pollination bulking/ hybrid bulking in the field. This in term limits the range of varieties that can be tested and bulked up for distribution and, importantly, it limited the potential to use these farms as demonstration sites to increase awareness and train farmers.

13. At IPAS head office, there are well trained staff and generally good facilities. The ability to make best use the existing genetic laboratory, accession collection and international cooperation from the International Maize and Wheat Improvement Centre (CIMMYT), the International Atomic Energy Agency (IAEA) and others is reduced by the lack of climate controlled growth rooms/ greenhouses that would greatly increase the throughput for testing of material and support speed breeding and hybridizing of new lines for cereals. It is possible to get several generations of a breeding line through these climate spaces in one year because they do not rely on field conditions and only one possible cropping cycle. This make it possible to test for introgression of desired traits such as drought and cold tolerance under controlled conditions with several generations without the cost and space issues of field trials before the line goes to larger-scale field testing. This greatly improves the efficiency of breeding, selection and testing, making best use of ongoing improvements in genetic techniques and advances made elsewhere beneficial to Mongolia.

14. IPAS also needs seed cleaning, sorting, grading and packaging equipment and, climate- controlled storage facilities for a range of crops. Currently this is lacking and elite lines, breeding lines and unique material can be compromised by the lack of such equipment. Storage condition for different crops varies so large storage for wheat should be supplemented by small specialty storage for other crops such as grain and green manure legumes, and for fruit and vegetables lines as well.

15. For fruits and vegetables, these also need additional facilities as outlined above to test new material such as new lines of vegetables and fruit before they go into field trials. Breeding is much easier in growth chambers as the space is manageable and isolated from outside pollen. Flowering can be induced by control of day length and or environmental conditions. With appropriate cool rooms, crops such as cabbages, onions, red and black currant canes and garlic can be vernalized and induced to flower and seed more than once per year so breeding, quality and climate adaptability can be tested rapidly before selections are released for field trials.

16. IPAS has the staff to undertake a much more intensive program of breeding and selection of crops and provision of the above would greatly improve the efficiency and output from IPAS for the benefit of Mongolian farmers and consumers.

17. The related IPAS farms in the central, western and eastern areas where cereal, legume and potato/vegetable seed and fruit canes/trees are produced basic facilities and equipment as well irrigation is needed. This includes covered machinery sheds and work spaces, training spaces for field days and demonstration support, seed cleaning, sorting and packaging equipment to ensure seed lines are free of weed contamination and off types and that lines can be maintained for both breeding as well as sale/distribution with confidence that the material is what is needed.

18. The Darkhan Elite (part of the IPAS network) farm currently produces about 30% wheat of the seed needed for the central region, however, it could supply all the high quality seed needed with improved irrigation to increase irrigated area and flexibility in planting and, the equipment necessary for production and for harvesting, cleaning, packaging and storage of wheat and other crops including grain/green manure legumes, other cereals and corn. This farm produces less than 200 tons of elite line seed per year from about 90 ha of irrigated land although not all is planted to wheat and there is not enough water for full irrigation through the season. With improved travelling irrigators and available water, 200 ha could produce enough wheat seed for the central region and a small amount for testing in other regions. There is around 400 ha of irrigatable land available. The area planted to other seed crops including vegetables and potatoes

could also increase as there are around 1,000 ha of land available for all activities so there is room for green manuring and conservation farming demonstration in both irrigated and dryland settings. The government has agreed to support some machinery for this farm although not conservation farming equipment.

19. Drought tolerance is a major selection criterion for Mongolian wheat: the genetic base has been identified and material imported from Russia and elsewhere. The Darkhan Elite farms are the prime testing and bulking site for these lines so improving this site is essential for seed production and future food security in Mongolia, regardless of vegetable production. While the larger farm close to Darkhan is a larger producer of seed for seed growers and farmers, other smaller farms in other areas are important for local bulking and testing of wheat and other crops. These farms spread risk and increase resilience in the seed system and provide the opportunity to test a wider variety of potential lines that could be more adaptable to different locations. Climate change impacts areas differently and genetically based resilience is the key to local adaptation and risk management so support for smaller farmers is also necessary.

20. Demonstrating rotations to maintain soil fertility is another very important function these farms can undertake with head office support and inputs. That is to practice and demonstrate better farming practices for maintaining soil fertility including the use of green manure legumes into rotations, conservation farming to improve soil organic matter levels and soil moisture and, equipment to facilitate these practices. IPAS headquarters has the mandate to do this work although the farms lack the equipment and inputs to adequately undertake the work to demonstrate benefits. Improving irrigation to increase flexibility and scale will help this process and provide a base for changing practices that are talked about at present but not done or demonstrated in practice, so they are not being used or adopted by commercial farmers. While large-scale wheat and cereals are the focus, it also applies to potato and vegetables where rotations, green manure crops and conservation techniques to address soil fertility and pest/disease management from continual cropping in the same site, largely caused by restricted access to irrigation and appropriate equipment.

21. Vegetable seed can be scaled up on other IPAS related farms with the same approach outlined for the large farms. This includes potato where the experience exists in handling, sorting and storage at a scale. For other vegetables including field onions, cabbage, carrots, beet and turnips the small farm produces around 600 kg of seed from a few hectares of irrigated land. Support for this farm and similar farms will greatly increase seed quantity and in time quality and ensure that seed is clean, packaged and stored to maintain germination for the coming season. Currently 7 potato varieties are common and that is good in case of disease issues but the ability to bulk-up clean potato is at risk if an outbreak occurs unless the current farms are upgraded because areas would need to be quarantined and movement of potato restricted from infected areas. This would apply to other crops as well.

22. Fruits are not well supported with a production and multiplication system and this needs to be addressed, the IPAS related small farm close to Darkhan could fulfil this role because it is close the where the material is imported and assessed. Breeding and selection are possible for some of these crops at IPAS headquarters, so multiplication of better types is important to improve yields and quality around Mongolia. This farm needs better irrigation, all weather green houses for vegetative propagation, farming machinery to field trees and covered areas for machinery and a clean house for potting and grafting trees, preparation of canes and a cool store to hold canes over winter.

D. Rationale to Support Mongolian-based Seed Production

23. There are several reasons for Mongolia having its own seed production system rather than importing seeds.

24. Growing conditions. Mongolia has a range of environmental conditions for vegetables although these are harsh with a short growing season so developing varieties well adapted to these conditions and that meet other needs including long term storage and ease of long-distance transport is necessary. Importing seed developed elsewhere does not usually cover all of these needs but the genetic material is important for developing local varieties. In wheat, for example, Darkhan imported drought tolerant wheat from Russia and has used this to develop locally adapted lines. With cabbage, the Hurricane F1 imported from the Netherlands has proven to be successful, while it has taken many years to develop potato varieties suited to Mongolia. Onions are an important crop with a longer-term need for adaption to Mongolian conditions. Most onions are still imported from the PRC to meet local demand and Mongolia has a desire for self- sufficiency.

25. Existing Facilities. The IPAS facility at Darkhan has a high level of skills and knowledge for breeding and selection supported by a genetic laboratory and international cooperation. However, it lacks a few key pieces of equipment to make best use the skills and genetic opportunities such as speed breeding, using growth chambers to rapidly test new genetic material, support introgression of specific traits, and reduce the time taken for new elite lines to reach the field for field testing. This is relatively easy to address with straight forward investment and will greatly enhance the quest for self-sufficiency in climatically adapted vegetable seeds for Mongolian conditions.

26. Self-sufficiency. Mongolia is a land-locked country and has experienced serious issues with closed borders in the past, causing severe internal food security issues at the time. Mongolia still imports more than 70% of its vegetables apart from potatoes. It has taken many years to become self-sufficient in potatoes because adapting varieties to Mongolian conditions and then building up the planting material is time consuming. These potatoes varieties are unique to Mongolia. Work is in progress on cabbage (that will store for 8 months); white, brown and red onions (that will also store for 8 months); and garlic of different types that will produce well and store. These are large import items. Carrots, turnips and beets are important in the diet and store well. They are also imported but R&D is being undertaken using locally derived and imported seed. Other seasonal vegetables including tomato, cucumber, lettuce and melons that can be grown in greenhouses are the last target because of the difficulty in growing year-round as it would need heating and artificial lighting for an extra 3 months. Hence Mongolia will take more time to become self-sufficient as adapted seed becomes available.

27. Productivity. Locally developed and adapted varieties will improve productivity and reliability of production in a variable climate. Mongolia is suffering from climate impacts and that trend will continue so locally adapted varieties are a key part of maintaining productivity in this changing environment. Greenhouse varieties are usually different from field varieties and dryland often different from irrigated varieties so there is good potential for better varieties in different production niches to improve productivity.

28. Economic benefits of import substitution. Mongolia spends scarce foreign exchange on imports of food so reducing imports and producing locally will help farmers and the national economy. This started with locally produced seed and continue with import substitution of produce. At present, the next Mongolian target for vegetables is to be self-sufficient in round

cabbage, onions and possibly garlic. These can be stored in appropriate cool stores for up to 8 months and overcome the need for imports once the end of summer harvest is complete. Crops such as carrots, turnip and beetroot can be stored for some months and better varieties will improve the length of storage possible to increase self-sufficiency and work is proceeding with IPAS and MFARD. It is difficult to achieve self-sufficiency in other summer vegetables such as tomato, lettuce and cucumber as these need all weather greenhouses. In the latitude of Mongolia, light becomes a limiting factor for all year-round cultivation although Southern Gobi could produce all year. Supplemental lighting would overcome this problem in areas further north, but this is a large investment for small farmers with small scale greenhouses. Self-sufficiency is some time away for all vegetables but for those that can be stored for several months, it is achievable in the short term with improved irrigation and better adapted varieties.

29. Imported Seed. Seed is a significant cost for farmers. MOFALI indicated that currently around 8,500 ha of vegetables are grown with the seed cost averaging about $1,500 per ha (about $12.75 million total seed cost) and this will increase as the irrigated area increases. This represents a significant potential income for local seed suppliers particularly of potatoes, carrots and turnips, which are produced locally. Since imported seed is more expensive than local, increasing supply of locally adapted seed varieties has a dual benefit of import substitution with reduced budget expense and improved climate resilient varieties for local farmers. At present, Mongolia is self-sufficient in carrot and turnip seed, 40% in cabbage seed (summer cabbage types, short-storage types), 15% in beetroot, 30% in garlic, and 5% in onions. Other vegetables, including lettuce and cucumbers, are all imported.

1. Cost of Improvements

a. IPAS headquarters and related farms

30. Table 1 outlines the support needed for the IPAS farms, related farms in the regions and the Gobi South farm of MULS. These inputs would provide the seed system with the capacity to increase the production of certified seed for direct sale/distribution and sale to seed farms for bulking. The IPAS system at headquarters and related farms, linked to the MFARD network and MULS technical capacity can develop climatically adapted vegetable seed for greenhouse and open field vegetable production for Mongolia, reducing import needs and supporting the increase in vegetable production throughout the year.

Table 1: Equipment to Support Vegetable Seed Production at IPAS and Related Farms Location/Item Unit Cost Number Estimated cost ($) ($) IPAS Headquarters Climate control growth chambers 20,000 5 100,000 Seed/vegetable cool storage rooms 4,000 5 20,000 Seed cleaning and packaging unit 6,500 1 6,500 Small cool rooms (2m x 3m) 8,000 3 24,000 Subtotal 155,500 Darkhan Elite Farm Machinery sheds 50,000 2 100,000 Classroom and amenities 20,000 1 20,000 Seed cleaning and packaging 6500 1 6,500 Bulk Storage silo type 100 ton 15,000 4 60,000 Small storage 20 ton 5,000 5 25,000 Conservation farming equipment 60,000 1 60,000 Secure fencing of compound 20,000 1 20,000

Location/Item Unit Cost Number Estimated cost ($) ($) Subtotal 292,500 IPAS Small Vegetable farm Machinery shed 35,000 1 35,000 Winter greenhouse 20,000 1 20,000 Classroom with amenities 15,000 1 15,000 Machinery package (tractor, rotary hoe, 60,000 1 60,000 sprayer, bedmaker/mulch layer) Small cool store 8000 2 16,000 Fencing of site 30,000 1 30,000 Subtotal 176,000 Choibalsan City Machinery shed 45,000 1 45,000 Classroom and amenities 15,000 1 15,000 Winter greenhouse 10,000 1 10,000 Machinery package (tractor, rotary hoe, 60,000 1 60,000 sprayer, bedmaker/mulch layer) Fencing of site 30,000 1 30,000 Subtotal 160,000 Chinggis Khan City Machinery shed 45,000 1 45,000 Classroom and amenities 15,000 1 15,000 Winter greenhouse 10,000 1 10,000 Machinery package (tractor, rotary hoe, 60,000 1 60,000 sprayer, bedmaker/mulch layer) Fencing of Site 45,000 1 45,000 Subtotal 160,000 MULS Gobi South Farm Seed cleaning and packaging 6,500 1 6,500 Small cool stores (2 m x 3 m) 8,000 2 16,000 Subtotal 22,500 Total 966,500 IPAS = Institute for Plant and Agricultural Science, MULS = Mongolia University of Life Sciences Source: Institute for Plant and Agricultural Science

b. Other Related Farms Including Vegetable Seed Farm Visited

31. Although these farms are generally smaller, a similar package to the fruit farm is needed to ensure clean seed is produced, packaged and stored for local use. They are typically close to farming areas and service the same irrigation areas for vegetables. Hence, producing seeds and demonstrating varieties and technology at these farms is logical, with at least one in each region, based in Choibalsan and Chinggis Khan City.

32. In the Southern Gobi Region, the facility attached to MULF has a research facility that also produces vegetable seeds with a focus on greenhouse production. This is well serviced and supported in general although it does need seed cleaning, packaging and storage equipment and two small cool stores (2m x 2m) to overwinter vegetables for breeding such as carrots and beetroot.

E. Food Quality and Pest Management

33. Mongolia has a perceived problem with the quality of imported agro-chemicals and the safety of imported vegetables. The Institute for Plant Protection (IPP) has the role of testing

imported agro-chemicals for purity and composition and, undertaking market basket and farm sources surveys for food safety. IPP has well trained staff and a small amount of high-end equipment including High Pressure Liquid Chromatograph’s (HPLC) although the number of samples they can process is limited by the number of machines and consumables including reference samples. Given the known food safety issues in the neighboring exporting countries, safety issues with imported food should be anticipated. In a survey commenced in 2012/13, analysis by IPP found 10% of products tested had pesticide residues higher than the permissible levels under CODEX recommended standards for MRLs. Imports of agricultural chemicals are three times higher in 2018 than in 2012-17 and IPP cannot cope with the increased need for testing relying on existing equipment. There are now 159 different chemicals imported, many of which IPP does not have a standard reference sample for comparison and calibration for testing. IPP can process around 1,000 samples per year and would like to process 5,000 to improve detection of poor quality agro-chemicals and improve food safety. Rapidly increasing use of chemicals with a poorly educated farming community is a danger to users within the community, such as farmer/farm workers applying chemicals, and consumers. Similar to problems are experienced in other countries, such as Myanmar, which are not able to adequately manage importation and use of agricultural chemicals.

F. Feasibility of Support to Plant Protection Institute

1. Overview

34. IPP and its laboratories has a wide mandate including pest and disease control and food safety for Mongolia. These include the monitoring of imported agricultural chemicals (particularly from the PRC where a perceived quality problem exists), and monitoring agricultural chemicals residues in food.

2. Rationale for Support

35. This institute is the main research laboratory center for MOFALI with seven individual laboratories. They are small with up-to-date equipment and well-trained staff restricted by scale which limits possible sample throughput. This facility undertakes a range of tests and research on pest, diseases, food quality, pesticide residues and pesticide quality. They have Intellectual Property Rights on some products for biological control of pests and diseases. MOFALI has requested IPP to undertake testing of agricultural chemicals imported for use on vegetables because they are used extensively without certification for quality or ingredients. There is also a need to test vegetables for agricultural chemical residues to ensure food safety. As other countries have learned, this can be a very serious issue so there is a legitimate concern for MOFALI, confirmed by initial testing using general CODEX MRLs as a guide for food safety.

36. IPP is requesting addition equipment to undertake the testing of imported pesticides and imported and local food to meet the concerns of MOFALI and support food safety through residue testing. IPP needs equipment to do the work fast enough to be effective and allow action to be taken to address the issues as they arise to ensure food safety. Table 2 lists the requested items from IPP to meet the MOFALI food and chemical testing targets. The total value is MNT501.4 million, equivalent to about $189,210.

Table 2: IPP Equipment and Input Needs No. Item Units Unit price Total price Specification (no.) (MNT) (MNT) Equipment 1 LC/MS Ultivo triple quadrupole 1 240,000,000 240,000,000 Determine the residues, LC/MS (LC-TQ) High content and mycotoxin Performance Liquid contamination of all Chromatography – Mass pesticides. Spectrometer 2 Atomic absorption spectrometer 1 200,000,000 200,000,000 Determine the quality of ААS /ICE3000AA/ /Complete heavy metals residues and Set/ fertilizers. 3 LC/MS column 1 2,500,000 2,500,000 Determine residue and concentration of pesticides 4 Identification detector of Chlorine 1 15,342,800 15,342,800 Determine residue and organic compound /GC-ECD concentration of chlorine (electron capture detector) organic pesticides 5 HPLC column /HPLC columns 1,624,800 HPLC determine pesticide 1 1,624,800 Eclipse Plus C8, 4.6x150 mm, 5um concentration 6 HPLC column /HPLC columns 1,825,800 HPLC determine pesticide Eclipse Plus C18, 4.6x150 mm, 1 1,825,800 concentration 5um/ 7 HPLC column /HPLC columns 2,400,000 HPLC determine pesticide Eclipse Plus C18, 4.6 x 250 mm, 1 2,400,000 concentration 5um/ 8 Guard columns - Eclipse XDB- 559,900 HPLC determine pesticide 1 559,900 C18 4.6x12.5,5u Grd Car concentration. 9 Guard columns - Guard 564,400 HPLC determine pesticide 1 564,400 Cartridges 4.6 x 12.5 4/PK concentration. 10 Analytical balance 1 3,141,800 3,141,800 Determine residue and concentration of pesticides, also sample preparation 11 Vacuum manifold 1 4,200,000 4,200,000 Determine residue of pesticides and sample preparation 12 Homogenizer 1 11,173,800 11,173,800 Determine residue of (Silent crusher M-Heidolph) pesticides and sample preparation. 13 Centrifugal 50мл, 5000 turn/min 1 6,114,208 6,114,208 Determine residue of pesticides and sample preparation 14 Sample crusher 1 300,000 300,000 Determine residue of pesticides and sample preparation 15 Soxhlet apparatus 3 120,000 360,000 Determine residue of pesticides and sample preparation 16 HPLC grade water purifier (like 1 1,500,000 1,500,000 Determine residue and Millipore) Water purifier concentration of pesticides, also sample preparation. (НPLC-) 17 Sep Pack cartridges (G1833- 1 451,000, 451,000 Determine residue and 65569 Peri pump tube Tygon 3- concentration of pesticides, stop wht/wht ) also sample preparation 18 1 243,800 243,800 Determine residue and Sample concentrator concentration of pesticides, also sample preparation 19 Single taper, deactivated, 900 μl 1 388,300 388,300 Determine residue and 4mm diameter, 5 per Pk Part Nr concentration of pesticides, 5183-4695 also sample preparation 20 Straight, non-deactivated, quart 1 88,000 88,000 Determine residue and

No. Item Units Unit price Total price Specification (no.) (MNT) (MNT) 250 μl 2mm diameter, 1per Pk, concentration of pesticides, part Nr. 18740-80220 also sample preparation 21 Injector Non-stick bleed and 1 226,000 226,000 Sample preparation temperature optimized (BTO) septa, 11mm 50/pk Agilent part: 5183-4757 22 3 Universal column nut, 1/16 in 1 85,800 85,800 Sample preparation. hex, 2/pk 5181-8830 23 Graphite ferrules 1/8 in Graphite 1 102,300 102,300 Sample preparation 10/pk 0100-1325 24 pH electrode for the pH meter 1 480,000 480,000 Sample preparation 25 Tube 15 ml without cap 200 19,000 380,000 Sample preparation 26 Tube 2 ml with cap of centrifuge 100 14,000 140,000 Sample preparation 27 Micro vials 200 298,000 596,000 Sample preparation 28 Acrodisc® Minispike syringe filters Sample preparation (box) (PTFE membrane, pore 2 180,000 360,000 size 0.2 μm) 29 Acrodisc® syringe filters Sample preparation PTFE membrane, diam. 25 mm, 100 220,000 220,000 pore size 0.45 μm 30 Injector liners (5183-4701 Liner, Sample preparation Split, Low Press drop, Tpr, Glswl, 1 58,300 58,300 Deac 31 Solvent reservoir supplies 9301- Sample preparation 1 58,300 58,300 1421 (1 liter) 31a GC/MS- Auto Sampler 1 100,000,000 100,000,000 Sample analyzer Standard substance and reagent 32 Acetone 10 l 89,000 890,000 Organic solvents 33 Acetonitrile 10 l 89,000 890,000 Organic solvents 34 Methanol 10 l 98,000 980,000 Organic solvents 35 Ethyl acetate 10л 40,000 980,000 Organic solvents 36 Fenoxoprap-P-ethyl 250 mg 123,391 123,391 Standard substance 37 Dicamba 250 mg 106,894 106,894 Standard substance 38 Chlorsulfuron 250 mg 152,850 152,850 Standard substance 39 Pendimethalin 250 mg 77,435 77,435 Standard substance 40 Bromadolion 250 mg 173,388 173,388, Standard substance 41 Thiram /TMTD/ 250 mg 125,450 125,450 Standard substance 42 Promethrin 250mg 160,790 160,790 Standard substance 43 Lambdacyhalothrin 250 mg 170,500 170,500 Standard substance 44 Fenvalerate 250 mg 180,600 180,600 Standard substance 45 Cypermethrin 250 mg 198,000 198,000 Standard substance 46 Tiacloprid 250 mg 197,855 197,855 Standard substance 47 Glyphosate 500mg 300,855 300,855 Standard substance 48 Tebuconazol 500mg 324,895 324,895 Standard substance 49 Pirimiphos-methyl 250mg 152,894 152,894 Standard substance 50 Mancozeb 250mg 158,800 158,800 Standard substance 51 Metsulfuron-methyl 250mg 156,698 156,698 Standard substance Total 501,406,603 Source: Institute of Plant Protection.

G. Vegetable Production

1. Overview

37. Apart from potatoes, vegetable farming—including carrots, turnips, beetroot and summer cabbage—is a small relatively new industry in Mongolia and greenhouse production more so. Discussions with existing commercial greenhouse growers close to Ulaan Baatar (Atariim Shim Co Ltd and Asral Agro Park) and the Group for the Environment, Renewable Energy and Solidarity

(GERES), a nongovernment organization (NGO) working with community groups for 5 years on summer and winter green houses, indicate developing skill levels for farmers is necessary for successful production and payback on investment in greenhouses even close to the market in Ulaanbataar is difficult. This includes the agronomic skillset and goes further to understanding marketing, storage and preserving/ processing vegetables to reduce waste and increase product range for the winter months. At aimag level agriculture officers are usually focused on livestock with minimal understanding of greenhouse and outside vegetable farming. MOFALI has limited extension capability for vegetable production and greenhouses and although the Mongolia University for Life Sciences (MULS) has expertise, this is focused on Gobi South at present. MULS is also supporting the Greenhouse Extension Centre of MFARD (see below) and other growers and is valuable resource in country but has limited time due to teaching commitments.

38. The Community Vegetable Farming for Livelihood Project (ADB Grant 9192-Mon) will be focusing on greenhouse production supporting training and investing in greenhouse technology for Mongolia. The project will introduce some “high-tech greenhouses” and support existing communities to improve production with farmer groups at aimag level. It can learn from and build on the work of GERES and the experiences of commercial farms to improve outcomes at community level with farmer groups. MFARD is establishing a Greenhouse Production Extension Centre in Zwnmod and MULS has supported this activity with technical inputs. Providing support for these initiatives will support increased vegetable production. Vegetable consumption is low in rural areas with potato and cucumber the main items with rural households consuming about 25% of the recommended intake of vegetables. Hence supporting production and consumption at local level is important from a public health perspective, especially women and children where malnourishment is around 46%.

2. National Programme on Vegetables

39. The National Programme on Vegetables has four major components, initially to be implemented during 2018-20:2 (i) Support diversification of vegetables, increase the efficient production per each scalable land, to supply people with fresh vegetable even during winter and spring seasons, to decrease reliance on imported vegetables; (ii) Introduce state-of-the-art technology in order to intensify vegetable farm production and irrigation system, reward investments towards increasing storage capacity and roominess, develop and support direct marketplaces as well as for vegetables; (iii) Support seed production, to test additional prosperous seeds in the soil in order to introduce it to the production, increase quality and supply; and (iv) Enhance knowledge and skills of vegetable farmers, prepare qualified specialists, improve industry human resources through teaching and provide necessary information.

40. ADB and JICA are supporting the Government of Mongolia to achieve the above and South Korea is providing targeted support to institutions including MULS. Mongolia imports around $500,000 of food products including 54% of vegetables annually so import substitution is an important outcome. Winter greenhouse production is limited by low light intensity for plant growth in December and January, so supplemental lighting is needed to overcome this constraint; lighting uses electricity although LED technology has greatly reduced electricity requirements. At aimag level, high technology is difficult to sustain and very costly because of electricity cost,

2 ADB Market Study and Value Chain Analysis 2018.

limited skill sets and the need for high quality storage to preserve product quality in storage. However, GERES has a good design for winter greenhouses at low cost that is quite effective and produces for 10 months of the year. The more expensive Chinese heated greenhouse production is still limited by light levels and bok choi type cabbage greens can be grown in the middle of winter, at a higher cost/slow growth rate. While it is quite possible to grow successfully all year round with a high technology greenhouse, these are expensive and need high-level skills to operate, so are difficult for aimag level. “Three-season” heated greenhouses vary in price for around $50 per square meter (GERES); $100 per square meter for the Korean and local adaptations of heated greenhouses (Atariin Shim Co), increasing to $150 per square meter for the PRC-sourced heated greenhouse (Asral Agro Park), mostly full season. Finding working models for different crops and available markets is an issue at aimag level so that time to payback of investment and supporting a reasonable livelihood for the farmer is an issue raised by GERES. Currently 3 to 5 years is needed for an experienced farmer to buy and payback the investment in a medium sized greenhouse of 60 x 10 meters if they have a close market. More than one unit is necessary for diversity in product to supply a larger outlet such as supermarkets.

41. At present, most seed for greenhouse production is imported and some summer vegetable seed are imported, making Mongolia vulnerable to external influences. The unique environment of Mongolia makes it necessary to have locally adapted varieties that can produce in a range of seasons and suit local consumption and storage needs throughout the year. IPAS and MULS have the skill set to breed and select new varieties but have limited capability to bulk up seed because of outdoor and indoor production facilities including irrigation, mechanization, seed cleaning, packaging and storage and, over winter cool storage for biennial crops. Mongolia has been able to achieve seed self-sufficiency in low technology potato and close to self-sufficiency in sturdy vegetables such turnips and carrots. It now needs to move further into cabbages, onions and garlic while salad vegetables and hybrids are some way off. Investment in the seed system is necessary to support breeding and selection for conditions in Mongolia to achieve food security and improve public health outcomes.

42. At suom level within irrigation systems under this project it is suggested that a demonstration of greenhouse production and mechanization is used to improve vegetable production efficiency and extend the vegetable season into the colder months. Table 3 provides an indicative list of the equipment needed.

Table 3: Vegetable Demonstration Equipment at Soum Location/Item Number Unit Cost Total Cost ($) ($) At soum Summer greenhouse (120 m2) 2 2,000 4,000 Winter greenhouse (800 m2) 1 45,000 45,000 Large vegetable storage (100 ton) 1 15,000 15,000 Small cool rooms (2 m x 3 m) 3 8,000 24,000 Total 85,000 Farmer Group Machinery Machinery sheds 1 15,000 15,000 Tractor (50 hp) 1 14,000 14,000 Plough 1 2,000 2,000 Rotary hoe 1 1,500 1,500 Seeder 5 5,750 5750 Vegetable Harvester 1 1,500 1500 Total 39,750 Source: MOFALI

42. Mongolia has limited expertise in vegetable production at farmer level and supporting these groups is necessary to improve production outcomes. The skill set must be supported by storage at local level and appropriate level greenhouse technology so farmers can make a living from vegetable growing. The lack of young farmers is a major concern with farmers in the GERES communities in the 50 plus age group. Inspiring younger people to become vegetable farmers is important and this must be a viable alternative to other income generation activities or moving to Ulaan Baatar for work. The JFPR funded Community Vegetable Farming for Livelihood Project (ADB Grant 9192-Mon) will address farmer training and support in selected areas and, will demonstrate high-technology greenhouses for year-round production although this technology has yet to be defined. This leaves farmers outside of the target areas above dependent on local government extension (usually focused on livestock farming) or support from a single MOFALI greenhouse expert based in Ulaanbaatar, neither of which is adequate for inexperienced farmers. Including support for MFARD who have experience with greenhouses and are developing a greenhouse training center closer to Ulaanbaatar that would help support farmers not covered by the Community Vegetable activity.

43. MFARD has experience in working across the vegetable farming sector (including seed supply in a limited way). The greenhouse training center provides a place for training, but this is still remote from the irrigation areas. Developing training manuals for green house production and implementing these would be useful. Cooperation with the Community Vegetable activity that will develop some manuals will help although these may be targeted at more “High Technology Greenhouses”. Inclusion of time for a regional/international expert such as from South Korea or China where a similar level of greenhouse technology is used, and similar crops are grown in basic greenhouses, would be useful. The timing of this would need to be in the second, third and fourth year to support skills development of nationals so this could overlap with the Community Vegetable greenhouse expert input through extension of that input or be a separate activity. The cost to this loan would be modest with around 2 person-months in each of years 2, 3 and 4.